As filed with the Securities and Exchange Commission on August 22, 1997
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. 19 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 20 [X]
----------------------------
STATE STREET RESEARCH 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
Executive Vice President, Secretary & General Counsel
State Street Research & Management Company
One Financial Center
Boston, Massachusetts 02111
(Name and Address of Agent for Service)
Copy to:
Geoffrey R.T. Kenyon, Esq.
Goodwin, Procter & Hoar, LLP
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 November 1, 1996 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, 1997 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 State Street Research Equity Investment Fund series, the 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, 1997,
will be filed by the Registrant on or about August 29, 1997.
<PAGE>
CROSS REFERENCE SHEET
Pursuant to Rule 481(a)
Part A
<TABLE>
<CAPTION>
CAPTION OR LOCATION IN CAPTION OR LOCATION CAPTION OR LOCATION
PROSPECTUS FOR IN PROSPECTUS IN PROSPECTUS
STATE STREET RESEARCH FOR STATE STREET FOR STATE STREET
EQUITY INVESTMENT RESEARCH EQUITY RESEARCH GLOBAL
FORM N-1A ITEM NO. FUND INCOME FUND RESOURCES FUND
- ------------------ ------------------ -------------- --------------
<S> <C> <C> <C>
1. Cover Page........... Same Same Same
2. Synopsis ............ Table of Expenses Investor Expenses Table of Expenses
3. Condensed Financial Financial Highlights; Financial Highlights; Financial Highlights;
Information.......... Calculation of Performance Performance and Calculation of Performance
Data Volatility Data
4. General Description The Funds' Investments; Goal and Strategy; The Fund's Investments;
of Registrant........ Limiting Investment Risk; Other Securities Limiting Investment Risk;
The Funds and Their and Risks; The Fund and its Shares
Shares; Appendix Your Account;
Fund Details
5. Management of the Management of the Funds; Fund Details Management of the Fund;
Fund................. Purchase of Shares Purchase of Shares
5A.Management's
Discussion of [To be included in [To be included in [To be included in
Fund Performance .... Financial Statements] Financial Statements] Financial Statements]
6. Capital Stock and Shareholder Services; The Your Account; Shareholder Services; The
Other Securities..... Funds and Their Shares; Fund Details 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; Your Account Purchase of Shares;
Offered............. Shareholder Services Shareholder Services
8. Redemption or Redemption of Shares; Your Account Redemption of Shares;
Repurchase.......... Shareholder Services Shareholder Services
9. Legal Proceedings... Not Applicable Not Applicable Not Applicable
</TABLE>
<PAGE>
Part B
<TABLE>
<CAPTION>
CAPTION OR LOCATION IN
STATEMENT OF ADDITIONAL CAPTION OR LOCATION CAPTION OR LOCATION
INFORMATION FOR IN STATEMENT OF ADDITIONAL IN STATEMENT OF ADDITIONAL
STATE STREET RESEARCH INFORMATION FOR STATE INFORMATION FOR STATE
EQUITY INVESTMENT STREET RESEARCH EQUITY STREET RESEARCH GLOBAL
FORM N-1A ITEM NO. FUND INCOME FUND RESOURCES FUND
- ------------------ ------------------ -------------- --------------
<S> <C> <C> <C>
10. Cover Page.......... Same Same Same
11. Table of Contents... Same Same Same
12. General Information
and History......... Not Applicable Not Applicable Not Applicable
13. Investment Additional Investment Investment Objective; Additional Investment
Objectives Policies and Restrictions; Additional Investment Policies and Restrictions;
and Policies........ Additional Information Policies and Restrictions; Additional Information
Concerning Certain Additional Information Concerning Certain
Investment Techniques; Concerning Certain Investment Techniques;
Debt Instruments and Investment Techniques; Additional Information
Permitted Cash Investments; Debt Instruments and Concerning Debt
Portfolio Transactions Permitted Cash Instruments and Permitted
Investments; Cash Investments;
Portfolio Transactions Rating Categories of
Debt Securities;
Portfolio Transactions
14. Management of the
Registrant.......... Trustees and Officers Trustees and Officers Trustees and Officers
15. Control Persons and
Principal Holders of
Securities.......... Trustees and Officers Trustees and Officers Trustees and Officers
16. Investment Investment Advisory Investment Advisory Investment Advisory
Advisory and Services; Custodian; Services; Custodian; Services; Custodian;
Other Services...... Independent Accountants; Independent Accountants; Independent Accountants;
Distribution of Shares Distribution of Shares Distribution of Shares
of the Funds of the Fund of the Fund
17. Brokerage
Allocation.......... Portfolio Transactions Portfolio Transactions Portfolio Transactions
18. Capital Stock and Not Applicable The Trust, the Fund Not Applicable
Other Securities.....(Description in Prospectus) and its Shares (Description in Prospectus)
19. Purchase, Redemption
and Pricing of
Securities Being Purchase and Redemption Purchase and Redemption Purchase and Redemption
Offered............. of Shares; Net Asset Value of Shares; Shareholder of Shares; Net Asset Value
Accounts; Net Asset Value
20. Tax Status.......... Certain Tax Matters Certain Tax Matters Certain Tax Matters
21. Underwriters........ Distribution of Shares Distribution of Shares of Distribution of Shares of
of the Funds the Fund the Fund
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CAPTION OR LOCATION IN
STATEMENT OF ADDITIONAL CAPTION OR LOCATION CAPTION OR LOCATION
INFORMATION FOR IN STATEMENT OF ADDITIONAL IN STATEMENT OF ADDITIONAL
STATE STREET RESEARCH INFORMATION FOR STATE INFORMATION FOR STATE
EQUITY INVESTMENT STREET RESEARCH EQUITY STREET RESEARCH GLOBAL
FORM N-1A ITEM NO. FUND INCOME FUND RESOURCES FUND
- ------------------ ------------------ -------------- --------------
<S> <C> <C> <C>
22. Calculation of
Performance
Data............... Calculation of Calculation of Calculation of
Performance Data Performance Data Performance Data
23. Financial
Statements......... Financial Statements Financial Statements Financial Statements
</TABLE>
<PAGE>
The Prospectus and Statement of Additional Information of the State Street
Research Equity Income Fund series (the "Fund") of the State Street Research
Equity Trust (the "Registrant") are included herein.
The Prospectuses and Statements of Additional Information of the State Street
Research Equity Investment Fund and the State Street Research Global Resources
Fund are included in Post-Effective Amendment No. 18 to the Registrant's
Registration Statement on Form N-1A (File No. 33-4296) filed with the Securities
and Exchange Commission on October 16, 1996.
The State Street Research Capital Appreciation Fund series of the Registrant
ceased operations effective August 15, 1997. Accordingly, references to this
fund have been deleted from this amendment where appropriate.
The Registrant anticipates that the class designations of the Fund's Class C and
Class D shares will be redesignated effective on or about November 1, 1997. At
that time, the Fund's classes currently designated as Class C and Class D will
be redesignated to Class S and Class C, respectively. Accordingly, all
references to Class C and Class S in the Prospectus and Statement of Additional
Information of the Fund herein reflect the new class designations.
<PAGE>
STATE STREET RESEARCH
EQUITY INCOME FUND
Investing in stocks for current
income as well as long-term
growth.
Prospectus
November 1, 1997
STATE STREET RESEARCH FUNDS
[sidebar text]
This prospectus has information you should know before you invest. Please read
it carefully and keep it with your investment records.
Although these securities have been registered with the Securities and Exchange
Commission, the commission has not judged them for investment merit and does not
guarantee the accuracy or adequacy of the information in this prospectus. Anyone
who informs you otherwise is committing a federal crime.
<PAGE>
WHO MAY WANT TO INVEST
State Street Research Equity Income Fund is designed for investors who seek one
or both of the following:
* a conservative long-term investment that focuses on total return
* an investment combining dividend-paying stocks, convertible securities and
lower-rated bonds
The fund is not appropriate for:
* investors who want to avoid even moderate volatility
* investors seeking either maximum growth or high income
* short-term investments
* emergency reserve money
The fund's shares will rise and fall in value. There is a risk that you could
lose money by investing in the fund.
The fund cannot be certain that it will achieve its goal.
Fund shares are not bank deposits and are not guaranteed, endorsed or insured by
any financial institution, government entity or the FDIC.
<PAGE>
CONTENTS 1
- -------------------------------------------------------------------------------
2 EQUITY INCOME FUND
The fund's goal and strategy, main
risks, expenses and performance,
plus financial highlights
12 YOUR ACCOUNT
Managing your State Street Research
investments
12 Opening an Account
12 Choosing a Share Class
14 Sales Charges
16 Policies for Buying Shares
18 Policies for Selling Shares
20 Account Policies
21 Distributions and Taxes
23 Investor Services
24 FUND DETAILS
The fund's business structure,
dealer compensation plus
additional policies
26 OTHER SECURITIES & RISKS
Information on additional
portfolio securities and
practices, and the risks
associated with them
Back Cover For Additional Information
<PAGE>
2 EQUITY INCOME FUND
[chesspiece graphic] GOAL AND STRATEGY
FUNDAMENTAL GOAL The fund seeks to provide a high level of current income, and
secondarily, long-term growth of capital, by investing primarily in common
stocks that offer above-average dividend yields, and in convertible securities.
STRATEGY Under normal market conditions, the fund invests at least 65% of total
assets in stocks and convertible securities. In selecting stocks, the fund takes
a value approach, favoring companies that appear to be trading below their true
worth. The fund also looks for companies that are established or that have the
potential to pay increasing dividends. However, pursuing the growth aspect of
its goal, the fund may also invest in stocks that do not currently pay
dividends.
The fund may invest up to 35% of total assets in non-convertible corporate and
government bonds, and in warrants. This includes up to 15% of total assets in
junk bonds in the BB/Ba and B/B (Standard & Poor's/Moody's) major rating
categories, and their unrated equivalents.
The fund may also invest in other securities, ranging from conservative stocks
to aggressive investments of various types (more information, page 26). The fund
adjusts the mix of securities in its portfolio as market conditions and economic
outlooks change.
<PAGE>
3
(traffic sign graphic) PORTFOLIO RISKS
Because the fund invests primarily in stocks, its major risks are those of stock
investing, including sudden, unpredictable drops in value and the potential for
periods of lackluster performance.
The fund's current investment approach, with its emphasis on midsize company
value stocks and high-yield bonds, is different from the approach used by many
equity income funds, which tend to favor large company stocks. As a result, the
fund may perform somewhat differently than other equity income funds. The fund's
value stock emphasis also means that the fund may underperform certain other
stock funds (those emphasizing growth or momentum stocks, for example) during
periods when value stocks are out of favor.
Because value investing involves the difficult task of identifying companies
that will succeed in profiting from unique situations, the fund's performance is
more dependent on the manager's abilities than is the case with many stock
funds. Examples of unique situations include introducing a new product,
undergoing a restructuring or attempting a financial turnaround.
To the extent that the fund invests in bonds, it takes on certain risks:
* A bond's issuer could default on principal or interest payments.
* Most types of bonds tend to fall in value when interest rates rise.
* Junk bonds are more risky than investment-grade bonds. Their issuers are less
secure financially, and are more likely to be hurt by interest rate increases
and declines in
[sidebar text]
(magnifying glass graphic) BONDS AND
INTEREST RATES
When interest rates go up, bond prices generally go down, causing the share
price of any mutual fund that holds bonds to drop accordingly.
The reason is simple economics: new bonds issued after rates rise will offer
higher yields, making older bonds with lower rates less attractive to investors.
Discounting the prices of the older bonds effectively raises their yields,
bringing them in line with the newer bonds. This principle works in reverse as
well: when interest rates fall, bond prices go up.
In general, the longer a bond's duration or maturity, the more sensitive it will
be to interest rate fluctuations.
<PAGE>
4 Equity Income Fund continued
- -------------------------------------------------------------------------------
the health of the issuer or the economy. Junk bonds have a higher risk of
default and their market prices can be volatile.
* Convertible securities often follow the issuer's common stock price.
Information on other securities and risks appears on page 26.
A "snapshot" of the fund's investments may be found in the current annual or
semiannual report (see back cover).
(Thinker graphic) INVESTMENT MANAGEMENT
The fund's investment manager is State Street Research & Management Company. The
firm traces its heritage back to 1924 and the founding of one of America's first
mutual funds. Today the firm has more than $45 billion in assets under
management (as of June 30, 1997), including more than $12.9 billion in mutual
funds.
Bartlett R. Geer has been responsible for the fund's day-to-day portfolio
management since January 1992. A senior vice president, he has worked as an
investment professional since joining the firm in 1981.
<PAGE>
INVESTOR EXPENSES 5
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class descriptions begin on page 10
-----------------------------------
<S> <C> <C> <C> <C> <C>
Shareholder fees are paid directly Shareholder Fees(1) (% of offering price) Class A Class B Class C(2) Class S(2)
by investors. ----------------------------------------------------------------------------------------------
Maximum front-end sales charge 4.50 0.00 0.00 0.00
Maximum deferred sales charge 0.00(3) 5.00 1.00 0.00
Annual fund expenses are deducted Annual Fund Expenses (% of average net assets)
from fund assets. Class A Class B Class C Class S
- -----------------------------------------------------------------------------------------------------------------------------------
Management fee 0.65 0.65 0.65 0.65
Marketing (12b-1) fees(4) 0.25 1.00 1.00 0.00
Other expenses, after voluntary reduction(5) 0.35 0.35 0.35 0.35
---- ---- ---- ----
Total annual fund expenses,
after voluntary reduction(5) 1.25 2.00 2.00 1.00
==== ==== ==== ====
EXAMPLE Here is what you would Year Class A Class B(7) Class C(7) Class S
pay if you invested $1,000 ----------------------------------------------------------------------------------------------
over the years indicated. The 1 $57 $70/$20 $30/$20 $10
example is for comparison only 3 $83 $93/$63 $63/$63 $32
and does not represent the 5 $111 $128/$108 $108/$108 $55
fund's actual expenses, either 10 $189 $213/$213 $233/$233 $122
past or future(6).
</TABLE>
[footnote text]
(1) Not charged on reinvestments or exchanges.
(2) Before November 1, 1997, Class C shares were designated Class D and Class S
shares were designated Class C.
(3) Except for investments of $1 million or more; see page 14.
(4) For share classes that have 12b-1 fees, long-term shareholders may pay more
than the equivalent of the regulatory maximum sales charge.
(5) Without reduction, other expenses would have been 0.47%, 0.46%, 0.45% and
0.47%, and total expenses would have been 1.37%, 2.11%, 2.10% and 1.12% for
Class A, B, C, and S respectively. If the subsidy is reduced or eliminated,
which could happen at any time, performance would be reduced accordingly.
(6) Example assumes dividend reinvestment, hypothetical 5% annual return,
maximum applicable sales charges and conversion of Class B shares to Class
A after eight years.
(7) The first number assumes you sold all your shares at the end of the period,
the second assumes you stayed in the fund.
- --------------------------------------------------------------------------
Some financial professionals may receive additional compensation for fund sales
and for services provided to the fund. This compensation does not increase your
expenses.
<PAGE>
6 PERFORMANCE AND VOLATILITY
<TABLE>
<CAPTION>
As of June 30, 1997
-------------------
AVERAGE ANNUAL TOTAL RETURN 1 Year 5 Years 10 Years
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A (%) 21.72 17.06 11.52
Class B (%) 21.45 17.30 11.87
Class C (%) 25.42 17.50 11.86
Class S (%) 27.75 18.49 12.33
S&P 500 Index (%) 34.68 19.76 14.63
Lipper Equity Income Fund Index (%) 27.14 16.59 12.86
</TABLE>
<TABLE>
<CAPTION>
[bar chart graphic]
Years ended June 30
----------------------------------------------------------------------------------------
CLASS A YEAR-BY-YEAR TOTAL RETURN 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
30%
25%
20%
15%
10%
5%
0% (2.35) 17.01 11.33 (6.51) 14.81 21.64 4.30 16.12 22.41 27.45
(5%)
(10%)
</TABLE>
<PAGE>
7
[sidebar text]
(magnifying glass graphic) UNDERSTANDING
PERFORMANCE
AND VOLATILITY
The information on the opposite page is designed to show two aspects of the
fund's track record:
* Average annual total return is a measure of the fund's performance over time.
It is determined by taking the fund's performance over a given period and
expressing it as an average annual rate. Average annual total return includes
the effects of fund expenses and maximum sales charges for each class, and
assumes that you sold your shares at the end of the period.
* The graph of year-by-year returns shows how volatile the fund has been: how
much the difference has been, historically, between its best years and worst
years. In general, funds with higher average annual total returns will also
have higher volatility. The graph includes the effects of fund expenses, but
not sales charges.
Also included are two independent measures of performance. The S&P 500
(officially, the "Standard & Poor's 500 Stock Price Index") is an unmanaged
index of 500 domestic stocks. The Lipper Equity Income Fund Index shows the
performance of a category of mutual funds with similar goals. The Lipper index
shows you how well the fund has done compared to competing funds.
While the fund does not seek to match the returns or the volatility of the S&P
500 index, this index is a good indicator of general stock market performance
and can be used as a rough guide when gauging the return of this and other
investments. When making comparisons, keep in mind that neither the S&P 500 nor
the Lipper index includes the effects of sales charges. Also, even if your stock
portfolio were identical to the S&P 500, your returns would always be lower,
because the S&P 500 doesn't include the cost of brokerage and administrative
expenses.
<PAGE>
8 FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
The information in these tables has been audited by Price Waterhouse LLP, the
fund's independent accountants. The top section of each table shows information
for a single share of the fund. Total return figures assume reinvestment of all
distributions.
<TABLE>
<CAPTION>
Years ended June 30
----------------------------------------------------------------------------------------------
Class A 1988 1989 1990 1991 1992 1993 1994 1995(2) 1996(2) 1997(2)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of year ($) 10.35 8.93 9.87 9.83 8.33 9.19 10.79 10.87 11.70 13.85
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net investment income ($)* 0.53 0.47 0.55 0.45 0.39 0.44 0.24 0.28 0.23 0.33
Net realized and unrealized
gain (loss) on investments,
foreign currency and
forward contracts ($) (0.82) 0.99 0.54 (1.08) 0.83 1.52 0.25 1.37 2.36 2.90
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations ($) (0.29) 1.46 1.09 (0.63) 1.22 1.96 0.49 1.65 2.59 3.23
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income distributions per
share ($) (0.66) (0.51) (0.52) (0.48) (0.36) (0.36) (0.26) (0.28) (0.28) (0.28)
Capital gain distributions
per share ($) (0.47) (0.01) (0.61) (0.39) -- -- (0.15) (0.54) (0.16) (1.94)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions ($) (1.13) (0.52) (1.13) (0.87) (0.36) (0.36) (0.41) (0.82) (0.44) (2.22)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value per share,
end of year ($) 8.93 9.87 9.83 8.33 9.19 10.79 10.87 11.70 13.85 14.86
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Ratios/supplemental data:
Total return(3) (%) (2.35) 17.01 11.33 (6.51) 14.81 21.64 4.30 16.12 22.41 27.45
Net assets at end of year
($ thousands) 30,315 40,411 49,842 45,233 51,585 28,995 40,484 37,327 44,464 71,087
Expense ratio (%)* 1.50 1.50 1.50 1.50 1.50 1.50 1.50 1.42 1.25 1.25
Ratio of net investment income
(loss) to average net assets (%)* 5.91 5.20 5.43 5.30 4.27 3.76 2.42 2.55 1.78 2.43
Portfolio turnover rate (%) 163.00 87.43 106.40 131.43 102.39 80.42 73.96 67.50 111.13 63.33
Average commission rate ($)(6) n/a n/a n/a n/a n/a n/a n/a n/a 0.0140 0.0512
*Reflects voluntary assumption
of fees or expenses per
share in each year ($) 0.03 0.02 0.02 0.01 0.01 0.01 0.05 0.05 0.03 0.02
</TABLE>
<PAGE>
9
<TABLE>
<CAPTION>
Years ended June 30
-------------------------------------------------------------------------
Class B 1993(1) 1994 1995(2) 1996(2) 1997(2)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ($) 10.81 10.79 10.86 11.68 13.82
----- ----- ----- ----- -----
Net investment income ($)* 0.02 0.21 0.21 0.13 0.22
Net realized and unrealized
gain (loss) on investments, foreign
currency and forward contracts ($) (0.02) 0.21 1.38 2.36 2.89
----- ----- ----- ----- -----
Total from investment operations ($) 0.00 0.42 1.59 2.49 3.11
----- ----- ----- ----- -----
Income distributions per share ($) (0.02) (0.20) (0.23) (0.19) (0.18)
Capital gain distributions per share ($) -- (0.15) (0.54) (0.16) (1.94)
----- ----- ----- ----- -----
Total distributions ($) (0.02) (0.35) (0.77) (0.35) (2.12)
----- ----- ----- ----- -----
Net asset value per share, end of year ($) 10.79 10.86 11.68 13.82 14.81
===== ===== ===== ===== =====
Ratios/supplemental data:
Total return(3) (%) 0.05(4) 3.79 15.43 21.60 26.45
Net assets at end of year ($ thousands) 1,060 10,752 16,130 25,543 71,986
Expense ratio (%)* 2.00(5) 2.00 2.00 2.00 2.00
Ratio of net investment income
(loss) to average net assets (%)* 1.53(5) 1.80 1.95 1.05 1.65
Portfolio turnover rate (%) 80.42 73.96 67.50 111.13 63.33
Average commission rate ($)(6) n/a n/a n/a 0.0140 0.0512
*Reflects voluntary assumption of fees
or expenses per share in each year ($) 0.00 0.07 0.05 0.03 0.02
</TABLE>
(1) June 1, 1993 (commencement of share class designations) to June 30, 1993.
(2) Per-share figures have been calculated using the average shares method.
(3) 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) Not annualized.
(5) Annualized.
(6) Average commission rate per share paid for security trades beginning with
the fiscal year ended June 30, 1996.
<PAGE>
10 Financial Highlighs continued
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years ended June 30
--------------------------------------------------------------------
Class C 1993(1) 1994 1995(2) 1996(2) 1997(2)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ($)* 10.81 10.79 10.86 11.67 13.82
----- ----- ----- ----- -----
Net investment income ($)* 0.02 0.21 0.22 0.13 0.21
Net realized and unrealized
gain (loss) on investments, foreign
currency and forward contracts ($) (0.02) 0.21 1.36 2.37 2.90
----- ----- ----- ----- -----
Total from investment operations 0.00 0.42 1.58 2.50 3.11
----- ----- ----- ----- -----
Income distributions per share ($) (0.02) (0.20) (0.23) (0.19) (0.20)
Capital gain distributions per share ($) -- (0.15) (0.54) (0.16) (1.94)
----- ----- ----- ----- -----
Total distributions ($) (0.02) (0.35) (0.77) (0.35) (2.14)
----- ----- ----- ----- -----
Net asset value per share, end of year ($) 10.79 10.86 11.67 13.82 14.79
===== ===== ===== ===== =====
Ratios/supplemental data:
Total return(3) (%) 0.04(4) 3.78 15.33 21.68 26.42
Net assets at end of year ($ thousands) 628 1,280 1,366 1,386 9,592
Expense ratio (%)* 2.00(5) 2.00 2.00 2.00 2.00
Ratio of net investment income
(loss) to average net assets (%)* 1.49(5) 1.88 1.96 1.03 1.59
Portfolio turnover rate (%) 80.42 73.96 67.50 111.13 63.33
Average commission rate ($)(6) n/a n/a n/a 0.0140 0.0512
*Reflects voluntary assumption of fees
or expenses per share in each year ($) 0.00 0.06 0.05 0.03 0.01
</TABLE>
<PAGE>
11
<TABLE>
<CAPTION>
Years ended June 30
---------------------------------------------------------------------
Class S 1993(1) 1994 1995(2) 1996(2) 1997(2)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ($) 10.81 10.79 10.86 11.70 13.85
----- ----- ----- ----- -----
Net investment income ($)* 0.03 0.33 0.32 0.26 0.36
Net realized and unrealized
gain (loss) on investments, foreign
currency and forward contracts ($) (0.02) 0.21 1.39 2.36 2.90
----- ----- ----- ----- -----
Total from investment operations 0.01 0.54 1.71 2.62 3.26
----- ----- ----- ----- -----
Income distributions per share ($) (0.03) (0.32) (0.33) (0.31) (0.31)
Capital gain distributions per share ($) -- (0.15) (0.54) (0.16) (1.94)
----- ----- ----- ----- -----
Total distributions ($) (0.03) (0.47) (0.87) (0.47) (2.25)
----- ----- ----- ----- -----
Net asset value per share, end of year ($) 10.79 10.86 11.70 13.85 14.86
===== ===== ===== ===== =====
Ratios/supplemental data:
Total return(3) (%) 0.14(4) 4.84 16.64 22.82 27.75
Net assets at end of year ($ thousands) 15,988 20,266 34,827 39,298 59,453
Expense ratio (%)* 1.00(5) 1.00 1.00 1.00 1.00
Ratio of net investment income
(loss) to average net assets (%)* 1.65(5) 2.92 2.93 2.03 2.68
Portfolio turnover rate (%) 80.42 73.96 67.50 111.13 63.33
Average commission rate ($)(6) n/a n/a n/a 0.0140 0.0512
*Reflects voluntary assumption of fees
or expenses per share in each year ($) 0.00 0.06 0.05 0.03 0.02
</TABLE>
(1) June 1, 1993 (commencement of share class designations) to June 30, 1993.
(2) Per-share figures have been calculated using the average shares method.
(3) 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) Not annualized.
(5) Annualized.
(6) Average commission rate per share paid for security trades beginning with
the fiscal year ended June 30, 1996.
<PAGE>
12 YOUR ACCOUNT
- -------------------------------------------------------------------------------
[Key Graphic]
OPENING AN ACCOUNT
If you are opening an account through a financial professional, he or she can
assist you with all phases of your investment.
If you are investing through a large retirement plan or other special program,
follow the instructions in your program materials.
To open an account without the help of a financial professional, please use the
instructions on these pages.
[Pencil & Paper Graphic]
CHOOSING A SHARE CLASS
The fund offers four share classes, each with its own sales charge and expense
structure.
If you are investing a substantial amount and plan to hold your shares for a
long period, Class A shares may make the most sense for you. If you are
investing a lesser amount, you
[sidebar text, bottom of page]
CLASS A -- FRONT LOAD
* Initial sales charge of 4.5% or less; schedule on page 14
* Lower sales charges for larger investments; see sidebar on facing page and
sales charge schedule
* Lower annual expenses than Class B or C shares due to lower marketing (12b-1)
fee of 0.25%
CLASS B -- BACK LOAD
* No initial sales charge
* Deferred sales charge of 5% or less on shares you sell within five years;
schedule on page 14
* Annual marketing (12b-1) fee
* Automatic conversion to Class A shares after eight years, reducing future
annual expenses
CLASS C(1) -- LEVEL LOAD
* No initial sales charge
* Deferred sales charge of 1%, paid if you sell shares within one year of
purchase
* Lower deferred sales charge than Class B shares
* Annual marketing (12b-1) fee
* No conversion to Class A shares after eight years, so annual expenses do not
decrease
(1) Before November 1, 1997, these were designated Class D
<PAGE>
13
may want to consider Class B shares (if investing for at least five years) or
Class C shares (if investing for less than five years). If you are investing
through a special program, such as a large employer-sponsored retirement plan or
certain programs available through brokers, you may be eligible to purchase
Class S shares.
Because all future investments in your account will be made in the share class
you designate when opening the account, you should make your decision carefully.
Your financial professional can help you choose the share class that makes the
most sense for you.
[sidebar text, bottom of page]
CLASS S(2) -- NO LOAD
* No sales charges of any kind
* No marketing (12b-1) fees; annual expenses are lower than other share
classes
* Available through a range of retirement and special programs, including broker
programs offering customized recordkeeping and other services; these programs
usually involve special conditions and separate fees (contact your financial
professional for information)
(2) Before November 1, 1997, these were designated Class C
[sidebar text]
[Magnifying Glass Graphic] CLASS A SALES
CHARGE REDUCTIONS
AND WAIVERS
* Substantial investments receive lower sales charge rates; see information on
the following page.
* The "right of accumulation" allows you to include your existing State Street
Research investments (except Money Market Fund Class E shares) as part of your
current investment for sales charge purposes.
* A "letter of intent" allows you to count all investments in this or other
State Street Research funds over the next 13 months as if you were making them
all at once, for purposes of calculating sales charges.
To take advantage of right of accumulation or letter of intent waivers, consult
your financial professional or State Street Research.
<PAGE>
14 Your Account continued
- -------------------------------------------------------------------------------
SALES CHARGES
Class A -- Front Load
when you invest this % is which equals
this amount deducted this % of
for sales your net
charges investment
- ------------------------------------------------------------
Up to $99,999 4.50 4.71
$100,000 - $249,999 3.50 3.63
$250,000 - $499,999 2.50 2.56
$500,000 - $999,999 2.00 2.04
$1 million or more see next column
With Class A shares, you pay a sales charge only when you buy shares.
If you are investing $1 million or more (either as a lump sum or through any of
the methods described on page 11), you can purchase Class A shares without any
sales charge. However, you may be charged a "contingent deferred sales charge"
(CDSC) if you sell any shares you have held for less than one year. Policies
regarding the calculation of the CDSC are the same as for Class B.
Class A shares are also offered with low or no sales charges through various
wrap-fee programs and other sponsored arrangements (contact your financial
professional for information).
CLASS B -- BACK LOAD
this % of net asset value
when you sell shares at the time of purchase (or
in this year after you of sale, if lower) is deduct-
bought them ed from your proceeds
- -------------------------------------------------------------
First year 5.00
Second year 4.00
Third year 3.00
Fourth year 3.00
Fifth year 2.00
Sixth year or later None
With Class B shares, you pay no sales charge when you invest, but you are
charged a "contingent deferred sales charge" (CDSC) when you sell shares you
have held for five years or less, as described in the table above. Any shares
acquired through reinvestment are not subject to the CDSC. There is no CDSC on
exchanges into other State Street Research funds, and the
<PAGE>
15
date of your initial investment will continue to be used as the basis for CDSC
calculations when you exchange. To ensure that you pay the lowest CDSC possible,
the fund will always use the shares with the lowest CDSC to fill your sell
requests.
The CDSC is waived on shares sold for mandatory retirement distributions or
because of disability or death. Consult your financial professional or State
Street Research Shareholder Services.
Class B shares automatically convert to Class A shares after eight years,
lowering your annual expenses from that time on.
CLASS C (FORMERLY CLASS D) -- LEVEL LOAD
this % of net asset value
when you sell shares at the time of purchase (or
in this year after you of sale, if lower) is deduct-
bought them ed from your proceeds
- ---------------------------------------------------------------
First year 1.00
Second year or later None
With Class C shares, you pay no sales charge when you invest, but you are
charged a "contingent deferred sales charge" (CDSC) when you sell shares you
have held for one year or less, as described in the table above. Policies
regarding the calculation of the CDSC are the same as for Class B.
