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As filed with the Securities and Exchange Commission on October 30, 1998
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. 24 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 25 [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).
[X] On November 1, 1998 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 ________________ pursuant to
paragraph (a)(1).
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
--------------------------------------
<PAGE>
The Prospectus and Statement of Additional Information of the State Street
Research Global Resources Fund, a series of the State Street Research Equity
Trust (the "Registrant"), are included herein.
The Prospectuses and Statements of Additional Information of the Registrant's
other series were included in the Post-Effective Amendments to the Registrant's
Registration Statement on Form N-1A (File No. 33-4296) as noted below and filed
with the Securities and Exchange Commission as follows:
<TABLE>
<CAPTION>
Securities Act of 1933
Series Registration/Amendment Date Filed
- ------ ---------------------- ----------
<S> <C> <C>
State Street Research Equity Post-Effective Amendment No. 23 August 31, 1998
Investment Fund
State Street Research Alpha Fund
State Street Research Athletes Fund
</TABLE>
<PAGE>
[front cover]
[background photo: Custom House, Boston]
[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 SEC has not
approved or disapproved
them and does not guarantee
the accuracy or adequacy of
the information in this
prospectus. Anyone who
informs you otherwise is
committing a federal crime.
[end of sidebar text]
[STATE STREET RESEARCH logo]
GLOBAL RESOURCES FUND
An aggressive growth fund
investing in energy and
natural resources
companies.
Prospectus
November 1, 1998
<PAGE>
[BLANK PAGE]
<PAGE>
CONTENTS 1
- --------------------------------------------------------------------------------
2 THE FUND
-----------
2 Goal and Strategies
3 Principal Risks
6 Volatility and Performance
8 Investor Expenses
10 Investment Management
11 YOUR INVESTMENT
-------------------
11 Opening an Account
11 Choosing a Share Class
13 Sales Charges
15 Dealer Compensation
16 Buying and Selling Shares
20 Account Policies
22 Distributions and Taxes
23 Investor Services
24 OTHER INFORMATION
---------------------
24 Other Securities and Risks
26 Financial Highlights
BACK COVER For Additional Information
<PAGE>
2 THE FUND
- --------------------------------------------------------------------------------
[chesspiece graphic] GOAL AND STRATEGIES
FUNDAMENTAL GOAL The fund seeks to provide long-term growth of capital.
PRINCIPAL STRATEGIES Under normal market conditions, the fund invests at least
65% of total assets in securities of energy and natural resources companies and
companies in associated businesses, as well as utilities. These typically
include companies involved in the exploration, production or distribution of
energy or natural resources, such as gas, oil, metals and minerals, as well as
related transportation companies and equipment manufacturers. The fund may
invest in companies located anywhere in the world and will generally invest in
at least three countries. It expects to invest primarily in developed markets,
particularly the U.S. and Canada, but may also invest in emerging markets.
In selecting investments, the fund looks for companies that appear to have the
potential for above-average long-term performance. These may include companies
that are expected to show above-average growth over the long term as well as
those that appear to be trading below their true worth. While the fund tends to
[sidebar text]
[Magnifying glass graphic]
WHO MAY WANT TO INVEST
State Street Research Global Resources Fund is designed for investors who seek
one or more of the following:
[bullet] an aggressive stock fund for a long-term goal
[bullet] a fund to complement a well-diversified portfolio
[bullet] a focused fund with a global scope
The fund is NOT appropriate for investors who:
[bullet] want to avoid high volatility or possible losses
[bullet] want a fund that invests in a broad
range of industries
[bullet] are making short-term investments
[bullet] are investing emergency reserve money
[bullet] are seeking regular income
[end of sidebar text]
<PAGE>
3
-----
emphasize smaller companies, from time to time it may emphasize companies of
other sizes. The fund's investments may include common and preferred stocks,
convertible securities, warrants and depositary receipts.
The fund reserves the right to invest up to 35% of total assets in other U.S.
and foreign investments. These may include stocks of companies not associated
with energy or natural resources. They may also include debt securities,
although the fund may not invest more than 10% of total assets in junk bonds
(bonds that are in or below the Standard & Poor's BB or Moody's Ba rating
categories, or their unrated equivalents). The fund may buy and sell currencies,
either for immediate or future delivery, to hedge its positions in foreign
securities or to enhance returns.
The fund may adjust the composition of its portfolio as market conditions and
economic outlooks change.
For more information about the fund's investments and practices, see page 24.
[traffic sign graphic] PRINCIPAL RISKS
Because the fund invests primarily in stocks, including foreign stocks, its
major risks are those of stock investing, including sudden, unpredictable drops
in value and the potential for periods of lackluster performance.
Foreign stocks carry additional risks, including the risk of currency
fluctuations.
The fund's strategy of focusing on energy and natural resources companies means
that its performance will be closely tied to the performance of a particular
market segment. At times, the performance of these companies may lag the
performance of the broader stock market.
<PAGE>
4 THE FUND continued
- --------------------------------------------------------------------------------
Stocks of smaller energy and natural resources companies are especially affected
by variations in the commodities markets because smaller companies usually lack
the resources and the broad business lines to weather hard times. Similarly,
because the fund is non-diversified with regard to issuers of securities, it
does not have to invest in as many companies as a diversified fund, and could
therefore be more significantly affected by the performance of a small number of
its investments.
For these reasons, an investment in the fund should only be used to complement a
portfolio that is already well-diversified.
Foreign securities present risks beyond those of U.S. securities. They are
generally more volatile and less liquid than their U.S. counterparts, in part
because of higher political and economic risks, lack of reliable information and
fluctuations in currency exchange rates. Changes in currency exchange rates have
the potential to reduce or eliminate certain gains achieved in securities
markets or create net losses. These risks are usually higher for investments in
less developed countries.
In addition, many U.S. companies in which the fund may invest generate
significant revenues and earnings from abroad. As a result, these companies and
the prices of their securities may be affected by weaknesses in global and
regional economies and the relative value of foreign currencies to the U.S.
dollar. These factors, taken as a whole, could adversely affect the price of
fund shares.
The success of the fund's investment strategy depends largely on the investment
manager's skill in anticipating commodity price trends, allocating assets
geographically and assessing the potential of the stocks the fund buys.
The fund's shares will rise and fall in value and there is a risk that you could
lose money by investing in the fund. Also, the fund cannot be certain that it
will achieve its goal. Finally, fund shares are not bank deposits and are not
guaranteed, endorsed or insured by any financial institution, government entity
or the FDIC.
Information on other securities and risks appears on page 24.
A "snapshot" of the fund's investments may be found in the current annual or
semiannual report (see back cover).
<PAGE>
5
-----
[sidebar text]
[magnifying glass graphic]
WHAT DRIVES THE
ENERGY AND NATURAL
RESOURCES MARKETS?
Energy and natural resources companies are significantly affected by the markets
for the commodities associated with their businesses. The prices of individual
commodities can be influenced by broad economic trends, such as inflation. They
can also be influenced by specific supply and demand considerations that may not
affect the prices of other commodities, such as political developments in
critical producing regions.
In many cases, the price of a commodity will be determined by a complex
combination of factors, with various factors offsetting or reinforcing each
other. Oil prices, for example, can be influenced by global or regional economic
growth, climate patterns, government policies encouraging conservation or
consumption, technological advances, the policies of the OPEC cartel and
political developments in the Middle East or the former Soviet Union, to name
just a few. A fund investing in energy and natural resources companies,
therefore, must try to anticipate the general and specific factors that will
influence the prices of various commodities and adjust its portfolio
accordingly.
[end of sidebar text]
<PAGE>
6 VOLATILITY AND PERFORMANCE
- --------------------------------------------------------------------------------
[bar chart]
<TABLE>
<CAPTION>
Years ended December 31
-------------------------------------------------------------
YEAR-BY-YEAR TOTAL RETURN (Class A) 1991 1992 1993 1994 1995 1996 1997
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
(17.84) 6.78 32.08 (4.45) 22.63 70.25 5.56
</TABLE>
[end bar chart]
[arrow pointing up] Best quarter: first quarter 1993, up 34.55%
[arrow pointing down] Worst quarter: fourth quarter 1997, down 19.66%
Return from 1/1/98 - 9/30/98 (not annualized): down 38.77%
<TABLE>
<CAPTION>
As of December 31, 1997
-------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN 1 Year 5 Years Since Inception*
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
Class A (%) 0.81 21.58 8.57
- -----------------------------------------------------------------------------------------------------------
Class B (%) 0.06 21.80 8.80
- -----------------------------------------------------------------------------------------------------------
Class C (%) 3.80 21.93 8.76
- -----------------------------------------------------------------------------------------------------------
Class S (%) 5.86 23.09 9.42
- -----------------------------------------------------------------------------------------------------------
S&P 500 Index (%) 33.35 20.25 17.84
- -----------------------------------------------------------------------------------------------------------
Lipper Natural Resources Funds Average (%) 0.52 14.19 8.08
- -----------------------------------------------------------------------------------------------------------
</TABLE>
*Since inception (3/2/90)
<PAGE>
7
-----
[magnifying glass graphic]
UNDERSTANDING
VOLATILITY AND
PERFORMANCE
The chart and table on the opposite page are designed to show two aspects of the
fund's track record:
[bullet] YEAR-BY-YEAR TOTAL RETURN 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. If sales charges had been
included, returns would have been less than shown.
[bullet] 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.
Also included with the fund's average annual returns are two independent
measures of performance. The S&P 500 (officially, the "Standard & Poor's 500
Composite Stock Price Index") is an unmanaged index of 500 U.S. stocks. The
Lipper Natural Resources Funds Average shows the performance of a category of
mutual funds with similar goals. The Lipper average 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, 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
average 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 brokerage and administrative expenses.
In both the chart and the table, the returns shown for the fund include
performance from before the creation of share classes in 1993. If the returns
for Class B and Class C from before 1993 had reflected their current
distribution/service (12b-1) fee (as described on page 8), these returns would
have been lower.
Also, the returns in both the chart and the table would have been lower if the
distributor and its affiliates had not voluntarily reduced a portion of the
fund's expenses.
Keep in mind that past performance is no guarantee of future results.
<PAGE>
8 INVESTOR EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class descriptions begin on page 11
-----------------------------------------------
SHAREHOLDER FEES (% of offering price) Class A Class B Class C Class S
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Maximum front-end sales charge (load) 4.50 0.00 0.00 0.00
- -------------------------------------------------------------------------------------------------------------------------------
Maximum deferred sales charge (load) 0.00(1) 5.00 1.00 0.00
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND EXPENSES (% of average net assets) Class A Class B Class C Class S
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Management fee 0.75 0.75 0.75 0.75
- -------------------------------------------------------------------------------------------------------------------------------
Distribution/service (12b-1) fees 0.25 1.00 1.00 0.00
- -------------------------------------------------------------------------------------------------------------------------------
Other expenses 0.46 0.46 0.46 0.46
---- ---- ---- ----
- -------------------------------------------------------------------------------------------------------------------------------
Total annual fund operating expenses 1.46 2.21 2.21 1.21
==== ==== ==== ====
</TABLE>
<TABLE>
<CAPTION>
EXAMPLE Year Class A Class B Class C Class S
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1 $592 $724/$224 $324/$224 $123
- -------------------------------------------------------------------------------------------------------------------------------
3 $891 $991/$691 $691 $384
- -------------------------------------------------------------------------------------------------------------------------------
5 $1,212 $1,385/$1,185 $1,185 $665
- -------------------------------------------------------------------------------------------------------------------------------
10 $2,118 $2,355 $2,544 $1,466
</TABLE>
[footnote text]
(1) Except for investments of $1 million or more; see page 13.
[end of footnote text]
<PAGE>
9
-----
[magnifying glass graphic] UNDERSTANDING
INVESTOR EXPENSES
The information on the opposite page is designed to give you an idea of what you
should expect to pay in expenses as an investor in the fund:
[bullet] SHAREHOLDER FEES are costs that are charged to you directly. These fees
are not charged on reinvestments or exchanges.
[bullet] ANNUAL FUND EXPENSES are deducted from the fund's assets every year,
and are thus paid indirectly by all fund investors.
[bullet] The EXAMPLE is designed to allow you to compare the costs of this fund
with those of other funds. It assumes that you invested $10,000 over
the years indicated, reinvested all distributions, earned a
hypothetical 5% annual return and paid the maximum applicable sales
charges. For Class B shares, it also assumes the automatic conversion
to Class A after eight years.
Where two numbers are shown separated by a slash, the first one assumes you sold
all your shares at the end of the period, while the second assumes you stayed in
the fund. Where there is only one number, the costs would be the same either
way.
Investors should keep in mind that the example is for comparison purposes only.
The fund's actual performance and expenses may be higher or lower.
<PAGE>
10 THE FUND continued
- --------------------------------------------------------------------------------
[Thinker graphic] INVESTMENT MANAGEMENT
The fund's investment manager is State Street Research & Management Company, One
Financial Center, Boston, MA 02111. 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 $51 billion in assets under management (as of September 30, 1998),
including $15 billion in mutual funds.
The investment manager is responsible for the fund's investment and business
activities, and receives the management fee (0.75% of net assets, annually) as
compensation. The investment manager is a subsidiary of Metropolitan Life
Insurance Company.
Daniel J. Rice III has been responsible for the fund's day-to-day portfolio
management since its inception in March 1990. A senior vice president, he joined
the firm in 1984 and has worked as an investment professional since 1979.
<PAGE>
YOUR INVESTMENT 11
- --------------------------------------------------------------------------------
[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.
[checklist 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 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.
<PAGE>
12 YOUR INVESTMENT continued
- --------------------------------------------------------------------------------
[magnifying glass graphic] UNDERSTANDING
DISTRIBUTION/SERVICE
FEES
As noted in the descriptions at right, all share classes except Class S have an
annual distribution/service fee, also called a 12b-1 fee.
Under its current 12b-1 plan, the fund may pay certain distribution and service
fees for these classes out of fund assets. Because 12b-1 fees are an ongoing
expense, they will increase the cost of your investment and, over time, could
potentially cost you more than if you had paid other types of sales charges. For
that reason, you should consider the effects of 12b-1 fees as well as sales
loads when choosing a share class.
Some of the 12b-1 fee is used to compensate those financial professionals who
sell fund shares and provide ongoing service to shareholders. The table on page
15 shows how these professionals' compensation is calculated.
The fund may continue to pay 12b-1 fees even if the fund is subsequently closed
to new investors.
[end of sidebar text]
CLASS A -- FRONT LOAD
[bullet] Initial sales charge of 4.5% or less
[bullet] Lower sales charges for larger investments; see sales charge schedule
on facing page
[bullet] Lower annual expenses than Class B or Class C shares because of lower
distribution/service (12b-1) fee of 0.25%
CLASS B -- BACK LOAD
[bullet] No initial sales charge
[bullet] Deferred sales charge of 5% or less on shares you sell within five
years
[bullet] Annual distribution/service (12b-1) fee of 1.00%
[bullet] Automatic conversion to Class A shares after eight years, reducing
future annual expenses
CLASS C -- LEVEL LOAD
[bullet] No initial sales charge
[bullet] Deferred sales charge of 1%, paid if you sell shares within one year of
purchase
[bullet] Lower deferred sales charge than Class B shares
[bullet] Annual distribution/service (12b-1) fee of 1.00%
[bullet] No conversion to Class A shares after eight years, so annual expenses
do not decrease
CLASS S -- SPECIAL PROGRAMS
[bullet] Available only through certain retirement accounts, advisory accounts
of the investment manager and other special programs, including broker
programs with recordkeeping and other services; these programs usually
involve special conditions and separate fees (consult your financial
professional or your program materials)
[bullet] No sales charges of any kind
[bullet] No distribution/service (12b-1) fees; annual expenses are lower than
other share classes
<PAGE>
13
-----
SALES CHARGES
CLASS A -- FRONT LOAD
<TABLE>
<CAPTION>
when you invest this % is which equals
this amount deducted this % of
for sales your net
charges investment
- -------------------------------------------------
<S> <C> <C>
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
</TABLE>
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 the application), you can purchase Class A shares
without any sales charge. However, you may be charged a "contingent deferred
sales charge" (CDSC) of 1% if you sell any shares within one year of purchasing
them. The CDSC will be based on the net asset value of the shares at the time of
purchase (or sale, if lower). The CDSC does not apply to shares acquired through
reinvestments, and those shares will be used first in the event of a redemption.
