As filed with the Securities and Exchange Commission on December 31, 1997
Securities Act of 1933 Registration No. 33-10327
Investment Company Act of 1940 File No. 811-4911
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. ____ [ ]
Post-Effective Amendment No. 17 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 18 [X]
--------------------
STATE STREET RESEARCH FINANCIAL TRUST
(Exact Name of Registrant as Specified in Charter)
One Financial Center, Boston, Massachusetts 02111
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (617) 357-1200
Francis J. McNamara, III
Senior Vice President, Secretary & General Counsel
State Street Research & Management Company
One Financial Center
Boston, Massachusetts 02111
(Name and Address of Agent for Service)
Copy of Communications 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 pursuant to paragraph (b),
[ ] On _____________ pursuant to paragraph (b),
[ ] 60 days after filing pursuant to paragraph (a)(1),
[X] On March 1, 1998 pursuant to paragraph (a)(1).
[ ] 75 days after filing pursuant to paragraph (a)(2).
[ ] On ___________ pursuant to paragraph (a)(2).
If appropriate, check the following box:
[ ] 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 State Street
Research Government Income Fund are included herein.
The Prospectus and Statement of Additional Information of State Street
Research Strategic Portfolios: Moderate, State Street Research Strategic
Portfolios: Conservative and State Street Research Strategic Portfolios:
Aggressive are included in Post-Effective Amendment No. 16 to this Registration
Statement.
<PAGE>
CROSS REFERENCE SHEET
Pursuant to Rule 481(a)
Part A
<TABLE>
<CAPTION>
CAPTION OR LOCATION
IN PROSPECTUS FOR STATE
STREET RESEARCH STRATEGIC
PORTFOLIOS: CONSERVATIVE,
STATE STREET RESEARCH
CAPTION OR LOCATION STRATEGIC PORTFOLIOS:
IN PROSPECTUS FOR MODERATE AND STATE STREET
STATE STREET RESEARCH RESEARCH STRATEGIC
FORM N-1A ITEM NO. GOVERNMENT INCOME FUND PORTFOLIOS: AGGRESSIVE
<S> <C> <C>
1. Cover Page............ Same Same
2. Synopsis.............. Investor Expenses Table of Expenses
3. Condensed Financial
Information........... Financial Highlights; Financial Highlights; Calculation of
Performance and Volatility Performance Data
4. General Description
of Registrant......... Goal and Strategy; Other The Funds' Investments and Asset
Securities and Risks; Allocation; The Funds and Their
Your Account; Fund Details Shares
5. Management of the
Fund.................. Fund Details Management of the Funds;
Purchase of Shares
5A. Management's Discussion
of Fund Performance... [To be included in [To be included in
Financial Statements] Financial Statements]
6. Capital Stock and
Other Securities...... Your Account; Fund Details Shareholder Services; The
Funds and Their Shares;
Management of the
Funds; Dividends and
Distributions; Taxes
7. Purchase of
Securities Being
Offered............... Your Account Purchase of Shares;
Shareholder Services
8. Redemption or
Repurchase............ Your Account Redemption of Shares;
Shareholder Services
9. Legal Proceedings..... Not Applicable Not Applicable
i
<PAGE>
Part B
CAPTION OR LOCATION
IN STATEMENT OF ADDITIONAL
INFORMATION FOR STATE
STREET RESEARCH STRATEGIC
PORTFOLIOS: CONSERVATIVE,
CAPTION OR LOCATION STATE STREET RESEARCH
IN STATEMENT OF ADDITIONAL STRATEGIC PORTFOLIOS:
INFORMATION FOR STATE MODERATE AND STATE
STREET RESEARCH STREET RESEARCH STRATEGIC
FORM N-1A ITEM NO. GOVERNMENT INCOME FUND PORTFOLIOS: AGGRESSIVE
10. Cover Page.......... Same Same
11. Table of Contents... Same Same
12. General Information
and History......... Not Applicable Not Applicable
13. Investment
Objectives
and Policies........ Investment Objective; Additional Investment
Additional Investment Policies and Restrictions;
Policies and Restrictions; Additional Information
Additional Information Concerning Certain
Concerning Certain Investment Techniques;
Investment Techniques; Debt Instruments and
Debt Instruments and Permitted Cash Investments;
and Permitted Cash Investments; Portfolio Transactions
Portfolio Transactions
14. Management of the
Registrant.......... Trustees and Officers Trustees and Officers
15. Control Persons and
Principal Holders of
Securities.......... Trustees and Officers Trustees and Officers;
Investment Advisory Services
16. Investment
Advisory and
Other Services...... Investment Advisory Services; Investment Advisory
Custodian; Independent Services; Custodian;
Accountants; Distribution of Independent Accountants;
Shares of the Fund Distribution of Shares of the
Funds
17. Brokerage
Allocation.......... Portfolio Transactions Portfolio Transactions
18. Capital Stock and
Other Securities.... The Trust, the Fund and its Not Applicable (Description
Shares in Prospectus)
ii
<PAGE>
CAPTION OR LOCATION
IN STATEMENT OF ADDITIONAL
INFORMATION FOR STATE
STREET RESEARCH STRATEGIC
PORTFOLIOS: CONSERVATIVE,
CAPTION OR LOCATION STATE STREET RESEARCH
IN STATEMENT OF ADDITIONAL STRATEGIC PORTFOLIOS:
INFORMATION FOR STATE MODERATE AND STATE
STREET RESEARCH STREET RESEARCH STRATEGIC
FORM N-1A ITEM NO. GOVERNMENT INCOME FUND PORTFOLIOS: AGGRESSIVE
19. Purchase, Redemption
and Pricing of
Securities Being
Offered............. Purchase and Redemption of Purchase and Redemption
Shares; Shareholder of Shares; Net Asset Value
Accounts; Net Asset Value
20. Tax Status.......... Certain Tax Matters Certain Tax Matters
21. Underwriters........ Distribution of Shares of the Distribution of Shares of the
Fund Funds
22. Calculation of
Performance
Data.............. Calculation of Performance Data Calculation of Performance Data
23. Financial
Statements........ Financial Statements Financial Statements
</TABLE>
50847.c3
1/25/95
iii
<PAGE>
[front cover]
[logo] STATE STREET RESEARCH
Government Income Fund
[photo of partial clock face]
This prospectus has information you should know before you invest. Please read
it carefully and keep it with your investment records.