Class C shares currently have the same annual expenses as Class B shares, but
never convert to Class A shares (with their lower annual expenses).
CLASS S (FORMERLY CLASS C) -- NO LOAD
Class S shares have no sales charges or CDSC.
<PAGE>
16 Your Account continued
- -------------------------------------------------------------------------------
[Cash Register Graphic]
POLICIES FOR
BUYING SHARES
Once you have chosen a share class, the next step is to determine the amount you
want to invest.
MINIMUM INITIAL INVESTMENTS:
* $1,000 for accounts that use the Investamatic regular investing program
* $2,000 for Individual Retirement Accounts
* $2,500 for all other accounts
MINIMUM ADDITIONAL INVESTMENTS:
* $50 for any account
Complete the enclosed application. You can avoid future inconvenience by signing
up now for any services you might later use.
TIMING OF REQUESTS All requests received by State Street Research before 4:00
p.m. eastern time will be executed the same day, at that day's closing share
price. Orders received after 4:00 p.m. will be executed the following day, at
that day's closing share price.
WIRE TRANSACTIONS Funds may be wired between 8:00 a.m. and 4:00 p.m. eastern
time. To make a same-day wire investment, please notify State Street Research by
12:00 noon of your intention to wire funds, and make sure your wire arrives by
4:00 p.m. Your bank may charge a fee for wiring money.
<PAGE>
BUYING SHARES 17
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
To Open an Account To Add to an Account
<S> <C> <C>
[Graphic of briefcase] Through a Contact your financial professional. Contact your financial professional.
Financial
Professional
By Mail [Graphic Make your check payable to "State Street Fill out the investment stub from an
of Mailbox] Research Funds." Forward the check and account statement, or indicate the fund
your application to State Street Research. name and account number on your check.
Make your check payable to "State Street
Research Funds." Forward the check and
stub to State Street Research.
[Graphic of By Federal Forward your application to State Street Call State Street Research to obtain a
Federal Building] Funds Wire Research, then call to obtain an control number. Instruct your bank to
account number. Wire funds using the wire funds to:
instructions at right. * State Street Bank & Trust Company, Boston, MA
* ABA: 011000028
* BNF: fund name and share class you want to buy
* AC: 99029761
* OBI: your name and your account number
* Control: the number given you by State Street
Research
By Electronic [Graphic Verify that your bank is a member of the Call State Street Research to verify that
Funds Transfer of Plug] ACH (Automated Clearing House) system. the necessary bank information is on
Forward your application to State Street file for your account. If it is, you may
Research. Please be sure to include the request a transfer with the same phone
appropriate bank information. Call State call. If not, please ask State Street Research
Street Research to request a purchase. to provide you with an EZ Trader
application.
[Graphic of
Application] By Investamatic Forward your application, with all Call State Street Research to verify that
appropriate sections completed, to State Investamatic is in place on your
Street Research, along with a check for account, or to request a form to add it.
your initial investment payable to Investments are automatic once
"State Street Research Funds." Investamatic is in place.
By Exchange [Graphic of Call State Street Research to request Call State Street Research to request
Exchange] an exchange. an exchange.
State Street Research Shareholder Services PO Box 8408, Boston, MA 02266-8408 Internet www.ssrfunds.com
Call toll-free: 1-800-562-0032 (business days 8:00 a.m. - 6:00 p.m., eastern
time)
</TABLE>
<PAGE>
18 Your Account continued
- -------------------------------------------------------------------------------
[Graphic of Typewriter] POLICIES FOR
SELLING SHARES
CIRCUMSTANCES THAT REQUIRE WRITTEN REQUESTS Please submit instructions in
writing when any of the following apply:
* you are selling more than $50,000 worth of shares
* the name or address on the account has changed within the last 30 days
* you want the proceeds to go to a name or address not on the account
registration
* you are transferring shares to an account with a different registration or
share class
* you are selling shares held in a corporate or fiduciary account; for these
accounts, additional documents are required:
corporate accounts: certified copy of a corporate resolution
fiduciary accounts: copy of power of attorney or other governing document
To protect your account against fraud, all signatures on these documents must be
guaranteed. You may obtain a signature guarantee at most banks and securities
dealers. A notary public cannot provide a signature guarantee.
INCOMPLETE SELL REQUESTS State Street Research will attempt to notify you
promptly if any information necessary to process your request is missing.
TIMING OF REQUESTS All requests received in good order by State Street Research
before 4:00 p.m. eastern time will be executed the same day, at that day's
closing share price. Requests received after 4:00 p.m. will be executed the
following day, at that day's closing share price.
WIRE TRANSACTIONS Proceeds sent by federal funds wire must total at least
$5,000. A fee of $7.50 will be deducted from all proceeds sent by wire, and your
bank may charge an additional fee to receive wired funds.
SELLING RECENTLY PURCHASED SHARES If you sell shares before the check or
electronic funds transfer for those shares has been collected, you will not
receive the proceeds until your initial payment has cleared. This may take up to
15 days after your purchase was recorded (in rare cases, longer). If you open an
account with shares purchased by wire, you cannot sell those shares until your
application has been processed.
<PAGE>
SELLING SHARES 19
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
To Sell Some or All of Your Shares
<S> <C>
[Graphic of briefcase] Through a Contact your financial professional.
Financial
Professional
By Mail [Graphic of Mailbox] Send a letter of instruction, an endorsed stock power or share certificates (if
you hold certificate shares) to State Street Research. Specify the fund, the
account number and the dollar value or number of shares. Be sure to include all
necessary signatures and any additional documents, as well as signature
guarantees if required (see facing page).
[Graphic of Federal Building] By Federal Check with State Street Research to make sure that wire redemption privileges
Funds Wire are in place on your account. Once these privileges are established, you may
place your request to sell shares with State Street Research. Proceeds will be
wired to your pre-designated bank account. (See "Wire Transactions" on facing
page.)
By Electronic [Graphic of Plug] Check with State Street Research to make sure that the EZ Trader feature and a
Funds Transfer bank designation is in place on your account. Once one of these is established,
you may place your request to sell shares with State Street Research. Proceeds
will be wired to your pre-designated bank account.
[Graphic of Telephone] By Telephone As long as your request does not require a written request (see facing page),
you can sell shares by calling State Street Research. A check will be mailed to
you on the following business day.
By Exchange [Graphic of Exchange] Read the prospectus for the fund into which you are exchanging. Call State
Street Research to request an exchange.
[Graphic of Calendar] By Systematic See plan information on page 23.
Withdrawal Plan
State Street Research Shareholder Services PO Box 8408, Boston, MA 02266-8408 Internet www.ssrfunds.com
Call toll-free: 1-800-562-0032 (business days 8:00 a.m. - 6:00 p.m., eastern
time)
</TABLE>
<PAGE>
20 Your Account continued
- -------------------------------------------------------------------------------
[Graphic of Pages] ACCOUNT POLICIES
THE FUND'S BUSINESS HOURS The fund is open the same days as the New York Stock
Exchange (generally Monday through Friday). Fund representatives are available
from 8:00 a.m. to 6:00 p.m. eastern time on these days.
CALCULATING SHARE PRICE The fund calculates its net asset value per share (NAV)
every business day at the regular close of the New York Stock Exchange (usually
at 4:00 p.m. eastern time). Each class's share price is calculated by dividing
its net assets by the number of its shares outstanding.
TELEPHONE REQUESTS When you open an account you automatically receive telephone
privileges, allowing you to place requests on your account by telephone. Your
broker can also use these privileges to request exchanges on your account. For
your protection, all telephone calls are recorded.
As long as State Street Research takes certain measures to authenticate
telephone requests on your account, you may be held responsible for unauthorized
requests. Unauthorized telephone requests are rare, but if you want to protect
yourself completely, you can decline the telephone privilege on your
application. The fund may suspend or eliminate the telephone privilege at any
time.
EXCHANGE PRIVILEGES There is no fee to exchange shares among State Street
Research funds. Your new fund shares will be the equivalent class as your
current shares. Any contingent deferred sales charges will continue to be
calculated from the date of your initial investment.
Frequent exchanges can interfere with fund management and drive up costs for all
shareholders. Because of this, the fund currently limits each account, or group
of accounts under common ownership or control, to six exchanges per calendar
year. The fund may change or eliminate the exchange privilege at any time, may
limit or cancel any shareholder's exchange privilege and may refuse to
<PAGE>
accept any exchange request, particularly those associated with "market timing"
strategies.
For Merrill Lynch customers, exchange privileges extend to Summit Cash Reserves
Fund, which is related to the fund for purposes of investment and investor
services.
ACCOUNTS WITH LOW BALANCES If the value of your account falls below $1,500,
State Street Research may mail you a notice asking you to bring the account back
up to $1,500 or close it out. If you do not take action within 60 days, State
Street Research may either sell your shares and mail the proceeds to you at the
address of record or may deduct an annual maintenance fee (currently $18).
REINSTATING RECENTLY SOLD SHARES For 120 days after you sell shares, you have
the right to "reinstate" your investment by putting some or all of the proceeds
into any currently available State Street Research fund at net asset value. Any
CDSC you paid on the amount you are reinstating will be credited to your
account. You may only use this privilege once in any twelve-month period with
respect to your shares of a given fund.
[Graphic of Uncle Sam] DISTRIBUTIONS AND TAXES
Income and Capital Gains Distributions The fund typically distributes its net
income to shareholders four times a year. Net capital gains, if any, are
typically distributed around the end of the fund's fiscal year, which is June
30. To comply with tax regulations, the fund may also pay an additional capital
gains distribution in December.
You may have your distributions reinvested in the fund, invested in a different
State Street Research fund, deposited in a bank account, or mailed out by check.
If you do not give State Street Research other instructions, your distributions
will automatically be reinvested in the fund.
<PAGE>
22 Your Account continued
- -------------------------------------------------------------------------------
[sidebar text]
[Magnifying Glass Graphic] TAX CONSIDERATIONS
Unless your investment is in a tax-deferred account, you may want to avoid:
* investing a large amount in the fund close to the end of its fiscal year (if
the fund makes a capital gains distribution, you will receive some of your
investment back as a taxable distribution)
* selling shares at a loss for tax purposes and investing in a substantially
identical investment within 30 days before or after that sale (such a
transaction is usually considered a "wash sale," and you will not be allowed
to claim a tax loss)
TAX EFFECTS OF DISTRIBUTIONS AND TRANSACTIONS In general, any dividends and
short-term capital gain distributions you receive from the fund are taxable as
ordinary income. Distributions of net capital gains are generally taxable as
long-term capital gains. This is true no matter how long you have owned your
shares and whether you reinvest your distributions or take them in cash.
Every year, the fund will send you information detailing the amount of ordinary
income and capital gains distributed to you for the previous year.
The sale of shares in your account may produce a gain or loss, and is a taxable
event. For tax purposes, an exchange is the same as a sale.
Your investment in the fund could have additional tax consequences. Please
consult your tax professional for assistance.
BACKUP WITHHOLDING By law, the fund must withhold 31% of your distributions and
proceeds if you have not provided complete, correct taxpayer information.
<PAGE>
23
INVESTOR SERVICES [Interlocked Hands Graphic]
INVESTAMATIC PROGRAM Use Investamatic to set up regular automatic investments in
the fund from your bank account. You determine the frequency and amount of your
investments, and you can skip an investment with three days notice. Not
available with Class S shares.
SYSTEMATIC WITHDRAWAL PROGRAM This plan is designed for retirees and other
investors who want regular withdrawals from a fund account. The plan is free and
allows you to withdraw up to 8% of your fund assets a year without incurring any
contingent deferred sales charges. Certain terms and minimums apply.
DIVIDEND ALLOCATION PLAN This plan automatically invests your distributions from
the fund into another fund of your choice, without any fees or sales charges.
AUTOMATIC BANK CONNECTION This plan lets you route any distributions or
Systematic Withdrawal Program payments directly to your bank account.
State Street Research also offers a full range of prototype retirement plans for
individuals, sole proprietors, partnerships, corporations and employees. Call
1-800-562-0032 for information on retirement plans or any of the services
described above.
<PAGE>
24 FUND DETAILS
- -------------------------------------------------------------------------------
[Graphic of Column] BUSINESS STRUCTURE
Formed in 1986, the fund is a diversified series of State Street Research Equity
Trust, an open-end management investment company that is organized as a
Massachusetts business trust. A board of trustees representing shareholder
interests oversees the fund's operations, including the hiring of the investment
manager and other service providers. The fund does not hold regular shareholder
meetings, but may call meetings when matters arise that require shareholder
approval. These may include amendments to the investment management agreement,
the election of trustees or proposed changes in the fund's fundamental goal,
which cannot be changed without shareholder approval.
The investment manager is responsible for the fund's investment and business
activities, and receives the management fee (0.65% of fund assets, annually) as
compensation. The investment manager and the distributor are subsidiaries of
Metropolitan Life Insurance Company.
BROKERS FOR PORTFOLIO TRADES When placing trades for the fund's portfolio, State
Street Research chooses brokers that provide the best execution (a term defined
by service as well as price), but may also consider a broker's sales of fund
shares.
INVESTMENT MANAGER
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
CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110
<PAGE>
25
[Graphic of a Check] DEALER COMPENSATION
Dealers who sell shares of the fund and perform services for fund investors
receive sales commissions and annual fees. These are paid by the fund's
distributor, using money from sales charges and from marketing (12b-1) fees.
Maximum Dealer Compensation Class A Class B Class C Class S
- ------------------------------------------------------------------------------
Initial commission (%) -- 4.00 1.00 0.00
Investments up to $100,000 (%) 4.00 -- -- --
$100,000 - $249,999 (%) 3.00 -- -- --
$250,000 - $499,999 (%) 2.00 -- -- --
$500,000 - $999,999 (%) 1.75 -- -- --
First $1-3 million (%) 1.00(1) -- -- --
Next $2 million (%) 0.50(1) -- -- --
Next $1 and above (%) 0.25(1) -- -- --
Annual fee (%) 0.25 0.25 0.90 0.00
ADDITIONAL POLICIES Please note that the fund maintains additional policies and
reserves certain rights, including:
* The fund may vary its initial or additional investments in the case of
exchanges, reinvestments, periodic investment plans, retirement and employee
benefit plans, sponsored arrangements and other similar programs.
* All orders to purchase shares are subject to acceptance by the fund.
* At any time, the fund may change or discontinue its sales charge waivers and
any of its order acceptance practices, and may suspend the sale of its shares.
* To permit investors to obtain the current price, dealers are responsible for
transmitting all orders to shareholder services promptly.
* Dealers may impose a transaction fee on the purchase or sale of shares by
shareholders.
[footnote text]
(1) If your broker declines this commission, the one-year CDSC on your
investment is waived
<PAGE>
26 OTHER SECURITIES AND RISKS
- -------------------------------------------------------------------------------
[Graphic to be determined] OTHER SECURITIES
AND RISKS
Each of the fund's portfolio securities and investment practices offers certain
opportunities and carries various risks. Major investments and risk factors are
outlined in the fund description starting on page 2. Below are brief
descriptions of other securities and practices, along with their associated
risks.
RESTRICTED AND ILLIQUID SECURITIES Any securities that are thinly traded or
whose resale is restricted can be difficult to sell at a desired time and price.
Some of these securities are new and complex, and trade only among institutions;
the markets for these securities are still developing, and may not function as
efficiently as established markets. Owning a large percentage of restricted and
illiquid securities could hamper the fund's ability to raise cash to meet
redemptions. Also, because there may not be an established market price for
these securities, the fund may have to estimate their value, which means that
their valuation (and, to a much smaller extent, the valuation of the fund) may
have a subjective element.
DERIVATIVES Derivatives, a category that includes options and futures, are
financial instruments whose value derives from another security or an index. The
fund may use derivatives for hedging (attempting to offset a potential loss in
one position by establishing an interest in an opposite position). The fund may
also use derivatives for speculation (investing for potential income or capital
gain).
While hedging can guard against potential risks, it adds to the fund's expenses
and can eliminate some opportunities for gains. There is also a risk that a
derivative intended as a hedge may not perform as expected. The main risk with
derivatives is that some types can amplify a gain or loss, potentially earning
or losing substantially more money than the actual cost of the derivative.
With all derivatives, whether used for hedging or speculation, there is also the
risk that the counterparty may fail to honor its contract terms, causing a loss
for the fund.
<PAGE>
27
FOREIGN INVESTMENTS Foreign securities are more volatile than their domestic
counterparts, in part because of higher political and economic risks, lack of
reliable information, and fluctuations in currency exchange rates. These risks
are usually higher in less developed countries. The fund may use foreign
currencies and related instruments to hedge its foreign investments.
SECURITIES LENDING The fund may seek additional income by lending portfolio
securities to qualified institutions. By reinvesting the collateral it receives
in these transactions, the fund could magnify any gain or loss it realizes on
the underlying investment. If the borrower fails to return the securities and
the collateral is insufficient to cover the loss, the fund could lose money.
WHEN-ISSUED SECURITIES The fund may invest in securities prior to their date of
issue. These securities could fall in value by the time they are actually
issued, which may be anytime from a few days to over a year.
SHORT-TERM TRADING While the fund ordinarily does not trade securities for
short-term profits, it will sell any security at the time it believes best,
which may result in some short-term trading. Short-term trading can increase the
fund's brokerage costs and its shareholders' tax liabilities.
REPURCHASE AGREEMENTS The fund may buy securities with the understanding that
the seller will buy them back with interest at a later date. If the seller is
unable to honor its commitment to repurchase the securities, the fund could lose
money.
INVESTMENT LIMITATIONS
Limitation
Practice (% of total assets)
- ------------------------------------------------------------------
Investing in securities of any given
issuer (other than the U.S.
government and its agencies)(1) 5(2)
Investing in any given industry(1) 25
Lending securities 33
Lending money(1) Prohibited
Repurchase agreements 30
Limitation
Security (% of net assets)
- ----------------------------------------------------------------
Commodity futures contracts
(for non-hedging purposes only) 5(3)
Options contracts (for non-hedging
purposes only) 5
Swap arrangements 5
Illiquid securities 15
Foreign securities 35(4)
[footnote text]
(1) Fundamental policy; may not be changed without shareholder approval.
(2) The fund is also prohibited from owning more than 10% of an issuer's voting
securities.
(3) Initial margin deposits plus premiums may not exceed 5% of the value of the
fund's net assets.
(4) Applies to all direct and indirect interests in securities of non-U.S.
issuers; includes a 5% net asset limitation on investments in developing
countries.
<PAGE>
FOR ADDITIONAL INFORMATION
- -------------------------------------------------------------------------------
You can obtain a free copy of the current annual/semiannual report or SAI by
contacting:
[State Street Research Logo]
Shareholder Services
P.O. Box 8408, Boston, MA 02266
Telephone: 1-800-562-0032
Internet: www.ssrfunds.com
Or you can visit the SEC website at:
http://www.sec.gov
You can find additional information on the fund's structure and its performance
in the following documents:
ANNUAL/SEMIANNUAL REPORTS While the prospectus describes the fund's potential
investments, these reports detail the fund's actual investments as of the report
date. Reports include a discussion by fund management of recent economic and
market trends and fund performance. The annual report also includes the report
of the fund's independent accountants.
STATEMENT OF ADDITIONAL INFORMATION (SAI) A supplement to the prospectus, the
SAI contains further information about the fund and its investment limitations
and policies. It also includes the most recent annual report and the independent
accountants' report. A current SAI for this fund is on file with the Securities
and Exchange Commission and is incorporated by reference (is legally part of
this prospectus).
<PAGE>
State Street Research Equity Income Fund
a Series of
State Street Research Equity Trust
STATEMENT OF ADDITIONAL INFORMATION
November 1, 1997
TABLE OF CONTENTS
Page
INVESTMENT OBJECTIVE........................................................2
ADDITIONAL INVESTMENT POLICIES AND RESTRICTIONS.............................2
ADDITIONAL INFORMATION CONCERNING
CERTAIN INVESTMENT TECHNIQUES......................................5
DEBT INSTRUMENTS AND
PERMITTED CASH INVESTMENTS........................................15
THE TRUST, THE FUND AND ITS SHARES.........................................19
TRUSTEES AND OFFICERS......................................................20
INVESTMENT ADVISORY SERVICES...............................................25
PURCHASE AND REDEMPTION OF SHARES..........................................27
SHAREHOLDER ACCOUNTS.......................................................32
NET ASSET VALUE............................................................37
PORTFOLIO TRANSACTIONS.....................................................38
CERTAIN TAX MATTERS........................................................41
DISTRIBUTION OF SHARES OF THE FUND.........................................43
CALCULATION OF PERFORMANCE DATA............................................48
CUSTODIAN..................................................................54
INDEPENDENT ACCOUNTANTS....................................................54
FINANCIAL STATEMENTS.......................................................54
APPENDIX .................................................................A-1
The following Statement of Additional Information is not a Prospectus.
It should be read in conjunction with the Prospectus of State Street Research
Equity Income Fund dated November 1, 1997, 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-96102996(1197)SSR-LD ET-879D-1196
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INVESTMENT OBJECTIVE
As set forth under "Equity Income Fund--Goal and Strategy" in the
Prospectus of State Street Research Equity Income Fund (the "Fund"), the Fund's
investment goal, which is to provide a high level of current income and,
secondarily, long-term growth of capital, by investing primarily in common
stocks that offer above-average dividend yields, and in convertible securities,
is fundamental and may not be changed by the Fund except by the affirmative vote
of a majority of the outstanding voting securities of the 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.)
ADDITIONAL INVESTMENT POLICIES AND RESTRICTIONS
As set forth under "Equity Income Fund--Portfolio Risks" and "Other
Securities and Risks" in the Fund's Prospectus, the Fund has adopted certain
investment restrictions, and those restrictions are either fundamental or not
fundamental. Fundamental restrictions may not be changed by the Fund except by
the affirmative vote of a majority of the outstanding voting securities of the
Fund. Restrictions that are not fundamental may be changed by a vote of a
majority of the Trustees of the Trust.
The Fund's fundamental investment restrictions are set forth below.
Under these restrictions, it is the Fund's policy:
(1) to invest at least 65% of its assets in equity securities and
equity convertibles into equity securities;
(2) not to invest in a security if the transaction would result in
more than 5% of the 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;
(3) not to invest in a security if the transaction would result in
the Fund 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;
(4) not to issue senior securities;
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(5) not to underwrite or participate in the marketing of
securities of other issuers, although the 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 [as a matter of
interpretation, which is not part of the fundamental policy,
this restriction does not apply 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];
(6) not to purchase or sell real estate in fee simple or real
estate mortgage loans;
(7) 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;
(8) not to lend money; however, the Fund may lend portfolio
securities and purchase bonds, debentures, notes and similar
obligations (and enter into repurchase agreements with respect
thereto);
(9) not to conduct arbitrage transactions (provided that
investments in futures and options for hedging purposes shall
not be deemed arbitrage transactions);
(10) not to invest in oil, gas or other mineral exploration or
development programs (provided that the 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);
(11) 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
(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
(12) not to borrow money (through reverse repurchase agreements or
otherwise) except for extraordinary and emergency purposes,
such as permitting redemption
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requests to be honored, and then not in an amount in excess of
10% of the value of its total assets, provided that additional
investments will be suspended during any period when
borrowings exceed 5% of the Fund's total assets, and provided
further that reverse repurchase agreements shall not exceed 5%
of the Fund's total assets. Reverse repurchase agreements
occur when the Fund sells money market securities and agrees
to repurchase such securities at an agreed-upon price, date
and interest payment. The Fund would use the proceeds from the
transaction to buy other money market securities, which are
either maturing or under the terms of a resale agreement, on
the same day as (or day prior to) the expiration of the
reverse repurchase agreement, and would employ a reverse
repurchase agreement when interest income from investing the
proceeds of the transaction is greater than the interest
expense of the reverse repurchase transaction.
The following investment restrictions are not fundamental. Under these
restrictions, it is the Fund's policy:
(1) not to purchase any security or enter into a repurchase
agreement if as a result more than 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 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 ("S&P") or "Baa" by Moody's Investor's Service,
Inc. ("Moody's"), or their equivalent by any other nationally
recognized statistical rating organization, or securities of
issuers considered by State Street Research & Management
Company (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;
(3) 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
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on financial futures, and futures contracts to the extent set
forth in the Fund's Prospectus and this Statement of
Additional Information;
(4) not to hypothecate, mortgage or pledge any of its assets
except as may be necessary in connection with permitted
borrowings and then not in excess of 15% of the Fund's total
assets, taken at cost (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);
(5) 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;
(6) 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
(7) 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.
ADDITIONAL INFORMATION CONCERNING
CERTAIN INVESTMENT TECHNIQUES
The Fund may buy and sell certain types of derivatives such as options,
futures contracts, options on futures contracts, and swaps under circumstances
in which such instruments are expected by the Investment Manager to aid in
achieving the Fund's investment objective. The Fund may also purchase
instruments with characteristics of both futures and securities (e.g., debt
instruments with interest and principal payments determined by reference to the
value of a commodity or a currency at a future time) and which, therefore,
possess the risks of both futures and securities investments.
Derivatives such as options, futures contracts, options on futures
contracts, and swaps enable the Fund to take both "short" positions (positions
which anticipate a decline in the market value of a particular asset or index)
and "long" positions (positions which anticipate an increase in the market value
of a particular asset or index). The Fund may also use strategies
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which involve simultaneous short and long positions in response to specific
market conditions, such as where the Investment Manager anticipates unusually
high or low market volatility.
The Investment Manager may enter into derivative positions for the Fund
for either hedging or non-hedging purposes. The term hedging is applied to
defensive strategies designed to protect the Fund from an expected decline in
the market value of an asset or group of assets that the Fund owns (in the case
of a short hedge) or to protect the Fund from an expected rise in the market
value of an asset or group of assets which it intends to acquire in the future
(in the case of a long or "anticipatory" hedge). Non-hedging strategies include
strategies designed to produce incremental income (such as the option writing
strategy described below) or "speculative" strategies which are undertaken to
profit from an expected decline in the market value of an asset or group of
assets asset which the Fund does not own or expected increases in the market
value of an asset which it does not plan to acquire. Information about specific
types of instruments is provided below.
Futures Contracts
Futures contracts are publicly traded contracts to buy or sell an
underlying asset or group of assets, such as a currency, or an index of
securities, at a future time at a specified price. A contract to buy establishes
a long position while a contract to sell establishes a short position.
The purchase of a futures contract on an equity security or an index of
equity securities normally enables a buyer to participate in the market movement
of the underlying asset or index after paying a transaction charge and posting
margin in an amount equal to a small percentage of the value of the underlying
asset or index. The Fund will initially be required to deposit with the Trust's
custodian or the broker effecting the futures transaction an amount of "initial
margin" in cash or securities, as permitted under applicable regulatory
policies.
Initial margin in futures transactions is different from margin in
securities transactions in that the former does not involve the borrowing of
funds by the customer to finance the transaction. Rather, the initial margin is
like a performance bond or good faith deposit on the contract. Subsequent
payments (called "maintenance margin") to and from the broker will be made on a
daily basis as the price of the underlying asset fluctuates. This process is
known as "marking to market." For example, when the Fund has taken a long
position in a futures contract and the value of the underlying asset has risen,
that position will have increased in value and the Fund will receive from the
broker a maintenance margin payment equal to the increase in value of the
underlying asset. Conversely, when the Fund has taken a long position in a
futures contract and the value of the underlying instrument has declined, the
position would be less valuable, and the Fund would be required to make a
maintenance margin payment to the broker.
At any time prior to expiration of the futures contract, the Fund may
elect to close the position by taking an opposite position which will terminate
the Fund's position in the futures
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contract. A final determination of maintenance margin is then made, additional
cash is required to be paid by or released to the Fund, and the Fund realizes a
loss or a gain. While futures contracts with respect to securities do provide
for the delivery and acceptance of such securities, such delivery and acceptance
are seldom made.
In transactions establishing a long position in a futures contract,
assets equal to the face value of the futures contract will be identified by the
Fund to the Trust's custodian for maintenance in a separate account to insure
that the use of such futures contracts is unleveraged. Similarly, assets having
a value equal to the aggregate face value of the futures contract will be
identified with respect to each short position. The Fund will utilize such
assets and methods of cover as appropriate under applicable exchange and
regulatory policies.
Options
The Fund may use options to implement its investment strategy. There
are two basic types of options: "puts" and "calls." Each type of option can
establish either a long or a short position, depending upon whether the Fund is
the purchaser or the writer of the option. A call option on a security, for
example, gives the purchaser of the option the right to buy, and the writer the
obligation to sell, the underlying asset at the exercise price during the option
period. Conversely, a put option on a security gives the purchaser the right to
sell, and the writer the obligation to buy, the underlying asset at the exercise
price during the option period.
Purchased options have defined risk, that is, the premium paid for the
option, no matter how adversely the price of the underlying asset moves, while
affording an opportunity for gain corresponding to the increase or decrease in
the value of the optioned asset. In general, a purchased put increases in value
as the value of the underlying security falls and a purchased call increases in
value as the value of the underlying security rises
The principal reason to write options is to generate extra income (the
premium paid by the buyer). Written options have varying degrees of risk. An
uncovered written call option theoretically carries unlimited risk, as the
market price of the underlying asset could rise far above the exercise price
before its expiration. This risk is tempered when the call option is covered,
that is, when the option writer owns the underlying asset. In this case, the
writer runs the risk of the lost opportunity to participate in the appreciation
in value of the asset rather than the risk of an out-of-pocket loss. A written
put option has defined risk, that is, the difference between the agreed-upon
price that the Fund must pay to the buyer upon exercise of the put and the
value, which could be zero, of the asset at the time of exercise.
The obligation of the writer of an option continues until the writer
effects a closing purchase transaction or until the option expires. To secure
its obligation to deliver the underlying asset in the case of a call option, or
to pay for the underlying asset in the case of a
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put option, a covered writer is required to deposit in escrow the underlying
security or other assets in accordance with the rules of the applicable clearing
corporation and exchanges.
Among the options which the Fund may enter are options on securities
indices. In general, options on indices of securities are similar to options on
the securities themselves except that delivery requirements are different. For
example, a put option on an index of securities does not give the holder the
right to make actual delivery of a basket of securities but instead gives the
holder the right to receive an amount of cash upon exercise of the option if the
value of the underlying index has fallen below the exercise price. The amount of
cash received will be equal to the difference between the closing price of the
index and the exercise price of the option expressed in dollars times a
specified multiple. As with options on equity securities or futures contracts, 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. In
connection with the use of such options, the Fund may cover its position by
identifying assets having a value equal to the aggregate face value of the
option position taken.
Options on Futures Contracts
An option on a futures contract gives the purchaser the right, in
return for the premium paid, to assume a position in a futures contract (a long
position if the option is a call and a short position if the option is a put) at
a specified exercise price at any time during the period of the option.