The CDSC also does not apply to exchanges, shares sold for mandatory retirement
distributions or because of disability or death.
Class A shares are also offered with low or no sales charges through various
wrap-fee programs and other sponsored arrangements (consult your financial
professional or your program materials).
CLASS B -- BACK LOAD
<TABLE>
<CAPTION>
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
- ---------------------------------------------------------
<S> <C>
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
- ---------------------------------------------------------
</TABLE>
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>
14 YOUR INVESTMENT continued
- --------------------------------------------------------------------------------
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 the State
Street Research Service Center.
Class B shares automatically convert to Class A shares after eight years; Class
A shares have lower annual expenses.
CLASS C -- LEVEL LOAD
<TABLE>
<CAPTION>
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
- ---------------------------------------------------------
<S> <C>
First year 1.00
- ---------------------------------------------------------
Second year or later None
- ---------------------------------------------------------
</TABLE>
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 -- SPECIAL PROGRAMS
Class S shares have no sales charges.
<PAGE>
15
-----
[check graphic] DEALER COMPENSATION
Financial professionals who sell shares of State Street Research funds and
perform services for fund investors may receive sales commissions and annual
fees. These are paid by the fund's distributor, using money from sales charges,
distribution/service (12b-1) fees and its other resources.
Brokers and agents may charge a transaction fee on orders of fund shares placed
directly through them. The distributor may pay its affiliate MetLife Securities,
Inc. additional compensation of up to 0.25% of certain sales or assets.
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.
<TABLE>
<CAPTION>
MAXIMUM DEALER COMPENSATION Class A Class B Class C Class S
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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
</TABLE>
[footnote text]
(1) If your broker declines this commission, the one-year CDSC on your
investment is waived.
[end of footnote text]
<PAGE>
16 BUYING AND SELLING SHARES
- --------------------------------------------------------------------------------
[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:
[bullet] $1,000 for accounts that use the Investamatic program
[bullet] $2,000 for Individual Retirement Accounts
[bullet] $2,500 for all other accounts
MINIMUM ADDITIONAL INVESTMENTS:
[bullet] $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 in good order by State Street Research
before the close of regular trading on the New York Stock Exchange (usually 4:00
p.m. eastern time) will be executed the same day, at that day's closing share
price. Orders received thereafter 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. If the New York Stock Exchange closes before 4:00 p.m. eastern time,
you may be unable to make a same-day wire investment. Your bank may charge a fee
for wiring money.
<PAGE>
INSTRUCTIONS FOR BUYING SHARES 17
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
To Open an Account To Add to an Account
- ----------------------------------------------------------------------------------------------------------
[briefcase Through a Consult your financial Consult your financial professional or your
graphic] Professional professional or your program program materials.
or Program materials.
- ----------------------------------------------------------------------------------------------------------
By Mail [mailbox Make your check payable to Fill out an investment slip or indicate the
graphic] "State Street Research fund name and account number on your check.
Funds." Forward the check and Make your check payable to "State Street
your application to State Research Funds." Forward the check and slip to
Street Research. State Street Research.
- ----------------------------------------------------------------------------------------------------------
[Capitol By Federal Call to obtain an account Call State Street Research to obtain a control
Building Funds Wire number and forward your number. Instruct your bank to wire funds to:
graphic] application to State Street [bullet] State Street Bank and Trust Company,
Research. Wire funds using Boston, MA
the instructions at right. [bullet] ABA: 011000028
[bullet] BNF: fund name and share class you
want to buy
[bullet] AC: 99029761
[bullet] OBI: your name and your account number
[bullet] Control: the number given to you by
State Street Research
- ----------------------------------------------------------------------------------------------------------
By [plug Verify that your bank is a Call State Street Research to verify that the
Electronic graphic] member of the ACH (Automated necessary bank information is on file for your
Funds Clearing House) system. account. If it is, you may request a transfer
Transfer Forward your application to with the same phone call. If not, please ask
(ACH) State Street Research. Please State Street Research to provide you with an
be sure to include the EZ Trader application.
appropriate bank information.
Call State Street Research to
request a purchase.
- ----------------------------------------------------------------------------------------------------------
[calendar By Forward your application, Call State Street Research to verify that
graphic] Investamatic with all appropriate sections Investamatic is in place on your account, or
completed, to State Street to request a form to add it. Investments are
Research, along with a check automatic once Investamatic is in place.
for your initial investment
payable to "State Street
Research Funds."
- ----------------------------------------------------------------------------------------------------------
By Exchange [exchange Call State Street Research or Call State Street Research or visit our Web
graphic] visit our Web site. site.
- ----------------------------------------------------------------------------------------------------------
State Street Research Service Center 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 INVESTMENT continued
- --------------------------------------------------------------------------------
[receipt graphic] POLICIES FOR
SELLING SHARES
CIRCUMSTANCES THAT REQUIRE WRITTEN REQUESTS Please submit instructions in
writing when any of the following apply:
[bullet] you are selling more than $100,000 worth of shares
[bullet] the name or address on the account has changed within the last 30 days
[bullet] you want the proceeds to go to a name or address not on the account
registration
[bullet] you are transferring shares to an account with a different registration
or share class
[bullet] 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 the close of regular trading on the New York Stock Exchange (usually 4:00
p.m. eastern time) will be executed the same day, at that day's closing share
price. Requests received thereafter 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 (ACH) 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>
INSTRUCTIONS FOR SELLING SHARES 19
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
To Sell Some or All of Your Shares
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
[briefcase Through a Consult your financial professional or your program materials.
graphic] Professional
or Program
- ----------------------------------------------------------------------------------------------------------
By Mail [mailbox Send a letter of instruction, an endorsed stock power or share certificates
graphic] (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).
- ----------------------------------------------------------------------------------------------------------
[Capitol By Federal Check with State Street Research to make sure that a wire redemption
Building Funds Wire privilege, including a bank designation, is in place on your account. Once
graphic] this is 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 [plug Check with State Street Research to make sure that the EZ Trader feature,
Electronic graphic] including a bank designation, is in place on your account. Once this is
Funds established, you may place your request to sell shares with State Street
Transfer Research. Proceeds will be sent to your pre-designated bank account.
(ACH)
- ----------------------------------------------------------------------------------------------------------
[telephone By As long as the transaction does not require a written request (see facing
graphic] Telephone page), you or your financial professional can sell shares by calling State
Street Research. A check will be mailed to your address of record on the
following business day.
- ----------------------------------------------------------------------------------------------------------
By Exchange [exchange Read the prospectus for the fund into which you are exchanging. Call State
graphic] Street Research or visit our Web site.
- ----------------------------------------------------------------------------------------------------------
[calendar By See plan information on page 23.
graphic] Systematic
Withdrawal
Plan
- ----------------------------------------------------------------------------------------------------------
State Street Research Service Center 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 INVESTMENT continued
- --------------------------------------------------------------------------------
[policies graphic] ACCOUNT POLICIES
TELEPHONE REQUESTS When you open an account you automatically receive telephone
privileges, allowing you to place requests for your account by telephone. Your
financial professional can also use these privileges to request exchanges on
your account and, with your written permission, redemptions. 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 of 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 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, depending on the circumstances, may deduct an annual
maintenance fee (currently $18).
<PAGE>
21
-----
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 share price every business day
at the close of regular trading on the New York Stock Exchange (usually at 4:00
p.m. eastern time). The share price is the fund's total assets minus its
liabilities (net asset value, or NAV) divided by the number of existing shares.
In calculating its NAV, the fund uses the last reported sale price or quotation
for portfolio securities. However, in cases where these are unavailable, or when
the investment manager believes that subsequent events have rendered them
unreliable, the fund may use fair-value estimates instead.
Because foreign securities markets are sometimes open on different days from
U.S. markets, there may be instances when the value of the fund's portfolio
changes on days when you cannot buy or sell fund shares.
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.
ADDITIONAL POLICIES Please note that the fund maintains additional policies and
reserves certain rights, including:
[bullet] The fund may vary its requirements for initial or additional
investments, exchanges, reinvestments, periodic investment plans,
retirement and employee benefit plans, sponsored arrangements and other
similar programs
[bullet] All orders to purchase shares are subject to acceptance by the fund
[bullet] 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
[bullet] The fund may delay sending you redemption proceeds for up to seven
days, or longer if permitted by the SEC
[bullet] To permit investors to obtain the current price, dealers are
responsible for transmitting all orders to the State Street Research
Service Center promptly
<PAGE>
22 YOUR INVESTMENT continued
- --------------------------------------------------------------------------------
[magnifying glass graphic] TAX CONSIDERATIONS
Unless your investment is in a tax-deferred account, you may want to avoid:
[bullet] investing a large amount in the fund close to the end of its fiscal
year or a calendar year (if the fund makes a distribution, you will
receive some of your investment back as a taxable distribution)
[bullet] 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 in the current year)
[Uncle Sam graphic] DISTRIBUTIONS AND TAXES
INCOME AND CAPITAL GAINS DISTRIBUTIONS The fund typically distributes any net
income and net capital gains to shareholders 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.
TAX EFFECTS OF DISTRIBUTIONS AND TRANSACTIONS In general, any dividends and
short-term capital gains distributions you receive from the fund are taxable as
ordinary income. Distributions of other capital gains are generally taxable as
capital gains -- in most cases, at different rates from those that apply to
ordinary income.
The tax you pay on a given capital gains distribution generally depends on how
long the fund has held the portfolio securities it sold. It does not depend on
how long you have owned your fund shares or whether you reinvest your
distributions.
<PAGE>
23
-----
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.
[shaking hands graphic] INVESTOR SERVICES
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.
SYSTEMATIC WITHDRAWAL PLAN 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.
EZ TRADER This service allows you to purchase or sell fund shares over the
telephone through the ACH (Automated Clearing House) system.
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 Plan payments directly to your bank account.
RETIREMENT PLANS 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 any of the services described above.
<PAGE>
24 OTHER INFORMATION
- --------------------------------------------------------------------------------
[stock certificates graphic] 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.
BONDS The value of any bonds held by the fund is likely to decline when
interest rates rise; this risk is greater for bonds with longer maturities. A
less significant risk is that a bond issuer could default on principal or
interest payments, causing a loss for the fund. However, junk bonds have a
higher risk of default than investment grade bonds, and their market prices can
be more volatile.
<PAGE>
25
-----
DERIVATIVES Derivatives, a category that includes options and futures, are
financial instruments whose value derives from one or more securities, indices
or currencies. The fund may use certain 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 certain 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 some 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.
SECURITIES LENDING The fund may seek additional income or fees by lending
portfolio securities to qualified institutions. By reinvesting any cash
collateral it receives in these transactions, the fund could realize additional
gains or losses. If the borrower fails to return the securities and the invested
collateral has declined in value, the fund could lose money.
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 short-term trading. Short-term trading can increase the
fund's transaction costs and may increase your tax liability if there are
capital gains. In addition, foreign securities generally involve higher
transaction costs per share traded.
DEFENSIVE INVESTING During unusual market conditions, the fund may place up to
100% of total assets in cash or high-quality, short-term debt securities. To the
extent that the fund does this, it is not pursuing its goal.
YEAR 2000 The investment manager does not currently anticipate that computer
problems related to the year 2000 will have a material effect on the fund.
However, there can be no assurances in this area, including the possibility that
year 2000 computer problems could negatively affect communication systems,
investment markets or the economy in general.
<PAGE>
26 FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
These highlights are intended to help you understand the fund's performance over
the past five years. The information in these tables has been audited by
PricewaterhouseCoopers LLP, the fund's independent accountants. Their report and
the fund's financial statements are included in the fund's annual report, which
is available upon request. Total return figures assume reinvestment of all
distributions.
<TABLE>
<CAPTION>
Class A Class B
------------------------------------------ -------------------------------------------
Years ended June 30 Years ended June 30
Per Share Data 1994(1) 1995(1) 1996(1) 1997(1) 1998(1) 1994(1) 1995(1) 1996(1) 1997(1) 1998(1)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year ($) 13.51 11.84 12.16 17.44 22.39 13.51 11.78 12.03 17.12 21.80
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
- ------------------------------------------------------------------------------------------------------------------------------
Net investment loss ($)* (0.17) (0.16) (0.20) (0.15) (0.18) (0.23) (0.23) (0.30) (0.30) (0.33)
- ------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments,
foreign currency and forward
contracts ($) (1.50) 0.48 5.48 5.86 (2.52) (1.50) 0.48 5.39 5.74 (2.42)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment
operations ($) (1.67) 0.32 5.28 5.71 (2.70) (1.73) 0.25 5.09 5.44 (2.75)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
- ------------------------------------------------------------------------------------------------------------------------------
Distributions from
capital gains ($) -- -- -- (0.76) (2.34) -- -- -- (0.76) (2.34)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
- ------------------------------------------------------------------------------------------------------------------------------
Total distributions ($) -- -- -- (0.76) (2.34) -- -- -- (0.76) (2.34)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year ($) 11.84 12.16 17.44 22.39 17.35 11.78 12.03 17.12 21.80 16.71
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
- ------------------------------------------------------------------------------------------------------------------------------
Total return (%)(2) (12.36) 2.70 43.42 32.96 (14.28) (12.81) 2.12 42.31 31.98 (14.94)
- ------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------
Net assets at end of
year ($ thousands) 30,679 25,692 30,943 80,029 82,376 6,333 7,030 12,828 78,701 89,689
- ------------------------------------------------------------------------------------------------------------------------------
Expense ratio (%)* 1.75 1.75 1.75 1.42 1.46 2.25 2.33 2.50 2.17 2.21
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment
loss to average net assets (%)* (1.46) (1.41) (1.47) (0.73) (0.82) (1.93) (1.98) (2.20) (1.47) (1.57)
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 30.98 62.94 92.33 51.67 68.69 30.98 62.94 92.33 51.67 68.69
- ------------------------------------------------------------------------------------------------------------------------------
*Reflects voluntary reduction
of expenses per share of these
amounts ($) 0.11 0.09 0.05 0.00 -- 0.14 0.09 0.04 0.00 --
</TABLE>
<PAGE>
27
-----
<TABLE>
<CAPTION>
Class C Class S
------------------------------------------ -------------------------------------------
Years ended June 30 Years ended June 30
Per Share Data 1994(1) 1995(1) 1996(1) 1997(1) 1998(1) 1994(1) 1995(1) 1996(1) 1997(1) 1998(1)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year ($) 13.51 11.77 12.02 17.10 21.76 13.52 11.90 12.27 17.64 22.72
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
- ------------------------------------------------------------------------------------------------------------------------------
Net investment loss ($)* (0.23) (0.23) (0.30) (0.30) (0.33) (0.15) (0.11) (0.17) (0.10) (0.13)
- ------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments,
foreign currency and forward
contracts ($) (1.51) 0.48 5.38 5.72 (2.42) (1.47) 0.48 5.54 5.94 (2.58)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment
operations ($) (1.74) 0.25 5.08 5.42 (2.75) (1.62) 0.37 5.37 5.84 (2.71)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
- ------------------------------------------------------------------------------------------------------------------------------
Distributions from
capital gains ($) -- -- -- (0.76) (2.34) -- -- -- (0.76) (2.34)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
- ------------------------------------------------------------------------------------------------------------------------------
Total distributions ($) -- -- -- (0.76) (2.34) -- -- -- (0.76) (2.34)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year ($) 11.77 12.02 17.10 21.76 16.67 11.90 12.27 17.64 22.72 17.67
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
- ------------------------------------------------------------------------------------------------------------------------------
Total return (%)(2) (12.88) 2.12 42.26 31.90 (14.97) (11.98) 3.11 43.77 33.33 14.11
- ------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year
($ thousands) 1,931 2,350 5,154 27,528 37,566 960 3,288 5,632 10,747 5,745
- ------------------------------------------------------------------------------------------------------------------------------
Expense ratio (%)* 2.25 2.33 2.50 2.17 2.21 1.25 1.33 1.50 1.17 1.21
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment loss
to average net assets (%)* (1.94) (1.99) (2.20) (1.45) (1.57) (0.95) (1.01) (1.20) (0.48) (0.55)
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover rate (%) 30.98 62.94 92.33 51.67 68.69 30.98 62.94 92.33 51.67 68.69
- ------------------------------------------------------------------------------------------------------------------------------
*Reflects voluntary reduction
of expenses per share of these
amounts ($) 0.13 0.09 0.05 0.00 -- 0.16 0.08 0.05 0.00 --
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
[footnote text]
(1) Per-share figures have been calculated using the average shares method.