Limitations and Risks of Options and Futures Activity
The Fund may not establish a position in a commodity futures contract
or purchase or sell a commodity option contract for other than bona fide hedging
purposes if immediately thereafter the sum of the amount of initial margin
deposits and premiums required to establish such positions for such nonhedging
purposes would exceed 5% of the market value of the Fund's net assets.
As noted above, the Fund may engage in both hedging and nonhedging
strategies. Although effective hedging can generally capture the bulk of a
desired risk adjustment, no hedge is completely effective. The Fund's ability to
hedge effectively through transactions in futures and options depends on the
degree to which price movements in its holdings correlate with price movements
of the futures and options.
Nonhedging strategies typically involve special risks. The
profitability of the Fund's non-hedging strategies will depend on the ability of
the Investment Manger to analyze both the
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applicable derivatives market and the market for the underlying asset or group
of assets. Derivatives markets are often more volatile than corresponding
securities markets and a relatively small change in the price of the underlying
asset or group of assets can have a magnified effect upon the price of a related
derivative instrument.
Derivatives markets also are often less liquid than the market for the
underlying asset or group of assets. Some positions in futures and options may
be closed out only on an exchange which provides a secondary market therefor.
There can be no assurance that a liquid secondary market will exist for any
particular futures contract or option at any specific time. Thus, it may not be
possible to close such an option or futures position prior to maturity. The
inability to close options and futures positions also could have an adverse
impact on the Fund's ability to effectively carry out their derivative
strategies and might, in some cases, require a Fund to deposit cash to meet
applicable margin requirements. The Fund will enter into an option or futures
position only if it appears to be a liquid investment.
Swaps
The Fund may enter into various forms of swap arrangements with
counterparties with respect to interest rates, currency rates or indices,
including purchase of caps, floors and collars as described below. In an
interest rate swap the Fund could agree for a specified period to pay a bank or
investment banker the floating rate of interest on a so-called notional
principal amount (i.e., an assumed figure selected by the parties for this
purpose) in exchange for agreement by the bank or investment banker to pay the
Fund a fixed rate of interest on the notional principal amount. In a currency
swap the Fund would agree with the other party to exchange cash flows based on
the relative differences in values of a notional amount of two (or more)
currencies; in an index swap, the Fund would agree to exchange cash flows on a
notional amount based on changes in the values of the selected indices. Purchase
of a cap entitles the purchaser to receive payments from the seller on a
notional amount to the extent that the selected index exceeds an agreed upon
interest rate or amount whereas purchase of a floor entitles the purchaser to
receive such payments to the extent the selected index falls below an agreed
upon interest rate or amount. A collar combines a cap and a floor.
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 portion of the Fund's portfolio.
However, the Fund may enter into
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such arrangements for income purposes to the extent permitted by the Commodities
Futures Trading Commission for entities which are not commodity pool operators,
such as the Fund. In entering a swap arrangement, the Fund is dependent upon the
creditworthiness and good faith of the counterparty. The Fund attempts to reduce
the risks of nonperformance by the counterparty by dealing only with
established, reputable institutions. The swap market is still relatively new and
emerging; positions in swap arrangements may become illiquid to the extent that
nonstandard arrangements with one counterparty are not readily transferable to
another counterparty or if a market for the transfer of swap positions does not
develop. The use of interest rate swaps is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. If the 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 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.
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Repurchase Agreements
The Fund may enter into repurchase agreements. Repurchase agreements
occur when the Fund acquires a security and the seller, which may be either (i)
a primary dealer in U.S. Government securities or (ii) an FDIC-insured bank
having gross assets in excess of $500 million, simultaneously commits to
repurchase it at an agreed-upon price on an agreed-upon date within a specified
number of days (usually not more than seven) from the date of purchase. The
repurchase price reflects the purchase price plus an agreed-upon market rate of
interest which is unrelated to the coupon rate or maturity of the acquired
security. The Fund will only enter into repurchase agreements involving U.S.
Government securities. Repurchase agreements could involve certain risks in the
event of default or insolvency of the other party, including possible delays or
restrictions upon the Fund's ability to dispose of the underlying securities.
Repurchase agreements will be limited to 30% of the Fund's 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.
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 months, or over a year or
more; during this period dividends or interest on the securities are not
payable. A frequent form of when-issued trading occurs when corporate securities
to be created by a merger of companies are traded prior to the actual
consummation of the merger. Such transactions may involve a risk of loss if the
value of the securities falls below the price committed to prior to actual
issuance. The Trust's custodian will establish a segregated account when 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
transactions involving delayed deliveries or forward commitments are frequently
characterized as when-issued transactions and are similarly treated by the Fund.
Restricted Securities
It is the Fund's policy not to make an investment in restricted
securities, including restricted securities sold in accordance with Rule 144A
under the Securities Act of 1933 ("Rule 144A Securities") if, as a result, more
than 35% of the Fund's total assets are invested in restricted securities,
provided not more than 10% of the Fund's total assets are invested in restricted
securities other than Rule 144A Securities.
Securities may be resold pursuant to Rule 144A under certain
circumstances only to qualified institutional buyers as defined in the rule, and
the markets and trading practices for such securities are relatively new and
still developing; depending on the development of such markets, 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
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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 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 subjective valuation of such securities in the absence
of a market for them. Restricted securities that are not resalable under Rule
144A may be subject to risks of illiquidy and subjective valuations to a greater
degree than Rule 144A Securities.
Lower Quality Debt Securities ("Junk Bonds")
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. Risk 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 period of rising interest rates and economic
downturn. For further information concerning the rating categories of debt
securities, see the Appendix to this Statement of Additional Information.
For the fiscal year ended June 30, 1997, the percentage of the 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: 0.4% BB, 8.4% B, and 1.3%
CCC, as determined on a dollar weighted basis, comprising 10.1% of total
investments. Of these securities, 90.2% were rated by a nationally recognized
statistical rating organization and 9.8% 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.
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Foreign Investments
The Fund reserves the right to invest without limitation in securities
of non-U.S. issuers directly, or indirectly in the form of American Depositary
Receipts ("ADRs") and European Depositary Receipts ("EDRs"). Under current
policy, however, the 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 the Fund; (b) the
relative illiquidity of the issue in U.S. markets; and (c) the possibility of
higher trading costs in the over-the-counter market as opposed to exchange based
tradings. The Fund will take these and other risk considerations into account
before making an investment in an unsponsored ADR.
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 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, although the Fund presently does not expect to invest
13
<PAGE>
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.
Securities Lending
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 any loaned securities plus accrued interest. Collateral received
by the Fund will generally be held in the form tendered, although cash may be
invested in unaffiliated mutual funds with quality short-term portfolios,
securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities or certain unaffiliated mutual funds, irrevocable stand-by
letters of credit issued by a bank, repurchase agreements, or other similar
investments. The investing of cash collateral received from loaning portfolio
securities involves leverage which magnifies the potential for gain or loss on
monies invested and, therefore, results in an increase in the volatility of 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.
Temporary and Defensive Investments
The Fund may hold up to 100% of its assets in cash or short-term debt
securities for temporary defensive purposes. The Fund will adopt a temporary
defensive position when, in the opinion of the Investment Manager, such a
position is more likely to provide protection against adverse market conditions
than adherence to the Fund's other investment policies. The types of short-term
instruments in which the Fund 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, which at the
time of purchase are rated at least within the "A" major rating category by S&P
or the "Prime" major rating category by Moody's (or, if not rated, issued by
companies having an outstanding long-term unsecured debt issued rated at least
within the "A" category by S&P or Moody's).
14
<PAGE>
Industry Classifications
In determining how much of the Fund's portfolio is invested in a given
industry, the following industry classifications are currently used. Securities
issued or guaranteed as to principal or interest by the U.S. Government or its
agencies or instrumentalities or mixed- ownership Government corporations or
sponsored enterprises (including repurchase agreements involving U.S. Government
securities to the extent excludable under relevant regulatory interpretations)
are excluded. Securities issued by foreign governments are also excluded.
Companies engaged in the business of financing may be classified according to
the industries of their parent or sponsor companies or industries that otherwise
most affect such financing companies. Issuers of asset-backed pools will be
classified as separate industries based on the nature of the underlying assets,
such as mortgages and credit card receivables. "Asset-backed-Mortgages"
includes private pools of nongovernment backed mortgages.
<TABLE>
<CAPTION>
Basic Industries Consumer Staple Science & Technology
- ---------------- --------------- --------------------
<S> <C> <C>
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 Refining & Marketing Airline
Gas Oil Production Automotive
Gas Transmission Oil Service Building
Telephone Hotel & Restaurant
Photography
Other Finance Recreation
- ----- ------- Retail Trade
Trust Certificates- Bank Textile & Apparel
Government Related Lending Financial Service
Asset-backed--Mortgages Insurance
Asset-backed--Credit
Card Receivables
</TABLE>
DEBT INSTRUMENTS AND
PERMITTED CASH INVESTMENTS
The Fund's may invest in long-term and short-term debt securities.
Certain debt securities and money market instruments in which the Fund may
invest are described below.
15
<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:
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 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 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, 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 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, 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 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.
16
<PAGE>
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 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.
17
<PAGE>
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 within the "A" major rating category by S&P or within the
"Prime" major rating category by Moody's, or, if not rated, issued by companies
having an outstanding long-term unsecured debt issue rated at least within the
"A" category by S&P 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 within the "A"
category by S&P or within the "Prime" category by Moody's.
Commercial paper rated within the "A" category (highest quality) by S&P
is issued by entities which have liquidity ratios which are adequate to meet
cash requirements. Long-term senior debt is rated within the "A" category or
better, although in some cases credits within the "BBB" category may be allowed.
The issuer has access to at least two additional channels of borrowing. Basic
earnings and cash flow have an upward trend with allowance made for unusual
circumstances. Typically, the issuer's industry is well established and the
issuer has a strong position within the industry. The reliability and quality of
management are unquestioned. The relative strength or weakness of the above
factors determines whether the issuer's commercial paper is rated A-1, A-2 or
A-3. (Those A-1 issues determined to possess overwhelming safety characteristics
are denoted with a plus (+) sign: A-1+.)
The rating Prime is the highest commercial paper rating category
assigned by Moody's. Among the factors considered by Moody's in assigning
ratings are the following: evaluation of the management of the issuer; economic
evaluation of the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain areas; evaluation of the
issuer's products in relation to competition and customer acceptance; liquidity;
amount and quality of long-term debt; trend of earnings over a period of 10
years; financial management of obligations which may be present or may arise as
a result of public interest questions and preparations to meet such obligations.
These factors are all considered in determining whether the commercial paper is
rated Prime-1, Prime-2 or Prime-3.
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 the Fund's portfolio, the Trustees of the Trust will review the
situation and take such action as they deem in the best interests of the Fund's
shareholders, including, if necessary, changing the composition of the
portfolio.
18
<PAGE>
THE TRUST, THE FUND AND ITS SHARES
State Street Research Equity Trust is currently comprised of the
following series: State Street Research Equity Investment Fund, State Street
Research Equity Income Fund, and State Street Research Global Resources Fund.
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. The
Trustees also 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. 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 authorized shares of the Fund to be issued in four
classes: Class A, Class B, Class C and Class S shares. Prior to November 1,
1997, the Fund's current Class C shares were designated as Class D shares and
the Fund's current Class S shares were designated as Class C shares.
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 C
shares bear the expenses of the deferred sales arrangement and any expenses
(including the higher service and distribution fees) resulting from such sales
arrangement, and certain other incremental expenses related to a class. Each
class will have exclusive voting rights with respect to provisions of the Rule
12b-1 distribution plan pursuant to which the service and distribution fees, if
any, are paid. Although the legal rights of holders of each class of shares are
identical, it is likely that the different expenses borne by each class will
result in different net asset values and dividends. The different classes of
shares of the Fund also have different exchange privileges. Except for those
differences between classes of shares described above, in the Fund's Prospectus
and otherwise this Statement of Additional Information, 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 [by the Fund].
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 Trust's 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 a 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 Master Trust Agreement, no annual or regular meeting of
shareholders is required. Thus, there ordinarily will be no shareholder meetings
unless required by the 1940 Act. Except as otherwise provided under the 1940
Act, the Board of Trustees will be a self-perpetuating body until fewer than
two-thirds of the Trustees serving as such are Trustees who were elected by
shareholders of the Trust. In the event less than a majority of the Trustees
serving as such were elected by shareholders of the Trust, a meeting of
shareholders will be
19
<PAGE>
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 for 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.
TRUSTEES AND OFFICERS
The Trustees and principal officers of the Trust, their addresses, and
their principal occupations and positions with certain affiliates of the
Investment Manager are set forth below.
*+Peter C. Bennett, One Financial Center, Boston, MA 02111, serves as
Vice President of the Trust. He is 59. His principal occupation is Executive
Vice President and Director of State Street Research & Management Company.
During the past five years he has also served as Senior Vice President of State
Street Research & Management Company. Mr. Bennett's other principal business
affiliation is Director, State Street Research Investment Services, Inc.
+Steve A. Garban, The Pennsylvania State University, 210 Old Main,
University Park, PA 16802, serves as Trustee of the Trust. He is 59. He is
retired and was formerly Senior Vice President for Finance and Operations and
Treasurer of The Pennsylvania State University.
*+Bartlett R. Geer, One Financial Center, Boston, MA 02111 serves as
Vice President of the Trust. He is 42. 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.
+Malcolm T. Hopkins, 14 Brookside Road, Biltmore Forest, Asheville, NC
28803, serves as Trustee of the Trust. He is 69. He is engaged principally in
private investments. Previously, he was Vice Chairman of the Board and Chief
Financial Officer of St. Regis Corp.
*+Frederick R. Kobrick, One Financial Center, Boston, MA 02111, serves
as Vice President of the Trust. He is 54. His principal occupation is currently,
and during the past five years has been, Senior Vice President of State Street
Research & Management Company.
- -------------------------
* or +, see footnotes on page 22.
20
<PAGE>
+Edward M. Lamont, Box 1234, Moores Hill Road, Syosset, NY 11791,
serves as Trustee of the Trust. He is 70. 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 71. 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 46. His principal occupation is Executive Vice
President, Treasurer, Chief Financial Officer 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, One Financial Center, Boston, MA 02111
serves as Secretary and General Counsel of the Trust. He is 42. His principal
occupation is Executive Vice President, General Counsel and Secretary of State
Street Research & Management Company. During the past five years he has also
served as Senior Vice President of State Street Research & Management Company
and as Senior Vice President, General Counsel and Assistant Secretary of The
Boston Company, Inc., Boston Safe Deposit and Trust Company and The Boston
Company Advisors, Inc. Mr. McNamara's other principal business affiliations
include 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 59. His principal occupation currently,
and during the past five years has been, Senior 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 65. 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 73. 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 45. 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.
- -------------------------
* or +, see footnotes on page 22.
21
<PAGE>
+Toby Rosenblatt, 3409 Pacific Avenue, San Francisco, CA 94118, serves
as Trustee of the Trust. He is 59. 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
60. His principal occupation during the past five years has been Jay W.
Forrester Professor of Management at Sloan School of Management, Massachusetts
Institute of Technology.
*+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 54. 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
and Director of State Street Research Investment Services, Inc., and until
February 1996, prior positions as President and Chief Executive Officer of that
company.
+Jeptha H. Wade, 251 Old Billerica Road, Bedford, MA 01730, serves as
Trustee of the Trust. He is 72. 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.
*+James M. Weiss, One Financial Center, Boston, MA 02111, serves as
Vice President of the Trust. He is 51. His principal occupation is Senior Vice
President of State Street Research & Management Company. During the past five
years he has also served as President and Chief Investment Officer of IDS
Advisory Group, Inc. and as Senior Vice President of Stein, Roe & Farnham.
*+John T. Wilson, One Financial Center, Boston, MA 02111, serves as
Vice President of the Trust. He is 34. His principal occupation is Vice
President of State Street Research & Management Company. During the past five
years he has also served as an analyst and portfolio manager at Phoenix Home
Life Mutual Insurance Company and, from 1995 to 1996, as a Vice President of
Phoenix Investment Counsel, Inc.
- -------------------------
* These Trustees and/or officers are or may be deemed to be "interested
persons" of the Trust under the 1940 Act because of their affiliations
with the Fund's investment adviser.
+ Serves as a Trustee 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, 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.
22
<PAGE>
Record ownership of shares of the Fund as of July 31, 1997 was as
follows:
% of
Class Holder Class
A Merrill Lynch 5.5
B Merrill Lynch 18.4
C(a) Merrill Lynch 62.2
S(a) Chase Manhattan 92.8
Bank, N.A.
The full name and address of the above institutions are:
Chase Manhattan Bank, N.A.(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
- ---------------------------------
(a) Prior to November 1, 1997, the Fund's current Class C shares were
designated as Class D shares and the Fund's current Class S shares were
designated as Class C shares.
(b) Chase Manhattan Bank, N.A. holds such shares as trustee under certain
employee benefit plans serviced by Metropolitan Life Insurance Company
("Metropolitan").
(c) The Fund believes 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.
23
<PAGE>
As of July 31, 1997, the Trustees and principal officers of the
Trust as a group owned the approximately 1.5% of the outstanding Class A shares
of the Fund, and none of the outstanding Class B, Class C or Class S Shares.*
- ------------------------
* Prior to November 1, 1997, the Fund's current Class C shares were
designated as Class D shares and the Fund's current Class S shares were
designated as Class C shares.
The Trustees were compensated as follows:
Total
Compensation
Aggregate From Trust and
Compensation Complex Paid
Name of Trustee From Trust(a) to Trustees(b)
- --------------------------------------------------------------------------------
Steve A. Garban $ 4,443 $34,750
Malcolm T. Hopkins $ 5,043 $34,750
Edward M. Lamont $11,325 $59,375
Robert A. Lawrence $11,725 $92,125
Dean O. Morton $12,525 $96,125
Thomas L. Phillips $11,725 $59,375
Toby Rosenblatt $11,325 $59,375
Michael S. Scott Morton $13,725 $100,325
Ralph F. Verni $ 0 $ 0
Jeptha H. Wade $12,925 $63,375
(a) For the Fund's fiscal year ended June 30, 1997. Includes compensation
from multiple series of the Trust. See "The Trust, the Fund and its
Shares" in this Statement of Additional Information for a listing of
series.
(b) Includes compensation on behalf of all series of 12 investment
companies for which the Investment Manager served directly or
indirectly as investment adviser or for which the Investment Manager
served as sub-investment adviser, and series of State Street Research
Portfolios, Inc., for which State Street Research Investment Services,
Inc. served as distributor. "Total Compensation from Trust and Complex
Paid to Trustees" is for the 12 months ended December 31, 1996. The
Trust does not provide any pension or retirement benefits for the
Trustees.
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 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
24
<PAGE>
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 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 0.65% of the net
assets of the Fund. The advisory fees paid by the Fund to the Investment Manager
for the last three fiscal years, prior to the assumption of fees or expenses,
were as follows: 1997, $975,669; 1996, $649,578; and 1995, $521,730.
The Distributor and its affiliates may from time to time and in varying
amounts voluntarily assumed some portion of fees or expenses relating to the
Fund. The voluntary reduction of fees or assumption of expenses for the same
periods were as follows: 1997, $181,305; 1996, $267,958; and 1995, $333,725.
The Advisory Agreement provides that it shall continue in effect from
year to year with respect to the Fund as long as it is approved at least
annually both (i) by a vote of a majority of the outstanding voting securities
of the Fund (as defined in the 1940 Act) or by the Trustees of the Trust, and
(ii) in either event by a vote of a majority of the Trustees who are not parties
to the Advisory Agreement or "interested persons" of any party thereto, cast in
person at a meeting called for the purpose of voting on such approval. The
Advisory Agreement may be terminated on 60 days' written notice by either party
and will terminate automatically in the event of its assignment, as defined
under the 1940 Act and regulations thereunder. Such regulations provide that a
transaction which does not result in a change of actual control or management of
an adviser is not deemed an assignment.
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Under the Fund's 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 the Fund's shares may be purchased.
Under the Code of Ethics of the Investment Manager, investment
management personnel are only permitted to engage in personal securities
transactions in accordance with certain conditions relating to such person's
position, the identity of the security, the timing of the transaction, and
similar factors. Such personnel must report their personal securities
transactions quarterly and supply broker confirmations of such transactions to
the Investment Manager.
PURCHASE AND REDEMPTION OF SHARES
Shares of the Fund are distributed by State Street Research Investment
Services, Inc., 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 S shares, a sales charge which, at the election
of the investor, may be imposed (i) at the time of purchase (the Class A shares)
or (ii) on a deferred basis (the Class B and Class C shares). General
information on how to buy shares of the Fund, as well as sales charges involved,
are set forth under "Your Account" in the Prospectus. The following supplements
that information.
Public Offering Price. The public offering price for each class of
shares is based on their net asset value determined as of the close of the NYSE
on the day the purchase order is received by State Street Research Shareholder
Services ("Shareholder Services") [the Distributor?] 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 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.
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Class A Shares--Reduced Sales Charges. The reduced sales charges set
forth under "Your Account--Class A Sales Charge Reductions and Waivers" in the
Fund's Prospectus apply to purchases made at any one time by any "person," which
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 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 S 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
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<PAGE>
as eligible to join with the investor in a single purchase. Class B, Class C and
Class S 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.
Other Programs Related to Class A Shares. Class A shares of the Fund
may be sold or issued in an exchange at a reduced sales charge or without 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.
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 person: (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.
Conversion of Class B Shares to Class A Shares. A shareholder's Class B
shares of the Fund, including all shares received as dividends or distributions
with respect to such shares, will automatically convert to Class A shares of the
Fund at the end of eight years following the issuance of such 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.
Contingent Deferred Sales Charges. The amount of any contingent
deferred sales charge paid on Class A shares (on sales of $1 million or more and
which do not involve an
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<PAGE>
initial sales charge) or on Class B or Class C shares of the Fund will be paid
to the Distributor. The Distributor will pay dealers at the time of sale a 4%
commission for selling Class B shares and a 1% commission for selling Class C
shares. In certain cases, a dealer may elect to waive the 4% commission on Class
B shares and receive in lieu thereof a 1% annual fee with respect to such shares
until the shares convert to Class A shares. The proceeds of the contingent
deferred sales charges and the distribution fees are used to offset distribution
expenses and thereby permit the sale of Class B and Class C shares without an
initial sales charge.
In determining the applicability and rate of any contingent deferred
sales charge of Class B or Class C shares, it will be assumed that a redemption
of the shares is made first of those shares having the greatest capital
appreciation, next of shares representing reinvestment of dividends and capital
gains distributions and finally of remaining shares held by shareholder for the
longest period of time. Class B shares that are redeemed within a five-year
period after their purchase, and Class C shares that are redeemed within a
one-year period after their purchase, will not be subject to a contingent
deferred sales charge to the extent that the value of such shares represents (1)
capital appreciation of Fund assets or (2) reinvestment of dividends or capital
gains distributions. The holding period for purposes of applying a contingent
deferred sales charge for a particular class of shares of the Fund acquired
through an exchange from another Eligible Fund will be measured from the date
that such shares were initially acquired in the other Eligible Fund, and shares
of the same class being redeemed will be considered to represent, as applicable,
capital appreciation or dividend and capital gains distribution reinvestments in
such other Eligible Fund. These determinations will result in any contingent
deferred sales charge being imposed at the lowest possible rate. For federal
income tax purposes, the amount of the contingent deferred sales charge will
reduce the gain or increase the loss, as the case may be, on the amount realized
on redemption.
Contingent Deferred Sales Charge Waivers. With respect to Class A
shares (on sales of $1 million or more and which do not involve an initial sales
charge), and Class B and Class C shares of the Fund, the contingent deferred
sales charge does not apply to exchanges or to redemptions under a systematic
withdrawal plan which meets certain conditions. In addition, the contingent
deferred sales charge will be waived for: (i) redemptions made within one year
of the death or total disability, as defined by the Social Security
Administration, of all shareholders of an account; (ii) redemptions made after
attainment of a specific age in an amount which represents the minimum
distribution required at such age under Section 401(a)(9) of the Internal
Revenue Code of 1986, as amended, for retirement accounts or plans (e.g., age 70
1/2 for Individual Retirement Accounts and Section 403(b) plans), calculated
solely on the basis of assets invested in the Fund or other Eligible Funds; and
(iii) a redemption resulting from a tax-free return of an excess contribution to
an Individual Retirement Account. (The foregoing waivers do not apply to a
tax-free rollover or transfer of assets out of the Fund). The Fund may modify or
terminate the waivers at any time; for example, the Fund may limit the
application of multiple waivers and establish other conditions for employee
benefit plans.
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<PAGE>
Class S Shares. Class S shares are currently available to certain
employee benefit plans such as qualified retirement plans which meet criteria
relating to number of participants, service arrangements, or similar factors;
insurance companies; investment companies; endowment funds of nonprofit
organizations with substantial minimum assets (currently a minimum of $10
million); and other similar institutional investors. Class S shares may be
acquired through programs or products sponsored by Metropolitan, its affiliates,
or both for which Class S shares have been designated. In addition, Class S
shares are available through programs under which investors pay an asset-based
fee and a transaction fee to an intermediary. Class S share availability is
determined by the Distributor and intermediaries based on the overall direct and
indirect costs of a particular program, expected assets, account sizes and
similar considerations.
Reorganizations. In the event of mergers or reorganizations with other
public or private collective investment entities, including investment companies
as defined in the 1940 Act, 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.
Systematic Withdrawal Plan. A shareholder who owns noncertificated
Class A or Class S shares with a value of $5,000 or more, or Class B or Class C
shares with a value of $10,000 or more, may elect, by participating in the
Fund's Systematic Withdrawal Plan, to have periodic checks issued for specified
amounts. These amounts may not be less than certain minimums, depending on the
class of shares held. The Plan provides that all income dividends and capital
gains distributions 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 Systematic Withdrawal 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 Systematic Withdrawal
Plan was initiated, whichever is higher.
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Expenses of the Systematic Withdrawal Plan are borne by the Fund. A
participating shareholder may withdraw from the Systematic Withdrawal Plan, and
the Fund may terminate the Systematic Withdrawal Plan at any time on written
notice. Purchase of additional shares while a shareholder is receiving payments
under a Systematic Withdrawal Plan is ordinarily disadvantageous because of
duplicative sales charges. For this reason, a shareholder may not participate in
the Investamatic Program (see "Your Account--Investor Services--Investamatic
Program" in the Fund's Prospectus) and the Systematic Withdrawal Plan at the
same time.
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.
Signature Guarantees. Signature guarantees are required for, among
other things: (1) written requests for redemptions for more than $50,000; (2)
written requests for redemptions for any amount if the proceeds are transmitted
to other than the current address of record (unchanged in the past 30 days); (3)
written requests for redemptions for any amount submitted by corporations and
certain fiduciaries and other intermediaries; 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.
Dishonored Checks. If a purchaser's check is not honored for its full
amount, the purchaser could be subject to additional charges to cover collection
costs and any investment loss, and the purchase may be canceled.
Processing Charges. Purchases and redemptions processed through
securities dealers may be subject to processing charges imposed by the
securities dealer in addition to sales charges that may be imposed by the Fund
or the Distributor.
SHAREHOLDER ACCOUNTS
General information on shareholder accounts is included in the Fund's
Prospectus under "Your Account." The following supplements that information.
Maintenance Fees and Involuntary Redemption. Because of the relatively
high cost of maintaining small shareholder accounts, the Fund reserves the right
to redeem at its option
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<PAGE>
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 involuntarily 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 values; or (3) during such
other periods as the Securities and Exchange Commission (the "SEC") may by order
permit for the protection of investors; and (b) the payment of redemption
proceeds may be postponed as otherwise provided under "Purchase and Redemption
of Shares" in this Statement of Additional Information.
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 C shares will not be issued, while certificates representing Class A or
Class S 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 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 and Redemption of Shares" in this Statement of
Additional Information.
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2. The following methods of receiving dividends from investment
income and distributions from capital gains generally are
available:
(a) All income dividends and capital gains distributions
reinvested in additional shares of the Fund.
(b) All income dividends and capital gains distributions
in cash.
(c) All income dividends and capital gains distributions
invested in any one available Eligible Fund
designated by the shareholder 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 Privileges. 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 C shares may be redeemed without the payment of any contingent deferred
sales charge that might otherwise be due upon an ordinary redemption of such
shares. The State Street Research Money Market Fund issues Class E shares which
are sold without any sales charge. Exchanges of State Street Research Money
Market Fund Class E shares into Class A shares of the Fund or any other Eligible
Fund are subject to the initial sales charge or contingent deferred sales charge
applicable to an initial investment in such Class A shares, unless a prior Class
A sales charge has been paid directly or indirectly with respect to the shares
redeemed. For purposes of computing the contingent deferred sales charge that
may be payable upon disposition of any acquired Class A, Class B and Class C
shares, the holding period of the redeemed shares is "tacked" to the holding
period of any acquired shares. No exchange transaction fee is currently imposed
on any exchange.
Shares of the Fund may also be acquired or redeemed in exchange for
shares of the Summit Cash Reserves Fund ("Summit Cash Reserves") by customers of
Merrill Lynch, Pierce, Fenner & Smith Incorporated (subject to completion of
steps necessary to implement the program). The Fund and Summit Cash Reserves are
related mutual funds for purposes of
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<PAGE>
investment and investor services. Upon the acquisition of shares of Summit Cash
Reserves by exchange for redeemed shares of the Fund, (a) no sales charge is
imposed by Summit Cash Reserves, (b) no contingent deferred sales charge is
imposed by the Fund on the Fund shares redeemed, and (c) any applicable holding
period of the Fund shares redeemed is "tolled," that is, the holding period
clock stops running pending further transactions. Upon the acquisition of shares
of the Fund by exchange for redeemed shares of Summit Cash Reserves, (a) the
acquisition of Class A shares shall be subject to the initial sales charges or
contingent deferred sales charges applicable to an initial investment in such
Class A shares, unless a prior Class A sales charge has been paid indirectly,
and (b) the acquisition of Class B or Class C shares of the Fund shall restart
any holding period previously tolled, or shall be subject to the contingent
deferred sales charge applicable to an initial investment in such shares.
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 with
respect to the Fund (see "Your Account--Account Policies--Telephone Requests" in
the Fund's Prospectus and "--Telephone Privileges," below) 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 or into 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
exchanges 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 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 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
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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.
Dividend Allocation Plan. The Dividend Allocation Plan allows
shareholders to elect to have all their dividends and any other distributions
from the Fund or any Eligible Fund automatically invested at net asset value in
one other such Eligible Fund designated by the shareholder, provided the account
into which the dividends and distributions are directed is initially funded with
the requisite minimum amount.
Telephone Privileges. Unless a shareholder declines telephone
privileges that are offered with his or her Account, (see "Your Account--Account
Policies--Telephone Requests"), he or she 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. Neither the Fund, the other Eligible Funds, the Transfer
Agent, the Investment Manager nor 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.
Alternative Means of Contacting the Fund. It is unlikely, during
periods of extraordinary market conditions, that a shareholder may have
difficulty in reaching Shareholder Services. In that event, however, the
shareholder should contact Shareholder Services at 1-800-
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<PAGE>
562-0032, 1-617-357-7800 or otherwise at its main office at One Financial
Center, Boston, Massachusetts 02111-2690.
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 utilize one or more pricing services in lieu of market quotations for
certain securities which are not readily available on a daily basis. Such
services utilize information with respect to market transactions, quotations
from dealers and various relationships among securities in determining value and
may provide prices determined as of times prior to the close of the NYSE.
In general, securities are valued as follows. Securities which are
listed or traded on the New York or American Stock Exchange are valued at the
price of the last quoted sale on the respective exchange 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
with the use of such pricing services as may be deemed appropriate or
methodologies approved by the Trustees.
The Trustees have authorized the use of the amortized cost method to
value short-term debt instruments issued with a maturity of one year or less and
having a remaining maturity of 60 days or less when the value obtained is fair
value, provided that during any period in which more than 25% 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
36
<PAGE>
amortized cost method. Under the amortized cost method of valuation, the
security is initially valued at cost on the date of purchase (or in the case of
short-term debt instruments purchased with more than 60 days remaining to
maturity, the market value on the 61st day prior to maturity), and thereafter a
constant amortization to maturity of any discount or premium is assumed
regardless of the impact of fluctuating interest rates on the market value of
the security.
PORTFOLIO TRANSACTIONS
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 Fund's portfolio turnover rates for the fiscal years ended
June 30, 1996 and 1997, respectively, were as follows: 111.13% and 63.33%.
The Investment Manager believes the Fund's portfolio turnover rate for
the fiscal year ended June 30, 1997 was significantly lower than that for the
previous fiscal year because of numerous transactions during the previous year
to reposition the Fund to be more defensive in light of economic expectations as
compared to its more cyclical positioning before and after that year.
Brokerage Allocation
The Investment Manager's policy is to seek for its clients, including
the Fund, what in the Investment Manager's judgment will be the best overall
execution of purchase or sale orders and the most favorable net prices in
securities transactions consistent with its judgment as to the business
qualifications of the various broker or dealer firms with whom the Investment
Manager may do business, and the Investment Manager may not necessarily choose
the broker offering the lowest available commission rate. Decisions with respect
to the market where the transaction is to be completed, to the form of
transaction (whether principal or agency), and to the allocation of orders among
brokers or dealers are made in accordance with this policy. In selecting brokers
or dealers to effect portfolio transactions, consideration is given to their
proven integrity and financial responsibility, their demonstrated execution
experience and capabilities both generally and with respect to particular
markets or securities, the competitiveness of their commission rates in agency
transactions (and their net prices in principal transactions), their willingness
to commit capital, and their clearance and settlement capability. The Investment
Manager makes every effort to keep informed of commission rate structures and
prevalent bid/ask spread characteristics of the markets and securities in which
transactions for the Fund occur. Against this background, the Investment Manager
evaluates the reasonableness of a commission or a net price with respect to a
particular transaction by
37
<PAGE>
considering such factors as difficulty of execution or security positioning by
the executing firm. The Investment Manager may or may not solicit competitive
bids based on its judgment of the expected benefit or harm to the execution
process for that transaction.
When it appears that a number of firms could satisfy the required
standards in respect of a particular transaction, consideration may also be
given to services other than execution services which certain of such firms have
provided in the past or may provide in the future. Negotiated commission rates
and prices, however, are based upon the Investment Manager's judgment of the
rate which reflects the execution requirements of the transaction without regard
to whether the broker provides services in addition to execution. Among such
other services are the supplying of supplemental investment research; general
economic, political and business information; analytical and statistical data;
relevant market information, quotation equipment and services; reports and
information about specific companies, industries and securities; purchase and
sale recommendations for stocks and bonds; portfolio strategy services;
historical statistical information; market data services providing information
on specific issues and prices; financial publications; proxy voting data and
analysis services; technical analysis of various aspects of the securities
markets, including technical charts; computer hardware used for brokerage and
research purposes; computer software and databases (including those used for
portfolio analysis and modeling and including software providing investment
personnel with efficient access to current and historical data from a variety of
internal and external sources) and portfolio evaluation services and relative
performance of accounts.
In the case of the Fund and other registered investment companies
advised by the Investment Manager or its affiliates, the above services may
include data relating to performance, expenses and fees of those investment
companies and other investment companies; this information is used by the
Trustees or Directors of the investment companies to fulfill their
responsibility to oversee the quality of the Investment Manager's advisory
contracts between the investment companies and the Investment Manager. The
Investment Manager considers these investment company services only in
connection with the execution of transactions on behalf of its investment
company clients and not its other clients.
Certain of the nonexecution services provided by broker-dealers may in
turn be obtained by the broker-dealers from third parties who are paid for such
services by the broker-dealers. The Investment Manager has an investment in less
than ten percent of the outstanding equity of one such third party which is
engaged in the development and licensing of trading systems which include
portfolio analysis and modeling and other research and investment
decision-making capabilities. The Investment Manager may allocate brokerage to
broker-dealers who in turn pay this third party for the portion of the third
party's trading system provided to the Investment Manager, which is estimated by
the Investment Manager to provide appropriate assistance in the investment
decision-making process. Because of its minority interest in the third party,
the Investment Manager could be said to benefit indirectly from such brokerage
allocation.
38
<PAGE>
The Investment Manager regularly reviews and evaluates the services
furnished by broker-dealers. Among other measures, the Investment Manager's
investment management personnel seek to evaluate the quality of research and
other services received, and the results of this effort are made available to
the equity trading department, which sometimes uses this information as
consideration in the selection of brokers to execute portfolio transactions.
Some services furnished by broker-dealers may be used for research and
investment decision-making purposes, and also for marketing or administrative
purposes. Under these circumstances, the Investment Manager allocates the cost
of such services to determine the appropriate proportion of the cost which is
allocable to purposes other than research or investment decision-making and the
Investment Manager pays for that portion directly from its own funds. Some
research and execution services may benefit the Investment Manager's clients as
a whole, while others may benefit a specific segment of clients. Not all such
services will necessarily be used exclusively in connection with the accounts
which pay the commissions to the broker-dealer producing the services.
The Investment Manager has no fixed agreements or understandings with
any broker-dealer as to the amount of brokerage business which the firm may
expect to receive for services supplied to the Investment Manager or otherwise.
There may be, however, understandings with certain firms that in order for such
firms to be able to continuously supply certain services, they need to receive
allocation of a specified amount of brokerage business. These understandings are
honored to the extent possible in accordance with the policies set forth above.
It is not the Investment Manager's policy to intentionally pay a firm a
brokerage commission higher than that which another firm would charge for
handling the same transaction in recognition of services (other than execution
services) provided. However, the Investment Manager is aware that this is an
area where differences of opinion as to fact and circumstances may exist, and in
such circumstances, if any, the Investment Manager relies on the provisions of
Section 28(e) of the Securities Exchange Act of 1934, to the extent applicable.
Brokerage commissions paid by the Fund in secondary trading during the last
three fiscal years ended June 30 were as follows: 1995, $175,736; 1996,
$296,364; and 1997, $362,454.
During and at the end of its most recent fiscal year, the Fund did not
hold in its portfolio securities of any entity that might be deemed to be a
regular broker-dealer of the Fund as defined under the 1940 Act.
39
<PAGE>
In the case of the purchase of fixed income securities in underwriting
transactions, the Investment Manager follows any instructions received from its
clients as to the allocation of new issue discounts, selling commissions and
designations to brokers or dealers which provide the client with research,
performance evaluation, master trustee and other services. In the absence of
instructions from the client, the Investment Manager may make such allocations
to broker-dealers which have provided the Investment Manager with research and
brokerage services.
When more than one client of the Investment Manager is seeking to buy
or sell the same security, the sale or purchase is carried out in a manner which
is considered fair and equitable to all accounts. In allocating investments
among various clients (including in what sequence orders for trades are placed),
the Investment Manager will use its best business judgment and will take into
account such factors as the investment objectives of the clients, the amount of
investment funds available to each, the amount already committed for each client
to a specific investment and the relative risks of the investments, all in order
to provide on balance a fair and equitable result to each client over time.
Although sharing in large transactions may sometimes affect price or volume of
shares acquired or sold, overall it is believed there may be an advantage in
execution. The Investment Manager may follow the practice of grouping orders of
various clients for execution to get the benefit of lower prices or commission
rates. In certain cases where the aggregate order may be executed in a series of
transactions at various prices, the transactions are allocated as to amount and
price in a manner considered equitable to each so that each receives, to the
extent practicable, the average price of such transactions. Exceptions may be
made based on such factors as the size of the account and the size of the trade.
For example, the Investment Manager may not aggregate trades where it believes
that it is in the best interests of clients not to do so, including situations
where aggregation might result in a large number of small transactions with
consequent increased custodial and other transactional costs which may
disproportionately impact smaller accounts. Such disaggregation, depending on
the circumstances, may or may not result in such accounts receiving more or less
favorable execution relative to other clients.
CERTAIN TAX MATTERS
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, for each of the Fund's tax years that
has begun on or prior to August 5, 1997, the Fund must, among other things, (a)
derive at least 90% of its gross income in each taxable year from dividends,
interest, payments with respect to securities loans, gains from the sale or
other disposition of stock, securities or foreign currencies, or other income
(including, but not limited to, gains from options, futures or forward
contracts) derived with respect to its business of investing in
40
<PAGE>
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). For any Fund tax year beginning after August 5, 1997, the Fund will have
to comply with each of those requirements except the 30% test in order to
qualify to be treated as a regulated investment company under Subchapter M.
Beginning July 1, 1998 (the start of the Fund's first tax year that
begins after August 5, 1997), when the Fund no longer has to comply with the 30%
test in order to qualify under Subchapter M, the Fund will have greater
flexibility in buying and selling securities and in the use of futures and
options in managing risks. The 30% test has the effect of limiting 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 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.) The
30% test also may 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 to the extent of the Fund's current or
accumulated earnings and profits. Also, the shareholders, if they received a
distribution in excess of current or accumulated earnings and profits, would
receive a return of capital that would reduce the basis of their shares of the
Fund to the extent thereof. Any distribution in excess of a shareholder's basis
in the shareholder's shares would be taxable as gain realized from the sale of
such shares.
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,
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<PAGE>
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 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
(until July 1, 1998), 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
42
<PAGE>
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 shareholder 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
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 C 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: 1997, $438,175; 1996, $161,679; and
1995, $97,853.
For the same periods, the Distributor retained the following amounts
after reallowance of concessions to dealers: 1997, $54,328; 1996, $20,463;
and 1995, $11,212.
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
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<PAGE>
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, managed fee-based programs and so-called "mutual fund
supermarkets," among other 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 charges, 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 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 or similar
programs 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 based on the aggregate of such sales. 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 C shares of
the Fund and paid initial commissions to securities dealers for sales of such
Class A, Class B and Class C shares as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended Fiscal Year Ended Fiscal Year Ended
June 30, 1997 June 30, 1996 June 30, 1995
------------- ------------- -------------
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>
Class A $ 0 $ 383,847 $ 0 $ 141,216 $ 265 $ 86,641
Class B $68,306 $1,239,062 $ 65,434 $ 271,051 $50,949 $130,203
Class C $ 2,402 $ 50,310 $ 39 $ 3,592 $ 632 $ 0
</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 C shares, including, but not limited to, (1) the
payment of commissions and/or reimbursement to underwriters, securities
44
<PAGE>
dealers and others engaged in the sale of shares, including payments to the
Distributor to be used to pay commissions and/or reimbursement to securities
dealers (which securities dealers may be affiliates of the Distributor) engaged
in the distribution and marketing of shares and furnishing ongoing assistance to
investors, (2) reimbursement of direct out-of-pocket expenditures incurred by
the Distributor in connection with the distribution and marketing of shares and
the servicing of investor accounts including expenses relating to the
formulation and implementation of marketing strategies and promotional
activities such as direct mail promotions and television, radio, newspaper,
magazine and other mass media advertising, the preparation, printing and
distribution of Prospectuses of the Fund and reports for recipients other than
existing shareholders of the Fund, and obtaining such information, analyses and
reports with respect to marketing and promotional activities and investor
accounts as the Fund may, from time to time, deem advisable, and (3)
reimbursement of expenses incurred by the Distributor in connection with the
servicing of shareholder accounts including payments to securities dealers and
others in consideration of the provision of personal service to investors and/or
the maintenance or servicing of shareholder accounts and expenses associated
with the provision of personal service by the Distributor directly to investors.
In addition, the Distribution Plan is deemed to authorize the Distributor and
the Investment Manager to make payments out of general profits, revenues or
other sources to underwriters, securities dealers and others in connection with
sales of shares, to the extent, if any, that such payments may be deemed to be
within the scope of Rule 12b-1 under the 1940 Act.
Some or all of the service fees are used to pay or reimburse dealers
(including dealers that are affiliates of the Distributor) or others for
personal services and/or the maintenance of shareholder accounts. A portion of
any initial commission paid to dealers for the sale of shares of the Fund
represents payment for personal services and/or the maintenance or servicing of
shareholder accounts by such dealers. Dealers who have sold Class A shares are
eligible for further reimbursement commencing as of the time of such sale.
Dealers who have sold Class B and Class C shares are eligible for further
reimbursement after the first year during which such shares have been held of
record by such dealer as nominee for its clients (or by such clients directly).
Any service fees received by the Distributor and not allocated to dealers may be
applied by the Distributor in reduction of expenses incurred by it directly for
personal services and the maintenance or servicing of shareholder accounts.
The distribution fees are used primarily to offset initial and ongoing
commissions paid to dealers for selling such shares. Any distribution fees
received by the Distributor and not allocated to dealers may be applied by the
Distributor in connection with sales or marketing efforts, including special
promotional fees and cash and noncash incentives based upon sales by dealers.
The Distributor provides distribution services on behalf of other funds
having distribution plans and receives similar payments from, and incurs similar
expenses on behalf of, such other funds. When expenses of the Distributor cannot
be identified as relating to a specific
45
<PAGE>
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.
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 C shares, an annual rate of 0.75% of the
average daily value of the net assets represented by such Class B or Class C
shares (as the case may be) to finance sales or promotion expenses and an annual
rate of 0.25% of the average daily value of the net assets represented by such
Class B or Class C shares (as the case may be) to make payments for personal
services and/or the maintenance or servicing of shareholder accounts. In
addition, a rule of the National Association of Securities Dealers, Inc.
("NASD") limits annual expenditures that 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 that the Fund may pay for such distribution costs to 6.25%
of gross share sales of a class since the inception of any asset-based sales
charge plus interest at the prime rate plus 1% on unpaid amounts thereof (less
any contingent deferred sales charges). Such limitation does not apply to
shareholder service fees.
The distribution and servicing expenses of a particular class will be
borne solely by that class.
Payments to the Distributor or to dealers funded under the Distribution
Plan may be discontinued at any time.
The Distributor may pay certain dealers and other intermediaries
additional compensation for sales and administrative services. The Distributor
may provide cash and noncash incentives to intermediaries who, for example, sell
significant amounts of shares or develop particular distribution channels. The
Distributor may compensate dealers with clients who maintain their investments
in the Fund over a period of years. The incentives can include merchandise and
trips to, and attendance at, sales seminars at resorts. The Distributor may pay
for administrative services, such as technological and computer systems support
for the maintenance of pension plan participant records, for subaccounting, and
for distribution through mutual fund supermarkets or similar arrangements.
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<PAGE>
During the fiscal year ended June 30, 1997, the Fund paid the
Distributor fees under the Distribution Plan and the Distributor used all of
such payments for expenses incurred on behalf of the Fund as follows:
<TABLE>
<CAPTION>
Class A Class B Class C
------- ------- -------
<S> <C> <C> <C>
Advertising $ 0 $ 14,272 $ 0
Printing and mailing
of prospectuses to
other than current
shareholders 0 5,760 0
Compensation to dealers 136,021 333,967 38,510
Compensation to sales
personnel 0 45,295
Interest 0 0 0
Carrying or other
financing charges 0 0 0
Other expenses: marketing; general 0 23,833 0
-------------- ------------- -------------
Total fees $ 136,021 $ 423,127 $ 38,510
============== ============= =============
</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 make alternative
arrangements for such services for shareholders who acquired shares through such
institutions.
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 S shares to the performance of other
mutual funds with similar investment objectives, to certificates of deposit
and/or to other financial alternatives. The Fund may also compare its
47
<PAGE>
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
Fund might be compared to the Lipper Equity Income Funds Group.
The average annual total return ("standard total return") and yield of
the Class A, Class B, Class C and Class S shares of the Fund will be calculated
as set forth below. Total return and yield are computed separately for each
class of shares of the Fund. Performance data for a specified class includes
periods prior to the adoption of class designations on June 1, 1993, when
designations were assigned based on the pricing and Rule 12b-1 fees applicable
to shares sold thereafter. The application of the additional Rule 12b-1 fees, if
any, of up to 1% will, for periods after to June 1, 1993 adversely affect Fund
performance results. Thus, 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.
The performance data below reflect Rule 12b-1 fees and, where
applicable, sales charges as follows:
<TABLE>
<CAPTION>
Rule 12b-1 Sales Charges
----------------------------------------------- -------------------------------------
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* 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
S* None 0.50% until June 1, 1993; None
0% thereafter
- ------------------------
</TABLE>
* Prior to November 1, 1997, the Fund's current Class C shares were
designated as Class D shares and the Fund's current Class S shares were
designated as Class C shares.
All calculations of performance data in this section reflect the
voluntary measures, if any, by the Fund's affiliates to reduce fees or expenses
relating to the Fund; see "--Accrued Expenses and Recurring Charges" later in
this section.
48
<PAGE>
Total Return
The Fund's standard average annual total returns ("standard total
return") of each class of shares were as follows:
Ten Years Five Years One Year
Ended Ended Ended
to June 30, 1997 June 30, 1997 June 30, 1997
----------------- -------------- --------------
Class A 11.52% 17.06% 21.72%
Class B 11.87% 17.30% 21.45%
Class C* 11.86% 17.50% 25.42%
Class S* 12.33% 18.49% 27.75%
- ------------------
* Prior to November 1, 1997, the Fund's current Class C shares were
designated as Class D shares and the Fund's current Class S shares were
designated as Class C shares. Standard total return is computed
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
49
<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 highest
applicable initial or contingent deferred sales charge is deducted, and that all
dividends and distributions by the Fund are reinvested at net asset value on the
reinvestment dates during the periods. All accrued expenses and recurring
charges are also taken into account as described later herein.
Yield
The annualized yield of each class of shares of the Fund based on the
month of June 1997 was as follows:
Class A 1.23%
Class B 0.23%
Class C* 0.23%
Class S* 1.65%
- ------------------------
* Prior to November 1, 1997, the Fund's current Class C shares were
designated as Class D shares and the Fund's current Class S shares were
designated as Class C shares.
Yield for the Fund's Class A, Class B, Class C and Class S 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
50
<PAGE>
To calculate interest earned (for the purpose of "a" above) on debt
obligations, the Fund computes the yield to maturity of each obligation held by
the 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 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 and recurring charges are taken into account as
described later herein.
Yield information is useful in reviewing the 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 and Recurring Charges
Accrued expenses include all recurring charges 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 Fund would have been lower.]
51
<PAGE>
Nonstandardized Total Return
The Fund may provide the above described standard total return results
for Class A, Class B, Class C and Class S shares for periods which end no
earlier than the most recent calendar quarter end and which begin twelve months
before, five years before and ten years before. 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, and as noted
any applicable sales charge may not be taken into account and therefore not
deducted from the hypothetical initial payment of $1,000. For example, the
Fund's nonstandardized total returns for the six months ended June 30, 1997,
without taking sales charges into account, were as follows:
Class A 11.58%
Class B 11.17%
Class C* 11.09%
Class S* 11.70%
- ------------------------
* Prior to November 1, 1997, the Fund's current Class C shares were
designated as Class D shares and the Fund's current Class S shares were
designated as Class C shares.
Distribution Rates
The 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 the Fund even though
such option income is not considered investment income under generally accepted
accounting principles.
Because a distribution can include such premiums, capital gains and
option income, the amount of the distribution may be susceptible to control by
the Investment Manager through transactions designed to increase the amount of
such items. Also, because the distribution rate is calculated in part by
dividing the latest distribution by the offering price, which is based on net
asset value plus any applicable sales charge, the distribution rate will
increase as the net
52
<PAGE>
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 Fund, based on the quarter
ended June 30, 1997, was as follows:
Class A 1.80%
Class B 1.05%
Class C* 1.22%
Class S* 2.10%
- ------------------------
* Prior to November 1, 1997, the Fund's current Class C shares were
designated as Class D shares and the Fund's current Class S shares were
designated as Class C shares.
CUSTODIAN
State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, is the Trust's custodian. As custodian, State Street Bank
and Trust Company is responsible for, among other things, safeguarding and
controlling the Fund's cash and securities, handling the receipt and delivery of
securities and collecting interest and dividends on the Fund's investments.
State Street Bank and Trust Company is not an affiliate of the Investment
Manager or its affiliates.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, 160 Federal Street, Boston, Massachusetts 02110,
serves as the Trust's independent accountants, providing professional services
including (1) audits of the Fund's annual financial statements, (2) assistance
and consultation in connection with SEC filings and (3) review of the annual
income tax returns filed on behalf of the Fund.
FINANCIAL STATEMENTS
In addition to the reports provided to holders of record on a
semiannual basis, other supplementary financial reports may be made available
from time to time through electronic or other media. Shareholders with
substantial holdings in one or more State Street Research Funds may also receive
reports and other information which reflect or analyze their positions in a
consolidated manner. For more information, call State Street Research
Shareholder Services.
53
<PAGE>
The following financial statements are for the Fund's fiscal year ended
June 30, 1997.
54
<PAGE>
STATE STREET RESEARCH EQUITY INCOME FUND
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
- --------------------------------------------------------------------------------
June 30, 1997
Value
Shares (Note 1)
--------- ------------
COMMON STOCKS 70.5%
Basic Industries 15.8%
Chemical 8.9%
BOC Group PLC* ........................ 243,000 $ 4,220,175
Cabot Corp. ........................... 160,000 4,540,000
Mississippi Chemical Corp. ............ 97,900 2,031,425
Rohm & Haas Co. ........................ 28,000 2,521,750
Thiokol Corp. ........................... 80,000 5,600,000
------------
18,913,350
------------
Diversified 0.8%
Mark IV Industries Inc. ............... 58,695 1,408,680
Ogden Corp. ........................... 15,000 326,250
------------
1,734,930
------------
Forest Product 2.1%
Abitibi-Consolidated Inc. ............... 99,300 1,774,988
Stone Container Corp. .................. 195,000 2,790,937
------------
4,565,925
------------
Machinery 1.3%
Sundstrand Corp. ........................ 48,000 2,679,000
------------
Metal & Mining 0.6%
Kennametal Inc. ........................ 30,000 1,290,000
------------
Railroad 2.1%
Canadian National Railway Co. ......... 100,000 4,375,000
------------
Total Basic Industries ........................... 33,558,205
------------
Consumer Cyclical 11.2%
Airline 0.5%
America West Holding Corp. Cl. B* ...... 75,000 1,087,500
------------
Automotive 3.8%
Borg-Warner Automotive Inc. ............ 38,600 2,086,813
Exide Corp. ........................... 197,100 4,323,881
Lear Corp.* ........................... 36,600 1,624,125
------------
8,034,819
------------
Building 1.4%
Lafarge Corp. ........................... 125,000 3,062,500
------------
Hotel & Restaurant 2.0%
AmeriKing Inc.* ........................ 1,000 50,000
Harrah's Entertainment Inc.* ............ 225,000 4,106,250
Motels of America Inc.*+ ............... 500 5,500
------------
4,161,750
------------
Recreation 1.5%
HSN Inc.* .............................. 98,450 3,076,562
------------
Value
Shares (Note 1)
--------- ------------
Retail Trade 2.0%
Hannaford Brothers Co. .................. 22,200 $ 789,488
Kroger Co.* ........................... 70,000 2,030,000
Rite Aid Corp. ........................ 29,500 1,471,312
------------
4,290,800
------------
Total Consumer Cyclical ............... 23,713,931
------------
Consumer Staple 16.8%
Business Service 3.5%
ADT Ltd.* .............................. 116,200 3,834,600
Hillenbrand Industries Inc. ............ 40,400 1,919,000
Moore Corp Ltd. ........................ 75,000 1,476,562
Pagemart Nationwide Inc.*+ ............ 1,750 10,500
Vestar/LPA Investment Corp.*+ ......... 3,125 46,875
Viatel Inc.* ........................... 18,050 117,325
------------
7,404,862
------------
Food & Beverage 2.7%
Coca-Cola Enterprises Inc. ............ 121,200 2,787,600
Seven-Up/RC Bottling Co. of Southern
California* ........................ 8,750 102,813
Whitman Corp. ........................... 114,000 2,885,625
------------
5,776,038
------------
Hospital Supply 5.0%
Columbia/HCA Healthcare Corp. ......... 46,700 1,835,895
Pacificare Health Systems, Inc. Cl. A* 49,000 2,967,563
Tenet Healthcare Corp. .................. 93,700 2,770,006
Trigon Healthcare Inc.* ............... 125,000 3,031,250
------------
10,604,714
------------
Printing & Publishing 3.9%
Hollinger International, Inc. Cl. A* ... 118,900 1,330,195
Southam Inc.* ........................... 133,900 2,290,616
Valassis Communications Inc. ............ 195,000 4,680,000
------------
8,300,811
------------
Tobacco 1.7%
Imperial Tobacco Group PLC* ............ 548,000 3,520,462
------------
Total Consumer Staple .................. 35,606,887
------------
Energy 7.2%
Oil 5.8%
Oryx Energy Co.* ........................ 85,700 1,810,413
Seagull Energy Corp.* .................. 165,000 2,887,500
Tosco Corp. ........................... 90,000 2,694,375
Total SA Cl. B ADR ..................... 49,375 2,499,609
Ultramar Diamond Shamrock Co. ......... 75,100 2,450,138
------------
12,342,035
------------
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATE STREET RESEARCH EQUITY INCOME FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Value
Shares (Note 1)
--------- -------------
Oil Service 1.4%
Mapco Inc. ................................. 95,000 $ 2,992,500
-------------
Total Energy ....................................... 15,334,535
-------------
Finance 10.9%
Bank 4.5%
Bank of New York Inc. ..................... 70,000 3,045,000
Fleet Financial Group Inc. .................. 54,100 3,421,825
Mellon Bank Corp. ........................... 70,000 3,158,750
-------------
9,625,575
-------------
Financial Service 0.9%
Federal National Mortgage Association ...... 45,000 1,963,125
-------------
Insurance 5.5%
Ace Ltd. .................................... 50,000 3,693,750
AMBAC Inc. ................................. 15,000 1,145,625
Mid Ocean Ltd. .............................. 90,000 4,719,375
Saint Paul Companies, Inc. .................. 26,200 1,997,750
-------------
11,556,500
-------------
Total Finance ....................................... 23,145,200
-------------
Science & Technology 6.2%
Aerospace 0.9%
Boeing Co. ................................. 34,120 1,810,492
-------------
Computer Software & Service 0.8%
Western Digital Corp.* ..................... 51,800 1,638,175
-------------
Office Equipment 4.5%
Komag Inc.* ................................. 60,000 982,500
Lexmark International Group Inc. Cl. A* ... 130,000 3,948,750
Quantum Corp.* .............................. 230,800 4,688,125
-------------
9,619,375
-------------
Total Science & Technology ........................... 13,068,042
-------------
Utility 2.4%
Electric 1.9%
Edison International Corp. .................. 80,000 1,990,000
OGE Energy Corp. ........................... 45,000 2,047,500
-------------
4,037,500
-------------
Natural Gas 0.4%
TransTexas Gas Corp.* ..................... 48,000 768,000
-------------
Value
Shares (Note 1)
--------- -------------
Telephone 0.1%
Celcaribe SA*+ .............................. 69,918 $ 174,795
Colt Telecom Group PLC ADR* ............... 5,900 122,425
-------------
297,220
-------------
Total Utility .............................. 5,102,720
-------------
Total Common Stocks (Cost $118,161,327) ...... 149,529,520
-------------
CONVERTIBLE PREFERRED STOCKS & OTHER 11.1%
AmeriKing Inc. Sr. Exch. Pfd.* ............ 40,000 1,120,000
Atlantic Richfield Co. Exch. Notes ......... 193,200 4,153,800
Clearnet Communications Inc. Wts.* ......... 3,300 16,500
Cooper Industries Inc. Exch. Note* ......... 128,000 2,944,000
Crown Packaging Holdings Ltd. Wts.*+ ...... 2,000 250
Food 4 Less Holdings Inc. Wts.*+ ............ 1,344 120,375
Granite Broadcasting Corp. Cv. Pfd. ......... 10,000 515,000
Heartland Wireless Communications, Inc.
Wts.*+ ................................. 1,500 15
Hollinger International, Inc. Cv. Pfd. ...... 420,000 4,830,000
ICG Holdings Inc. Exch. Pfd.* ............... 576 610,560
North Atlantic Trading Inc. Sr. Pfd.*+= ... 30,000 757,500
NS Group Inc. Wts.* ........................ 250 1,250
Pagemart Inc. Wts.*+ ........................ 3,450 17,250
RSL Communications Ltd. Wts.*+ ............ 500 15,000
S.D. Warren Co. Series B Sr. Exch. Pfd.= ... 27,000 1,107,000
Salomon Inc. Cv. Pfd.* ..................... 45,000 1,541,250
SDW Holdings Corp. Wts.*+ .................. 27,000 135,000
Sheffield Steel Corp. Wts.* ............... 2,500 7,500
Station Casinos Inc. Cv. Pfd. ............... 90,000 4,027,500
Supermarkets General Holdings Corp. Exch.
Pfd.= .................................... 80,000 1,640,000
Wireless One Inc. Wts.* ..................... 1,500 15
-------------
Total Convertible Preferred Stocks & Other
(Cost $22,343,008) ................................. 23,559,765
-------------
Principal Maturity
Amount Date
------------ ------------
CONVERTIBLE BONDS 1.3%
Crown Resources Corp. Cv. Sub.
Deb., 5.75% ..................... $ 600,000 8/27/2001 543,000
Rohr Inc. Cv. Sub. Note, 7.75% . 500,000 5/15/2004 825,000
Winstar Communications Inc. Sr.
Sub. Cv. Note, 0.00% to
10/14/00, 14.00% from
10/15/00 to maturity+ ......... 2,150,000 10/15/2005 1,354,500
-------------
Total Convertible Bonds (Cost $2,333,459) .................. 2,722,500
-------------
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATE STREET RESEARCH EQUITY INCOME FUND
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO (cont'd)
- --------------------------------------------------------------------------------
Principal Maturity Value
Amount Date (Note 1)
------------ ------------ -------------
NON-CONVERTIBLE BONDS 11.7%
Advanced Radio Telecom Corp.