(2) 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 reduced a portion of the fund's expenses.
[end of footnote text]
<PAGE>
28 NOTES
- --------------------------------------------------------------------------------
<PAGE>
NOTES 29
- --------------------------------------------------------------------------------
<PAGE>
[back cover]
FOR ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
If you have questions about the fund or would like to request a free copy of the
current annual/semiannual report or SAI, contact State Street Research or your
financial professional
[logo: State Street Research]
Service Center
P.O. Box 8408, Boston, MA 02266
Telephone: 1-800-562-0032
Internet: www.ssrfunds.com
You can also obtain information about the fund, including the SAI and certain
other fund documents, on the Internet at www.sec.gov, in person at the SEC's
Public Reference Room in Washington, DC (telephone 1-800-SEC-0330) or by mail by
sending your request, along with a duplicating fee, to the SEC's Public
Reference Section, Washington, DC 20549-6009.
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.
<TABLE>
<CAPTION>
Ticker Symbols
- ----------------------------------------
<S> <C>
Class A SSGRX
- ----------------------------------------
Class B SSBGX
- ----------------------------------------
Class C SSGDX
- ----------------------------------------
Class S (proposed) SSGCX
- ----------------------------------------
</TABLE>
STATEMENT OF ADDITIONAL INFORMATION (SAI) A supplement to the prospectus, the
SAI contains further information about the fund and its investment limitations
and policies. 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).
prospectus
- -------------------------------- GR-036F-1198
SEC File Number: 811-4624 Control Number: (exp1199)SSR-LD
<PAGE>
State Street Research Global Resources Fund
a series of
State Street Research Equity Trust
STATEMENT OF ADDITIONAL INFORMATION
November 1, 1998
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
INVESTMENT OBJECTIVE..............................................................................................2
ADDITIONAL INVESTMENT POLICIES AND RESTRICTIONS...................................................................2
ADDITIONAL INFORMATION CONCERNING
CERTAIN RISKS AND INVESTMENT TECHNIQUES..................................................................4
DEBT INSTRUMENTS AND PERMITTED CASH INVESTMENTS..................................................................16
THE TRUST, THE FUND AND ITS SHARES...............................................................................23
TRUSTEES AND OFFICERS............................................................................................25
MANAGEMENT OF THE FUND AND INVESTMENT ADVISORY SERVICES..........................................................30
PURCHASE AND REDEMPTION OF SHARES................................................................................31
SHAREHOLDER ACCOUNTS.............................................................................................36
NET ASSET VALUE..................................................................................................41
PORTFOLIO TRANSACTIONS...........................................................................................42
CERTAIN TAX MATTERS..............................................................................................45
DISTRIBUTION OF SHARES OF THE FUND...............................................................................49
CALCULATION OF PERFORMANCE DATA..................................................................................54
CUSTODIAN........................................................................................................57
INDEPENDENT ACCOUNTANTS..........................................................................................57
FINANCIAL STATEMENTS.............................................................................................57
</TABLE>
The following Statement of Additional Information is not a Prospectus.
It should be read in conjunction with the Prospectus of State Street Research
Global Resources Fund (the "Fund") dated November 1, 1998, 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.
The Fund's financial statements for the fiscal year ended June 30,
1998, which are included in the Fund's Annual Report for that year, are
incorporated by reference. The Annual Report is available, without charge, upon
request by calling 1-800-562-0032.
CONTROL NUMBER: (exp1199) SSR-LD GR-879D-1198
<PAGE>
INVESTMENT OBJECTIVE
As set forth under "The Fund--Goal and Strategies in the Prospectus of
State Street Research Global Resources Fund (the "Fund"), the Fund's investment
goal, which is to provide long-term growth of capital, 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 "The Fund--Principal Risks" and "Other
Information--Other Securities and Risks" in the Fund's Prospectus, the Fund has
adopted certain investment restrictions, and those investment 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) not to invest in a security if the transaction would result in
the Fund owning more than 10% of any class of voting
securities of an issuer, except that this restriction does not
apply to investments in securities issued or guaranteed by the
U.S. Government or its agencies or instrumentalities or backed
by the U.S.
Government;
(2) not to issue senior securities;
(3) not to underwrite or participate in the marketing of
securities of other issuers, except (a) the Fund may purchase
or otherwise acquire securities of other issuers for
investment, either from the issuers or from persons in a
control relationship with the issuers or from underwriters of
such securities; and (b) to the extent that, in connection
with the disposition of the Fund's securities, the Fund may be
deemed to be an underwriter under certain federal securities
laws;
(4) not to purchase or sell fee simple interests in real estate or
illiquid interests in limited partnerships that invest in real
estate, although the Fund may purchase
2
<PAGE>
and sell other interests in real estate including readily
marketable interests in real estate investment trusts or
companies which own or invest or deal in real estate;
(5) not to invest in physical commodities or physical commodity
contracts or options in excess of 10% of the Fund's total
assets, except that investments in essentially financial items
or arrangements such as, but not limited to, swap
arrangements, hybrids, currencies, currency and other forward
contracts, futures contracts and options on futures contracts
on securities, securities indices, interest rates and
currencies shall not be deemed investments in commodities or
commodities contracts;
(6) not to make loans, except that the Fund may lend portfolio
securities and purchase bonds, debentures, notes and similar
obligations (including repurchase agreements with respect
thereto);
(7) not to conduct arbitrage transactions (provided that
investments in futures and options shall not be deemed
arbitrage transactions);
(8) not to invest directly as a joint venturer or general partner
in oil, gas or other mineral exploration or development joint
ventures or general partnerships (provided that the Fund may
invest in securities issued by companies which invest in or
sponsor such programs and in securities indexed to the price
of oil, gas or other minerals);
(9) not to borrow money except for borrowings from banks for
extraordinary and emergency purposes, such as permitting
redemption requests to be honored, and then not in an amount
in excess of 25% of the value of its total assets, and except
insofar as reverse repurchase agreements may be regarded as
borrowing. The Fund will not purchase additional portfolio
securities at any time when it has outstanding money
borrowings in excess of 5% of the Fund's total assets (taken
at current value); and
(10) not to make any investment which would cause more than 25% of
the value of the Fund's total assets to be invested in
securities of issuers principally engaged in any one industry
other than any energy industry [for purposes of this
restriction, (a) energy and nonenergy industries will be
divided according to their services, so that, for example, in
the case of (i) utilities, gas, gas transmission, electric and
telephone companies each will be deemed to be in a separate
industry, and (ii) oil and oil related companies will be
divided by types, with oil production companies, oil service
companies and marketing companies each deemed to be in a
separate industry, (b) finance companies will be classified
according to the industries of their parent companies and (c)
securities issued or guaranteed by the U.S. Government, or its
agencies or
3
<PAGE>
instrumentalities (including repurchase agreements involving
such U.S. Government securities to the extent excludable under
relevant regulatory interpretations) shall be excluded].
The following investment restrictions may be changed without
shareholder approval. Under these restrictions, it is the Fund's policy:
(1) not to engage in transactions in options except in connection
with options on securities, securities indices and currencies,
and options on futures contracts on securities, securities
indices and currencies;
(2) not to purchase securities on margin or make short sales of
securities or maintain a short position except for short sales
"against the box";
(3) not to hypothecate, mortgage or pledge any of its assets
except as may be necessary in connection with permitted
borrowings (for the purpose of this restriction, futures and
options, and related escrow or custodian receipts or letters,
margin or safekeeping accounts, or similar arrangements used
in the industry in connection with the trading of futures and
options, are not deemed to involve a hypothecation, mortgage
or pledge of assets);
(4) not to purchase a security issued by another investment
company, except to the extent permitted under the 1940 Act or
except by purchases in the open market involving only
customary brokers' commissions, or securities acquired as
dividends or distributions or in connection with a merger
consolidation or similar transaction or other exchange;
(5) not to invest in companies for the purpose of exercising
control over their management, although the Fund may from time
to time present its views on various matters to the management
of issuers in which it holds investments; and
(6) 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);
ADDITIONAL INFORMATION CONCERNING
CERTAIN RISKS AND INVESTMENT TECHNIQUES
Derivatives
The Fund may buy and sell certain types of derivatives, such as
options, futures contracts, options on futures contracts, and swaps under
circumstances in which such
4
<PAGE>
instruments are expected by State Street Research & Management Company, the
Fund's Investment Manager (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 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 (i) an expected decline in the market value of an asset or group of
assets which the Fund does not own or (ii) expected increases in the market
value of an asset which it does not plan to acquire. Information about specific
types of instruments is provided below.
Futures Contracts
Futures contracts are publicly traded contracts to buy or sell an
underlying asset or group of assets, such as a currency or an index of
securities, at a future time at a specified price. A contract to buy establishes
a long position while a contract to sell establishes a short position.
The purchase of a futures contract on an equity security or an index of
equity securities normally enables a buyer to participate in the market movement
of the underlying asset or index after paying a transaction charge and posting
margin in an amount equal to a small percentage of the value of the underlying
asset or index. The Fund will initially be required to deposit with the Trust's
custodian or the futures commission merchant effecting the futures transaction
an amount of "initial margin" in cash or securities, as permitted under
applicable regulatory policies.
Initial margin in futures transactions is different from margin in
securities transactions in that the former does not involve the borrowing of
funds by the customer to finance the transaction. Rather, the initial margin is
like a performance bond or good faith deposit on the
5
<PAGE>
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 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
6
<PAGE>
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 put option, a covered writer is
required to deposit in escrow the underlying security or other assets in
accordance with the rules of the applicable clearing corporation and exchanges.
Among the options which the Fund may enter are options on securities
indices. In general, options on indices of securities are similar to options on
the securities themselves except that delivery requirements are different. For
example, a put option on an index of securities does not give the holder the
right to make actual delivery of a basket of securities but instead gives the
holder the right to receive an amount of cash upon exercise of the option if the
value of the underlying index has fallen below the exercise price. The amount of
cash received will be equal to the difference between the closing price of the
index and the exercise price of the option expressed in dollars times a
specified multiple. As with options on equity securities or futures contracts,
the Fund may offset its position in index options prior to expiration by
entering into a closing transaction on an exchange or it may let the option
expire unexercised.
A securities index assigns relative values to the securities included
in the index and the index options are based on a broad market index. In
connection with the use of such options, the Fund may cover its position by
identifying assets having a value equal to the aggregate face value of the
option position taken.
Options on Futures Contracts
An option on a futures contract gives the purchaser the right, in
return for the premium paid, to assume a position in a futures contract (a long
position if the option is a call and a short position if the option is a put) at
a specified exercise price at any time during the period of the option.
Limitations and Risks of Options and Futures Activity
The Fund may not establish a position in a commodity futures contract
or purchase or sell a commodity option contract for other than bona fide hedging
purposes if immediately thereafter the sum of the amount of initial margin
deposits and premiums required to establish such positions for such non-hedging
purposes would exceed 5% of the market value of the Fund's net assets. The Fund
applies a similar policy to options that are not commodities.
7
<PAGE>
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.
Non-hedging strategies typically involve special risks. The
profitability of the Fund's non-hedging strategies will depend on the ability of
the Investment Manager to analyze both the 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.
Securities of Public Utilities
The Fund may invest from time to time in equity securities of public
utilities. Such issuers are subject to regulation by local government
authorities which may inhibit the potential for capital appreciation of their
securities.
Short Sales Against the Box
The Fund may effect short sales, but only if such transactions are
short sale transactions known as short sales "against the box." A short sale is
a transaction in which the Fund sells a security it does not own by borrowing it
from a broker, and consequently becomes obligated to replace that security. A
short sale against the box is a short sale where the Fund owns the security sold
short or has an immediate and unconditional right to acquire that security
without additional cash consideration upon conversion, exercise or exchange of
options with respect to securities held in its portfolio. The effect of selling
a security short against the box is to insulate that security against any future
gain or loss.
Swap Arrangements
The Fund may enter into various forms of swap arrangements with
counterparties with respect to interest rates, currency rates or indices,
including purchase of caps, floors and
8
<PAGE>
collars as described below, although the Fund does not presently expect to
invest more than 5% of its net assets in such items. In an interest rate swap,
the Fund could agree for a specified period to pay a bank or investment banker
the floating rate of interest on a so-called notional principal amount (i.e., an
assumed figure selected by the parties for this purpose) in exchange for
agreement by the bank or investment banker to pay the Fund a fixed rate of
interest on the notional principal amount. In a currency swap, the Fund would
agree with the other party to exchange cash flows based on the relative
differences in values of a notional amount of two (or more) currencies; in an
index swap, the Fund would agree to exchange cash flows on a notional amount
based on changes in the values of the selected indices. Purchase of a cap
entitles the purchaser to receive payments from the seller on a notional amount
to the extent that the selected index exceeds an agreed upon interest rate or
amount whereas purchase of a floor entitles the purchaser to receive such
payments to the extent the selected index falls below an agreed-upon interest
rate or amount. A collar combines a cap and a floor.
The Fund may enter credit protection swap arrangements involving the
sale by the Fund of a put option on a debt security which is exercisable by the
buyer upon certain events, such as a default by the referenced creditor on the
underlying debt or a bankruptcy event of the creditor.
Most swaps entered into by the Fund will be on a net basis; for
example, in an interest rate swap, amounts generated by application of the fixed
rate and the floating rate to the notional principal amount would first offset
one another, with the Fund either receiving or paying the difference between
such amounts. In order to be in a position to meet any obligations resulting
from swaps, the Fund will set up a segregated custodial account to hold
appropriate liquid assets, including cash; for swaps entered into on a net
basis, assets will be segregated having a daily net asset value equal to any
excess of the Fund's accrued obligations over the accrued obligations of the
other party, while for swaps on other than a net basis assets will be segregated
having a value equal to the total amount of the Fund's obligations.
These arrangements will be made primarily for hedging purposes, to
preserve the return on an investment or on a portion of the Fund's portfolio.
However, the Fund may, as noted above, enter into such arrangements for income
purposes to the extent permitted by the Commodities Futures Trading Commission
(the "CFTC") for entities which are not commodity pool operators, such as the
Fund. In entering a swap arrangement, the Fund is dependent upon the
creditworthiness and good faith of the counterparty. The Fund attempts to reduce
the risks of nonperformance by the counterparty by dealing only with
established, reputable institutions. The swap market is still relatively new and
emerging; positions in swap arrangements may become illiquid to the extent that
nonstandard arrangements with one counterparty are not readily transferable to
another counterparty or if a market for the transfer of swap positions does not
develop. The use of interest rate swaps is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. If the Investment Manager is
incorrect in its forecasts of market values, interest rates and other applicable
factors, the investment performance of the Fund would diminish compared with
what it would have been if these
9
<PAGE>
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.