Units, 14.00% .............. $ 250,000 2/15/2007 $ 250,000
Archibald Candy Corp. Sr. Sec.
Notes, 10.25%+ .............. 1,250,000 7/01/2004 1,271,875
Azteca Holdings SA Sr. Note,
11.00%+ .................... 1,000,000 6/15/2002 1,006,250
Belden & Blake Corp. Sr. Sub.
Note, 9.875%+ .............. 250,000 6/15/2007 247,500
Belle Casinos Inc. First
Mortgage Note, 12.00%+# ...... 175,000 10/15/2000 64,313
Celcaribe SA Sr. Sec. Note,
0.00% to 3/14/98, 13.50%
from 3/15/98 to maturity ..... 430,000 3/15/2004 395,600
CHC Helicopter Corp. Sr. Sub.
Note, 11.50% ................. 442,000 7/15/2002 459,680
Clearnet Communications Inc.
Sr. Note, 0.00% to 12/14/00,
14.75% from 12/15/00 to
maturity .................... 750,000 12/15/2005 502,500
Drypers Corp., 10.25%+ ........ 750,000 6/15/2007 750,000
Econophone Inc. Sr. Note,
13.50%+ .................... 1,000,000 7/15/2007 1,017,500
Empire Gas Corp. Sr. Sec. Note,
7.00% to 7/14/99, 12.875%
from 7/15/99 to maturity ..... 1,000,000 7/15/2004 900,000
Envirosource Inc. Note, 9.75% .. 1,250,000 6/15/2003 1,212,500
French Fragrances Inc. Sr. Note,
10.375%+ .................... 750,000 5/15/2007 780,000
Geotek Communications Inc. Sr.
Note, 0.00% to 7/14/00,
15.00% from 7/15/00 to
maturity .................... 500,000 7/15/2005 323,750
Intertek Finance PLC, 10.25%+ . 1,000,000 11/01/2006 1,045,000
L3 Communications Corp. Sr.
Sub. Note, 10.375%+ ........ 125,000 5/01/2007 132,188
La Petite Holdings Corp. Sr. Sec.
Notes, 9.625% .............. 750,000 8/01/2001 761,250
Marcus Cable Co. L.P. Sr. Deb.,
11.875% .................... 525,000 10/01/2005 567,000
North Atlantic Trading Inc. Note,
11.00%+ .................... 1,000,000 6/15/2004 1,017,500
NS Group Inc. Sr. Sec. Note,
13.50% ....................... 250,000 7/15/2003 282,500
Orion Network Systems Inc.
Unit, 11.25% ................. 1,250,000 1/15/2007 1,306,250
Principal Maturity Value
Amount Date (Note 1)
------------ ------------ -------------
Outdoor Systems Inc. Sr. Sub.
Note, 9.375% .................... $ 250,000 10/15/2006 $ 251,250
Packaging Resources Inc. Sr.
Sec. Note, 11.625% .............. 250,000 5/01/2003 258,750
Pagemart Inc. Sr. Exch. Note,
0.00% to 10/31/98, 12.25%
from 11/1/98 to maturity ........ 750,000 11/01/2003 648,750
Plastic Specialties & Technology,
Inc. Sr. Note, 11.25% ........... 250,000 12/01/2003 267,500
Real Time Data Inc. Note,
0.00% to 8/14/01, 13.50%
from 8/15/01 to maturity+ ..... 1,250,000 8/15/2006 718,750
RSL Communications Ltd. Sr.
Note, 12.25% .................... 500,000 11/15/2006 527,500
Sheffield Steel Corp. First
Mortgage Note, 12.00% ........... 500,000 11/01/2001 490,000
Silgan Holdings Inc., 13.25% ..... 279,000 7/15/2006 310,666
Snyder Oil Corp. Sr. Sub. Note,
8.75% .......................... 250,000 6/15/2007 250,625
Spanish Broadcasting Systems
Inc. Sr. Note, 7.50% ........... 750,000 6/15/2002 830,625
Spinnaker Industries Inc. Sr.
Sec. Note, 10.75% .............. 250,000 10/15/2006 252,500
Sun Media Corp. Sr. Sub. Note,
9.50%+ .......................... 750,000 2/15/2007 757,500
Tekni-Plex Inc. Sr. Sub. Note,
11.25%+ ....................... 250,000 4/01/2007 270,625
Transamerican Energy Corp. Sr.
Note, 0.00% to 6/14/00,
13.00% from 6/15/00 to
maturity+ ....................... 1,000,000 6/15/2002 720,000
Transamerican Energy Corp. Sr.
Note, 11.50%+ ................. 500,000 6/15/2002 485,000
U.S.A. Mobile Communications
Inc. Sr. Note, 14.00% ........... 750,000 11/01/2004 825,000
Universal Outdoor Inc. Sr. Sub.
Note, 9.75% .................... 750,000 10/15/2006 776,250
Viacap SA De CV Sr. Note,
11.375%+ ....................... 500,000 5/15/2007 523,125
Viasystems Inc. Sr. Sub. Note,
9.75%+ .......................... 500,000 6/01/2007 506,250
Viatel Inc. Sr. Note, 0.00% to
1/14/00, 15.00% from
1/15/00 to maturity ........... 750,000 1/15/2005 510,000
Wireless One Inc. Sr. Note,
13.00% .......................... 750,000 10/15/2003 478,125
------------
Total Non-Convertible Bonds (Cost $24,467,811) .............. 24,951,947
------------
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATE STREET RESEARCH EQUITY INCOME FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Principal Maturity Value
Amount Date (Note 1)
------------ ----------- ----------------
SHORT-TERM OBLIGATIONS 6.1%
American Express Credit Corp.,
6.15% ........................ $3,739,000 7/02/1997 $ 3,739,000
Ford Motor Credit Co., 5.48% ... 114,000 7/01/1997 114,000
General Electric Capital Corp.,
5.53% ........................ 7,080,000 7/07/1997 7,080,000
Merrill Lynch & Company Inc.,
6.20% ........................ 2,000,000 7/01/1997 2,000,000
------------
Total Short-Term Obligations (Cost $12,933,000) ......... 12,933,000
------------
Total Investments (Cost $180,238,605)--100.7% ......... 213,696,732
Cash and Other Assets, Less Liabilities--(0.7%) ...... (1,577,938)
------------
Net Assets--100.0% .................................... $212,118,794
============
Federal Income Tax Information:
At June 30, 1997, the net unrealized
appreciation of investments based on cost
for Federal income tax purposes of
$180,413,321 was as follows:
Aggregate gross unrealized appreciation for
all investments in which there is an excess
of value over tax cost ................................. $ 38,399,138
Aggregate gross unrealized depreciation for
all investments in which there is an excess
of tax cost over value ................................. (5,115,727)
------------
$ 33,283,411
============
- -------------------------------------
* Nonincome-producing securities.
ADR stands for American Depositary Receipt, representing ownership of
foreign securities.
= Payments of income may be made in cash or in the form of additional
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, 1997 was $13,769,494
and $13,950,936 (6.58% of net assets), respectively.
[square] Security is in default.
Forward currency exchange contracts outstanding at June 30, 1997 are as
follows:
<TABLE>
<CAPTION>
Unrealized
Appreciation Delivery
Total Value Contract Price (Depreciation) Date
----------------- --------------- ---------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Sell Pound Sterling,
Buy U.S. dollars ...... 5,010,000 GBP 1.62570 GBP $ (159,734) 12/1/97
Buy Pound Sterling,
Sell U.S. dollars ... 775,000 GBP 1.66430 GBP (5,206) 12/1/97
-----------
$ (164,940)
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATE STREET RESEARCH EQUITY INCOME FUND
- ---------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- ---------------------------------------------------------------------------
June 30, 1997
Assets
Investments, at value (Cost $180,238,605) (Note 1) ... $213,696,732
Cash ................................................ 510
Receivable for fund shares sold ..................... 813,903
Dividends and interest receivable .................. 680,218
Receivable from Distributor (Note 3) ............... 14,135
Receivable for securities sold ..................... 950
Other assets .......................................... 4,383
------------
215,210,831
Liabilities
Payable for securities purchased ..................... 2,250,000
Payable for open forward contracts .................. 164,940
Payable for fund shares redeemed ..................... 136,944
Accrued transfer agent and shareholder services
(Note 2) .......................................... 122,887
Accrued management fee (Note 2) ..................... 112,952
Accrued distribution and service fees (Note 5) ...... 79,348
Accrued trustees' fees (Note 2) ..................... 7,322
Other accrued expenses .............................. 217,644
------------
3,092,037
------------
Net Assets $212,118,794
============
Net Assets consist of:
Undistributed net investment income ............... $ 296,672
Unrealized appreciation of investments ............ 33,458,127
Unrealized depreciation of foreign currency and
forward contracts ................................. (163,199)
Accumulated net realized gain ..................... 12,137,052
Shares of beneficial interest ..................... 166,390,142
------------
$212,118,794
============
Net Asset Value and redemption price per share of
Class A shares ($71,087,362 [divided by] 4,783,428
shares of beneficial interest) .................... $14.86
======
Maximum Offering Price per share of Class A shares
($14.86 [divided by] .955)........................... $15.56
======
Net Asset Value and offering price per share of
Class B shares ($71,986,427 [divided by] 4,860,245
shares of beneficial interest)* .................... $14.81
======
Net Asset Value, offering price and redemption price
per share of Class C shares ($59,453,203 [divided by]
4,001,422 shares of beneficial interest) ......... $14.86
======
Net Asset Value and offering price per share of
Class D shares ($9,591,802 [divided by] 648,348
shares of beneficial interest)* .................... $14.79
======
- -------------------------------------
* 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, 1997
Investment Income
Dividends, net of foreign taxes of $53,695 ............... $ 3,131,681
Interest ................................................ 2,379,002
-----------
5,510,683
Expenses
Management fee (Note 2) ................................. 975,669
Transfer agent and shareholder services (Note 2) ...... 372,456
Custodian fee .......................................... 132,954
Reports to shareholders ................................. 94,565
Registration fees ....................................... 46,698
Service fee--Class A (Note 5) ........................... 136,021
Distribution and service fees--Class B (Note 5) ......... 423,127
Distribution and service fees--Class D (Note 5) ......... 38,510
Audit fee ............................................. 29,604
Trustees' fees (Note 2) ................................. 13,484
Legal fees ............................................. 7,911
Miscellaneous .......................................... 12,081
-----------
2,283,080
Expenses borne by the Distributor (Note 3) ............ (181,305)
-----------
2,101,775
-----------
Net investment income .................................... 3,408,908
-----------
Realized and Unrealized Gain (Loss) on Investments,
Foreign Currency and Forward Contracts
Net realized gain on investments (Notes 1 and 4) ...... 12,981,718
Net realized loss on foreign currency and forward
contracts (Note 1) .................................... (11,078)
-----------
Total net realized gain ............................ 12,970,640
-----------
Net unrealized appreciation of investments ............ 20,321,294
Net unrealized depreciation of foreign currency and
forward contracts .................................... (163,199)
-----------
Total net unrealized appreciation ................... 20,158,095
-----------
Net gain on investments, foreign currency and
forward contracts .................................... 33,128,735
-----------
Net increase in net assets resulting from operations...... $36,537,643
===========
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATE STREET RESEARCH EQUITY INCOME FUND
- ------------------------------------- -------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------- -------------------------------------
Year ended June 30
----------------------------------
1997 1996
---------------- ---------------
Increase (Decrease) in Net Assets
Operations:
Net investment income ............ $ 3,408,908 $ 1,719,834
Net realized gain on
investments, foreign currency
and forward contracts ......... 12,970,640 15,234,292
Net unrealized appreciation
of investments, foreign
currency and forward contracts 20,158,095 2,941,031
------------- ------------
Net increase resulting from
operations ..................... 36,537,643 19,895,157
------------- ------------
Dividends from net investment
income:
Class A ........................ (1,175,982) (882,400)
Class B ........................ (613,879) (304,585)
Class C ........................ (1,191,787) (914,329)
Class D ........................ (66,794) (17,808)
------------- ------------
(3,048,442) (2,119,122)
------------- ------------
Distributions from net realized
gains:
Class A ........................ (6,343,780) (492,304)
Class B ........................ (3,837,994) (223,972)
Class C ........................ (5,623,211) (472,914)
Class D ........................ (219,488) (18,976)
------------- ------------
(16,024,473) (1,208,166)
------------- ------------
Net increase from fund share
transactions (Note 6) ......... 83,963,174 4,473,009
------------- ------------
Total increase in net assets ... 101,427,902 21,040,878
Net Assets
Beginning of year ............... 110,690,892 89,650,014
------------- ------------
End of year (including
undistributed (overdistributed)
net investment income of
$296,672 and $(73,770),
respectively) .................. $ 212,118,794 $110,690,892
============= ============
NOTES TO FINANCIAL STATEMENTS
- ---------------------------------------------------------------------------
June 30, 1997
Note 1
State Street Research Equity Income Fund (the "Fund"), is a series of State
Street Research 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: State Street Research Equity Income
Fund, State Street Research Capital Appreciation Fund, State Street Research
Equity Investment Fund and State Street Research Global Resources Fund.
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.
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. 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
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATE STREET RESEARCH EQUITY INCOME FUND
- --------------------------------------------------------------------------------
NOTES (cont'd)
- --------------------------------------------------------------------------------
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.
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.
F. Forward Contracts and Foreign Currencies
The Fund enters into forward foreign currency exchange contracts in order to
hedge its exposure to changes in foreign currency exchange rates on its foreign
portfolio holdings and to hedge certain purchase and sale commitments
denominated in foreign currencies. A forward foreign currency exchange contract
is an obligation by the Fund to purchase or sell a specific currency at a
future date, which may be any fixed number of days from the origination date of
the contract. Forward foreign currency exchange contracts establish an exchange
rate at a future date. These contracts are transferable in the interbank market
conducted directly between currency traders (usually large commercial banks)
and their customers. Risks may arise from the potential inability of a
counterparty to meet the terms of a contract and from unanticipated movements
in the value of foreign currencies relative to the U.S. dollar. The aggregate
principal amount of forward currency exchange contracts is recorded in the
Fund's accounts. All commitments are marked-to-market at the applicable
transaction rates resulting in unrealized gains or losses. The Fund records
realized gains or losses at the time the forward contracts are extinguished by
entry into a closing contract or by delivery of the currency. Neither spot
transactions nor forward currency exchange contracts eliminate fluctuations in
the prices of the Fund's portfolio securities or in foreign exchange rates, or
prevent loss if the price of these securities should decline.
G. Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates.
Note 2
The Trust and State Street Research & Management Company (the "Adviser"), an
indirect wholly owned subsidiary of Metropolitan Life Insurance Company
("Metropolitan"), have entered into an agreement under which the Adviser earns
monthly fees at an annual rate of 0.65% 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, 1997, the fees pursuant to such agreement
amounted to $975,669.
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,
1997, the amount of such shareholder servicing and account maintenance expenses
was $212,109.
The fees of the Trustees not currently affiliated with the Adviser amounted to
$13,484 during the year ended June 30, 1997.
Note 3
The Distributor and its affiliates may from time to time and in varying amounts
voluntarily assume some portion of fees or expenses relating to the Fund.
During the year ended June 30, 1997, the amount of such expenses assumed by the
Distributor and its affiliates was $181,305.
<PAGE>
STATE STREET RESEARCH EQUITY INCOME FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Note 4
For the year ended June 30, 1997, purchases and sales of securities, exclusive
of short-term obligations, aggregated $155,892,785 and $90,471,481,
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. The Distributor uses such payments for personal
services and/or the maintenance or servicing of shareholder accounts, to
reimburse securities dealers for distribution and marketing services, to
furnish ongoing assistance to investors and to defray a portion of its
distribution and marketing expenses. For the year ended June 30, 1997, fees
pursuant to such plan amounted to $136,021, $423,127 and $38,510 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 $54,328 and $199,756, respectively, on sales of Class A shares of
the Fund during the year ended June 30, 1997, and that MetLife Securities, Inc.
earned commissions aggregating $456,724 on sales of Class B shares, and that
the Distributor collected contingent deferred sales charges of $68,306 and
$2,402 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, 1997, Metropolitan
owned 25,420 Class C shares and the Distributor owned 3,614 Class A shares of
the Fund.
Share transactions were as follows:
<TABLE>
<CAPTION>
Year ended June 30
--------------------------------------------------------------------------
1997 1996
------------------------------------ -----------------------------------
Class A Shares Amount Shares Amount
- ---------------------------------------- ---------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
Shares sold 1,551,622 $21,339,862 499,172 $ 6,447,619
Issued upon reinvestment of:
Distributions from net realized gains 497,882 5,949,190 37,754 461,359
Dividends from net investment income 78,757 1,077,039 61,647 800,177
Shares repurchased (554,634) (7,538,567) (578,171) (7,338,450)
---------- ----------- ---------- ------------
Net increase 1,573,627 $20,827,524 20,402 $ 370,705
========== =========== ========== ============
Class B Shares Amount Shares Amount
- ---------------------------------------- ---------------- -------------- --------------- ----------------
Shares sold 3,152,047 $43,148,521 670,304 $ 8,719,427
Issued upon reinvestment of:
Distributions from net realized gains 296,462 3,540,487 17,255 210,166
Dividends from net investment income 32,330 444,756 20,749 269,362
Shares repurchased (469,237) (6,363,046) (241,006) (3,101,383)
---------- ----------- ---------- ------------
Net increase 3,011,602 $40,770,718 467,302 $ 6,097,572
========== =========== ========== ============
Class C Shares Amount Shares Amount
- ---------------------------------------- ---------------- -------------- --------------- ----------------
Shares sold 1,772,262 $23,914,041 887,078 $ 11,446,658
Issued upon reinvestment of:
Distributions from net realized gains 470,421 5,622,233 38,732 472,914
Dividends from net investment income 87,937 1,191,070 70,662 914,329
Shares repurchased (1,167,373) 15,951,846) (1,135,981) (14,666,301)
---------- ----------- ---------- ------------
Net increase (decrease) 1,163,247 $14,775,498 (139,509) $ (1,832,400)
========== =========== ========== ============
Class D Shares Amount Shares Amount
- ---------------------------------------- ---------------- -------------- --------------- ----------------
Shares sold 657,453 $ 9,099,018 46,515 $ 607,680
Issued upon reinvestment of:
Distributions from net realized gains 17,516 208,976 1,480 18,010
Dividends from net investment income 4,050 56,205 861 11,171
Shares repurchased (130,981) (1,774,765) (65,543) (799,729)
---------- ----------- ---------- ------------
Net increase (decrease) 548,038 $ 7,589,434 (16,687) $ (162,868)
========== =========== ========== ============
</TABLE>
<PAGE>
STATE STREET RESEARCH EQUITY INCOME FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
For a share outstanding throughout each year:
<TABLE>
<CAPTION>
Class A
----------------------------------------------------------
Year ended June 30
----------------------------------------------------------
1997** 1996** 1995** 1994 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $13.85 $11.70 $10.87 $10.79 $ 9.19
------ ------ ------ ------ ------
Net investment income* 0.33 0.23 0.28 0.24 0.44
Net realized and unrealized gain on investments, foreign
currency and forward contracts 2.90 2.36 1.37 0.25 1.52
------ ------ ------ ------ ------
Total from investment operations 3.23 2.59 1.65 0.49 1.96
------ ------ ------ ------ ------
Dividends from net investment income (0.28) (0.28) (0.28) (0.26) (0.36)
Distributions from net realized gains (1.94) (0.16) (0.54) (0.15) --
------ ------ ------ ------ ------
Total distributions (2.22) (0.44) (0.82) (0.41) (0.36)
------ ------ ------ ------ ------
Net asset value, end of year $14.86 $13.85 $11.70 $10.87 $10.79
====== ======= ====== ====== ======
Total return 27.45%+ 22.41%+ 16.12%+ 4.30%+ 21.64%+
Net assets at end of year (000s) $71,087 $44,464 $37,327 $40,484 $28,995
Ratio of operating expenses to average net assets* 1.25% 1.25% 1.42% 1.50% 1.50%
Ratio of net investment income to average net assets* 2.43% 1.78% 2.55% 2.42% 3.76%
Portfolio turnover rate 63.33% 111.13% 67.50% 73.96% 80.42%
Average commission rate @ $0.0512 $0.0140 -- -- --
*Reflects voluntary assumption of fees or expenses per
share in each year (Note 3) $ 0.02 $ 0.03 $ 0.05 $ 0.05 $ 0.01
</TABLE>
<TABLE>
<CAPTION>
Class B
------------------------------
Year ended June 30
------------------------------
1997** 1996** 1995**
------ ------ ------
<S> <C> <C> <C>
Net asset value, beginning of year $13.82 $11.68 $10.86
------ ------ ------
Net investment income* 0.22 0.13 0.21
Net realized and unrealized gain (loss) on investments,
foreign currency and forward contracts 2.89 2.36 1.38
------ ------ ------
Total from investment operations 3.11 2.49 1.59
------ ------ ------
Dividends from net investment income (0.18) (0.19) (0.23)
Distributions from net realized gains (1.94) (0.16) (0.54)
------ ------ ------
Total distributions (2.12) (0.35) (0.77)
------ ------ ------
Net asset value, end of year $14.81 $13.82 $11.68
====== ====== ======
Total return 26.45%+ 21.60%+ 15.43%+
Net assets at end of year (000s) $71,986 $25,543 $16,130
Ratio of operating expenses to average net assets* 2.00% 2.00% 2.00%
Ratio of net investment income to average net assets* 1.65% 1.05% 1.95%
Portfolio turnover rate 63.33% 111.13% 67.50%
Average commission rate @ $0.0512 $0.0140 --
*Reflects voluntary assumption of fees or expenses per
share in each year (Note 3) $ 0.02 $ 0.03 $ 0.05
<CAPTION>
1994 1993***
----------- ----------
<S> <C> <C>
Net asset value, beginning of year $10.79 $10.81
---------- ----------
Net investment income* 0.21 0.02
Net realized and unrealized gain (loss) on investments,
foreign currency and forward contracts 0.21 (0.02)
---------- ----------
Total from investment operations 0.42 0.00
---------- ----------
Dividends from net investment income (0.20) (0.02)
Distributions from net realized gains (0.15) --
---------- ----------
Total distributions (0.35) (0.02)
---------- ----------
Net asset value, end of year $10.86 $10.79
========== ==========
Total return 3.79%+ 0.05%++
Net assets at end of year (000s) $10,752 $1,060
Ratio of operating expenses to average net assets* 2.00% 2.00%[dbldag]
Ratio of net investment income to average net assets* 1.80% 1.53%[dbldag]
Portfolio turnover rate 73.96% 80.42%
Average commission rate @ -- --
*Reflects voluntary assumption of fees or expenses per
share in each year (Note 3) $0.07 $0.00
</TABLE>
- --------------------------------------------------------------------------------
** Per-share figures have been calculated using the average shares method.
*** June 1, 1993 (commencement of share class designations) to June 30,
1993.
[dbldag] Annualized
+ Total return figures do not reflect any front-end or contingent
deferred sales charges. Total return would be lower if the Distributor
and its affiliates had not voluntarily assumed a portion of the Fund's
expenses.
++ Represents aggregate return for the period without annualization and
does not reflect any front-end or contingent deferred sales charges.
Total return would be lower if the Distributor and its affiliates had
not voluntarily assumed a portion of the Fund's expenses.
@ Average commission rate per share paid for security trades beginning
with the fiscal year ended June 30, 1996.
<PAGE>
STATE STREET RESEARCH EQUITY INCOME FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class C
----------------------------
Year ended June 30
----------------------------
1997** 1996** 1995**
------ ------ ------
<S> <C> <C> <C>
Net asset value, beginning of year $13.85 $11.70 $10.86
------ ------ ------
Net investment income* 0.36 0.26 0.32
Net realized and unrealized gain (loss) on investments,
foreign currency and forward contracts 2.90 2.36 1.39
------ ------ ------
Total from investment operations 3.26 2.62 1.71
------ ------ ------
Dividends from net investment income (0.31) (0.31) (0.33)
Distributions from net realized gains (1.94) (0.16) (0.54)
------ ------ ------
Total distributions (2.25) (0.47) (0.87)
------ ------ ------
Net asset value, end of year $14.86 $13.85 $11.70
====== ====== ======
Total return 27.75%+ 22.82%+ 16.64%+
Net assets at end of year (000s) $59,453 $39,298 $34,827
Ratio of operating expenses to average net assets* 1.00% 1.00% 1.00%
Ratio of net investment income to average net assets* 2.68% 2.03% 2.93%
Portfolio turnover rate 63.33% 111.13% 67.50%
Average commission rate @ $0.0512 $0.0140 --
*Reflects voluntary assumption of fees or expenses per
share in each year (Note 3) $0.02 $0.03 $0.05
<CAPTION>
1994 1993***
------ ------
<S> <C> <C>
Net asset value, beginning of year $10.79 $10.81
------ ------
Net investment income* 0.33 0.03
Net realized and unrealized gain (loss) on investments,
foreign currency and forward contracts 0.21 (0.02)
------ ------
Total from investment operations 0.54 0.01
------ ------
Dividends from net investment income (0.32) (0.03)
Distributions from net realized gains (0.15) --
------ ------
Total distributions (0.47) (0.03)
------ ------
Net asset value, end of year $10.86 $10.79
====== ======
Total return 4.84%+ 0.14%++
Net assets at end of year (000s) $20,266 $15,988
Ratio of operating expenses to average net assets* 1.00% 1.00%[dbldag]
Ratio of net investment income to average net assets* 2.92% 1.65%[dbldag]
Portfolio turnover rate 73.96% 80.42%
Average commission rate @ -- --
*Reflects voluntary assumption of fees or expenses per
share in each year (Note 3) $0.06 $0.00
</TABLE>
<TABLE>
<CAPTION>
Class D
-------------------------------
Year ended June 30
-------------------------------
1997** 1996** 1995**
------ ------ ------
<S> <C> <C> <C>
Net asset value, beginning of year $13.82 $11.67 $10.86
------ ------ ------
Net investment income* 0.21 0.13 0.22
Net realized and unrealized gain (loss) on investments,
foreign currency and forward contracts 2.90 2.37 1.36
------ ------ ------
Total from investment operations 3.11 2.50 1.58
------ ------ ------
Dividends from net investment income (0.20) (0.19) (0.23)
Distributions from realized gains (1.94) (0.16) (0.54)
------ ------ ------
Total distributions (2.14) (0.35) (0.77)
------ ------ ------
Net asset value, end of year $14.79 $13.82 $11.67
====== ====== ======
Total return 26.42%+ 21.68%+ 15.33%+
Net assets at end of year (000s) $9,592 $1,386 $1,366
Ratio of operating expenses to average net assets* 2.00% 2.00% 2.00%
Ratio of net investment income to average net assets* 1.59% 1.03% 1.96%
Portfolio turnover rate 63.33% 111.13% 67.50%
Average commission rate @ $0.0512 $0.0140 --
*Reflects voluntary assumption of fees or expenses per
share in each year (Note 3) $0.01 $0.03 $0.05
<CAPTION>
1994 1993***
------ ------
<S> <C> <C>
Net asset value, beginning of year $10.79 $10.81
------ ------
Net investment income* 0.21 0.02
Net realized and unrealized gain (loss) on investments,
foreign currency and forward contracts 0.21 (0.02)
------ ------
Total from investment operations 0.42 0.00
------ ------
Dividends from net investment income (0.20) (0.02)
Distributions from realized gains (0.15) --
------ ------
Total distributions (0.35) (0.02)
------ ------
Net asset value, end of year $10.86 $10.79
====== ======
Total return 3.78%+ 0.04%++
Net assets at end of year (000s) $1,280 $ 628
Ratio of operating expenses to average net assets* 2.00% 2.00%[dbldag]
Ratio of net investment income to average net assets* 1.88% 1.49%[dbldag]
Portfolio turnover rate 73.96% 80.42%
Average commission rate @ -- --
*Reflects voluntary assumption of fees or expenses per
share in each year (Note 3) $0.06 $0.00
</TABLE>
- --------------------------------------------------------------------------------
** Per-share figures have been calculated using the average shares method.
*** June 1, 1993 (commencement of share class designations) to June 30,
1993.
[dbldag] Annualized
+ Total return figures do not reflect any front-end or contingent
deferred sales charges. Total return would be lower if the Distributor
and its affiliates had not voluntarily assumed a portion of the Fund's
expenses.
++ Represents aggregate return for the period without annualization and
does not reflect any front-end or contingent deferred sales charges.
Total return would be lower if the Distributor and its affiliates had
not voluntarily assumed a portion of the Fund's expenses.
@ Average commission rate per share paid for security trades beginning
with the fiscal year ended June 30, 1996.
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Trustees of State Street Research
Equity Trust and the Shareholders of
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 State Street Research Equity
Income Fund (a series of State Street Research Equity Trust, hereafter referred
to as the "Trust") at June 30, 1997, and the results of its operations, the
changes in its net assets and the financial highlights for the periods
indicated, in conformity with generally accepted accounting principles. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Trust's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits, which included confirmation of
securities at June 30, 1997 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.
Price Waterhouse LLP
Boston, Massachusetts
August 8, 1997
<PAGE>
STATE STREET RESEARCH EQUITY INCOME FUND
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
- --------------------------------------------------------------------------------
Equity Income Fund had a fine year. Class A shares of the Fund returned +27.45%
to investors for the 12 months ended June 30, 1997. This total return
performance exceeded that of the average equity income fund tracked by Lipper
Analytical Services (does not reflect sales charges). The S&P 500 Composite
Index was up +34.71% for the period.
The Fund buys primarily equity securities that we believe are undervalued. The
Fund can invest a portion of assets in high-yield bonds to boost yield. Bonds
and convertible securities help diversify portfolio volatility and add
flexibility with stock selection.
Despite its mid-cap emphasis and value approach, Equity Income Fund
participated in a rising stock market that favored large capitalization stocks
and growth stocks. Over the period, small additions were made to several
favored sectors: health care, chemicals, and printing and publishing.
The high-yield exposure lagged much of the period, but made up its losses by
the fourth quarter.
June 30, 1997
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, which resulted in new or
increased 12b-1 fees of up to 1% per class thereafter and which will reduce
subsequent performance. Performance reflects maximum 4.5% "A" share front-end
sales charge or 5% "B" share or 1% "D" share contingent deferred sales charge.
"C" shares, offered without a sales charge, are available only to certain
employee benefit plans and large institutions. Performance results for the Fund
are increased by the Distributor's voluntary reduction of Fund fees and
expenses; without subsidization, performance would have been lower.