Repurchase Agreements
The Fund may enter into repurchase agreements. Repurchase agreements
occur when the Fund acquires a security and the seller, which may be either (i)
a primary dealer in U.S. Government securities or (ii) an FDIC-insured bank
having gross assets in excess of $500 million, simultaneously commits to
repurchase it at an agreed-upon price on an agreed-upon date within a specified
number of days (usually not more than seven) from the date of purchase. The
repurchase price reflects the purchase price plus an agreed-upon market rate of
interest which is unrelated to the coupon rate or maturity of the acquired
security. The Fund will only enter into repurchase agreements involving U.S.
Government securities. Repurchase agreements could involve certain risks in the
event of default or insolvency of the other party, including possible delays or
restrictions upon the Fund's ability to dispose of the underlying securities.
Repurchase agreements will be limited to 30% of the Fund's net assets, except
that repurchase agreements extending for more than seven days when combined with
any other illiquid securities held by the Fund will be limited to 15% of the
Fund's net assets.
Reverse Repurchase Agreements
The Fund may enter into reverse repurchase agreements. In a reverse
repurchase agreement the Fund transfers possession of a portfolio instrument to
another person, such as a financial institution, broker or dealer, in return for
a percentage of the instrument's market value in cash, and agrees that on a
stipulated date in the future the Fund will repurchase the portfolio instrument
by remitting the original consideration plus interest at an agreed-upon rate.
The ability to use reverse repurchase agreements may enable, but does not ensure
the ability of, the Fund to avoid selling portfolio instruments at a time when a
sale may be deemed to be disadvantageous.
When effecting reverse repurchase agreements, assets of the Fund in a
dollar amount sufficient to make payment of the obligations to be purchased are
segregated on the Fund's records at the trade date and maintained until the
transaction is settled.
When-Issued Securities
The Fund may purchase "when-issued" securities, which are traded on a
price or yield basis prior to actual issuance. Such purchases will be made only
to achieve the Fund's investment objective and not for leverage. The when-issued
trading period generally lasts from a few days to 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
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<PAGE>
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
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 illiquidity and subjective valuations to a
greater degree than Rule 144A Securities.
Foreign Investments
The Fund reserves the right to invest without limitation in securities
of non-U.S. issuers directly, or indirectly in the form of American Depositary
Receipts ("ADRs"), European Depositary Receipts ("EDRs") and Global Depositary
Receipts ("GDRs").
ADRs are receipts, typically issued by a U.S. bank or trust company,
which evidence ownership of underlying securities issued by a foreign
corporation or other entity. EDRs are receipts issued in Europe which evidence a
similar ownership arrangement. GDRs are receipts issued in one country which
also evidence a similar ownership arrangement. Generally, ADRs in registered
form are designed for use in U.S. securities markets and EDRs are designed for
use in European securities markets. GDRs are designed for use when the issuer is
raising capital in more than one market simultaneously, such as the issuer's
local market and the U.S., and have been used to overcome local selling
restrictions to foreign investors. In addition, many GDRs are eligible for
book-entry settlement through Cedel, Euroclear and DTC. The underlying
securities are not always denominated in the same currency as the ADRs, EDRs or
11
<PAGE>
GDRs. Although investment in the form of ADRs, EDRs or GDRs facilitates trading
in foreign securities, it does not mitigate all the risks associated with
investing in foreign securities.
ADRs are available through facilities which may be either "sponsored"
or "unsponsored." In a sponsored arrangement, the foreign issuer establishes the
facility, pays some or all of the depository's fees, and usually agrees to
provide shareholder communications. In an unsponsored arrangement, the foreign
issuer is not involved, and the ADR holders pay the fees of the depository.
Sponsored ADRs are generally more advantageous to the ADR holders and the issuer
than are unsponsored ADRs. More and higher fees are generally charged in an
unsponsored program compared to a sponsored facility. Only sponsored ADRs may be
listed on the New York or American Stock Exchanges. Unsponsored ADRs may prove
to be more risky due to (a) the additional costs involved to the Fund; (b) the
relative illiquidity of the issue in U.S. markets; and (c) the possibility of
higher trading costs in the over-the-counter market as opposed to exchange based
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.
These risks are usually higher in less-developed countries. Such
countries include countries that have an emerging stock market on which trade a
small number of securities and/or countries with economies that are based on
only a few industries. The Fund may invest in the securities of issuers in
countries with less developed economies as deemed appropriate by the Investment
Manager. However, it is anticipated that a majority of the foreign investments
by the Fund will consist of securities of issuers in countries with developed
economies.
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
12
<PAGE>
purchase or sell currencies. Under current policy, 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.
Securities Lending
The Fund may lend portfolio securities with a value of up to 33 1/3% of
its total assets. The Fund will receive cash or cash equivalents (e.g., U.S.
Government obligations) as 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, 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 may receive a lending fee and will retain rights to dividends,
interest or other distributions, on the loaned securities. Voting rights pass
with the lending, although the Fund may call loans to vote proxies if desired.
Should the borrower of the securities fail financially, there is a risk of delay
in recovery of the securities or loss of rights in the collateral. Loans are
made only to borrowers which are deemed by the Investment Manager or its agents
to be of good financial standing.
Short-Term Trading
The Fund may engage in short-term trading of securities and reserves
full freedom with respect to portfolio turnover. In periods where there are
rapid changes in economic conditions and security price levels or when
reinvestment strategy changes significantly, portfolio
13
<PAGE>
turnover may be higher than during times of economic and market price stability
or when investment strategy remains relatively constant. The Fund's portfolio
turnover rate may involve greater transaction costs, relative to other funds in
general, and may have tax and other consequences.
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
Standard & Poor's Corporation ("S&P") or the "Prime" major rating category by
Moody's Investor's Service, Inc. ("Moody's"), or, if not rated, issued by
companies having an outstanding long-term unsecured debt issued rated at least
within the "A" category by S&P or Moody's.
Industry Classifications
In determining how much of the 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.
14
<PAGE>
<TABLE>
<S> <C> <C>
Basic Industries Consumer Staple Science & Technology
- ---------------- --------------- --------------------
Chemical Business Service Aerospace
Diversified Container Computer Software & Service
Electrical Equipment Drug Electronic Components
Forest Products Food & Beverage Electronic Equipment
Machinery Hospital Supply Office Equipment
Metal & Mining Personal Care
Railroad Printing & Publishing Consumer Cyclical
Truckers Tobacco -----------------
Airline
Automotive
Utility Energy Building
- ------- ------ Hotel & Restaurant
Electric Oil Refining & Photography
Gas Marketing Recreation
Gas Transmission Oil Production Retail Trade
Telephone Oil Service Textile & Apparel
Other Finance
- ----- -------
Trust Certificates-- Bank
Government Related Lending Financial Service
Asset-backed--Mortgages Insurance
Asset-backed--Credit Card
Receivables
</TABLE>
Computer-Related Risks
Many mutual funds and other companies that issue securities, as well as
government entities upon whom those mutual funds and companies depend, may be
adversely affected by computer systems (whether their own systems or systems of
their service providers) that do not properly process dates beginning with
January 1, 2000 and information related to those dates. In addition, many funds
and other companies, especially those funds and companies that do business in
one or more national currencies of the countries in the European Union (the
"EU"), may be adversely affected by computer systems that cannot accommodate
concurrent references to two currencies, the national currency and the euro (the
proposed currency unit of the EU). Beginning on January 1, 1999 and for the
three years thereafter, businesses and governments in most EU countries
generally must be prepared to conduct their businesses in their national
currency and the euro. After such three-year period, they must conduct their
businesses only in the euro.
The euro conversion presents additional risks for the Fund to the
extent that it invests in securities denominated in a national currency that
eventually will be replaced by the euro. For example, trading, accounting and
other administrative systems must be able to reflect exchange rates between a
national currency of an EU member and the euro and to redenominate
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outstanding tradeable debt securities into the euro in accordance with specific
technical requirements.
The Investment Manager currently is in the process of reviewing its
internal computer systems as they relate to the Fund, as well as the computer
systems of those service providers upon which the Fund relies, in order to
obtain reasonable assurances that the Fund will not experience a material
adverse impact related to either problem. The Fund does not currently anticipate
that either problem will have a material adverse impact on its portfolio
investments, taken as a whole. There can be no assurances in either area,
however, including the possibility that either or both problems could negatively
affect the investment markets or the economy generally.
DEBT INSTRUMENTS AND PERMITTED CASH INVESTMENTS
The Fund 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.
U.S. Government and Related Securities
U.S. Government securities are securities which are issued or
guaranteed as to principal or interest by the U.S. Government, a U.S. Government
agency or instrumentality, or certain mixed-ownership Government corporations as
described herein. The U.S. Government securities in which the Fund invests
include, among others:
o direct obligations of the U.S. Treasury, i.e., U.S. Treasury
bills, notes, certificates and bonds;
o obligations of U.S. Government agencies or instrumentalities
such as the Federal Home Loan Banks, the 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 Bank, the Federal Farm Credit Bank, the Federal National
Mortgage Association and the Federal
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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.
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.
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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.
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, among others, (a) corporations and (b) domestic or foreign bank
holding companies or 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.
Lower Rated Debt Securities
The Fund may invest in lower quality debt securities within the BB
major rating category or lower as rated by Standard & Poor's Corporation ("S&P")
or the Ba major rating category or lower as rated by Moody's Investor's Service,
Inc. ("Moody's") or debt securities that are unrated but considered by the
Investment Manager to be of equivalent investment quality to comparable rated
securities. Such securities generally involve more credit risk than higher rated
securities and are considered by S&P and Moody's to be predominantly speculative
with respect to capacity to pay interest and repay principal in accordance with
the terms of the obligation. Further, such securities may be subject to greater
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<PAGE>
market fluctuations and risk of loss of income and principal than lower
yielding, higher rated debt securities. Risks of lower quality debt securities
include (i) limited liquidity and secondary market support, (ii) substantial
market price volatility resulting from changes in prevailing interest rates
an/or investor perception, (iii) subordination to the prior claims of banks and
other senior lenders, (iv) the operation of mandatory sinking fund or
call/redemption provisions during periods of declining interest rates when the
fund may be required to reinvest premature redemption proceeds in lower yielding
portfolio securities; (v) the possibility that earnings of the issuer may be
insufficient to meet its debt service; and (vi) the issuer's low
creditworthiness and potential for insolvency during periods of rising interest
rates and economic downturn. For further information concerning the ratings of
debt securities, see "--Commercial Paper Ratings" below. 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.
Zero and Step Coupon Securities
Zero and step coupon securities are debt securities that may pay no
interest for all or a portion of their life but are purchased at a discount to
face value at maturity. Their return consists of the amortization of the
discount between their purchase price and their maturity value, plus in the case
of a step coupon, any fixed rate interest income. Zero coupon securities pay no
interest to holders prior to maturity even though interest on these securities
is reported as income to the Fund. The Fund will be required to distribute all
or substantially all of such amounts annually to its shareholders. These
distributions may cause the Fund to liquidate portfolio assets in order to make
such distributions at a time when the Fund may have otherwise chosen not to sell
such securities. The market value of such securities may be more volatile than
that of securities which pay interest at regular intervals.
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;
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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.
Rating Categories of Debt Securities
Set forth below is a description of S&P corporate bond and debenture
rating categories:
AAA: An obligation rated within the AAA category has the highest rating
assigned by S&P. Capacity to meet the financial commitment on the obligation is
extremely strong.
AA: An obligation rated within the AA category differs from the highest
rated obligation only in small degree. Capacity to meet the financial obligation
is very strong.
A: An obligation rated within the A category is somewhat more
susceptible to the adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories. However, capacity to meet the
financial commitment on the obligation is still strong.
BBB: An obligation rated within the BBB category exhibits adequate
protection parameters. However, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to meet the
financial commitment on the obligation.
Obligations rated within the BB, B, CCC, CC and C categories are
regarded as having significant speculative characteristics. BB indicates the
least degree of speculation and C the highest. While such obligations will
likely have some quality and protective characteristics, these may be outweighed
by large uncertainties or major exposures to adverse conditions.
BB: An obligation rated within the BB category is less vulnerable to
nonpayment 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 the financial commitment on the
obligation. The BB rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied BBB rating.
B: An obligation rated within the B category is more vulnerable to
nonpayment than obligations rated within the BB category, but currently has the
capacity to meet the financial commitment on the obligation. Adverse business,
financial or economic conditions will likely impair capacity or willingness to
meet the financial commitment on the obligation. 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: An obligation rated within the CCC category is vulnerable to
nonpayment and is dependent upon favorable business, financial and economic
conditions to meet the financial commitment on the obligation. In the event of
adverse business, financial or economic
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<PAGE>
conditions, it is not likely to have the capacity to meet the financial
commitment on the obligation.
CC: An obligation rated within the CC category is currently highly
vulnerable to nonpayment.
C: The C rating may be used to cover a situation where a bankruptcy
petition has been filed, but payments on this obligation are being continued.
D: An obligation rated within the D category is in payment default. The
D rating category is used when payments on an obligation are not made on the
date due even if the applicable grace period has not expired, unless S&P
believes that such payments will be made during such grace period. The D rating
also will be used upon the filing of a bankruptcy petition or the taking of a
similar action if payments on an obligation 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 the ratings of instruments with
significant noncredit risks. It highlights risks to principal or volatility of
expected returns which are not addressed in the credit rating. Examples include:
obligations linked or indexed to equities, currencies, or commodities;
obligations exposed to severe prepayments risks-such as interest only (IO) and
principal only (PO) mortgage securities; and obligations with unusually risky
terms, such as inverse floaters.
Set forth below is a description of Moody's corporate bond and
debenture rating categories:
Aaa: Bonds which are rated within the Aaa category 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 within the Aa category are judged to be of
high quality by all standards. Together with the Aaa group they comprise what
are generally known as high-grade bonds. They are rated lower than the best
bonds because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may be
other elements present which make the long-term risks appear somewhat larger
than in Aaa securities.
A: Bonds which are rated within the A category possess many favorable
investment attributes and are to be considered as upper medium grade
obligations. Factors giving security
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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 within the Baa category 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 within the Ba category 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 within the B category 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 within the Caa category 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 within the Ca category 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 within the C category 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.
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THE TRUST, THE FUND AND ITS SHARES
The Fund was organized in 1990 as a separate series of State Street
Research Equity Trust, a Massachusetts business trust. A "series" is a separate
pool of assets of the Trust which is separately managed and may have a different
investment objective and different investment policies from the objective and
policies of another series. The Trust currently is comprised of four series:
State Street Research Alpha Fund, State Street Research Athletes Fund, State
Street Research Equity Investment 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 each 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 classes.
The Trustees have authorized shares of the Fund to be issued in four classes:
Class A, Class B, Class C and Class S 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.
Shareholder rights granted under the Master Trust Agreement may be
modified by the Trustees, provided, however, that the Master Trust Agreement may
not be amended if such amendment (a) repeals the limitations on personal
liability of any shareholder, or repeals the prohibition of assessment upon the
shareholders, without the express consent of each shareholder involved or (b)
adversely modifies any shareholder right without the consent of the holders of a
majority of the outstanding shares entitled to vote. 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. Except as provided by law, the Trustees may otherwise
modify the rights of shareholders at any time.