Change in Value of
$10,000 Based on the S&P 500
Compared to Change in Value of $10,000
Invested in the Fund
Class A Shares
-------------------------------------------
Average Annual Total Return
-------------------------------------------
1 Year 5 Years 10 Years Life of Fund
-------------------------------------------
21.72% 17.06% 11.52% 11.86%
6/87 9550 10000
6/88 9318 9307
6/89 10889 11217
6/90 12139 13061
6/91 11376 14024
6/92 13061 15902
6/93 15902 18066
6/94 16588 18319
6/95 19264 23087
6/96 23582 29085
6/97 30005 39172
Class B Shares
-------------------------------------------
Average Annual Total Return
-------------------------------------------
1 Year 5 Years 10 Years Life of Fund
-------------------------------------------
21.45% 17.30% 11.87% 12.14%
6/87 10000 10000
6/88 9764 9307
6/89 11421 11217
6/90 12734 13061
6/91 11927 14024
6/92 13695 15902
6/93 16660 18066
6/94 17290 18319
6/95 19958 23087
6/96 24268 29085
6/97 30688 39172
Class C Shares
-------------------------------------------
Average Annual Total Return
-------------------------------------------
1 Year 5 Years 10 Years Life of Fund
-------------------------------------------
27.75% 18.49% 12.33% 12.57%
6/87 10000 10000
6/88 9764 9307
6/89 11421 11217
6/90 12734 13061
6/91 11927 14024
6/92 13695 15902
6/93 16675 18066
6/94 17481 18319
6/95 20389 23087
6/96 25042 29085
6/97 31992 39172
Class D Shares
-------------------------------------------
Average Annual Total Return
-------------------------------------------
1 Year 5 Years 10 Years Life of Fund
-------------------------------------------
25.42% 17.50% 11.86% 12.14%
6/87 10000 10000
6/88 9764 9307
6/89 11421 11217
6/90 12734 13061
6/91 11927 14024
6/92 13695 15902
6/93 16659 18066
6/94 17289 18319
6/95 19939 23087
6/96 24263 29085
6/97 30674 39172
<PAGE>
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: Dept 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 that 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 grate 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 repayment 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
A-1
<PAGE>
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 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.
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-2
<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.
A-3
<PAGE>
STATE STREET RESEARCH 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 State Street Research Equity
Income Fund for the fiscal years ended June 30, 1988
through 1997.
Financial Highlights for State Street Research Equity
Investment Fund and State Street Research Global Resources
Fund are incorporated by reference from Post-Effective
Amendment No. 18.
(2) Financial Statements included in PART B (Statement of
Additional Information) of this Registration Statement:
For State Street Research Equity Income Fund for the
fiscal year ended June 30, 1997 (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, 1997 and June 30, 1996)
Notes to Financial Statements (including financial
highlights)
Report of Independent Accountants
Management's Discussion of Fund Performance
For State Street Research Equity Investment Fund and State
Street Research Global Resources Fund for the fiscal year
ended June 30, 1996 (except as provided below)
incorporated by reference from Post-Effective Amendment
No. 18:
Investment Portfolio
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets (Fiscal years
ended June 30, 1996 and June 30, 1995)
Notes to Financial Statements (including financial
highlights)
Report of Independent Accountants
Management's Discussion of Fund Performance
Report on Special Meeting of Shareholders
C-1
<PAGE>
(b) Exhibits
(1)(a) First Amended and Restated Master Trust Agreement, Amendment No.
1, Amendment No. 2 and Amendment No. 3(17)
(1)(b) Amendment No. 4 to First Amended and Restated Master Trust
Agreement(18)
(1)(c) Amendment No. 5 to First Amended and Restated Master Trust
Agreement(18)
(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) Deleted
(4)(b) Deleted
(4)(c) Deleted
(5)(a) Advisory Agreement with MetLife - State Street Investment
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(17)
(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)*
(6)(e) Form of Supplement No. 1 to Selected Dealer Agreement(18)
(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(17)
(14)(b) State Street Research 403(b): Brochure, Maximum Salary
Reduction Worksheet, Account Application, Salary
Reduction Agreement and Transfer of 403(b) Assets Form
(14)(c) State Street Research SIMPLE IRA: Application, Terms &
Conditions and Disclosure Statement
(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) First Amended and Restated Multiple Class Expense Allocation Plan
(18)
(18) Powers of Attorney
(19) Certificate of Board Resolution respecting Powers of Attorney
(20) Application Forms
(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
17 Post-Effective Amendment No. 17 August 29, 1995
18 Post-Effective Amendment No. 18 October 16, 1996
Item 25. Persons Controlled by or Under Common Control with Registrant
Inapplicable.
C-5
<PAGE>
Item 26. Number of Holders of Securities
As of July 31, 1997, 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
State Street Research
Equity Investment Fund
Class A 4,803
Class B 2,371
Class C 61
Class D 42
State Street Research
Equity Income Fund
Class A 4,993
Class B 4,099
Class C 70
Class D 247
State Street Research
Global Resources Fund
Class A 7,376
Class B 5,660
Class C 138
Class D 1,228
C-6
<PAGE>
Item 27. Indemnification
Under Article VI of the Registrant's First Amended and Restated Master
Trust Agreement, as further amended ("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
Arpiarian, Tanya None
Vice President
Bangs, Linda L. None
Vice President
Bennett, Peter C. Executive Vice GFM International Investors
Director and President Limited London, England
Executive 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 Financial Trust Boston, MA
Vice President State Street Research Growth Trust Boston, MA
Vice President State Street Research Master Investment Trust Boston, MA
Vice President State Street Research Equity Trust
Vice President State Street Research Income Trust Boston, MA
Vice President State Street Research Portfolios, Inc. Boston, MA
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
Chairman and Trustee Gordon College Wenham, MA
Bochman, Kathleen None
Vice President
Bray, Michael J. Employee Merrill Lynch & Co. Boston, MA
Vice President
Brown, Susan H. None
Vice President
Buffum, Andrea Project Manager BankBoston Boston, MA
Vice President (until 12/96)
Managing Director State Street Global Advisors Boston, MA
(until 12/95)
Burbank, John F. None
Senior Vice President
(Vice President until
7/96)
Cabrera, Jesus A. Vice President First Chicago Investment Management Co. Chicago, IL
Vice President (until 5/96)
Vice President State Street Research Capital Trust Boston, MA
Canavan, Joseph W. Vice President GFM International Investors Limited London, England
Vice President Assistant Treasurer State Street Research Equity Trust Boston, MA
Assistant Treasurer State Street Research Financial Trust Boston, MA
Assistant Treasurer State Street Research Income Trust Boston, MA
Assistant Treasurer State Street Research Money Market Trust Boston, MA
Assistant Treasurer State Street Research Tax-Exempt Trust Boston, MA
Assistant Treasurer State Street Research Capital Trust Boston, MA
Assistant Treasurer State Street Research Exchange Trust Boston, MA
Assistant Treasurer State Street Research Growth Trust Boston, MA
Assistant Treasurer State Street Research Master Investment Trust Boston, MA
Assistant Treasurer State Street Research Securities Trust Boston, MA
Assistant Treasurer State Street Research Portfolios, Inc. Boston, MA
C-9
<PAGE>
Principal business
Name Connection Organization address of organization
- ---- ---------- ------------ -----------------------
Carmen, Michael Portfolio Manager Montgomery Asset Management San Francisco, CA
Vice President (until 11/96)
Vice President State Street Research & Management Company Boston, MA
(until 4/96)
Vice President State Street Research Capital Trust Boston, MA
Carstens, Linda C. None
Vice President
Clifford, Jr., Paul J. Vice President State Street Research Tax-Exempt Trust Boston, MA
Vice President
D'Vari, Ronald None
Vice President
DeVeuve, Donald None
Vice President
DiFazio, Susan M.W. Senior Vice President State Street Research Investment Services, Inc. Boston, MA
Vice President
Dillman, Thomas J Director of Research Bank of New York New York, NY
Senior Vice President (until 6/95)
Drake, Susan W. Vice President State Street Research Tax-Exempt Trust Boston, MA
Vice President (until 2/96)
Duggan, Peter J. None
Senior Vice
President
Evans, Gordon Senior Vice President State Street Research Investment Services, Inc. Boston, MA
Vice President (Vice President until 3/96)
Federoff, Alex G. None
Vice President
Feliciano, Rosalina None
Vice President
Gardner, Michael D. Partner Prism Group Seattle, WA
Senior Vice President
Geer, Bartlett R. Vice President State Street Research Equity Trust Boston, MA
Senior Vice President Vice President State Street Research Income Trust Boston, MA
Vice President State Street Research Securities Trust Boston, MA
Govoni, Electra None
Vice President
C-10
<PAGE>
Principal business
Name Connection Organization address of organization
- ---- ---------- ------------ -----------------------
Granger, Allison None
Vice President
Hamilton, Jr., William A. Treasurer and Director Ellis Memorial and Eldredge House Boston, MA
Senior Vice President Treasurer and Director Nautical and Aviation Publishing Company, Inc. Baltimore, MD
Treasurer and Director North Conway Institute Boston, MA
Hanson, Phyllis None
Vice President
Haverty, Jr., Lawrence J. None
Senior Vice President
Heineke, George R. None
Vice President
Jackson, Jr., Trustee Certain trusts of related and
F. Gardner non-related individuals
Senior Vice President Trustee and Chairman Vincent Memorial Hospital Boston, MA
of the Board
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 and Controller MetLife Securities, Inc. New York, NY
Senior Vice President GFM International Investors Limited London, England
Kallis, John H. Vice President State Street Research Financial Trust Boston, MA
Senior Vice President Vice President State Street Research Income Trust Boston, MA
Vice President State Street Research Money Market Trust Boston, MA
Vice President State Street Research Portfolios, Inc. Boston, MA
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 Equity Trust Boston, MA
Senior Vice Vice President State Street Research Capital Trust Boston, MA
President Vice President State Street Research Growth Trust Boston, MA
Member Harvard Business School Association Cambridge, MA
Member National Alumni Council, Boston University Boston, MA
Koski, Karen None
Vice President
Langholm, Knut None
Vice President
Leary, Eileen M. None
Vice President
McNamara, III, Francis J. Director and Executive GFM International Investors
Executive Vice Vice President Limited London, England
President, Senior Vice President, Clerk State Street Research Investment Services, Inc. Boston, MA
Secretary and and General Counsel
General Counsel Secretary and General Counsel State Street Research Master Investment Trust Boston, MA
(Senior Vice President, Secretary and General Counsel State Street Research Capital Trust Boston, MA
Secretary and General Secretary and General Counsel State Street Research Exchange Trust Boston, MA
Counsel until 7/96) Secretary and General Counsel State Street Research Growth Trust Boston, MA
Secretary and General Counsel State Street Research Securities Trust Boston, MA
Secretary and General Counsel State Street Research Equity Trust Boston, MA
Secretary and General Counsel State Street Research Financial Trust Boston, MA
Secretary and General Counsel State Street Research Income Trust Boston, MA
Secretary and General Counsel State Street Research Money Market Trust Boston, MA
Secretary and General Counsel State Street Research Portfolios, Inc. Boston, MA
Secretary and General Counsel State Street Research Tax-Exempt Trust Boston, MA
Secretary and General Counsel SSRM Holdings, Inc. Boston, MA
C-12
<PAGE>
Principal business
Name Connection Organization address of organization
- ---- ---------- ------------ -----------------------
Maus, Gerard P. Executive Vice President GFM International Investors
Director, Executive and Director Limited London, England
Vice President, Treasurer State Street Research Equity Trust Boston, MA
Treasurer, Chief Treasurer State Street Research Financial Trust Boston, MA
Financial Officer and Treasurer State Street Research Income Trust Boston, MA
Chief Administrative Treasurer State Street Research Money Market Trust Boston, MA
Officer 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 Portfolios, Inc. 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.
Treasurer and Chief Financial SSRM Holdings, Inc. Boston, MA
Officer
Treasurer (until 1/97) MetLife Securities, Inc. New York, NY
Milder, Judith J. None
Senior Vice President
Miller, Joan D. Senior Vice President State Street Research Investment Services, Inc. Boston, MA
Senior Vice President
(Vice President
until 7/96)
Moore, Jr., Thomas P. Vice President State Street Research Capital Trust Boston, MA
Senior Vice (until 11/96)
President Vice President State Street Research Exchange Trust Boston, MA
(until 2/97)
Vice President State Street Research Growth Trust Boston, MA
(until 2/97)
Vice President State Street Research Master Investment Trust Boston, MA
(until 2/97)
Vice President State Street Research Equity Trust Boston, MA
Vice President State Street Research Energy, Inc. Boston, MA
Director Hibernia Savings Bank Quincy, MA
Governor on the Association for Investment Management
Board of Governors and Research Charlottesville, VA
Mulligan, JoAnne C. Vice President State Street Research Money Market Trust Boston, MA
Senior Vice President
(Vice President
until 7/96)
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
- ---- ---------- ------------ -----------------------
Paddon, Steven W. Employee Metropolitan Life Insurance Company New York, NY
Vice President (until 10/96)
Pannell, James C. None
Vice President
Peters, Kim M. Vice President State Street Research Securities Trust Boston, MA
Senior Vice President
Ragsdale, E.K. Easton Senior Vice President GFM International Investors, Limited London, England
Senior Vice President
(Vice President
until 7/96)
Rawlins, Jeffrey A. None
Senior Vice President
(Vice President
until 7/96)
Rice III, Daniel Joseph Vice President State Street Research Equity Trust Boston, MA
Senior Vice President
Richards, Scott None
Vice President
Romich, Douglas A. Vice President GFM International Investors Limited London, England
Vice President Assistant Treasurer State Street Research Equity Trust Boston, MA
Assistant Treasurer State Street Research Financial Trust Boston, MA
Assistant Treasurer State Street Research Income Trust Boston, MA
Assistant Treasurer State Street Research Money Market Trust Boston, MA
Assistant Treasurer State Street Research Tax-Exempt Trust Boston, MA
Assistant Treasurer State Street Research Capital Trust Boston, MA
Assistant Treasurer State Street Research Exchange Trust
Assistant Treasurer State Street Research Growth Trust Boston, MA
Assistant Treasurer State Street Research Master Investment Trust Boston, MA
Assistant Treasurer State Street Research Securities Trust Boston, MA
Assistant Treasurer State Street Research Portfolios, Inc. Boston, MA
Saperstone, Paul None
Vice President
C-14
<PAGE>
Principal business
Name Connection Organization address of organization
- ---- ---------- ------------ -----------------------
Schrage, Michael None
Vice President
Schultz, David C. Director and Treasurer Mafraq Hospital Association Mafraq, Jordan
Executive Vice Member Association of Investment
President Management Sales Executives Atlanta, GA
Member, Investment Committee Lexington Christian Academy Lexington, MA
Shaver, Jr. C. Troy President and Chief Executive State Street Research Investment Services, Inc. Boston, MA
Executive Vice Officer
President President and Chief Executive John Hancock Funds, Inc. Boston, MA
Officer (until 1/96)
Shean, William G. None
Vice President
Shively, Thomas A. Vice President State Street Research Financial Trust Boston, MA
Director and Vice President State Street Research Money Market Trust Boston, MA
Executive Vice Vice President State Street Research Tax-Exempt Trust
President Director State Street Research Investment Services, Inc Boston, MA
Vice President State Street Research Securities Trust Boston, MA
Shoemaker, Richard D. Senior Vice President GFM International Investors Limited London, England
Senior Vice President
Strelow, Dan R. None
Senior Vice President
C-15
<PAGE>
Principal business
Name Connection Organization address of organization
- ---- ---------- ------------ -----------------------
Swanson, Amy McDermott None
Senior Vice President
Trebino, Anne M. Vice President SSRM Holdings, Inc. Boston, MA
Senior Vice President
(Vice President
until 6/95)
Verni, Ralph F. Chairman, President, GFM International Investors
Chairman, President, CEO and Director Limited London, England
Chief Executive Chairman, President, Chief State Street Research Capital Trust Boston, MA
Officer and Executive Officer and Trustee
Director Chairman, President, Chief State Street Research Exchange Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief State Street Research Growth Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief State Street Research Master Investment Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief State Street Research Securities Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief State Street Research Equity Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief State Street Research Financial Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief State Street Research Income Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief State Street Research Money Market Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief State Street Research Portfolios, Inc. Boston, MA
Executive Officer and Director
Chairman, President, Chief State Street Research Tax-Exempt Trust Boston, MA
Executive Officer and Trustee
Chairman and Director State Street Research Investment Services, Inc. Boston, MA
(President and Chief Executive
Officer until 2/96)
Chairman and Director Metric Holdings, Inc. San Francisco, CA
Director and Officer Certain wholly-owned subsidiaries
of Metric Holdings, Inc.
Chairman of the Board and Director MetLife Securities, Inc. New York, NY
(until 1/97)
President, Chief Executive SSRM Holdings, Inc. Boston, MA
Officer and Director
Director CML Group, Inc. Boston, MA
Director Colgate University Hamilton, NY
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
Weiss, James M. Vice President State Street Research Equity Trust Boston, MA
Senior Vice 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 State Street Research Capital Trust Boston, MA
Vice President State Street Research Portfolios, Inc. Boston, MA
President and Chief Investment IDS Equity Advisors Minneapolis, MN
Officer (until 12/95)
Westvold, Vice President State Street Research Securities Trust Boston, MA
Elizabeth McCombs
Senior Vice President
(Vice President
until 7/96)
Wilson, John T. Vice President State Street Research Equity Trust Boston, MA
Vice President Vice President State Street Research Master Investment Trust Boston, MA
Vice President Phoenix Investment Counsel, Inc. Hartford, CT
(until 6/96)
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 Vice President and GFM International Investors, Limited London, England
General Counsel Assistant General Counsel
Assistant Secretary State Street Research Capital Trust Boston, MA
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 State Street Research Equity Trust Boston, MA
Assistant Secretary State Street Research Financial Trust Boston, MA
Assistant Secretary State Street Research Income Trust Boston, MA
Assistant Secretary State Street Research Money Market Trust Boston, MA
Assistant Secretary State Street Research Portfolios, Inc. 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 (until 2/96)
Wu, Norman N. Partner Atlantic-Acton Realty Framingham, MA
Senior Vice President Director Bond Analysts Society of Boston Boston, MA
</TABLE>
C-17
<PAGE>
Item 29. Principal Underwriters
(a) State Street Research Investment Services, Inc., serves as principal
underwriter for State Street Research Equity Trust, State Street Research
Financial Trust, State Street Research Income Trust, State Street Research
Money Market Trust, State Street Research Tax-Exempt Trust, State Street
Research Capital Trust, State Street Research 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 and Director Board, President,
Boston, MA 02111 Chief Executive
Officer and
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
C. Troy Shaver, Jr. President None
One Financial Center and Chief
Boston, MA 02111 Executive Officer
George B. Trotta Executive Vice None
One Madison Avenue President
New York, NY 10010
C-18
<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
Gordon Evans Senior Vice President None
One Financial Center
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 General Counsel and
Boston, MA 02111 Clerk
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-19
<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, Assistant Secretary
Boston, MA 02111 General Counsel and
Assistant Clerk
Linda Grasso Vice President None
One Financial Center
Boston, MA 02111
Robert M. Gunville Vice President None
One Financial Center
Boston, MA 02111
Frederick H. Jamieson Vice President None
One Financial Center and Assistant
Boston, MA 02111 Treasurer
Susan V. Martin Vice President None
One Financial Center
Boston, MA 02111
Amy L. Simmons Vice President Assistant
One Financial Center Secretary
Boston, MA 02111
Kevin Wilkins Vice President None
One Financial Center
Boston, MA 02111
C-20
<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 State Street Research 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 State Street Research 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-21
<PAGE>
Notice
A copy of the First Amended and Restated Master Trust Agreement, as
further amended ("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-22
<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. 19 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 22nd day of August, 1997.
STATE STREET RESEARCH 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)
*
_________________________________
Steve A. Garban Trustee
*
_________________________________
Malcolm T. Hopkins Trustee
*
_________________________________ 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 22, 1997, 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. 19 [X]
and/or
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 20 [X]
____________________
STATE STREET RESEARCH EQUITY TRUST
(Exact Name of Registrant as Specified in Declaration of Trust)
____________________
EXHIBITS
<PAGE>
INDEX TO EXHIBITS
(11) Consent of Price Waterhouse LLP
(14) (c) State Street Research SIMPLE IRA: Application, Terms & Conditions
and Disclosure Statement
(18) Powers of Attorney
(19) Certificate of Board Resolution respecting Powers of Attorney
(20) Application Forms
(27) Financial Data Schedules
EXHIBIT 11
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 19 to the registration
statement (No. 33-4696) on Form N-1A (the "Registration Statement") of our
report dated August 8, 1997, relating to the financial statements and financial
highlights of the State Street Research Equity Income Fund (a series of the
State Street Research Equity Trust), which appears in such Statement of
Additional Information and to the incorporation by reference of our report into
the Prospectus which constitutes part of this Registration Statement. We also
consent to the reference to us under the heading "Independent Accountants" in
such Statement of Additional Information and to the reference to us under the
heading "Financial Highlights" in such Prospectus.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Boston, Massachusetts
August 21, 1997
EXHIBIT (14)(c)
[logo] STATE STREET RESEARCH IRA
SIMPLE IRA Application
Upon completion, send this application to the address listed on the back.
(1) What type of SIMPLE IRA are you opening?
[ ] Check if this IRA will receive contributions under your employer's SIMPLE
IRA plan, and complete the following employer information:
- -------------------------------------------------(---)-------------------------
Name of employer Telephone
- -------------------------------------------------------------------------------
Address
- -------------------------------------------------------------------------------
[ ] Check if this IRA will receive a transfer or a rollover from another
SIMPLE IRA to which contributions were made by your current or former
employer under a SIMPLE IRA plan, and complete the following:
- Amount to be transferred: $___________________________
- Date of first contribution to your other SIMPLE IRA under
the employer's SIMPLE IRA plan:__________________________________.
Your employer must complete the following to verify the date.
Verification: On behalf of the employer maintaining the SIMPLE IRA plan, I
verify that the date stated above (the date of the first contribution to the
Depositor's prior SIMPLE IRA under the employer's SIMPLE IRA plan) is correct.
I acknowledge that verifying an incorrect date may result in additional
income taxes or penalties.
- -------------------------------------------------------------------------------
Name of Employer: _____________________________________________________________
By: ___________________________________________________________________________
Authorized Officer
Note: For a transfer directly from the current SIMPLE IRA custodian or
trustee, complete the Transfer of Assets/Rollover Form. For a rollover (which
is a distribution from the current SIMPLE IRA custodian or trustee to you,
followed by a contribution on that amount by you to this SIMPLE IRA),
complete the Transfer of Assets/Rollover Form and attach the check for the
amount rolled over, payable to "State Street Bank and Trust Company,
Trustee." Consult your tax advisor on IRS requirements for a valid rollover.
(2) What is your name and address?
(Please print.)
/ /
- -------------------------------------------------------------------------------
Your name Date of birth
- -------------------------------------------------------------------------------
Street address
- -------------------------------------------------------------------------------
City State ZIP
- -------------------------------------------------------------------------------
Daytime telephone number Evening telephone number
- -------------------------------------------------------------------------------
Social security number/taxpayer identification number
(3) What fund(s) have you selected?
- -------------------------------------------------------------------------------
Fund name
[ ] A [ ] B [ ] D
- -------------------------------------------------------------------------------
Percentage Share class**
- -------------------------------------------------------------------------------
Fund name
[ ] A [ ] B [ ] D
- -------------------------------------------------------------------------------
Percentage Share class**
- -------------------------------------------------------------------------------
Fund name
[ ] A [ ] B [ ] D
- -------------------------------------------------------------------------------
Percentage Share class**
[ ] $ _______________________
Total proceeds enclosed
**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 fiduciary 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
Second 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 SIMPLE IRA, appoint
State Street Bank and Trust Company as Trustee, direct that contributions to
my SIMPLE 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
SIMPLE 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.
[graphic of pencil] -----------------------------------------------------------
Signature Date
Signature Guarantee
(fill out if your Dealer does not complete section)
- -------------------------------------------------------------------------------
Name of bank or eligible guarantor
- -------------------------------------------------------------------------------
Authorized signature of bank or eligible guarantor
- -------------------------------------------------------------------------------
Street address
- -------------------------------------------------------------------------------
City State ZIP
<PAGE>
(6) Dealer information
- -------------------------------------------------------------------------------
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.
Telephone Exchange Privilege
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
acknowledgement 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.
[graphic of pencil] (initial here.)__________________
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.
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
<PAGE>
Control Number: 3720-970130(0298)SSR-LD IR-567E-0197
<PAGE>
[logo] STATE STREET RESEARCH IRA
SIMPLE IRA Terms & Conditions
These Terms and Conditions are in the form promulgated by the Internal Revenue
Service in Form 5305-S for use in establishing a simple individual retirement
trust account.
ARTICLE I.
The Trustee will accept cash contributions made on behalf of the Participant by
the Participant's employer under the terms of a SIMPLE plan described in section
408(p). In addition, the Trustee will accept transfers or rollovers from other
SIMPLE IRAs of the Participant. No other contributions will be accepted by the
Trustee.
ARTICLE II.
The Participant'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 Participant'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 Participant 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 Participant and the
surviving spouse and shall apply to all subsequent years. The life expectancy of
a nonspouse beneficiary may not be recalculated.
3. The Participant's entire interest in the custodial account must be, or begin
to be, distributed by the Participant's required beginning date (April 1
following the calendar year end in which the Participant reaches age 70-1/2).
By that date, the Participant 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 Participant.
(c) An annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the joint and last survivor lives of the
Participant and his or her designated beneficiary.
(d) Equal or substantially equal annual payments over a specified period
that may not be longer than the Participant'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 Participant and his or her designated beneficiary.
4. If the Participant 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 Participant 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 Participant dies before distribution of his or her interest has
begun, the entire remaining interest will, at the election of the
Participant or, if the Participant 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 Participant'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
Participant's death. If, however, the beneficiary is the Participant's
surviving spouse, then this distribution is not required to begin
before December 31 of the year in which the Participant 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
Participant's required beginning date, even though payments may actually
have been made before that date.
(d) If the Participant 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 be 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 Participant'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 Participant (or the joint life and last survivor expectancy of the
Participant and the Participant's designed 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 Participant and designated
beneficiary as of their birthdays in the year the Participant 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 Participant 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
Participant as prescribed by the Internal Revenue Service.
3. The Trustee also agrees to provide the Participant's employer the summary
description described in section 408(1)(2) unless this SIMPLE IRA is a transfer
SIMPLE IRA.
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ARTICLE VI.
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 408(p) and
related regulations will be invalid.
ARTICLE VII.
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. article VIII.
1. The amount of each contribution credited to the Participant'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 Participant's
residence), in accordance with instructions of the Participant given under
Section 3 below. The Trustee (or any party appointed to act as agent for the
Trustee under section 16 of this Article VIII-the "Agent"; whenever an Agent is
acting for the Trustee, references to the Trustee will be deemed to include the
Agent) may retain the Participant'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 Participant has not revoked his account. If and to the extent permitted
by IRS regulations or rulings pertaining to SIMPLE IRA accounts under Code
Section 408(p), the Participant may revoke the account by following such
procedures as may be specified in applicable regulations or rulings (if any),
with such time limits as are provided in such regulations or rulings. Upon
revocation, the amount of the Participant's initial deposit will be returned to
him as provided in such regulations or rulings.
2. All dividends and capital gain distributions received on the shares of a
particular class of any Fund held in the Participant'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 Participant 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 Participant shall designate which class of shares of each
such Fund the Participant's contribution shall be invested in.
The Participant shall make such designation on the State Street Research
Simple 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 Participant may at any time
direct the Trustee to exchange all or a specified portion of the shares of a
Fund in the Participant's account for shares and fractional shares of one or
more other Funds.
The Participant shall give such directions by written, telephonic,
electronic 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 Participant by written notice to the Trustee, may designate one or more
beneficiaries to receive the balance (if any) remaining in the Participant'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 Participant and
filed with the Trustee. The Participant 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 Participant's account) will revoke
all other designations previously filed with the Trustee. If no such designation
is in effect upon the Participant's death, or if such designation is in effect
but does not fully dispose of the Participant's account, the balance in the
account shall be paid in a single sum, as soon as is practicable, to the
Participant's estate.
Subject to the applicable requirements of the preceding Articles of these
Terms and Conditions, the Participant 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 Participant, 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 Participant's death, each beneficiary (or the representative of
the Participant's estate) will exercise the powers and responsibilities of the
Participant hereunder with respect to the portion of the Participant's account
passing to such beneficiary (or estate).
6. The Trustee shall forward to the Participant any notices, prospectuses,
reports to shareholders, financial statements, proxies and proxy soliciting
materials, relating to the Fund shares in the Participant's account. The Trustee
shall vote any such shares held in the account in accordance with the timely
written instructions of the Participant if received. If no timely written
instructions are received from the Participant, 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 Participant, be paid from the Participant's account.
8. The Trustee shall make distributions from the account at such times and in
such manner as the Participant 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 Participant and/or the
Participant's spouse in connection with distributions from the account before
the Participant's death will be made only at the written election of the
Participant. The recalculation of life expectancy of the surviving spouse in
connection with distributions from the account after the Participant's death
will be made only at the written election of the surviving spouse. By
establishing the account, the Participant (for himself and his surviving spouse,
if any) determines not to recalculate life expectancies unless the Participant
(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 Participant (or 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 Participant (or the Participant's
employer) to determine the time and amount of salary
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reduction or other 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 Participant
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 Participant (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 Participant (or beneficiary) is meeting the
minimum distribution requirements from another individual retirement arrangement
maintained by the Participant (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 Participant or any other
person resulting from contributions to or distributions from the Participant'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 Participant's account arising out of the
Participant's establishment of a State Street Research SIMPLE Individual
Retirement Account or arising out of any investment instructions of the
Participant, 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 Participant (or beneficiary) and will have no duty of
inquiry concerning the Participant'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
Participant (or beneficiary) will have exclusive investment control over the
account.
11. Whenever the Participant (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 Participant (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 Participant (or beneficiary).
Participant 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 Participant (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
Participant's account and will have no liability for so doing.
12. These Term and Conditions shall terminate upon the complete distribution of
the account to the Participant or his beneficiaries or to a successor individual
retirement account. The Trustee shall have the right to terminate this account
upon 60 days notice to the Participant, 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 as the Participant (or his beneficiaries) shall designate, or, in the
absence of such designation, to the Participant, or if he is then dead, to the
beneficiaries or the Participant'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 Participant 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
of such payment.
19. Any purchase or redemption of shares of any class of a Fund for or from the
Participant's account will be affected 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 Participant'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 (unless the imposition of such fee or
charge is prohibited under applicable regulations or rulings).
20. SSRIS may amend these Terms and Conditions from time to time, and shall give
written notice of any material amendment to the Participant within a reasonable
time after the amendment is adopted or becomes effective, whichever is later.
The Participant hereby expressly delegates authority to SSRIS to amend these
Terms and Conditions and consents to any such amendments.