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
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<PAGE>
self-perpetuating body until fewer than two-thirds of the Trustees serving as
such are Trustees who were elected by shareholders of the Trust. In the event
less than a majority of the Trustees serving as such were elected by
shareholders of the Trust, a meeting of shareholders will be called to elect
Trustees. Under the Master Trust Agreement, any Trustee may be removed by vote
of two-thirds of the outstanding Trust shares; holders of 10% or more of the
outstanding shares of the Trust can require that the Trustees call a meeting of
shareholders for purposes of voting on the removal of one or more Trustees. In
connection with such meetings called by shareholders, shareholders will be
assisted in shareholder communications to the extent required by applicable law.
Under Massachusetts law, the shareholders of the Trust could, under
certain circumstances, be held personally liable for the obligations 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.
The Fund is an "open-end" management investment company, but it is not
a "diversified company" as those terms are defined in the 1940 Act. Among other
things, a diversified fund must, with respect to 75% of its total assets, not
invest more than 5% of its total assets in any one issuer. As a nondiversified
fund, the fund will not be subject to this limit. The Fund, therefore, could
invest in fewer issuers, which could increase the relative adverse effect on the
portfolio that one or a few poor performing investments could potentially have.
However, under the federal tax law, with respect to 50% of its total assets, the
fund may not invest more than 5% of its total assets in any single issuer.
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TRUSTEES AND OFFICERS
The Trustees and principal officers of the Trust, their addresses, and
their principal occupations and positions with certain affiliates of 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 60. His principal occupation is currently,
and during the past five years has been, Executive Vice President of State
Street Research & Management Company. Mr. Bennett is also a Director of State
Street Research & Management Company. Mr. Bennett's other principal business
affiliations include 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 61. 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 43. His principal occupation is Senior Vice
President of State Street Research & Management Company. During the past five
years he has also served as Vice President of State Street Research & Management
Company.
+Malcolm T. Hopkins, 14 Brookside Road, Biltmore Forest, Asheville, NC
28803, serves as Trustee of the Trust. He is 70. He is engaged principally in
private investments. Previously, he was Vice Chairman of the Board and Chief
Financial Officer of St. Regis Corp.
*F. Gardner Jackson, Jr., One Financial Center, Boston, MA 02111,
serves as Vice President of the Trust. He is 55. 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.
+Edward M. Lamont, Box 1234, Moores Hill Road, Syosset, NY 11791,
serves as Trustee of the Trust. He is 71. He is engaged principally in private
investments and civic affairs, and is an author of business history. Previously,
he was with an affiliate of J.P. Morgan & Co. in New York.
+Robert A. Lawrence, 175 Federal Street, Boston, MA 02110, serves as
Trustee of the Trust. He is 72. He is retired and was formerly a Partner in
Saltonstall & Co., a private investment firm.
- ---------------
* or + see footnotes on page 27
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*+Gerard P. Maus, One Financial Center, Boston, MA 02111, serves as
Treasurer of the Trust. He is 47. His principal occupation is currently, and
during the past five years has been, Executive Vice President, Treasurer, Chief
Financial Officer, Chief Administrative Officer and Director of State Street
Research & Management Company. Mr. Maus's other principal business affiliations
include Executive Vice President, Treasurer, Chief Financial Officer 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 43. His principal
occupation is Executive Vice President, General Counsel and Secretary of State
Street Research & Management Company. During the past five years he has also
served as Senior Vice President of State Street Research & Management Company
and as Senior Vice President, General Counsel and Assistant Secretary of The
Boston Company, Inc., Boston Safe Deposit and Trust Company and The Boston
Company Advisors, Inc. Mr. McNamara's other principal business affiliations
include Executive Vice President, 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 60. His principal occupation is 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 66. He is retired and was formerly Executive Vice
President, Chief Operating Officer and Director of Hewlett-Packard Company.
*Brian O'Dell, One Financial Center, Boston, MA 02111 serves as Vice
President of the Trust. He is 33. His principal occupation is Assistant
Portfolio Manager for State Street Research & Management Company. During the
past five years, he has also served as a portfolio manager and analyst at
Freedom Capital Management Corporation.
*Daniel J. Rice III, One Financial Center, Boston, MA 02111, serves as
Vice President of the Trust. He is 46. 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.
+Toby Rosenblatt, 3409 Pacific Avenue, San Francisco, CA 94118, serves
as Trustee of the Trust. He is 60. 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.
- ------------------
* or +, see footnotes on page 27.
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<PAGE>
+Michael S. Scott Morton, Massachusetts Institute of Technology, 77
Massachusetts Avenue, Cambridge, MA 02139, serves as Trustee of the Trust. He is
61. 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 55. His principal occupation is currently, and during the past five
years has been, Chairman of the Board, President, Chief Executive Officer and
Director of State Street Research & Management Company. Mr. Verni's other
principal business affiliations include Chairman of the Board and Director of
State Street Research Investment Services, Inc. and (until February 1996, prior
positions as President and Chief Executive Officer of that company).
*+James M. Weiss, One Financial Center, Boston, MA 02111, serves as
Vice President of the Trust. He is 52. His principal occupation is Executive
Vice President 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 President and Chief Investment Officer of IDS Advisory
Group, Inc. (provider of investment advisory service).
*+John T. Wilson, One Financial Center, Boston, MA 02111, serves as
Vice President of the Trust. He is 35. 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, 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. (provider of investment advisory service).
*+Peter A. Zuger, One Financial Center, Boston, MA 02111, serves as
Vice President of the Trust. He is 50. 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 American Century Investment
Management Company.
- --------------------
*These Trustees and/or officers are or may be deemed to be "interested
persons" of the Trust under the 1940 Act because of their affiliations with the
Fund's investment adviser.
+Serves as a Trustee/Director and/or officer of one or more of the
following investment companies, each of which has an advisory relationship with
the Investment Manager or its parent, Metropolitan Life Insurance Company
("Metropolitan"): State Street Research Equity Trust, State Street Research
Financial Trust, State Street Research Income Trust, State Street Research Money
Market Trust, State Street Research Tax-Exempt Trust, State Street Research
Capital Trust, State Street Research Exchange Trust, State Street Research
Growth Trust, State Street Research Master Investment Trust, State Street
Research Securities Trust, State Street Research Portfolios, Inc. and
Metropolitan Series Fund, Inc.
27
<PAGE>
Ownership of 25% or more of a voting security is deemed "control" as
defined in the 1940 Act. So long as 25% of a class of shares is so owned, such
owners will be presumed to be in control of such class of shares for purposes of
voting on certain matters submitted to a vote of shareholders, such as any
Distribution Plan for a given class.
As of September 30, 1998, the Trustees and principal officers of the
Trust as group owned less than 1% of the Fund's outstanding Class A shares and
owned no shares of the Fund's outstanding Class B, Class C or Class S shares.
Also as of September 30, 1998, the following persons or entities were
the record and/or beneficial owners of the approximate amounts of each class of
shares of the Fund as set forth beside their names:
<TABLE>
<CAPTION>
Shareholder %
----------- ---
<S> <C> <C>
Class A Merrill Lynch 16.2
Class B Merrill Lynch 27.5
Class C Merrill Lynch 28.4
Class S Chase Manhattan Bank 84.0
</TABLE>
The full name and address of each of the above persons or entities are
as follows:
Merrill Lynch, Pierce, Fenner & Smith, Inc. (a)
4800 Deerlake Drive East
Jacksonville, FL 32246
The Chase Manhattan Bank (a)(b)
770 Broadway
New York, New York 10003
- -----------------
(a) The Fund believes that the named record holder does not have beneficial
ownership of such shares.
(b) Chase Manhattan Bank holds such shares as a trustee under certain
employee benefit plans serviced by Metropolitan Life Insurance Company.
28
<PAGE>
The Trustees were compensated as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
Total
Compensation
Aggregate From Fund and
Name of Compensation Fund Complex Paid
Trustee From Fund(a) to Trustees(b)
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Steve A. Garban $4,200 $ 75,899
Malcolm T. Hopkins $4,000 $ 78,499
Edward M. Lamont $3,700 $ 68,741
Robert A. Lawrence $4,000 $ 93,125
Dean O. Morton $4,400 $ 97,125
Toby Rosenblatt $4,200 $ 68,741
Michael S. Scott Morton $4,600 $103,625
Ralph F. Verni $ 0 $ 0
</TABLE>
- -----------------
(a) For the Fund's fiscal year ended June 30, 1998.
(b) Includes compensation on behalf of all series of 12 investment
companies for which the Investment Manager or its parent, Metropolitan,
served as investment adviser. "Total Compensation from Fund and Fund
Complex Paid to Trustees" for the 12 months ended December 31, 1997.
The Trust does not provide any pension or retirement benefits for the
Trustees.
29
<PAGE>
MANAGEMENT OF THE FUND AND INVESTMENT ADVISORY SERVICES
Under the provisions of the Trust's Master Trust Agreement and the laws
of Massachusetts, responsibility for the management and supervision of the Fund
rests with the Trustees.
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 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.
The Investment Manager is charged with the overall responsibility for
managing the investments and business affairs of the Fund, subject to the
authority of the Board of Trustees. The 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 Life Insurance Company
("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 regular trading on the New York Stock
Exchange (the "NYSE") on each day the NYSE is open for trading, at the annual
rate of 0.75% of the net assets of the Fund.
The Distributor and its affiliates have from time to time and in
varying amounts voluntarily assumed some portion of fees or expenses relating to
the Fund. For the fiscal years ended June 30, 1996, 1997 and 1998, the Fund's
investment advisory fee prior to the assumption of fees or expenses was
$307,977, $940,108 and $1,812,714, respectively. For the same periods, the
voluntary reduction of fees or assumption of expenses amounted to $137,050,
$3,933 and 0, respectively.
The Advisory Agreement provides that it shall continue in effect with
respect to the Fund for a period of two years after its initial effectiveness
and will continue from year to year thereafter as long as it is approved at
least annually both (i) by a vote of a majority of the outstanding voting
securities of the Fund (as defined in the 1940 Act) or by the Trustees of the
Trust, and (ii) in either event by a vote of a majority of the Trustees who are
not parties to the Advisory Agreement or "interested persons" of any party
thereto, cast in person at a meeting called for the purpose of voting on such
approval. The Advisory Agreement may be
30
<PAGE>
terminated on 60 days' written notice by either party and will terminate
automatically in the event of its assignment, as defined under the 1940 Act and
regulations thereunder. Such regulations provide that a transaction which does
not result in a change of actual control or management of an adviser is not
deemed an assignment.
Under 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 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, is set forth under
"Your Investment" 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 regular
trading on the NYSE on the day the purchase order is received by State Street
Research Service Center (the "Service Center"), provided that the order is
received prior to the close of regular trading on 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 the Service Center 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.
Class A Shares--Reduced Sales Charges. The reduced sales charges set
forth under "Your Investment--Choosing a Share Class" in the 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.
31
<PAGE>
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"
(which include the Fund and other funds as designated by the Distributor from
time to time) 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 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
32
<PAGE>
without a sales charge, or with a reduced sales charge, may also be made through
brokers, registered investment advisers, 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 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 an annual fee, usually
1% with respect to such outstanding shares. The proceeds of the contingent
deferred sales charges and the distribution fees are used to offset distribution
expenses and thereby permit the sale of Class B 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
33
<PAGE>
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. Certain employee benefit plans sponsored by a financial
professional may be subject to other conditions under which the plans may
initially invest in Class A shares upon meeting specific criteria.
Class S Shares. Class S shares are currently available to certain
employee benefit plans such as qualified retirement plans which meet criteria
relating to number of participants, service arrangements, or similar factors;
insurance companies; investment companies; advisory accounts of the Investment
Manager; endowment funds of nonprofit organizations with substantial minimum
assets (currently a minimum of $10 million); and other similar institutional
investors. Class S shares may be acquired through programs or products sponsored
by Metropolitan, its affiliates, or both for which Class S shares have been
designated. In addition, Class S shares are available through programs under
which, for example, investors pay an asset-based fee and/or a transaction fee to
intermediaries. Class S share availability is determined by the Distributor and
intermediaries based on the overall direct and indirect costs of a particular
program, expected assets, account sizes and similar considerations.
34
<PAGE>
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.
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 Investment--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
35
<PAGE>
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 $100,000; (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 Investment." 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 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.
36
<PAGE>
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 "State
Street Research Funds" under the terms set forth above under
"Purchase and Redemption of Shares" in this Statement of
Additional Information.
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.
37
<PAGE>
Dividend and distribution selections should be made on the Application
accompanying the initial investment. If no selection is indicated on the
Application, that account will be automatically coded for reinvestment of all
dividends and distributions in additional shares of the same class of the Fund.
Selections may be changed at any time by telephone or written notice to the
Service Center. Dividends and distributions are reinvested at net asset value
without a sales charge.
Exchange 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 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.
38
<PAGE>
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 Investment--Account Policies--Telephone Requests"
in the Fund's Prospectus and "--Telephone Privileges," below) as the existing
account unless the Service Center is instructed otherwise. Related
administrative policies and procedures may also be adopted with regard to a
series of exchanges, street name accounts, sponsored arrangements and other
matters.
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 the Service
Center and delivered by the Service Center to the Transfer Agent by 12 noon
Boston time on any business day, the exchange usually will occur that day. For
further information regarding the exchange privilege, shareholders should
contact the Service Center.
Reinvestment Privilege. A shareholder of the Fund who has redeemed
shares or had shares repurchased at his or her request may reinvest all or any
portion of the proceeds (plus that amount necessary to acquire a fractional
share to round off his or her reinvestment to full shares) in shares, of the
same class as the shares redeemed, of the Fund or any other Eligible Fund at net
asset value and without subjecting the reinvestment to an initial sales charge,
provided such reinvestment is made within 120 calendar days after a redemption
or repurchase. Upon such reinvestment, the shareholder will be credited with any
contingent deferred sales charge previously charged with respect to the amount
reinvested. The redemption of shares is, for federal income tax purposes, a sale
on which the shareholder may realize a gain or loss. If a redemption at a loss
is followed by a reinvestment within 30 days, the transaction may be a "wash
sale" resulting in a denial of the loss for federal income tax purposes.
Any reinvestment pursuant to the reinvestment privilege will be subject
to any applicable minimum account standards imposed by the fund into which the
reinvestment is made. Shares are sold to a reinvesting shareholder at the net
asset value thereof next
39
<PAGE>
determined following timely receipt by the Service Center of such shareholder's
written purchase request and delivery of the request by the Service Center to
the Transfer Agent. A shareholder may exercise this reinvestment privilege only
once per 12-month period with respect to his or her shares of the Fund.
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. The following telephone privileges are
available:
o Telephone Exchange Privilege for Shareholder and Shareholder's
Financial Professional
o Shareholders automatically receive this privilege
unless declined.
o This privilege allows the shareholder or the
shareholder's financial professional to request
exchanges into other State Street Research funds.
o Telephone Redemption Privilege for Shareholder
o Shareholders automatically receive this privilege
unless declined.
o This privilege allows the shareholder to phone
requests to sell shares, with the proceeds sent to
the address of record.
o Telephone Redemption Privilege for Shareholder's Financial
Professional
(This privilege is not automatic; a shareholder must
specifically elect it)
o This privilege allows the shareholder's financial
professional to phone requests to sell shares, with
the proceeds sent to the address of record on the
account.
A shareholder with the above telephone privileges is deemed to
authorize the Service Center and the Transfer Agent to: (1) act upon the
telephone instructions of any person purporting to be the shareholder or the
shareholder's financial professional; 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.
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<PAGE>
Alternative Means of Contacting the Fund. It is unlikely, during
periods of extraordinary market conditions, that a shareholder may have
difficulty in reaching the Service Center. In that event, however, the
shareholder should contact the Service Center at 1-800-562-0032, 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 regular trading on 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, Martin
Luther King, Jr. Day, Presidents Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day and Christmas Day.
The net asset value per share of the Fund is computed by dividing the
sum of the value of the securities held by the Fund plus any cash or other
assets minus all liabilities by the total number of outstanding shares of the
Fund at such time. Any expenses, except for extraordinary or nonrecurring
expenses, borne by the Fund, including the investment management fee payable to
the Investment Manager, are accrued daily.
In determining the values of portfolio assets as provided below, the
Trustees may utilize one or more pricing services in lieu of market quotations
for certain securities which are not readily available on a daily basis. Such
services 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, Inc.'s (the "NASD") NASDAQ System, or other
system, are valued at the closing price supplied through such system for that
day at the close of the NYSE. Other securities are, in general, valued at the
mean of the bid and asked quotations last quoted prior to the close of the NYSE
if there are market quotations readily available, or in the absence of such
market quotations, then at the fair value thereof as determined by or under
authority of the Trustees of the Trust with the use of such pricing services as
may be deemed appropriate or methodologies approved by the Trustees. The
Trustees also reserve the right to adopt other valuations based on fair value
pricing in unusual circumstances where use of other methods as discussed in part
above, could otherwise have a material adverse effect on the Fund as a whole.
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<PAGE>
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 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 portfolio turnover rates for the fiscal years ended June 30,
1997 and 1998 were 51.67% and 68.69%, respectively.
The portfolio turnover rate for the fiscal year ended June 30, 1998 was
significantly higher than that for the previous fiscal year because of purchase
and sale transactions entered to manage the portfolios in response to volatile
market conditions stemming from various international forces, including adverse
developments in the Asian markets.
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
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<PAGE>
structures and prevalent bid/ask spread characteristics of the markets and
securities in which transactions for the Fund occur. Against this background,
the Investment Manager evaluates the reasonableness of a commission or a net
price with respect to a particular transaction by considering such factors as
difficulty of execution or security positioning by the executing firm. The
Investment Manager may or may not solicit competitive bids based on its judgment
of the expected benefit or harm to the execution process for that transaction.
When it appears that a number of firms could satisfy the required
standards in respect of a particular transaction, consideration may also be
given by the Investment Manager 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 contained in certain trading systems used for
portfolio analysis and modeling and also 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 regularly reviews and evaluates the services
furnished by broker-dealers. The Investment Manager's investment management
personnel seek to evaluate the quality of the research and other services
provided by various broker-dealer firms, and the results of these efforts are
made available to the equity trading department, which uses this information as
consideration to the extent described above in the selection of brokers to
execute portfolio transactions.
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<PAGE>
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 the services to determine the proportion which is allocable to research or
investment decision-making and the proportion allocable to other purposes. The
Investment Manager pays directly from its own funds for that portion that is
allocable to uses other than research or investment decision-making. 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 providing 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
an allocation of a specified amount of brokerage business. These understandings
are honored to the extent possible in accordance with the policies set forth
above.
It is not the 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. Brokerage commissions paid
by the Fund in secondary trading during the last three fiscal years ended June
30 were as follows: 1996, $207,690; 1997, $539,481 and 1998, $1,012,532.
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.
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.
In some instances, certain clients of the Investment Manager request it
to place all or part of the orders for their account with certain brokers or
dealers, which in some cases provide services to those clients. The Investment
Manager generally agrees to honor these requests to the extent practicable.
Clients may condition their requests by requiring the
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<PAGE>
Investment Manager only effect transactions with the specified broker-dealers if
the broker-dealers are competitive as to price and execution. In other cases,
the Investment Manager may be unable to negotiate commissions or obtain volume
discounts or best execution. In addition, a disparity may exist among the
commissions charged to clients who request the Investment Manager to use
particular brokers or dealers, and also between those clients and those who do
not make such requests. A client who requests the use of a particular
broker-dealer should understand that it may lose the possible advantage which
non-requesting clients derive from aggregation of orders for several clients as
a single transaction for the purchase or sale of a particular security. Among
other reasons why best execution may not be achieved with directed brokerage is
that, in an effort to achieve orderly execution of transactions, execution of
orders that have designated particular brokers may, at the discretion of the
trading desk, be delayed until execution of other non-designated orders have
been completed.
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 size of the order, the amount already
committed for each client to a specific investment and the relative risks of the
investments, all in order to provide on balance a fair and equitable result to
each client over time. Although sharing in large transactions may sometimes
affect price or volume of shares acquired or sold, overall it is believed there
may be an advantage in execution. The 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
Taxation Of The Fund--In General
The Fund intends to qualify and elects 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 qualify to do so. Accordingly, the Fund must, among other
things, (a) derive at least 90% of its gross income in
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<PAGE>
each taxable year from dividends, interest, payments with respect to securities
loans, gains from the sale or other disposition of stock, securities or foreign
currencies, or other income (including, but not limited to, gains from options,
futures or forward contracts) derived with respect to its business of investing
in such stock, securities or currencies (the "90% test"); and (b) satisfy
certain diversification requirements on a quarterly basis.
If in any year the Fund derives more than 10% of its gross income (as
defined in the Code, which disregards losses for that purpose) from investments
made directly in commodities, including precious metal investments, or
commodity-related options, futures or indices, the Fund in such year may fail to
qualify as a regulated investment company under the Code. The Investment Manager
intends to manage the Fund's portfolio so as to minimize the risk of such
disqualification.
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 and
accumulated earnings and profits. Also, the shareholders, if they received a
distribution in excess of current and 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, or be deemed to have distributed, an amount equal to the sum of
(1) at least 98% of its ordinary income (not taking into account any capital
gains or losses) for the calendar year, (2) at least 98% of its capital gains in
excess of its capital losses (adjusted for certain ordinary losses) for the
12-month period ending on October 31 of the calendar year and (3) all ordinary
income and capital gains for previous years that were not distributed during
such years. For this purpose, any income or gain retained by the Fund that is
subject to corporate tax will be considered to have been distributed by
year-end. The Fund intends to make sufficient distributions to avoid this 4%
excise tax.
Taxation Of The Fund's Investments
Original Issue Discount; Market 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 cash is actually received, and therefore is subject
to the distribution requirements of the Code. Generally, the amount of original
issue discount is
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<PAGE>
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, if any, at the time the Fund purchases the
securities. This additional discount represents market discount for income tax
purposes. In the case of any debt security 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). For debt securities acquired before May 1, 1993, this rule
applies only if the debt security was issued after July 18, 1984. 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 to purchase or carry any debt security having market discount,
unless the Fund makes the election to include market discount in income
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 in the Fund's income for purposes of the 90% test, and require inclusion
of unrealized gains or losses in the Fund's income for purposes of 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 and long-term gain or
loss irrespective of the holding period of the investment. Such provisions
generally apply to, among other investments, options on debt securities, indices
on securities and futures contracts. The Fund will monitor its transactions and
may make certain tax elections available to it in order to mitigate the impact
of these rules and prevent disqualification of the Fund as a regulated
investment company.
Gains or losses attributable to foreign currency contracts or
fluctuations in exchange rates that occur between the time the Fund accrues
income or expenses denominated in a foreign currency and the time the Fund
actually collects such income or pays such expenses are treated as ordinary
income or loss. The portion of any gain or loss on the disposition of a debt
security denominated in a foreign currency that is attributable to fluctuations
in the value of the foreign currency during the holding period of the debt
security may likewise be treated as ordinary income or loss. Such ordinary
income or loss will increase or decrease the amount of the Fund's net investment
income.
If the Fund invests in the stock of certain "passive foreign investment
companies" ("PFICs"), income of such companies may become taxable to the Fund
prior to its distribution to the Fund or, alternatively, ordinary income taxes
and interest charges may be imposed on
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<PAGE>
the Fund on "excess distributions" received by the Fund or on gain from the
disposition of such investments by the Fund. The Fund does not intend to invest
in PFICs. Because of the broad scope of the PFIC rules, however, there can be no
assurance that the Fund can avoid doing so.
Taxation Of The Fund's Shareholders
The Fund may be subject to foreign taxes, including foreign income
taxes. If so, the Fund intends to meet the requirements of the Code for passing
through to its shareholders the tax benefit of foreign income taxes paid,
although there is no assurance that it will be able to do so. Under this
provision, if more than half of the value of the total assets of the Fund at the
close of its taxable year consists of stock or securities of foreign
corporations, the Fund will be eligible and intends to elect to pass through to
its shareholders the amount of foreign taxes it paid if such amounts are
material. Pursuant to this election, a United States shareholder will, in
general, be required to (i) include in gross income, in addition to taxable
distributions actually received, his or her pro rata share of the foreign taxes
paid by the Fund, (ii) treat that share of taxes as having been paid directly by
him or her, and (iii) either deduct such share of taxes or treat such share of
taxes as a credit against United States income tax liability. A tax-exempt
shareholder will ordinarily not benefit from this election.
Generally, a credit for foreign taxes paid by the Fund may not exceed a
shareholder's United States income tax attributable to the shareholder's foreign
source income. This limitation applies separately to different categories of
income, one of which is foreign-source passive income, which is likely to
include all of the foreign-source income of the Fund. As a result of these
limitations, some shareholders may not be able to utilize fully any foreign tax
credits generated by an investment in the Fund. The Fund will provide its
shareholders with information about the source of its income and the foreign
taxes it has paid for use in preparing the shareholder's United States income
tax return.
Dividends from domestic corporations are not expected to comprise a
substantial part of the income of the Fund. If such dividends are earned by the
Fund, then a portion of the dividends paid by the Fund may qualify for the 70%
deduction for dividends received which is available to corporate shareholders of
the Fund. Shareholders will be informed of any portion of the dividends paid by
the Fund which qualifies for this deduction. The dividends-received deduction is
reduced to the extent the dividends received are treated as debt-financed, under
the Code, and is eliminated if the stock is held for less than 46 days.
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 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,
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<PAGE>
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.
The foregoing discussion of United States federal income tax law
relates solely to the application of that law to United States persons, that is,
United States citizens and residents and United States corporations,
partnerships, trusts and estates. Each shareholder who is not a United States
person should consider the United States and foreign tax consequences of
ownership of shares of the Fund, including the possibility that such a
shareholder may be subject to United States withholding tax at a rate of up to
30% (or at a lower rate under an applicable treaty) on amounts constituting
ordinary income received by him or her, where such amounts are treated as income
from United States sources under the Code..
Shareholders should consult their tax advisers about the application of
the provisions of tax law described in this Statement of Additional Information
in light of their particular tax situations.
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. For the fiscal years
ended June 30, 1996, 1997 and 1998, total sales charges on Class A shares paid
to the Distributor amounted to $169,918, $1,357,717 and $1,286,267,
respectively. For the same periods, the Distributor retained $20,357,$169,805,
and $157,465, respectively, after reallowance of concessions to dealers. The
Distributor may also pay its affiliate MetLife Securities, Inc. additional sales
compensation of up to 0.25% of certain sales or assets.
The differences in the price at which the Fund's Class A shares are
offered due to scheduled variations in sales charges, or Class S shares are
offered, 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,
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<PAGE>
reinvestments or dividend investments at net asset value. Similarly, no
significant sales effort is necessary for sales of shares at net asset value to
certain Directors, Trustees, officers, employees, their relatives and other
persons directly or indirectly related to the Fund or associated entities. Where
shares of the Fund are offered at a reduced sales charge or without a sales
charge pursuant to sponsored arrangements, managed fee-based programs and
so-called "mutual fund supermarkets," among other special 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, 1998 June 30, 1997 June 30, 1996
----------------------------------------------------------------------------------------------------------------
Contingent Commissions Contingent Commissions Contingent Commissions
Deferred Paid to Deferred Paid to Deferred Paid to
Sales Charges Dealers Sales Charges Dealers Sales Charges Dealers
------------- ----------- ------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Class A $0 $1,128,802 $0 $1,187,912 $0 $149,561
Class B $204,258 $2,179,718 $109,834 $2,384,944 $45,288 $207,595
Class C $16,639 $288,460 $33,827 $255,818 $100 $17,788
</TABLE>
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<PAGE>
The Fund has adopted a "Plan of Distribution Pursuant to Rule 12b-1"
(the "Distribution Plan") under which the Fund may engage, directly or
indirectly, in financing any activities primarily intended to result in the sale
of Class A, Class B and Class C shares, including, but not limited to, (1) the
payment of commissions and/or reimbursement to underwriters, securities dealers
and others engaged in the sale of shares, including payments to the Distributor
to be used to pay commissions and/or reimbursement to securities dealers (which
securities dealers may be affiliates of the Distributor) engaged in the
distribution and marketing of shares and furnishing ongoing assistance to
investors, (2) reimbursement of direct out-of-pocket expenditures incurred by
the Distributor in connection with the distribution and marketing of shares and
the servicing of investor accounts including special promotional fees and cash
and noncash incentives based upon sales by securities dealers, expenses relating
to the formulation and implementation of marketing strategies and promotional
activities such as direct mail promotions and television, radio, newspaper,
magazine and other mass media advertising, the preparation, printing and
distribution of Prospectuses of the Fund and reports for recipients other than
existing shareholders of the Fund, and obtaining such information, analyses and
reports with respect to marketing and promotional activities and investor
accounts as the Fund may, from time to time, deem advisable, and (3)
reimbursement of expenses incurred by the Distributor in connection with the
servicing of shareholder accounts including payments to securities dealers and
others in consideration of the provision of personal services to investors
and/or the maintenance or servicing of shareholder accounts and expenses
associated with the provision of personal services by the Distributor directly
to investors. In addition, the Distribution Plan is deemed to authorize the
Distributor and the Investment Manager to make payments out of general profits,
revenues or other sources to underwriters, securities dealers and others in
connection with sales of shares, to the extent, if any, that such payments may
be deemed to be within the scope of Rule 12b-1 under the 1940 Act.
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.
51
<PAGE>
The Distributor provides distribution services on behalf of other funds
having distribution plans and receives similar payments from, and incurs similar
expenses on behalf of, such other funds. When expenses of the Distributor cannot
be identified as relating to a specific fund, the Distributor allocates expenses
among the funds in a manner deemed fair and equitable to each fund.
Commissions and other cash and noncash incentives and payments to
dealers, to the extent payable out of the general profits, revenues or other
sources of the Distributor (including the advisory fees paid by the Fund), have
also been authorized pursuant to the Distribution Plan.
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. The
distribution and servicing expenses of a particular class will be borne solely
by that class. In addition, a rule of the 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. 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.
52
<PAGE>
During the fiscal year ended June 30, 1998, 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 $ 11,565 $ 7,129
Printing and mailing
of prospectuses to
other than current
shareholders 0 2,038 1,262
Compensation to dealers 239,096 920,279 360,705
Compensation to sales
personnel 0 23,848 15,046
Interest 0 0 0
Carrying or other
financing charges 0 0 0
Other expenses: marketing;
general 0 13,045 8,103
-------- -------- --------
Total fees $239,096 $970,775 $392,245
======== ======== ========
</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.
53
<PAGE>
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
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 Natural Resources Funds Average.
The average annual total return ("standard total return") of the Class
A, Class B, Class C and Class S shares of the Fund will be calculated as set
forth below. Total return is 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 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.
54
<PAGE>
The performance data below reflect Rule 12b-1 fees, where applicable,
sales charges as follows:
<TABLE>
<CAPTION>
Rule 12b-1 Fees Sales Charges
--------------------------------------------------------- --------------------------------------
Current
Class Amount Period
- ----- ------- ------
<S> <C> <C> <C>
A 0.25% 0.50% until March 10, 1995; Maximum 4.5% sales charge reflected
0.25% thereafter
B 1.00% 0.50% until June 1, 1993; 1.00% 1- and 5-year periods reflect a 5% and
June 1, 1993 to present; fee will reduce a 2% contingent deferred sales charge,
performance for periods after June 1, respectively
1993
C 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>
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.