21. The Terms and Conditions shall be construed, administered and enforced
according to the laws of Massachusetts. The Participant agrees that any legal
proceedings relating to the Participant'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 SIMPLE
Individual Retirement Account established hereby, and the term "Participant"
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-S, 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 amendments to the Internal
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<PAGE>
Revenue Code or regulations or rulings thereunder, the Trustee (and SSRIS and
the Agent) may operate the Participant's account in accordance with such
requirements to the extent deemed necessary to preserve the tax benefits of the
account.
24. The Participant 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 SIMPLE Individual Retirement Account Disclosure Statement.
(References are to the Internal Revenue Code.)
(a) SSRIS, the Agent, the Trustee and the Funds will have no responsibility
for compliance with the requirements of Code Section 408(p) and any other
applicable requirements (including, if applicable, whether any transferee
individual retirement account or annuity which the participant designates
to receive a transfer from his account hereunder meets the requirements to
be a SIMPLE IRA or whether any penalty taxes may be payable in connection
therewith), which matters shall be the sole responsibility of the
Depositor.
(b) This Agreement is intended to establish a valid SIMPLE Individual
Retirement Account operating in conjunction with a SIMPLE IRA plan operated
by the Participant's employer, and to meet all applicable requirements of
Code Section 408(p) (and other applicable legal requirements for SIMPLE
IRAs). This Agreement will be interpreted and the custodial account
hereunder administered in a manner that carries out such intent. In
addition, if future regulations or rulings provide guidance concerning the
requirements for a valid SIMPLE IRA, this Agreement will be interpreted and
the custodial account hereunder will be administered in a manner that
complies with such regulations or rulings pending the adoption of any
required amendment to this Agreement.
Control Number: 3735-970215(0398)SSR-LD IR-593E-0297
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[logo] STATE STREET RESEARCH IRA
SIMPLE IRA Disclosure Statement
The following information is provided to you in accordance with the requirements
of the Internal Revenue Code (the "Code") and Treasury regulations and should be
reviewed in conjunction with the State Street Research SIMPLE IRA Terms and
Conditions (the "Terms and Conditions"), SIMPLE IRA Application (the
"Application") and the current prospectus for each fund in which your account is
invested. The provisions of the Terms and Conditions, Application and prospectus
govern in any instance where the Disclosure Statement is incomplete or appears
to conflict. This Disclosure Statement reflects the provisions of the Internal
Revenue Code in effect on January 1, 1997. This Disclosure Statement provides a
nontechnical summary of the law. Please consult with your tax advisor for more
complete information and refer to IRS Publication 590.
The information in this Disclosure Statement relates to SIMPLE Individual
Retirement Accounts. SIMPLE IRAs operate as part of an employer SIMPLE IRA plan
maintained by your employer. Other IRAs, which are not part of an employer
SIMPLE IRA plan, are available and may be established using a different
Application. This Disclosure Statement does not describe such regular IRAs. For
more information on regular IRAs, contact State Street Research at the address
below to request forms and descriptive information.
Right to Revoke
To the extent provided by IRS rules for SIMPLE IRAs, you have the right to
revoke your IRA after signing the Application if you act within the time limits
provided under the IRS rules. You may revoke your IRA by mail or by delivery of
written notice to:
State Street Research
P.O. Box 8408
Boston, MA02266
Your notice will be considered mailed on the date of postmark, or the date
of certification or registration if it is sent by certified or registered mail.
If you revoke your IRA, you are entitled to a return of the amount
contributed. If you have any questions concerning your right of revocation,
please call 800-562-0032 during regular business hours.
Statutory Requirements of an IRA
An IRA is a trust or custodial account established for the exclusive benefit of
you and your beneficiaries. Current law requires that your SIMPLE IRA agreement
be in writing and meet the following requirements:
1. Contributions to your SIMPLE IRA must be in cash, and, for any taxable year,
cannot exceed the limits described below, unless the contribution is a rollover
or transfer to the account.
2. The custodian or trustee must be a bank, savings and loan association, credit
union or other institution or person approved by the Internal Revenue Service to
administer your IRA in accordance with current tax laws.
3. None of your IRA assets may be commingled with the assets of other people
except in a common trust fund or common investment fund.
4. No portion of your IRA may be invested in life insurance contracts or in
collectibles (within the meaning of Internal Revenue Code Section 408[m]). A
collectible is defined as a work of art, rug or antique, metal or gem, stamp or
coin, alcoholic beverage, or any other tangible personal property specified by
the Internal Revenue Service. Specially minted U.S. gold and silver bullions and
certain state issued coins are permissible IRA investments.
5. You are required to take minimum distributions from your IRA at certain times
in accordance with Proposed Regulations Section 1.408-8.
A. During Your Life
You are required to begin making withdrawals from your SIMPLE IRA for the
year in which you reach age 70-1/2 and each year thereafter. Generally, you must
withdraw an amount at least equal to the minimum distribution by December 31 of
each year. However, you may delay your first required withdrawal until the April
1 following the year in which you reached age 70-1/2. (This means that if you
wait to make your withdrawal for the 70-1/2 year until April 1 of the following
year, your total withdrawal in that year must equal the minimum distributions
for two years - one representing the minimum distribution for your 70-1/2 year
and a second withdrawal by December 31 representing the minimum distribution for
that year.)
The minimum distribution for any taxable year is equal to the amount
obtained by dividing the account balance at the end of the prior year (less any
required distributions taken between January 1 and April 1 of the year following
the year you attain age 70-1/2) by the joint life expectancy of you and your
designated beneficiary. If you have not designated a beneficiary for your IRA by
your required beginning date, your single life expectancy will be used. Your
single or joint life expectancy is determined by using the IRS unisex life
expectancy tables. You can find these tables in
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Treasury Regulations Section 1.72-9. See Article IV in your Terms and Conditions
for a more detailed explanation of how to calculate the minimum distribution.
If you name someone other than your spouse as your beneficiary, and your
beneficiary is more than ten years younger than you, your required minimum
distribution must satisfy the minimum incidental benefit rule (MDIB) described
in IRS regulations. The MDIB rule generally requires that your required minimum
distributions be calculated as if your beneficiary were exactly ten years
younger than you.
The minimum distribution required must be calculated separately for each
IRA you own, but the amounts so determined may be totalled and taken from any
one of your IRAs (SIMPLE IRAs and regular IRAs).
B. After Your Death
If you die on or after your required beginning date, distributions must be made
to your beneficiary or beneficiaries as least as rapidly as under the method
being used to determine minimum distributions as of the date of your death. If
your beneficiary is your spouse, your beneficiary can elect to treat your
SIMPLE IRA as his or her own IRA.
If you die before your required beginning date, the entire amount remaining
in your account must, in general, be distributed by December 31 of the year
containing the fifth anniversary of your death. If your beneficiary is a natural
person, he or she may instead choose to receive the remaining balance in your
account over his or her lifetime or over a period not exceeding his or her life
expectancy. Such payments must begin no later than the end of the year following
the year of your death. If your designated beneficiary is your spouse,
distribution need not commence until December 31 of the year you would have
attained 70-1/2, if later than the December 31st of the year following the year
of your death. See Article IV in the Terms and Conditions for a more detailed
explanation of how to calculate the minimum distributions.
Employer Information Requirements
The rules for SIMPLE IRA plans require your employer to give you a "Summary
Description" of the features of the employer's SIMPLE IRA plan. This requirement
to provide a Summary Description may be satisfied by your employer's giving you
a copy of IRS Form 5304-SIMPLE or Form 5305-SIMPLE, as filled out by the
employer to establish its SIMPLE IRA plan. As completed by the employer, this
form will include information such as eligibility requirements applicable to the
employer's SIMPLE IRA plan. Alternatively, your employer may satisfy the Summary
Description requirement by giving the same information in a different format.
In addition, your employer must give you a notice stating how much the
employer will contribute for a year to the SIMPLE IRA plan accounts of
participating employees.
Eligibility
A. Employer Eligibility
Only small employers (those with 100 or fewer employees in the previous
calendar year who received $5,000 or more in compensation from the
employer) may maintain SIMPLE IRA plans. There are other rules as well.
Your employer will determine if it is eligible to have a SIMPLE IRA plan.
B. Employee Eligibility
All employees must participate in the employer's SIMPLE IRA plan unless
specifically excluded. The employer may decide to exclude any of the
following:
-employees who did not receive $5,000 or more in compensation from the
employer in at least two prior calendar years (not necessarily
consecutive);
-employees who are not reasonably expected to receive $5,000 or more in
compensation from the employer for the current calendar year;
-employees in a collective bargaining unit, provided that there was good
faith bargaining over the issue of retirement benefits;
-employees who are non-resident aliens and receive no U.S. source income
from the employer.
The summary description of the employer's SIMPLE IRA plan should indicate
whether any of these groups of employees will be excluded from the
employer's SIMPLE IRA plan.
Contributions
Only two kinds of contributions are permitted: (i) employee contributions
elected by the employee in a salary reduction agreement with the employer and
(ii) employer contributions, which may be either matching or nonmatching
contributions.
Employee Contribution Limits
An eligible employee may elect to have a percentage of compensation contributed
by the employer to the employee's SIMPLE IRA. The maximum contribution amount is
$6,000 for a calendar year. The $6,000 limit is indexed for future
cost-of-living increases.
You elect the desired percentage of compensation to contribute by entering
into a salary reduction agreement with your employer. Your employer will have a
form for you to use. Salary reductions may be made only from compensation you
earn after signing the salary reduction agreement.
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Your employer must transfer your salary reduction contributions to your SIMPLE
IRA as soon as the employer can reasonably do so. However, this may not be later
than the 30th day of the month following the month when you would have received
the compensation except for the salary reduction.
Employer Contribution Requirements
For each calendar year that it maintains a SIMPLE IRA plan, your employer must
make contributions on behalf of participants. The employer may elect either
matching or nonmatching contributions for a particular calendar year.
If the employer elects matching contributions, you must elect salary
reduction contributions from your own compensation in order to receive a
matching contribution to your account by your employer. Your employer will match
your contributions, dollar for dollar, up to a cap of from 1% to 3% of your
compensation for the calendar year. Your employer decides the cap (subject to
certain IRS requirements--these requirements restrict how frequently an employer
may choose a matching contributions cap of less than 3%).
If your employer decides to make nonmatching contributions, it must
contribute 2% of your compensation for the calendar year (provided that you
receive $5,000 or more in compensation from the employer for the calendar year).
For this purpose only, compensation is subject to an IRS limit. The limit for
1997 is $160,000 (this amount is indexed for future cost-of-living changes).
Each calendar year, your employer must give you a notice specifying whether
it will make nonmatching or matching contributions (and specifying the matching
cap) for that calendar year. Employer nonmatching or matching contributions must
be transferred to the SIMPLE IRA accounts of eligible employees no later than
the due date (including any extension) for the employer to file its federal
income tax return for the year.
Rollovers and Transfers
Amounts in your SIMPLE IRA may be rolled over or transferred to another IRA of
yours, or your SIMPLE IRA may receive rollover or transfer contributions from
another SIMPLE IRA, provided all the applicable rollover rules are followed. A
"transfer" is a payment from one IRA trustee or custodian directly to another
IRA trustee or custodian, without passing through the hands of the participant.
A "rollover" is a distribution to the participant from one IRA trustee or
custodian, followed by the participant's depositing the amount received (all or
part of it) with another trustee or custodian within the time allowed by law.
The rollover rules are generally summarized below. If you have any questions
regarding these rules, please contact your tax advisor.
1. Rollovers from or to other IRA
You may make a transfer or rollover contribution to your State Street
Research SIMPLE IRA of amounts held in another SIMPLE IRA. Transfers or
rollovers to this SIMPLE IRA may come only from another SIMPLE IRA, not from a
regular IRA. There are no limits on the amount of the transfer or rollover
contributions made from one SIMPLE IRA to another SIMPLE IRA. A proper IRA to
IRA rollover is completed if all or part of the distribution is rolled over
within 60 days after the distribution is received. No more than one distribution
per year from an IRA may be rolled over into another IRA. The
one-rollover-per-year rule does not apply to transfers from one IRA trustee or
custodian directly to another; these may be made more often than once per year.
You may also transfer amounts held in this State Street Research SIMPLE IRA
account to another IRA with a different trustee or custodian, or you may make a
withdrawal from this IRA and within 60 days make a rollover of the amount
withdrawn to another IRA. However, during the first two years after your
participation in your employer's SIMPLE IRA plan begins, you may transfer or
roll over only to another SIMPLE IRA (not a regular IRA).
2. Transfers to Change Investments
The rules governing transfers to change investments depend on whether your
employer has established its SIMPLE IRA plan with a "designated financial
institution" or not. Normally, SIMPLE IRA plans established by employers through
State Street Research will not have a designated financial institution. However,
if your employer has established its SIMPLE IRA plan with another sponsor, the
designated financial institution rules may apply. The summary description (or
other information) about your employer's SIMPLE IRA plan should indicate whether
the plan uses a designated financial institution or not.
Under the designated financial institution rules, all employee and employer
contributions are initially paid to that institution. However, you may elect to
have contributions to your SIMPLE IRA account with the designated financial
institution transferred to another SIMPLE IRA you have established, for example
with State Street Research, where the contributions will be invested in
accordance with your directions. If you make this election during the 60-day
period when you elect your salary reduction contributions to the plan for a
calendar year, then contributions for that calendar year are required to be
transferred without a transfer fee or other cost or penalty. While held by the
designated financial institution pending transfer to your other SIMPLE IRA,
contributions, the contributions for you may be invested in a specified
investment, such as a money market fund or a deposit account, and you will have
no choice of investments. Other transfer may be made to another SIMPLE IRA or
3
<PAGE>
regular IRA, but they will be subject to normal custodian or trustee fees and
any redemption or other charges imposed by the investment fund in which
contributions are invested. More information on this subject should appear in
the summary description of your employer's SIMPLE IRA plan.
Your employer may decide to operate its SIMPLE IRA plan without a
designated financial institution. Normally, SIMPLE IRA plans established through
State Street Research will not have a designated financial institution. Each
eligible employee is required to establish a SIMPLE IRA with a financial
institution of his or her choice. Contributions on your behalf will be sent to
your SIMPLE IRA account, wherever you have set it up, and invested according to
your instructions.
Taxation of Withdrawals
Withdrawals by you (or your beneficiary) from your SIMPLE IRA will be includable
as income in the taxable year in which received.
Federal Tax Penalties
A. Early Withdrawal Penalty
If you make a withdrawal from your SIMPLE IRA prior to attaining age 59 1\2, an
additional penalty tax will be imposed on the amount of the distribution, unless
an exception to the penalty is available. The penalty tax will be 25% of the
amount withdrawn for withdrawals you make during the first two years after the
date of the first contribution to your SIMPLE IRA account. For withdrawals after
the first two years, the penalty is 10% of the amount withdrawn. Certain
exceptions to the imposition of this penalty are available. The penalty will not
be imposed if the distribution was made on account of death, disability, or was
a qualifying rollover or a direct transfer. The additional penalty tax may not
apply if the distribution is made in a series of substantially equal periodic
payments, at least annually, based on your life expectancy or the joint life
expectancy of you and your beneficiary. Finally, an exception to the penalty tax
is available if the withdrawal does not exceed either (i) the amount of your
deductible medical expenses for the year of the withdrawal (consult your tax
advisor on the deductibility or medical expenses; generally, medical expenses
paid during a year are deductible to the extent they exceed 7 1\2% of your
adjusted gross income for the year), or (ii) the amount you paid for health
insurance covering yourself, your spouse or dependents (this health insurance
exception applies only if you are unemployed and receive federal or state
unemployment benefit payments for at least 12 weeks, and is available for
withdrawals during the year in which you receive such unemployment compensation
benefits or in the following year, but not to withdrawals made after you have
been reemployed for 60 days).
B. Excess Accumulation Penalty
If you do not receive your required minimum distribution for the year you attain
age 70-1\2 and by the end of each subsequent year, you will be subject to a 50%
excise tax on the amount of the required minimum distribution which should have
been taken but was not. If the distribution you actually receive falls short of
the required minimum distribution, the 50% excise tax will be imposed on the
amount by which the distribution falls short. The IRS has authority to waive or
reduce the 50% penalty tax upon proof that the failure to receive the required
minimum distribution was due to reasonable cause and that reasonable steps are
being taken to remedy the failure.
C. Excess Distribution Penalty
There is a 15% excise tax assessed against annual distributions from tax-favored
retirement plans, including IRAs (regular and SIMPLE IRAs), which exceed
$160,000 (for 1997; this amount is indexed for future cost-of-living increases).
To determine whether you have distributions in excess of the limit, you must
aggregate the amounts of all distributions received by you during the calendar
year, including IRAs. If you had account balances or accrued benefits equal to
at least $562,500 as of August 1, 1986, you may have a portion of the excess
distributions exempted from the 15% additional tax if you made a timely
grandfather election on your tax return. If the penalty tax on both excess
distributions and premature distributions apply to the same distribution, the
penalty tax on excess distributions is reduced by the penalty tax on the
premature distributions. Under a recent amendment to the tax law, the 15% excise
tax for annual distributions above $160,000 will not apply to withdrawals during
calendar years 1997, 1998 and 1999. A related 15% excise tax on your estate for
certain excess accumulations remaining in all of your tax-favored retirement
plans at your death continues to apply during these three years. Please consult
your tax advisor for more complete information on penalty taxes, including
advice on whether you should consider making withdrawals from your SIMPLE IRA
during the three-year period when the 15% excess distribution penalty does not
apply.
D. Excess Retirement Accumulation Penalty
Your estate will have to pay additional federal estate tax if you die with an
excess retirement accumulation. The increased estate tax will be equal to 15% of
the excess retirement accumulation. An excess retirement accumulation exists if,
at the time of your death, the value of all your interests in tax-favored
retirement plans, including IRAs, exceeds the present value of an annuity with
annual payments of $160,000 (for 1997; this amount is indexed for future
cost-of-living increases) payable over your life expectancy immediately before
your death.
4
<PAGE>
Other Tax Considerations
A. Federal Tax Withholding
Federal income tax will be withheld on amounts withdrawn by you from your IRA
unless you elect not to have withholding. Generally, tax will be withheld at a
10% rate. The mandatory 20% federal income tax withholding rule that applies to
most distributions from qualified profit sharing or pension plans that are not
directly rolled over to another plan or IRA do not apply to withdrawals from
your simple IRA account. Depending on your state of residence, state income tax
withholding may also apply.
B. Special Tax Treatment
Capital gains treatment and the favorable 5- or 10-year forward averaging tax
treatment, available for certain lump sum distributions from qualified profit
sharing or pension plans, do not apply to IRA distributions.
C. Prohibited Transactions
If you or your beneficiary engage in a prohibited transaction with your IRA, as
described in IRC Section 4975, your IRA will lose its tax-exempt status and you
must include the value of your account in your gross income for that taxable
year. If you pledge any portion of your IRA as collateral for a loan, the amount
so pledged will be treated as a distribution to you and will be included in your
gross income for that year. If you are under age 59-1/2 at the time such a
transaction occurs, you may be subject to the 25% or 10% penalty tax on
premature distributions.
D. Reporting for Tax Purposes
Additional reporting is required in the event that special taxes or penalties
described herein are due. You must file Form 5329 with the IRS for each taxable
year in which a premature distribution takes place, less than the required
minimum distribution amount is distributed from your IRA, or excess
distributions are made.
IRS Approval and Information
The agreement used to establish this IRA (IRS Form 5305-S) has been approved by
the Internal Revenue Service. The Internal Revenue Service approval is a
determination only to its form. It is not an endorsement of the plan in
operation or of the investments offered. This Disclosure Statement provides only
a summary of the laws governing SIMPLE IRAs. Please note that SIMPLE IRA plans
are governed by new provisions of the tax laws and the IRS has not yet issued
regulations or other definitive rulings on SIMPLE IRA plan requirements. While
the information in this Disclosure Statement is accurate as of the date of its
publication, you should consult with your tax advisor or the IRS for latest
developments. You should consult your personal tax advisor or IRS Publication
590, Individual Retirement Arrangements, for more detailed information. This
publication is available from your local IRS office or by calling
1-800-TAX-FORMS.
5
<PAGE>
[logo] STATE STREET RESEARCH
(c) 1997 State Street Research Investment Services, Inc. Boston, MA 02111
Control Number: 3759-970220(0398)SSR-LD IR-600E-0297
EXHIBIT 18
POWER OF ATTORNEY
We, the undersigned State Street Research 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 22nd day of
August, 1997.
SIGNATURES
STATE STREET RESEARCH EQUITY TRUST
By: /s/ Ralph F. Verni
-------------------
Ralph F. Verni, Chief Executive
Officer and President
/s/ Ralph F. Verni /s/ Dean O. Morton
- ------------------ ------------------
Ralph F. Verni, Trustee and Dean O. Morton, Trustee
principal executive officer
/s/ Gerard P. Maus /s/Thomas L. Phillips
- ------------------ ---------------------
Gerard P. Maus, Principal financial Thomas L. Phillips, Trustee
and accounting officer
/s/ Steve A. Garban /s/ Toby Rosenblatt
- ------------------- -------------------
Steve A. Garban, Trustee Toby Rosenblatt, Trustee
/s/ Malcolm T. Hopkins /s/ Michael S. Scott Morton
- ---------------------- ---------------------------
Malcolm T. Hopkins, Trustee Michael S. Scott Morton, Trustee
/s/ Edward M. Lamont /s/ Jeptha H. Wade
- -------------------- ------------------
Edward M. Lamont, Trustee Jeptha H. Wade, Trustee
/s/ Robert A. Lawrence
- ----------------------
Robert A. Lawrence, Trustee
EXHIBIT 19
STATE STREET RESEARCH EQUITY TRUST
Certificate of Resolution
-------------------------
I, the undersigned Amy L. Simmons, hereby certify that I am Assistant
Secretary of State Street Research 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 22nd day of
August, 1997.
/s/ Amy L. Simmons
Assistant Secretary
STATE STREET RESEARCH FUNDS
NEW ACCOUNT APPLICATION
1 Your Account
- --------------------------------------------------------------------------------
* Use a pen. (graphic of a pen)
* Please print in CAPITAL LETTERS.
* Fill in one section only.
Individual Retirement Accounts require a different application. To obtain an
IRA application, call 1-800-562-0032. (graphic of a telephone)
Individual / Joint Account
_____________________________________________________________
- -------------------------------------------------------------
Name [first, middle initial, last]
[ ][ ][ ]-[ ][ ]-[ ][ ][ ][ ]
Social Security number
[ ][ ]/[ ][ ]/[ ][ ]
Date of birth [month / day / year]
- -------------------------------------------------------------
Name of joint owner, if any [first, middle initial, last]
[ ][ ][ ]-[ ][ ]-[ ][ ][ ][ ]
Joint owner's Social Security number
[ ][ ]/[ ][ ]/[ ][ ]
Joint owner's date of birth [month / day / year]
Joint owners will be joint tenants with rights of survivorship unless you
check a different option:
O Tenants in common O Tenants by entirety O Community property
Gift / Transfer to a Minor [UGMA/UTMA]
_____________________________________________________________
- -------------------------------------------------------------
Name of one custodian [first, middle initial, last]
- -------------------------------------------------------------
As custodian for [name of minor; first, middle initial, last]
Under the [ ][ ] Uniform Gifts / Transfers to Minors Act
[minor's state of residence]
[ ][ ][ ]-[ ][ ]-[ ][ ][ ][ ]
Minor's Social Security number
[ ][ ]/[ ][ ]/[ ][ ]
Minor's date of birth [month / day / year]
Trust Account
________________________________________________________________
- -------------------------------------------------------------
Name of trustee [first, middle initial, last]
- -------------------------------------------------------------
Name of co-trustee, if any [first, middle initial, last]
- -------------------------------------------------------------
As trustees of [name of trust]
- -------------------------------------------------------------
For the benefit of [trust beneficiary]
[ ][ ]-[ ][ ][ ][ ][ ][ ][ ]
Trust's federal tax identification number
[ ][ ]/[ ][ ]/[ ][ ]
Date of trust agreement [month / day / year]
Business / Other Account
______________________________________________________________
- -------------------------------------------------------------
Name of entity
[ ][ ][ ][ ][ ][ ][ ][ ][ ]
Federal tax identification number or Social Security number
Type of entity: O Corporation
O Partnership
O Estate
O Unincorporated association
O Guardian
O I / We have included a corporate resolution, as is required to open this
account.
For all other types of accounts, call 1-800-562-0032 for different
applications.
2 Your Address
- --------------------------------------------------------------------------------
- ---------------------------------------------------------------
Street address / P.O. Box
- ---------------------------------------------------------------
City
[ ][ ] [ ][ ][ ][ ][ ]-[ ][ ][ ][ ]
State Zip
[ ][ ][ ]-[ ][ ][ ]-[ ][ ][ ][ ]
Daytime phone number
[ ][ ][ ]-[ ][ ][ ]-[ ][ ][ ][ ]
Evening phone number
Check one:
O U.S. citizen or resident alien
O Non-resident alien * Country:
[ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ]
<PAGE>
3 Your Investment
- --------------------------------------------------------------------------------
* Choose one share class and distribution option per fund.
* Generally the minimum investment is $2,500 per account
($1,000 using Investamatic); please refer to prospectus.
This investment is being made:
O by mail - make check payable to "State Street Research Funds"
O by Federal Funds Wire; the control number is:
[ ][ ][ ][ ][ ][ ][ ][ ][ ][ ]
O through a dealer; the wire order confirmation number is:
[ ][ ][ ][ ][ ][ ][ ][ ][ ][ ]
<TABLE>
<CAPTION>
Fund Name Amount You are Investing Share Class All Distributions
- -----------------------------------------------------------------------------------------------------------------------------------
A B C In Cash Reinvested
<S> <C> <C> <C> <C> <C> <C>
O Aurora $ [ ],[ ][ ][ ],[ ][ ][ ].[ ][ ] O O O O O
($25,000 minimum)
O Capital $ [ ],[ ][ ][ ],[ ][ ][ ].[ ][ ] O O O O O
O Emerging Growth $ [ ],[ ][ ][ ],[ ][ ][ ].[ ][ ] O O O O O
O Equity Income $ [ ],[ ][ ][ ],[ ][ ][ ].[ ][ ] O O O O O
O Equity Investment $ [ ],[ ][ ][ ],[ ][ ][ ].[ ][ ] O O O O O
O Global Resources $ [ ],[ ][ ][ ],[ ][ ][ ].[ ][ ] O O O O O
O Government Income $ [ ],[ ][ ][ ],[ ][ ][ ].[ ][ ] O O O O O
O Growth $ [ ],[ ][ ][ ],[ ][ ][ ].[ ][ ] O O O O O
O High Income $ [ ],[ ][ ][ ],[ ][ ][ ].[ ][ ] O O O O O
O International Equity $ [ ],[ ][ ][ ],[ ][ ][ ].[ ][ ] O O O O O
O Investment Trust $ [ ],[ ][ ][ ],[ ][ ][ ].[ ][ ] O O O O O
O Managed Assets $ [ ],[ ][ ][ ],[ ][ ][ ].[ ][ ] O O O O O
O Money Market $ [ ],[ ][ ][ ],[ ][ ][ ].[ ][ ] Class E only O O
O New York Tax-Free $ [ ],[ ][ ][ ],[ ][ ][ ].[ ][ ] O O O O O
O Strategic Income $ [ ],[ ][ ][ ],[ ][ ][ ].[ ][ ] O O O O O
O Tax-Exempt $ [ ],[ ][ ][ ],[ ][ ][ ].[ ][ ] O O O O O
O Other: $ [ ],[ ][ ][ ],[ ][ ][ ].[ ][ ] O O O O O
</TABLE>
4 Options for Reducing Sales Charges
- --------------------------------------------------------------------------------
I wish to apply for reduced Class A sales charges through:
O Right of Accumulation
________________________________________________
When calculating my sales charges for this investment, please include the
assets in the following accounts owned by me, my family members or other
designated persons:
[ ][ ][ ][ ][ ][ ][ ][ ][ ][ ]
Account number
[ ][ ][ ][ ][ ][ ][ ][ ][ ][ ]
Account number
O Letter of Intent
________________________________________________
I plan to invest, without obligation, a total of at least the following
amount in eligible funds over the next 13 months:
O $100,000 O $250,000 O $500,000 O $1 Million
O Please include investments made within the past 90 days in these accounts:
[ ][ ][ ][ ][ ][ ][ ][ ][ ][ ]
Account number
[ ][ ][ ][ ][ ][ ][ ][ ][ ][ ]
Account number
<PAGE>
5 Telephone Exchanges / Redemptions
- --------------------------------------------------------------------------------
* NOTE: You automatically receive these privileges unless you
decline them. (graphic of a telephone)
* Available only for shares on deposit.
* See terms and conditions in current prospectus(es).
Telephone Exchange Privilege
____________________________________________________
Allows you or your dealer to request exchanges into other State Street
Research funds (and assumes you have read the relevant prospectuses).
O I DO NOT want this privilege on my account.
Initial here
Telephone Redemption Privilege
_____________________________________________________
Allows you (but not your dealer) to phone requests to sell shares, with the
proceeds sent to the address of record.
O I DO NOT want this privilege on my account.
Initial here
6 Transfers To / From Your Bank
- --------------------------------------------------------------------------------
* Convenient services to help you buy or sell fund shares.
* Be sure to attach a deposit slip or voided, unsigned check
depending on the service(s) you are requesting.
I would like to request one or more of the following service(s):
O Investamatic
________________________________________________________
Makes periodic investments in the State Street Research fund of your
choice. I authorize automatic withdrawals from the bank account
specified at right. I request these withdrawals on the: O 5th or O 20th
or O 5th and 20th of a month. I would like these withdrawals to occur O
every month or O every quarter, and that they be invested as follows:
$[ ][ ][ ],[ ][ ][ ].[ ][ ]
Investment amount ($50 minimum) Fund
[ ][ ][ ][ ][ ][ ][ ][ ][ ][ ]
Account number (if existing account)
$[ ][ ][ ],[ ][ ][ ].[ ][ ]
Investment amount ($50 minimum) Fund
[ ][ ][ ][ ][ ][ ][ ][ ][ ][ ]
Account number (if existing account)
O EZ Trader
_________________________________________________________
Allows you to move money between your fund account and bank account by
calling State Street Research. NOTE: Your bank must be a member of the
Automated Clearing House system.
O Wire Redemption Capability
__________________________________________________________
Lets you designate a bank account to receive proceeds by wire when you
sell State Street Research shares.
- ------------------------------------------------------------------------------
Please establish the service(s) between my fund account and my:
O Checking account [voided check attached]
O NOW / money market / savings account [deposit slip attached]
- ---------------------------------------------------
Bank name
- ---------------------------------------------------
Bank address
- ---------------------------------------------------
City
[ ][ ] [ ][ ][ ][ ][ ]-[ ][ ][ ][ ]
State Zip
[ ][ ][ ][ ][ ][ ][ ][ ][ ]
Bank routing number
[ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ]
Bank account number
- ---------------------------------------------------------------
Name of one bank accountholder, exactly as on bank statements
- ---------------------------------------------------------------
Name of second bank accountholder, if any
- ---------------------------------------------------------------
Signature of one bank accountholder, exactly as on bank statements
- ---------------------------------------------------------------
Signature of of second bank accountholder, if any
7 Your Signature
- --------------------------------------------------------------------------------
* All owners listed in Section 1 need to sign this application.