Total Return
The Fund's standard average annual total returns ("standard total
return") of each class of shares were as follows:
<TABLE>
<CAPTION>
Commencement of
Operations Five Years One Year
(March 2, 1990) Ended Ended
to June 30, 1998 June 30, 1998 June 30, 1998
---------------- ------------- -------------
<S> <C> <C> <C>
Class A 5.80% 7.04% -18.14%
Class B 5.96% 7.00% -18.77%
Class C 5.93% 7.26% -15.73%
Class S 6.59% 8.36% -14.11%
</TABLE>
Standard total return is computed separately for each class of shares
by determining the average annual compounded rates of return over the designated
periods that, if applied to the
55
<PAGE>
initial amount invested, would produce the ending redeemable value in accordance
with the following formula:
<TABLE>
<S> <C> <C> <C>
P(1+T)(n) = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of the designated period
assuming a hypothetical $1,000 payment made at the beginning of
the designated period
</TABLE>
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.
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 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 are determined without giving effect to the
subsidization, if any, by affiliates of fees or expenses during the subject
period. In calculating the performance, the accrued expenses are reduced by the
amount of any subsidy. In the absence of such subsidization, the performance of
the Fund would be lower.
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 at the time of commencement of the Fund's
operations. In addition, the Fund may provide nonstandardized total return
results for differing periods, such as for the most recent six months, and/or
without taking sales charges into account. Such nonstandardized total return is
computed as otherwise described under "Total Return" except the result may or
may not be annualized, and as noted any applicable sales charge, if any, may not
be taken into account and therefore not deducted from the hypothetical initial
payment of $1,000. For example, the
56
<PAGE>
Fund's nonstandardized total returns for the six months ended June 30, 1998
without taking sales charges into account, were as follows:
<TABLE>
<S> <C>
Class A -16.02%
Class B -16.37%
Class C -16.36%
Class S -15.98%
</TABLE>
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
PricewaterhouseCoopers 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
The Fund's financial statements for the fiscal year ended June 30,
1998, including the Investment Portfolio, Statement of Assets and Liabilities,
Statement of Operations, Statement of Changes in Net Assets, Notes to Financial
Statements, Financial Highlights, Report of Independent Accountants and
Management's Discussion of Fund Performance are hereby incorporated by reference
from the Fund's Annual Report, filed with the Securities and Exchange Commission
(EDGAR accession number 0000950146-98-001459).
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. Shareholder reports are available without charge upon
request. For more information, call State Street Research Service Center at
(800) 562-0032.
DOCSC\555820.14
57
<PAGE>
STATE STREET RESEARCH EQUITY TRUST
PART C
OTHER INFORMATION
Item 23. 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)
(1)(d) Amendments No. 6 and 7 to First Amended and Restated Master
Trust Agreement (22)
(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)(d) Letter Agreement with respect to the Advisory Agreement
relating to State Street Research Athletes Fund(23)
(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
(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)
(6)(f) Letter Agreement with respect to the Distribution
Agreement relating to State Street Research Athletes Fund(23)
(7) Not applicable
C-1
<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)*,***
(8)(f) Letter Agreement with respect to the Custodian(23)
Contract relating to State Street Research Athletes Fund (23)
(8)(g) Amendment to Custodian Contract(22)
(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)*,***
(10)(c) Opinion and Consent of Goodwin, Procter & Hoar LLP with respect
to State Street Research Athletes Fund (21)
(11) Consent of PricewaterhouseCoopers 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)*,***
(13)(d) Subscription and Investment Letter relating to State
Street Research Athletes Fund(23)
(14)(a) Deleted.
(14)(b) Deleted.
(14)(c) Deleted.
(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)***
(15)(c) Letter Agreement with respect to Plan of Distribution
Pursuant to Rule 12b-1 relating to State Street Research
Athletes Fund(23)
(16)(a) Deleted.
(16)(b) Deleted.
(16)(c) Deleted.
(16)(d) Deleted.
(17) First Amended and Restated Multiple Class Expense Allocation Plan
(18)
(18) Powers of Attorney(19)
(19) Certificate of Board Resolution respecting Powers of Attorney(19)
(20) Application Forms(19)
(27)(a) Financial Data Schedules for State Street Research Alpha Fund(23)
(27)(b) Financial Data Schedules for State Street Research Equity
Investment Fund(23)
(27)(c) Financial Data Schedules for State Street Research Global
Resources Fund
(27)(d) Financial Data Schedules for State Street Research Athletes
Fund(23)
C-2
<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.
*** Restated in electronic format in Post-Effective Amendment No. 22 filed
on June 2, 1998.
C-3
<PAGE>
Filed as part of the Registration Statement as noted below and incorporated
herein by reference:
<TABLE>
<CAPTION>
Footnote Securities Act of 1933
Reference Registration/Amendment Date Filed
<S> <C> <C> <C>
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
19 Post-Effective Amendment No. 19 August 22, 1997
20 Post-Effective Amendment No. 20 October 29, 1997
21 Post-Effective Amendment No. 21 January 9, 1998
22 Post-Effective Amendment No. 22 June 2, 1998
23 Post-Effective Amendment No. 23 August 31, 1998
</TABLE>
Item 24. Persons Controlled by or Under Common Control with the Fund
Inapplicable.
C-4
<PAGE>
Item 25. 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
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-5
<PAGE>
Item 26. Business and Other Connections of Investment Adviser
Describe any other business, profession, vocation or employment of a
substantial nature in which each investment adviser of the Registrant, and each
director, officer or partner of any such investment adviser, is or has been, at
any time during the past two fiscal years, engaged for his own account or in the
capacity of director, officer, employee, partner or trustee.
<TABLE>
<CAPTION>
Principal business
Name Connection Organization address of organization
- ----- ---------- ------------ -----------------------
<S> <C> <C> <C>
State Street Research & Investment Adviser Various investment advisory Boston, MA
Management Company clients
Arpiarian, Tanya None
Vice President
Bangs, Linda L. None
Vice President
Barnwell, Amy F.
Vice President
Beaudry, Matthew F.
Vice President
Bennett, Peter C. Vice President SSRM Services, Inc. Boston, MA
Director and Vice President State Street Research Capital Trust Boston, MA
Executive Vice Vice President State Street Research Exchange Trust Boston, MA
President 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 Boston, MA
Director State Street Research Investment Services, Inc. Boston, MA
Director and Chairman Boston Private Bank & Trust Co. Boston, MA
of Exec. Comm.
Vice President State Street Research Income Trust Boston, MA
Vice President State Street Research Portfolios, Inc. Boston, MA
Vice President State Street Research Securities Trust Boston, MA
President and Director Christian Camps & Conferences, Inc. Boston, MA
Chairman and Trustee Gordon College Wenham, MA
Bochman, Kathleen None
Vice President
Borzilleri, John Vice President Montgomery Securities San Francisco, CA
Senior Vice President (until 6/97)
(Vice President
until 4/98)
Bray, Michael J. Employee Merrill Lynch & Co. Boston, MA
Senior Vice President (until 7/96)
(Vice President
until 4/98)
Brezinski, Karen None
Vice President
Brown, Susan H. None
Vice President
Buffum, Andrea L. Project Manager BankBoston Boston, MA
(until 12/96)
Burbank, John F. None
Senior Vice President
Cabrera, Jesus A. Vice President State Street Research Capital Trust Boston, MA
Senior Vice President
(Vice President
until 4/98)
C-6
<PAGE>
Principal business
Name Connection Organization address of organization
- ----- ---------- ------------ -----------------------
Calame, Mara D. Vice President and State Street Research Energy, Inc. Boston, MA
Vice President and Assistant Counsel
Assistant Secretary
Canavan, Joseph W. Assistant Treasurer State Street Research Equity Trust Boston, MA
Senior Vice President Assistant Treasurer State Street Research Financial Trust Boston, MA
(Vice President Assistant Treasurer State Street Research Income Trust Boston, MA
until 4/98) Assistant Treasurer State Street Research Money Market Trust Boston, MA
Assistant Treasurer State Street Research Tax-Exempt Trust Boston, MA
Assistant Treasurer State Street Research Capital Trust Boston, MA
Assistant Treasurer State Street Research Exchange Trust Boston, MA
Assistant Treasurer State Street Research Growth Trust Boston, MA
Assistant Treasurer State Street Research Master Investment Trust Boston, MA
Assistant Treasurer State Street Research Securities Trust Boston, MA
Assistant Treasurer State Street Research Portfolios, Inc. Boston, MA
Carstens, Linda C. Vice President State Street Research Investment Boston, MA
Vice President Services, Inc.
Clifford, Jr., Paul J. Vice President State Street Research Tax-Exempt Trust Boston, MA
Vice President
Coleman, Thomas J. None
Vice President
Cowling, Dyann H. Vice President State Street Research Money Market Trust Boston, MA
Vice President
Cullen, Terrence J. Vice President Keystone-Evergreen Boston, MA
Vice President and Counsel
and Counsel, and (until 2/98)
Assistant Secretary
D'Vari, Ronald None
Vice President
Depp, Maureen G. Vice President Wellington Management Company Boston, MA
Vice President (until 9/97)
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. Vice President State Street Research Securities Trust Boston, MA
Senior Vice President
Drake, Susan W. None
Vice President
Dudley, Catherine Senior Portfolio Manager Chancellor Capital Management Boston, MA
Senior Vice President (until 2/98)
Duggan, Peter J. None
Senior Vice President
Even, Karen K. None
Vice President
Federoff, Alex G. None
Vice President
Fee, Richard E. Vice President CIGNA Retirement and Investment Services Hartford, CT
Vice President (until 3/97)
Vice President State Street Research Investment Services, Inc. Boston, MA
Feliciano, Rosalina None
Vice President
Ficco, Bonnie A. None
Vice President
Fochtman, Jr., Leo None
Vice President
C-7
<PAGE>
Principal business
Name Connection Organization address of organization
- ----- ---------- ------------ -----------------------
Fromm, Stuart Vice President State Street Research Investment Services, Inc. Boston, MA
Vice President
Gardner, Michael D. None
Senior Vice President
Geer, Bartlett R. Vice President State Street Research Equity Trust Boston, MA
Senior Vice President Vice President State Street Research Income Trust Boston, MA
Vice President State Street Research Securities Trust Boston, MA
Giroux, June M. None
Vice President
Govoni, Electra None
Vice President
Grace, Evan None
Vice President
Granger, Allison None
Vice President
Haggerty, Bryan D. None
Vice President
Hamilton, Jr., William A. Treasurer and Director Ellis Memorial and Eldredge House Boston, MA
Senior Vice President Treasurer and Director Nautical and Aviation Publishing Company, Inc. Baltimore, MD
Treasurer and Director North Conway Institute Boston, MA
Hanson, Phyllis None
Vice President
Haverty, Jr., Lawrence J. Vice President State Street Research Capital Trust Boston, MA
Senior Vice President
Healy, Laura J. None
Vice President
Heineke, George R. None
Vice President
Hickman, Joanne Managing Director Zurich Investment Management Chicago, IL
Senior Vice President (until 1/98)
Senior Vice President State Street Research Investment Services, Inc. Boston, MA
Huang, Jesse C. None
Vice President
Jackson, Jr., Vice President State Street Research Equity Trust Boston, MA
F. Gardner Trustee Certain trusts of related and
Senior Vice President non-related individuals
Trustee and Chairman of the Vincent Memorial Hospital Boston, MA
Board
Jamieson, Frederick H. Vice President and
Senior Vice President Asst. Treasurer State Street Research Investment Services, Inc. Boston, MA
Vice President and Asst.
Treasurer SSRM Holdings, Inc. Boston, MA
Vice (until 1/97) President MetLife Securities, Inc. New York, NY
and Controller
Jodka, Richard Portfolio Manager Frontier Capital Management Boston, MA
Senior Vice President (until 1/98)
Vice President State Street Research Capital Trust Boston, MA
C-8
<PAGE>
Principal business
Name Connection Organization address of organization
- ----- ---------- ------------ -----------------------
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.
Kasper, M. Katherine Vice President State Street Research Investment Services, Inc. Boston, MA
Vice President
Kern, Stephen None
Vice President
King, Stephen Vice President State Street Research Investment Services, Inc. Boston, MA
Vice President
Kluiber, Rudolph K. Vice President State Street Research Capital Trust Boston, MA
Senior Vice President
(Vice President
until 4/98)
Kuhn, Stephen P. None
Vice President
Langholm, Knut Director State Street Research Luxembourg
Vice President
Leary, Eileen M. None
Vice President
Levanson, David E. None
Vice President
Lomasney, Mary T. Business Analyst Fidelity Investments Boston, MA
Vice President (until 6/97)
Marinella, Mark A. Portfolio Manager STW Fixed Income Management, Ltd. Boston, MA
Senior Vice President (Until 8/98)
Maurer, Jacqueline J. None
Vice President
C-9
<PAGE>
Principal business
Name Connection Organization address of organization
- ----- ---------- ------------ -----------------------
McNamara, III, Francis J. Executive Vice President, State Street Research Investment Services, Inc. Boston, MA
Executive Vice Clerk and General Counsel
President, Secretary Secretary and General Counsel State Street Research Master Investment Trust Boston, MA
and General Counsel Secretary and General Counsel State Street Research Capital Trust Boston, MA
Secretary and General Counsel State Street Research Exchange Trust Boston, MA
Secretary and General Counsel State Street Research Growth Trust Boston, MA
Secretary and General Counsel State Street Research Securities Trust Boston, MA
Secretary and General Counsel State Street Research Equity Trust Boston, MA
Secretary and General Counsel State Street Research Financial Trust Boston, MA
Secretary and General Counsel State Street Research Income Trust Boston, MA
Secretary and General Counsel State Street Research Money Market Trust Boston, MA
Secretary and General Counsel State Street Research Tax-Exempt Trust Boston, MA
Secretary and General Counsel State Street Research Portfolios, Inc. Boston, MA
Secretary and General Counsel SSRM Holdings, Inc. Boston, MA
Maus, Gerard P. Treasurer State Street Research Equity Trust Boston, MA
Director, Executive Treasurer State Street Research Financial Trust Boston, MA
Vice President Treasurer State Street Research Income Trust Boston, MA
Treasurer, Chief Treasurer State Street Research Money Market Trust Boston, MA
Financial Officer and Treasurer State Street Research Tax-Exempt Trust Boston, MA
Chief Administrative Treasurer State Street Research Capital Trust Boston, MA
Officer Treasurer State Street Research Exchange Trust Boston, MA
Treasurer State Street Research Growth Trust Boston, MA
Treasurer State Street Research Master Investment Trust Boston, MA
Treasurer State Street Research Portfolios, Inc. Boston, MA
Treasurer State Street Research Securities Trust Boston, MA
Director, Executive Vice State Street Research Investment Services, Inc. Boston, MA
President, Treasurer and
Chief Financial Officer
Director Metric Holdings, Inc. San Francisco, CA
Director Certain wholly-owned subsidiaries
of Metric Holdings, Inc.
Treasurer and Chief SSRM Holdings, Inc. Boston, MA
Financial Officer
Treasurer (until 1/97) MetLife Securities, Inc. New York, NY
Director State Street Research Luxembourg
Milder, Judith J. None
Senior Vice President
Miller, Joan D. Senior Vice President State Street Research Investment Services, Inc. Boston, MA
Senior Vice President
C-10
<PAGE>
Principal business
Name Connection Organization address of organization
- ----- ---------- ------------ -----------------------
Moore, Jr., Thomas P.
Senior Vice Vice President State Street Research Capital Trust Boston, MA
President (until 11/96)
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
Director Hibernia Savings Bank Quincy, MA
Governor on the Board Association for Investment Management Charlottesville, VA
of Governors and Research
Morey, Andrew None
Vice President
Mulligan, JoAnne C. None
Senior Vice President
Orr, Stephen C. Member Technology Analysts of Boston Boston, MA
Vice President Member Electro-Science Analysts (of NYC) New York, NY
Paddon, Steven W. None
Vice President
Pannell, James C. None
Senior Vice President
(Vice President
until 4/97)
Peters, Kim M. Vice President State Street Research Securities Trust Boston, MA
Senior Vice President
Pierce, James D. None
Vice President
Poritzky, Dean E. Portfolio Manager Fidelity Management Boston, MA
Vice President (until 4/97)
Pyle, David J. Analyst Oak Value Capital Management Durham, NC
Vice President (until 4/97)
Ragsdale, E.K. Easton None
Senior Vice President
Ranson, Clifford Director of NatWest Markets
Vice President Special Situations
Rawlins, Jeffrey A. None
Senior Vice President
Rice III, Daniel Joseph Vice President State Street Research Equity Trust Boston, MA
Senior Vice President
Richards, Scott None
Vice President
C-11
<PAGE>
Principal business
Name Connection Organization address of organization
- ----- ---------- ------------ -----------------------
Romich, Douglas A. Assistant Treasurer State Street Research Equity Trust Boston, MA
Senior Vice President Assistant Treasurer State Street Research Financial Trust Boston, MA
(Vice President Assistant Treasurer State Street Research Income Trust Boston, MA
until 4/98) Assistant Treasurer State Street Research Money Market Trust Boston, MA
Assistant Treasurer State Street Research Tax-Exempt Trust Boston, MA
Assistant Treasurer State Street Research Capital Trust Boston, MA
Assistant Treasurer State Street Research Exchange Trust
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
Ryan, Michael J. Vice President Delaware Management Philadelphia, PA
Senior Vice President (until 1/98)
Sanderson, Derek Senior Vice President Freedom Capital Management Boston, MA
Senior Vice President (until 10/97)
Saperstone, Paul None
Vice President
Schrage, Michael None
Vice President
Schultz, David C. Director and Treasurer Mafraq Hospital Association Mafraq, Jordan
Executive Vice President Member Association of Investment
Management Sales Executives Atlanta, GA
Member, Investment Committee Lexington Christian Academy Lexington, MA
Shaver, Jr. C. Troy President, Chief State Street Research Investment Services, Inc. Boston, MA
Executive Vice Executive Officer and
President Executive Vice President
Shean, William G. None
Vice President
Shively, Thomas A. Vice President State Street Research Financial Trust Boston, MA
Director and Vice President State Street Research Money Market Trust Boston, MA
Executive Vice Vice President State Street Research Tax-Exempt Trust Boston, MA
President Director State Street Research Investment Services, Inc Boston, MA
Vice President State Street Research Securities Trust Boston, MA
Vice President State Street Research Portfolios, Inc. Boston, MA
Shoemaker, Richard D. None
Senior Vice President
Stambaugh, Kenneth None
Vice President
(Assistant Vice
President until 9/97)
Strelow, Dan R. None
Senior Vice President
C-12
<PAGE>
Principal business
Name Connection Organization address of organization
- ----- ---------- ------------ -----------------------
Stolberg, Thomas None
Vice President
Swanson, Amy McDermott None
Senior Vice President
Trebino, Anne M. Vice President SSRM Holdings, Inc. Boston, MA
Senior Vice President
Verni, Ralph F. Chairman, President, Chief State Street Research Capital Trust Boston, MA
Chairman, President, Executive Officer and Trustee
Chief Executive Chairman, President, Chief State Street Research Exchange Trust Boston, MA
Officer and Executive Officer and Trustee
Director Chairman, President, Chief State Street Research Growth Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief State Street Research Master Investment Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief State Street Research Securities Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief State Street Research Equity Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief State Street Research Financial Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief State Street Research Income Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief State Street Research Money Market Trust Boston, MA
Executive Officer and 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 MetLife Securities, Inc. New York, NY
and Director (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
Director State Street Research Luxembourg
C-13
<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
Walsh, Tucker None
Vice President
Watts, Evan D., Jr. Vice President State Street Research Investment Services, Inc. Boston, MA
Vice President
Weiss, James M. Vice President State Street Research Exchange Trust Boston, MA
Executive Vice President Vice President State Street Research Growth Trust Boston, MA
(Senior Vice President) Vice President State Street Research Securities Trust Boston, MA
until 6/98) Vice President State Street Research Capital Trust Boston, MA
Vice President State Street Research Equity Trust Boston, MA
Vice President State Street Research Income Trust Boston, MA
Vice President State Street Research Master Investment Trust Boston, MA
Welch, Timothy None
Vice President
Westvold, Vice President State Street Research Securities Trust Boston, MA
Elizabeth McCombs
Senior Vice President
Wilkins, Kevin Senior Vice President State Street Research Investment Boston, MA
Senior Vice President (Vice President until 9/98) Services, Inc.
(Vice President Vice President Fidelity Investments Boston, MA
until 9/98) (until 7/97)
Various Positions Fidelity Investments Boston, MA
(until 10/96)
Wilson, John T. Vice President State Street Research Equity Trust Boston, MA
Senior Vice President Vice President State Street Research Master Investment Trust Boston, MA
(Vice President
until 4/98)
C-14
<PAGE>
Principal business
Name Connection Organization address of organization
- ----- ---------- ------------ -----------------------
Wing, Darman A. Senior Vice President and State Street Research Investment Services, Inc. Boston, MA
Senior Vice President, Asst. Clerk
Assistant Secretary Assistant Secretary and State Street Research Capital Trust Boston, MA
and Assistant Assistant General Counsel
General Counsel Assistant Secretary and State Street Research Exchange Trust Boston, MA
(Vice President Assistant General Counsel
until 4/98) Assistant Secretary and State Street Research Growth Trust Boston, MA
Assistant General Counsel
Assistant Secretary and State Street Research Master Investment Trust Boston, MA
Assistant General Counsel
Assistant Secretary and State Street Research Securities Trust Boston, MA
Assistant General Counsel
Assistant Secretary and State Street Research Equity Trust Boston, MA
Assistant General Counsel
Assistant Secretary and State Street Research Financial Trust Boston, MA
Assistant General Counsel
Assistant Secretary and State Street Research Income Trust Boston, MA
Assistant General Counsel
Assistant Secretary and State Street Research Money Market Trust Boston, MA
Assistant General Counsel
Assistant Secretary and State Street Research Tax-Exempt Trust Boston, MA
Assistant General Counsel
Assistant Secretary and State Street Research Portfolios, Inc. Boston, MA
Assistant General Counsel
Assistant Secretary and SSRM Holdings, Inc. Boston, MA
Assistant General Counsel
Woodbury, Robert S. None
Vice President
Woodworth, Jr., Kennard Vice President State Street Research Exchange Trust Boston, MA
Senior Vice Vice President State Street Research Growth Trust Boston, MA
President Vice President State Street Research Securities Trust Boston, MA
Wu, Norman N. Partner Atlantic-Acton Realty Framingham, MA
Senior Vice President Director Bond Analysts Society of Boston Boston, MA
Yannone, John T. Vice President Statement Street Research Investment Boston, MA
Vice President Services, Inc.
</TABLE>
C-15
<PAGE>
Item 27: 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:
<TABLE>
<CAPTION>
(1) (2) (3)
Positions
Name and Principal and Offices Positions and Offices
Business Address with Underwriter with Fund
<S> <C> <C>
Ralph F. Verni Chairman of Chairman of the
One Financial Center the Board and Board, President,
Boston, MA 02111 Director Chief Executive Officer
and Trustee
Peter C. Bennett Director Vice President
One Financial Center
Boston, MA 02111
Gerard P. Maus Executive Vice President, Treasurer
One Financial Center Chief Financial Officer,
Boston, MA 02111 Chief Administrative
Officer and Director
Thomas A. Shively Director None
One Financial Center
Boston, MA 02111
C. Troy Shaver, Jr. President, Chief None
One Financial Center Executive Officer
Boston, MA 02111 and Executive Vice
President
Francis J. McNamara, III Executive Vice President, Secretary
One Financial Center General Counsel
Boston, MA 02111 and Clerk
Peter Borghi Senior Vice President None
One Financial Center
Boston, MA 02111
Paul V. Daly Senior Vice President None
One Financial Center
Boston, MA 02111
</TABLE>
C-16
<PAGE>
<TABLE>
<CAPTION>
(1) (2) (3)
Positions
Name and Principal and Offices Positions and Offices
Business Address with Underwriter with Fund
<S> <C> <C>
Susan M.W. DiFazio Senior Vice President None
One Financial Center
Boston, MA 02111
Joanne Hickman Senior Vice President None
One Financial Center
Boston, MA 02111
Russell A. Labrasca Senior Vice President None
One Financial Center
Boston, MA 02111
Joan D. Miller Senior Vice President None
One Financial Center
Boston, MA 02111
Kevin Wilkins Senior Vice President None
One Financial Center
Boston, MA 02111
Darman A. Wing Senior Vice President, Assistant Secretary
One Financial Center Assistant General Counsel
Boston, MA 02111 and Assistant Clerk
Amy F. Barnwell Vice President None
One Financial Center
Boston, MA 02111
Matthew F. Beaudry Vice President None
One Financial Center
Boston, MA 02111
Linda C. Carstons Vice President None
One Financial Center
Boston, MA 02111
Terrence J. Cullen Vice President, None
One Financial Center Counsel and
Boston, MA 02111 Assistant Clerk
Donald Doherty Vice President None
One Financial Center
Boston, MA 02111
Richard E. Fee Vice President None
One Financial Center
Boston, MA 02111
Stuart Fromm Vice President None
One Financial Center
Boston, MA 02111
Robert M. Gunville Vice President None
One Financial Center
Boston, MA 02111
Patricia A. Howell Vice President None
One Financial Center
Boston, MA 02111
Frederick H. Jamieson Vice President None
One Financial Center and Assistant
Boston, MA 02111 Treasurer
M. Katharine Kasper Vice President None
One Financial Center
Boston, MA 02111
Steven R. King Vice President None
One Financial Center
Boston, MA 02111
Amy L. Simmons Vice President Assistant Secretary
One Financial Center
Boston, MA 02111
Evan D. Watts, Jr. Vice President None
One Financial Center
Boston, MA 02111
</TABLE>
C-17
<PAGE>
Item 28. Location of Accounts and Records
Gerard P. Maus
State Street Research & Management Company
One Financial Center
Boston, MA 02111
Item 29. Management Services
Under a Shareholders' Administrative Services Agreement between the
Registrant and 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 series of the Registrant, and received the amounts set forth
below:
<TABLE>
<CAPTION>
Year-end Year-end Year-end
Fund June 30, 1996 June 30, 1997 June 30, 1998
---- ------------- ------------- -------------
<S> <C> <C> <C>
State Street Research
Equity Investment Fund $65,618 $71,588 $101,206
State Street Research
Global Resources Fund $38,159 $66,532 $117,754
State Street Research
Alpha Fund $66,907 $83,958 $151,166
State Street Research
Athletes Fund $ 0 $ 0 $ 28
</TABLE>
Item 30. 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) Deleted.
(f) Deleted.
C-18
<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, assistant 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-19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for the effectiveness of this Registration Statement pursuant
to Rule 485(b) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment No. 24 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 30th day of October, 1998.
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
Toby Rosenblatt
*
_________________________________ Trustee
Michael S. Scott Morton
*By: /s/ Francis J. McNamara, III
__________________________________
Francis J. McNamara, III,
Attorney-in-Fact under
Powers of Attorney dated
August 22, 1997, incorporated
by reference from Post-Effective
Amendment No. 19.
<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. 24 [X]
and/or
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 25 [X]
____________________
STATE STREET RESEARCH EQUITY TRUST
(Exact Name of Registrant as Specified in Declaration of Trust)
____________________
EXHIBITS
<PAGE>
INDEX TO EXHIBITS
(11) Consent of PricewaterhouseCoopers LLP
(27)(a) Financial Data Schedules for State Street Research Global
Resources Fund
Exhibit (11)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Statement of
Additional Information constituting part of this Post-Effective Amendment No. 24
to the registration statement (No. 33-4296) on Form N-1A (the "Registration
Statement") of our report dated August 7, 1998 relating to the financial
statements and financial highlights appearing in the June 30, 1998 Annual Report
of State Street Research Global Resources Fund (a series of State Street
Research Equity Trust), which report is also referenced in the Prospectus. 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.
PricewaterhouseCoopers LLP
Boston, Massachusetts
October 29, 1998
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000790941
<NAME> STATE STREET RESEARCH EQUITY TRUST
<SERIES>
<NUMBER> 041
<NAME> STATE STREET RESEARCH GLOBAL RESOURCES FUND CLASS A
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 261,788,466
<INVESTMENTS-AT-VALUE> 216,044,990
<RECEIVABLES> 2,010,511
<ASSETS-OTHER> 547
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 218,056,048
<PAYABLE-FOR-SECURITIES> 1,741,237
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 939,397
<TOTAL-LIABILITIES> 2,680,634
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 251,919,886
<SHARES-COMMON-STOCK> 4,746,916
<SHARES-COMMON-PRIOR> 3,574,507
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 9,199,004
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (45,743,476)
<NET-ASSETS> 215,375,414
<DIVIDEND-INCOME> 673,490
<INTEREST-INCOME> 873,934
<OTHER-INCOME> 0
<EXPENSES-NET> 4,523,585
<NET-INVESTMENT-INCOME> (2,976,161)
<REALIZED-GAINS-CURRENT> 30,028,876
<APPREC-INCREASE-CURRENT> (73,157,253)
<NET-CHANGE-FROM-OPS> (46,104,538)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> (9,874,227)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3,760,941
<NUMBER-OF-SHARES-REDEEMED> (2,997,412)
<SHARES-REINVESTED> 408,880
<NET-CHANGE-IN-ASSETS> 18,370,530
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 7,125,672
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,812,714
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,523,585
<AVERAGE-NET-ASSETS> 241,695,200
<PER-SHARE-NAV-BEGIN> 22.39
<PER-SHARE-NII> (0.18)
<PER-SHARE-GAIN-APPREC> (2.52)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> (2.34)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 17.35
<EXPENSE-RATIO> 1.46
<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> 042
<NAME> STATE STREET RESEARCH GLOBAL RESOURCES FUND CLASS B
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> JUN-30-1998
<INVESTMENTS-AT-COST> 261,788,466
<INVESTMENTS-AT-VALUE> 216,044,990
<RECEIVABLES> 2,010,511
<ASSETS-OTHER> 547
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 218,056,048
<PAYABLE-FOR-SECURITIES> 1,741,237
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 939,397
<TOTAL-LIABILITIES> 2,680,634
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 251,919,886
<SHARES-COMMON-STOCK> 5,368,907
<SHARES-COMMON-PRIOR> 3,610,815
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 9,199,004
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (45,743,476)
<NET-ASSETS> 215,375,414
<DIVIDEND-INCOME> 673,490
<INTEREST-INCOME> 873,934
<OTHER-INCOME> 0
<EXPENSES-NET> 4,523,585
<NET-INVESTMENT-INCOME> (2,976,161)
<REALIZED-GAINS-CURRENT> 30,028,876
<APPREC-INCREASE-CURRENT> (73,157,253)
<NET-CHANGE-FROM-OPS> (46,104,538)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 10,098,016
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,966,308
<NUMBER-OF-SHARES-REDEEMED> (1,646,026)
<SHARES-REINVESTED> 437,810
<NET-CHANGE-IN-ASSETS> 18,370,530
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 7,125,672
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,812,714
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 4,523,585
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