* Please note that the certification at right and the provision of your
federal tax identification number are the only portions of this
application for which the IRS requires your consent.
I acknowledge that I:
* have received current prospectus(es) for all funds in which I am
investing.
* accept the terms of investment described in the prospectus(es) and
this application.
* understand that these same terms will also apply to all shares obtained
by exchange.
* accept responsibility for unauthorized telephone instructions unless the
fund's agents are negligent or unless I declined the privileges in Section
5.
I certify, under penalties of perjury, 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.
- ---------------------------------------------------------------
Your signature exactly as your name appears in Section 1
- ---------------------------------------------------------------
Signature of joint owner (if any) exactly as name appears in Section 1
Date: [ ][ ]/[ ][ ]/[ ][ ]
[month / day / year]
<PAGE>
8 Signature Guarantee
- --------------------------------------------------------------------------------
* The undersigned guarantees the owner's signature and
legal capacity.
* If you are investing directly, have Section A completed; if not,
have your dealer fill out Section B.
A - For Direct Investments
_________________________________________________
- -----------------------------------------------------
Name of bank or other guarantor
- -----------------------------------------------------
Street address
- -----------------------------------------------------
City
[ ][ ] [ ][ ][ ][ ][ ]-[ ][ ][ ][ ]
State Zip
* The above institution guarantees all signatures on this application and
on related investment checks and instructions.
- --------------------------------------------------------------
Signature of bank's or guarantor's authorized representative
Date: [ ][ ]/[ ][ ]/[ ][ ]
[month / day / year]
B - For Investments Through a Dealer
_______________________________________________________
- -----------------------------------------------------
Dealer name
- -----------------------------------------------------
Home office address
- -----------------------------------------------------
City
[ ][ ] [ ][ ][ ][ ][ ]-[ ][ ][ ][ ]
State Zip
- -----------------------------------------------------
Branch office address
- -----------------------------------------------------
City
[ ][ ] [ ][ ][ ][ ][ ]-[ ][ ][ ][ ]
State Zip
[ ][ ][ ]-[ ][ ][ ]-[ ][ ][ ][ ]
Branch office telephone number
The dealer represents that:
* it agrees to the terms of the current prospectus(es), application and
current dealer agreement, which is included by reference.
* it has given the owner(s) all relevant prospectus(es).
* it has completed this application according to instructions from the
owner(s).
* it will indemnify the fund, its advisor, distributor or other agents from
any losses resulting from these instructions.
* it guarantees all signatures on this application and on related
investment checks and instructions.
[ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ]
Registered Representative
[ ][ ][ ][ ][ ][ ][ ][ ]
Registered Representative number
- -----------------------------------------------------
Signature of authorized officer of dealer
Date: [ ][ ]/[ ][ ]/[ ][ ]
[month / day / year]
Additional Services
________________________________________________________
Use the Additional Services Application enclosed with this application to
take advantage of a range of optional services, including:
Checkwriting - available on certain funds.
Dividend Allocation Plan - lets you invest dividends from one State Street
Research fund into another.
Direct Plan - lets you set up regular exchanges from one State Street
Research fund into others.
Systematic Withdrawal Plan - lets you set up regular sales of shares.
Automatic Bank Connection - forwards distributions or Systematic Withdrawal
Plan proceeds directly to your bank account.
(State Street Research logo)
Mail this application, along with any other required documents to: State Street
Research Funds, P.O. Box 8408, Boston, MA 02266-8408.
Questions? Call 1-800-562-0032.
<PAGE>
[STATE STREET RESEARCH LOGO] [METLIFE SECURITIES LOGO]
MUTUAL FUND ACCOUNT APPLICATION
Mail this application to MetLife Securities, Inc., P.O. Box 30421, Tampa, FL
33630
[ ] New Application [ ] Change-Account #____________________________
Type of Account (PLEASE PRINT FULL NAME(S) CONSISTENT WITH YOUR SIGNATURE(S) IN
SECTION 6.)
<TABLE>
<S> <C> <C>
[ ] Individual-complete (a) only [ ] Joint Tenant-complete (a & b) only [ ] Gift to a Minor-complete (c) only
[ ] Trust(1)-complete (d) only [ ] Corporation(1)-complete (e) only [ ] Partnership/Other Entity-complete (e) only
</TABLE>
Note: If the investment is to be used for an Individual Retirement Account
(IRA), a separate IRA application must be used.
(1)Call 1-800-638-8378 for additional forms.
Do you have any other mutual fund accounts with State Street Research?
[ ] Yes [ ] No
Individual or Joint Tenant
a _____________________________________________________________-______-_________
Name of Investor Social Security Number
b ______________________________________________________________________________
Name(s) of Joint Tenant(s)
Gift to a Minor
c _____________________________________ as custodian for _____________ under the
Name of Custodian (one only) Name of Minor (one only)
___________________________ "Uniform Gifts to Minors Act" _____-______-_________
Minor's State of Residence Minor's Social Security Number
Trust Account
d ______________________________________________________________________________
Trustee(s) Name(s)
_______________________________________________________________-______-_________
Name and Date of Trust Agreement Tax Identification
Number
Corporation, Partnership or Other Entity (Please include corporate resolution.)
e ______________________________________________________________________________
Name of Corporation or Other Entity
________________________________________________________________________________
Type of Business (specify corporation, Tax Identification Number
partnership, estate, guardian, etc.)
2 Your Mailing Address (PLEASE PRINT.)
( )
________________________________________________________________________________
Street Address Home Telephone Number
( )
________________________________________________________________________________
City State ZIP Business Telephone
Number
Residency [ ] U.S. (State _______________) [ ] Other(2) __________________
Specify Country
(2)Call 1-800-638-8378 for additional forms.
3 Fund Selection(s) and Distribution Option(s) (Choose only one distribution
option per Fund; see Fund prospectus for minimum initial investment
requirements.)
[ ] By Mail-Make check payable to "State Street Research"
[ ] By Federal Funds Wire
<TABLE>
<CAPTION>
Fund Name Class Designation(3) Amount Distribution Option
- ---------------------------------------------------------------------------------------------------------------------
Dividends & Dividends in Dividends & Dividend
Capital Gains Cash; Capital Capital Gains Allocation
A B(4) Reinvested Gains Reinvested(5) in Cash Plan (DAP)(6)
<S> <C> <C> <C> <C> <C> <C>
_________________ [ ] [ ] $_____ [ ] [ ] [ ] [ ]
_________________ [ ] [ ] $_____ [ ] [ ] [ ] [ ]
_________________ [ ] [ ] $_____ [ ] [ ] [ ] [ ]
_________________ [ ] [ ] $_____ [ ] [ ] [ ] [ ]
</TABLE>
(3)All Money Market Fund investments will purchase Class E shares. Be sure to
designate Class A or B shares for Money Market Fund DAP allocations.
(4)For purchase of Class B shares of more than $250,000, I hereby acknowledge
that I am aware of the reduced front-end sales charges available to me for the
purchase of Class A shares, and have chosen to purchase Class B shares. I am
aware that Class B shares have higher asset-based charges than Class A shares
for the first eight years.
(5)Does not apply to Money Market Fund.
(6)Dividend Allocation Plan: The Transfer Agent is authorized to invest all
dividends and distributions from________________________________________________
Fund Name
in the following Eligible Fund:_________________________________________________
Fund Name (Fund must meet Account
minimum investment requirements) Number (if
existing
account)
Authorization of Dividend Allocation Plan constitutes an acknowledgment that the
shareholder has received the current prospectus of the Fund to be acquired.
Except for Money Market Fund Class E, DAP must be allocated to same class
designation.
<PAGE>
4 Reduced Sales Charges (Applies to Class A shares only)
[ ] Right of Accumulation (ROA): I apply for Right of Accumulation reduced sales
charges subject to the Transfer Agent's confirmation of the following holdings
of certain designated persons, e.g. family members, in the Eligible Funds:
________________________________________________________________________________
Name on Account Account Number
________________________________________________________________________________
Name on Account Account Number
[ ] Letter of Intent (LOI): Although I am not obligated to purchase and the
Funds are not obligated to sell, I intend to invest over a 13-month period
beginning _______________, 19__ (purchase date not more than 90 days prior to
this letter) at least an aggregate of
[ ] $100,000 [ ] $250,000 [ ] $500,000 [ ] $1,000,000 of Eligible Funds.
5 Optional Shareholder Services
Your Bank Account (You must complete this section if you request Section A, B, C
or D below.)
Type of Bank Account: [ ] Checking [ ] NOW or Money Market
________________________________________________________________________________
Account Title (print exactly as it Bank Routing Number
appears on bank records)
________________________________________________________________________________
Bank Account Number Bank Name
________________________________________________________________________________
Bank Address City State ZIP
________________________________________________________________________________
Depositor's Signature(s) (exactly as it Date
appears on bank records)
________________________________________________________________________________
Depositor's Address City State ZIP
YOU MUST ATTACH A BLANK CHECK MARKED "VOID."
A Telephone Redemption and Exchange Privileges (Service available only for
shares held on deposit with Transfer Agent)
None of the Transfer Agent, the Fund, any other Eligible Funds, State Street
Research Shareholder Services, the Investment Manager or the Distributor will be
liable for any loss, injury, damage or expense as a result of acting upon, and
will not be 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.
Telephone Exchange By Shareholder OR DEALER
The Transfer Agent 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 the
shareholder has received the current prospectus of the fund to be acquired. The
account will automatically have this privilege unless it is expressly declined
by providing your initials in the space below.
I DO NOT WANT THE TELEPHONE EXCHANGE PRIVILEGE. _____ (Initial here.)
Telephone Redemption By Shareholder Only
1. Proceeds to Shareholder's Address of Record. The Transfer Agent may effect
redemptions of shares from my account according to telephone instructions from
me, as set forth in the Prospectus, and send the proceeds to my address of
record. The account will automatically have this privilege unless it is
expressly declined by providing your initials in the space below.
I DO NOT WANT THE TELEPHONE REDEMPTION PRIVILEGE (to address of record).
_____ (Initial here.)
2. Proceeds to Bank Designated by Shareholder. The Telephone Redemption
Privilege (to bank designated by shareholder) is not provided automatically;
please check the box below if you want this Privilege for the account. ATTACH A
BLANK CHECK MARKED "VOID" AND FILL OUT "YOUR BANK ACCOUNT" SECTION.
The Transfer Agent may effect redemptions of shares from my account according to
telephone instructions from me, as set forth in the Prospectus, and send the
proceeds to the bank named in "Your Bank Account." [ ] (Check here.)
<PAGE>
B Investamatic Check Program (YOU MUST ATTACH A BLANK CHECK MARKED "VOID.")
I hereby request and authorize the bank named in "Your Bank Account" section to
pay and charge checks drawn on, or debits against, my account initiated by and
payable to the order of the mutual fund transfer agent designated by the
Distributor. I agree that the named 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 in writing, and until the named Bank actually receives such
notice, I agree that the named 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 named 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 Transfer 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 Transfer Agent or me upon
thirty (30) business days' notice prior to the due date of any deposit.
$
________________________________________________________________________________
Fund Name Class Designation Amount ($50 minimum) Account Number
$
________________________________________________________________________________
Fund Name Class Designation Amount ($50 minimum) Account Number
_____________________________________
Total Amount of Investment: $______ Account Registration (exactly as it
appears on Fund records)
[ ] Monthly Investment Date: [ ] 5th or [ ] 20th If you do not choose a date,
[ ] Quarterly Investment Date: [ ] 5th or [ ] 20th the 5th will be chosen
automatically.
C Automatic Bank Connection (ABC) Not available for retirement plan accounts.
YOU MUST ATTACH A BLANK CHECK MARKED "VOID."
[ ] I authorize the Transfer Agent to liquidate $______________ (minimum-$50)
from my fund account beginning the month of to provide [ ] monthly,
[ ] quarterly, [ ] semiannual or [ ] annual payments. I would like the following
payment to be deposited directly into the bank account named in "Your Bank
Account" section. (Choose only one.)
[ ] Income dividends only [ ] Income dividends and capital gains
[ ] Systematic Withdrawal Plan payments (see below)
________________________________________________________________________________
Fund Name Class Designation
________________________________________________________________________________
Fund Name Class Designation
I hereby authorize the Fund and the Transfer Agent to effect the deposit of the
above indicated items by initiating credit entries to my account at the bank
named in "Your Bank Account" section. The named Bank shall not be responsible
for the correctness of the items, and the Transfer Agent is authorized to
correct and adjust any incorrect items to my bank account. This authorization
may be terminated at any time by written notification to the Fund, the Transfer
Agent and the Bank.
D Systematic Withdrawal Plan (SWP) Not available for retirement plan accounts.
See the prospectus for minimum account size and maximum withdrawal amounts.
YOU MUST ATTACH A BLANK CHECK MARKED "VOID."
[ ] I authorize the Transfer Agent to liquidate shares in and withdraw cash
(minimum-$50) from my fund account beginning the month of ____________________
to provide [ ] monthly, [ ] quarterly, [ ] semiannual or [ ] annual Systematic
Withdrawal Plan (SWP) payments in the amount of $_________________ to [ ] me
[ ] the bank named in "Your Bank Account" section, or [ ] the following payee.
(Note: If you authorize a SWP, you may not receive dividend or capital gain
distributions in cash.)
________________________________________________________________________________
Name of Payee
________________________________________________________________________________
Street Address City State ZIP
________________________________________________________________________________
Fund Name Class Designation
________________________________________________________________________________
Fund Name Class Designation
E Checkwriting Privilege
(Available for Class A shares and Money Market
Fund Class E shares only)
[ ] I request the checkwriting feature and have
completed the signature card below.
_______________________________________________
Account Number (if existing account)
_______________________________________________
Account Number (if existing account)
Signature Card Complete and sign this card and return it with your application
and investment. Do not detach.
Check applicable Fund(s) TO: State Street Bank and Trust Company ("Bank")
[ ] Money Market, Class E ________________________________________________
[ ] High Income Name (please print)
[ ] Tax-Exempt ________________________________________________
[ ] Government Income Name (please print)
[ ] NY Tax-Free ________________________________________________
[ ] Strategic Income Address City State ZIP
________________________________________________
Signature (exactly as it appears in the
Application, including any capacity)
________________________________________________
Signature (exactly as it appears in the
Application, including any capacity)
________________________________________________
Indicate the number of signatures required
______-_________________________________________
Tax Identification Number
Corporate and other accounts must include appropriate resolution forms. In
signing this signature card, the signator(s) signifies his/her or their
agreement to be subject to the rules and regulations of State Street Bank and
Trust Company pertaining thereto, as amended from time to time, and subject to
the conditions printed on the reverse side.
<PAGE>
MetLife Securities, Inc. Customer Profile
1
________________________________________________________________________________
Client's Name (or minor if U.G.M.A.) Age Social Security Number
________________________________________________________________________________
Joint Tenant Name (if any, or Age Social Security Number
custodian if U.G.M.A.)
Occupation ______________________ State of Residence ______________________
Name/Address of Employer _______________________________________________________
Is client an associated person of a broker/dealer? [ ] Yes [ ] No
If yes, furnish name and address _______________________________________________
2 Client's Estimated Annual Income (Not including income from this investment)
(N/A for UGMA, Trust, Partnership or Corp.)
[ ] $0-9,999 [ ] $20-39,999 [ ] $60-79,999 [ ] $100,000-199,999
[ ] $10-19,999 [ ] $40-59,999 [ ] $80-99,999 [ ] $200,000+
3 Savings and Investments (Exclusive of personal residence, home furnishings,
personal automobiles, and the amount of this investment) (N/A for UGMA, Trust,
Partnership or Corp.)
[ ] $0-9,999 [ ] $20-39,999 [ ] $60-79,999 [ ] $100,000-199,999 [ ] $400,000+
[ ] $10-19,999 [ ] $40-59,999 [ ] $80-99,999 [ ] $200,000-399,999
4 Net Worth (Assets minus liabilities exclusive of assets and liabilities
relating to personal residence, home furnishings and automobiles) (N/A for
UGMA, Trust, Partnership or Corp.)
[ ] $0-9,999 [ ] $20-39,999 [ ] $60-79,999 [ ] $100,000-199,999 [ ] $400,000+
[ ] $10-19,999 [ ] $40-59,999 [ ] $80-99,999 [ ] $200,000-399,999
<TABLE>
<CAPTION>
5 Main Investment Objective (select one) Secondary Investment Objective (optional)
<S> <C> <C> <C> <C> <C>
[ ] Aggressive Growth [ ] Growth & Income [ ] Tax Advantages [ ] Aggressive Growth [ ] Growth & Income [ ] Tax Advantages
[ ] Growth [ ] Current Income [ ] Growth [ ] Current Income
</TABLE>
<TABLE>
<CAPTION>
6 Source of Funds for This Investment
<S> <C> <C>
[ ] CD (Certificate of Deposit) [ ] Savings [ ] Money Market Fund
[ ] Surrender Life/Annuity Contract [ ] Rollover/Transfer of Pension Assets [ ] Another MetLife Policy, Account or Contract
[ ] Discretionary Income [ ] Loan [ ] Other ___________________________________
</TABLE>
7 This account was: [ ] Solicited [ ] Unsolicited
8 Tax Status of These Funds: [ ] Qualified [ ] Non-Qualified
9 Prior Investment Experience: Stocks ___ yrs. Bonds ___ yrs.
(complete all that apply) Mutual Funds ___ yrs. Margin ___ yrs.
Limited Partnerships ___ yrs. Options ___ yrs.
Other __________________ None ___
Investor Receipt and Arbitration Agreement
1. Arbitration
(i) Arbitration is final and binding on the parties.
(ii) The parties are waiving their right to seek remedies in court, including
the right to jury trial.
(iii) Pre-arbitration discovery is generally more limited than and different
from court proceedings.
(iv) The arbitrators' award is not required to include factual findings or
legal reasoning and any party's right to appeal or to seek modification of
rulings by the arbitrators is strictly limited.
(v) The panel of arbitrators will typically include a minority of arbitrators
who were or are affiliated with the securities industry.
(vi) No person shall bring a putative or certified class action to
arbitration, nor seek to enforce any pre-dispute arbitration agreement
against any person who has initiated in court a putative class action; or who
is a member of a putative class who has not opted out of the class with
respect to any claims encompassed by the putative class action until: (i) the
class certification is denied; or (ii) the class is decertified; or (iii) the
customer is excluded from the class by the court. Such forbearance to enforce
an agreement to arbitrate shall not constitute a waiver of any rights under
this agreement except to the extent stated herein.
2. MetLife Securities, Inc. (hereinafter "MSI") and the purchaser of the
shares, who is the signatory below (hereinafter the "Customer"), agree that
any controversy between MSI, its employees, directors, agents, officers or
affiliates and the Customer arising out of or relating to any transactions
between such parties shall be determined by arbitration. Any arbitration
pursuant to this agreement shall be conducted before, and under the rules of,
the National Association of Securities Dealers, Inc. Judgment upon the award
of the arbitrators may be entered in any federal or state court having
jurisdiction.
3. This agreement and any arbitration hereunder shall be governed and
construed in accordance with the laws of the State of New York, United States
of America, including New York procedural and substantive arbitration laws
and rules, without giving effect to conflicts of law principles.
The predispute arbitration agreement located immediately above is accepted and
agreed to. I have also received the current prospectus of the fund and have
given a check in the amount of $___________________ on this, the ____________
day of ________________ 19__
_______________________________________ ________________________________________
Customer Signature (exactly as your Registered Representative's Signature
name appears in Section 1)
/s/ Elaine S. Stevenson
_______________________________________ ________________________________________
Customer Signature MetLife Securities, Inc.; by:
Elaine S. Stevenson, President
_______________________________________ ________________________________________
Capacity
<PAGE>
6 Your Signature (All registered shareholders must sign.)
The undersigned confirms 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 shares of the
Fund.
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.
Certification instructions: 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 underreporting interest or dividends on your tax return.
1. Arbitration
(i) Arbitration is final and binding on the parties.
(ii) The parties are waiving their right to seek remedies in court, including
the right to jury trial.
(iii) Pre-arbitration discovery is generally more limited than and different
from court proceedings.
(iv) The arbitrators' award is not required to include factual findings or
legal reasoning and any party's right to appeal or to seek modification of
rulings by the arbitrators is strictly limited.
(v) The panel of arbitrators will typically include a minority of arbitrators
who were or are affiliated with the securities industry.
(vi) No person shall bring a putative or certified class action to
arbitration, nor seek to enforce any pre-dispute arbitration agreement
against any person who has initiated in court a putative class action; or who
is a member of a putative class who has not opted out of the class with
respect to any claims encompassed by the putative class action until (i) the
class certification is denied; or (ii) the class is decertified; or (iii) the
customer is excluded from the class by the court. Such forbearance to enforce
an agreement to arbitrate shall not constitute a waiver of any rights under
this agreement except to the extent stated herein.
2. MetLife Securities, Inc. (hereinafter "MSI") and the purchaser of the shares,
who is the signatory below (hereinafter the "Customer"), agree that any
controversy between MSI, its employees, directors, agents, officers or
affiliates and the Customer arising out of or relating to any transactions
between such parties shall be determined by arbitration. Any arbitration
pursuant to this agreement shall be conducted before, and under the rules of,
the National Association of Securities Dealers, Inc. Judgment upon the award of
the arbitrators may be entered in any federal or state court having
jurisdiction.
3. This agreement and any arbitration hereunder shall be governed and construed
in accordance with the laws of the State of New York, United States of America,
including New York procedural and substantive arbitration laws and rules,
without giving effect to conflicts of law principles.
The predispute arbitration agreement located immediately above is accepted and
agreed to. I have also received the current prospectus of the fund and have
given a check in the amount of $_________________ on this, the ______________
day of ___________________________ 19__
The Internal Revenue Service does not require your consent to any provision of
this document other than the certification required to avoid backup withholding.
_______________________________________ ________________________________________
Customer Signature (exactly as your Registered Representative's Signature
name appears in Section 1)
/s/ Elaine S. Stevenson
_______________________________________ ________________________________________
Customer Signature MetLife Securities, Inc.;
by: Elaine S. Stevenson, President
_______________________________________
Capacity
7 Dealer Information and Signature Guarantee (For Dealer use only)
The Dealer agrees to all applicable provisions in this application and in the
Prospectus, guarantees the signature and legal capacity of the shareholder, and
represents that it has provided a current Prospectus to the Applicant and that
the application is properly executed by a person authorized by the Dealer to
guarantee signatures. The Dealer warrants that this application is completed in
accordance with the shareholder's instructions and information and agrees to
indemnify the Fund, any other Eligible Funds, the Investment Manager, the
Distributor, State Street Research Shareholder Services and the Transfer Agent
for any loss or liability from acting or relying upon such instructions and
information. Signature(s) Guaranteed By
MetLife Securities, Inc.
_______________________________________ ________________________________________
Dealer Name Branch Office Number
P.O. Box 30421
_______________________________________ ________________________________________
Address of Home Office Address of Branch Office
Servicing Account
Tampa, FL 33630
_______________________________________ ________________________________________
City State ZIP City State ZIP
_______________________________________ ________________________________________
Authorized Signature of Dealer Registered Representative's
- Tampa, FL Name and Number
_______________________________________
Signature Guarantee
The payment of monies is authorized by the signature(s) on the reverse side.
If the shareholder's account with the Fund is joint, all checks drawn upon this
account must include the signatures of all persons named in the account, unless
the persons signing this card have indicated on the reverse side of this card
that the Bank is authorized to accept any one signature. Each person guarantees
the genuineness of the other's signature. Checks may not be for less than $500
or such other minimum or maximum amounts as may from time to time be established
by the Fund.
The Bank is hereby appointed agent by the person(s) signing this card (the
"Depositor(s)") and, as agent, is authorized and directed to present checks
drawn on this checking account to the Fund or its redemption agent as requests
to redeem shares of the Fund registered in the name of the Depositor(s) in the
amounts of such checks and to deposit the proceeds of such redemptions in this
checking account. The Bank shall be liable only for its own negligence.
Depositor(s) hereby authorize(s) the Fund or its redemption agent to honor
redemption requests presented in the above manner by the Bank. The Fund and its
redemption agent will not be liable for any loss, expense or cost arising out of
check redemptions. If shares of the Fund are purchased by check, redemption
proceeds will ordinarily be withheld until the Fund is reasonably assured that
payment has been collected on the check. The Bank has the right not to honor
checks in amounts exceeding the value of the depositor(s) shareholder account at
the time the check is presented for payment.
The Bank reserves the right to change, modify or terminate this checking account
at any time upon notification mailed to the address of record of the
Depositor(s).
The terms and conditions of the Distributor's currently effective Selected
Dealer Agreement are included by reference in this section. The Dealer
represents that it has a currently effective Selected Dealer Agreement with the
Distributor authorizing the Dealer to sell shares of the Fund and the Eligible
Funds, and that it may lawfully sell shares of the designated Fund(s) in the
state designated as the Applicant's address of record.
- -------------------------------
DO NOT COMPLETE
MSI - Tampa
Dealer #__________ ST _____
Rep #______________________
Rep Name __________________
- -------------------------------
CONTROL NUMBER: 3672-970214(0398)SSR-LD
ML-598E-297
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000790941
<NAME> STATE STREET RESEARCH EQUITY TRUST
<SERIES>
<NUMBER> 031
<NAME> STATE STREET RESEARCH EQUITY INCOME FUND CLASS A
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 180,238,605
<INVESTMENTS-AT-VALUE> 213,696,732
<RECEIVABLES> 1,509,206
<ASSETS-OTHER> 4,893
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 215,210,831
<PAYABLE-FOR-SECURITIES> 2,250,000
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 842,037
<TOTAL-LIABILITIES> 3,092,037
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 166,390,142
<SHARES-COMMON-STOCK> 4,783,428
<SHARES-COMMON-PRIOR> 3,209,801
<ACCUMULATED-NII-CURRENT> 296,672
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 12,137,052
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 33,294,928
<NET-ASSETS> 212,118,794
<DIVIDEND-INCOME> 3,131,681
<INTEREST-INCOME> 2,379,002
<OTHER-INCOME> 0
<EXPENSES-NET> 2,101,775
<NET-INVESTMENT-INCOME> 3,408,908
<REALIZED-GAINS-CURRENT> 12,970,640
<APPREC-INCREASE-CURRENT> 20,158,095
<NET-CHANGE-FROM-OPS> 36,537,643
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,175,982)
<DISTRIBUTIONS-OF-GAINS> (6,343,780)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,551,622
<NUMBER-OF-SHARES-REDEEMED> (554,634)
<SHARES-REINVESTED> 576,639
<NET-CHANGE-IN-ASSETS> 101,427,902
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 15,197,104
<OVERDISTRIB-NII-PRIOR> (73,770)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 975,669
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,283,080
<AVERAGE-NET-ASSETS> 150,102,923
<PER-SHARE-NAV-BEGIN> 13.85
<PER-SHARE-NII> 0.33
<PER-SHARE-GAIN-APPREC> 2.90
<PER-SHARE-DIVIDEND> (0.28)
<PER-SHARE-DISTRIBUTIONS> (1.94)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.86
<EXPENSE-RATIO> 1.25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000790941
<NAME> STATE STREET RESEARCH EQUITY TRUST
<SERIES>
<NUMBER> 032
<NAME> STATE STREET RESEARCH EQUITY INCOME FUND CLASS B
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 180,238,605
<INVESTMENTS-AT-VALUE> 213,696,732
<RECEIVABLES> 1,509,206
<ASSETS-OTHER> 4,893
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 215,210,831
<PAYABLE-FOR-SECURITIES> 2,250,000
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 842,037
<TOTAL-LIABILITIES> 3,092,037
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 166,390,142
<SHARES-COMMON-STOCK> 4,860,245
<SHARES-COMMON-PRIOR> 1,848,643
<ACCUMULATED-NII-CURRENT> 296,672
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 12,137,052
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 33,294,928
<NET-ASSETS> 212,118,794
<DIVIDEND-INCOME> 3,131,681
<INTEREST-INCOME> 2,379,002
<OTHER-INCOME> 0
<EXPENSES-NET> 2,101,775
<NET-INVESTMENT-INCOME> 3,408,908
<REALIZED-GAINS-CURRENT> 12,970,640
<APPREC-INCREASE-CURRENT> 20,158,095
<NET-CHANGE-FROM-OPS> 36,537,643
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (613,879)
<DISTRIBUTIONS-OF-GAINS> (3,837,994)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,152,047
<NUMBER-OF-SHARES-REDEEMED> (469,237)
<SHARES-REINVESTED> 328,792
<NET-CHANGE-IN-ASSETS> 101,427,902
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 15,197,104
<OVERDISTRIB-NII-PRIOR> (73,770)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 975,669
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,283,080
<AVERAGE-NET-ASSETS> 150,102,923
<PER-SHARE-NAV-BEGIN> 13.82
<PER-SHARE-NII> 0.22
<PER-SHARE-GAIN-APPREC> 2.89
<PER-SHARE-DIVIDEND> (0.18)
<PER-SHARE-DISTRIBUTIONS> (1.94)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.81
<EXPENSE-RATIO> 2.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000790941
<NAME> STATE STREET RESEARCH EQUITY TRUST
<SERIES>
<NUMBER> 033
<NAME> STATE STREET RESEARCH EQUITY INCOME FUND CLASS C
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 180,238,605
<INVESTMENTS-AT-VALUE> 213,696,732
<RECEIVABLES> 1,509,206
<ASSETS-OTHER> 4,893
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 215,210,831
<PAYABLE-FOR-SECURITIES> 2,250,000
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 842,037
<TOTAL-LIABILITIES> 3,092,037
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 166,390,142
<SHARES-COMMON-STOCK> 4,001,422
<SHARES-COMMON-PRIOR> 2,838,175
<ACCUMULATED-NII-CURRENT> 296,672
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 12,137,052
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 33,294,928
<NET-ASSETS> 212,118,794
<DIVIDEND-INCOME> 3,131,681
<INTEREST-INCOME> 2,379,002
<OTHER-INCOME> 0
<EXPENSES-NET> 2,101,775
<NET-INVESTMENT-INCOME> 3,408,908
<REALIZED-GAINS-CURRENT> 12,970,640
<APPREC-INCREASE-CURRENT> 20,158,095
<NET-CHANGE-FROM-OPS> 36,537,643
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,191,787)
<DISTRIBUTIONS-OF-GAINS> (5,623,211)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,772,262
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<TABLE> <S> <C>
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<CIK> 0000790941
<NAME> STATE STREET RESEARCH EQUITY TRUST
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<NAME> STATE STREET RESEARCH EQUITY INCOME FUND CLASS D
<S> <C>
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