Although these securities have been registered with the Securities and Exchange
Commission, the commission has not judged them for investment merit and does not
guarantee the accuracy or adequacy of the information in this prospectus. Anyone
who informs you otherwise is committing a federal crime.
A bond fund focusing on
U.S. government securities.
Prospectus
March 1, 1998
<PAGE>
Who May Want to Invest
- -------------------------------------------------------------------------------
State Street Research Government Income Fund is designed for investors who seek
one or more of the following:
[bullet] a relatively conservative investment for income
[bullet] a bond fund that emphasizes highly creditworthy U.S. government
securities
[bullet] a fund to complement a portfolio of more aggressive investments
The fund is NOT appropriate for investors who:
[bullet] want to avoid even moderate volatility
[bullet] are seeking high growth or maximum income
[bullet] are investing emergency reserve money
The fund's shares will rise and fall in value. There is a risk that you could
lose money by investing in the fund.
The fund cannot be certain that it will achieve its goal.
Fund shares are not bank deposits and are not guaranteed, endorsed or insured by
any financial institution, government entity or the FDIC.
<PAGE>
Contents 1
- -------------------------------------------------------------------------------
2 Government Income Fund
The fund's goal and strategy, main
risks, expenses and performance,
plus financial highlights
12 Your Account
Managing your State Street Research
investments
12 Opening an Account
12 Choosing a Share Class
14 Sales Charges
16 Policies for Buying Shares
18 Policies for Selling Shares
20 Account Policies
21 Distributions and Taxes
23 Investor Services
24 Fund Details
The fund's business structure
and dealer compensation, plus
additional policies
26 Other Securities and Risks
Information on additional
portfolio securities and
practices, and the risks
associated with them
Back Cover For Additional Information
<PAGE>
2 Government Income Fund
- -------------------------------------------------------------------------------
[graphic of chesspiece] Goal and Strategy
Fundamental Goal The fund seeks high current income.
Strategy Under normal market conditions, the fund invests at least 65% of total
assets in U.S. government securities. These may include debt securities of such
issuers as:
[bullet] the U.S. Treasury
[bullet] the Government National Mortgage Association (Ginnie Mae)
[bullet] the Federal National Mortgage Association (Fannie Mae)
[bullet] the Federal Home Loan Mortgage Association (Freddie Mac)
[bullet] the Resolution Funding Corporation
The fund may also invest in STRIPS, securities offered by the government in
which the principal and interest components of U.S. Treasury bonds trade
separately from each other.
The fund may invest up to 35% of total assets in other government and private
securities. These may include mortgage-related securities (securities that
represent interests in pools of mortgages) that are issued by investment banks
and insurance companies. At the time of purchase these securities are in the
highest rating category (Standard & Poor's AAA or Moody's Aaa) or if unrated are
the equivalent. The fund may also invest in foreign securities, asset-backed
securities and trust certificates (securities representing interest in pools of
U.S. government loans), as well as custodial receipts, which are similar to
STRIPS but are privately issued.
In managing its portfolio, the fund attempts to balance sensitivity to interest
rate movements with the potential for yields. Although the fund may invest in
securities of any maturity, it generally invests in those with medium- to
long-term remaining maturities in order to obtain higher yields. Securities with
longer maturities, however, tend to be more sensitive to interest rate changes.
Thus at times the fund may invest in short-term and other types of securities.
In addition, the fund may emphasize securities of different sectors -- for
example, U.S. Treasuries or mortgage-related securities, both for reasons of
yield and of interest rate sensitivity.
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 26.
<PAGE>
3
---
[graphic of traffic sign] Portfolio Risks
Because the fund invests primarily in bonds and other debt securities, its major
risks are those of bond investing, including the tendency of prices to fall when
interest rates rise. Such a fall would lower the fund's share price and the
value of your investment.
In general, the price of a bond will move in the opposite direction from
interest rates, for the reason that new bonds issued after a rise in rates will
offer higher yields to investors; the only way an existing bond with a lower
yield can appear attractive to investors is by selling at a lower price. (This
principle works in reverse as well: a fall in interest rates will tend to cause
a bond's price to rise).
[graphic of magnifying glass and page]
U.S. Government
Securities and
Credit Quality
The term "U.S. government securities" covers securities from a range of issuers.
These include the federal government itself, various agencies and certain
organizations created through legislation. Some of these issuers are actually
private (or partly so) but have a special relationship with the government.
Treasury securities are direct obligations of the U.S. Treasury, and are backed
by the full faith and credit of the federal government. This is recognized as
the strongest form of credit backing in the U.S.
Some securities that are not issued by the U.S. Treasury carry the government's
full faith and credit backing as to principal or interest, although they are not
actually direct obligations of the government. Other securities are backed by
the issuer's right to borrow up to a certain amount from the U.S. Treasury,
while some are backed only by the credit of the issuing organization itself or
by a pledge that the government would intervene in the event of a default.
While there are different shades of credit quality to these securities,
government securities as a group are considered highly creditworthy. Of course,
credit quality only pertains to the risk of default; the market value of these
securities will still change with movements in interest rates and other factors.
<PAGE>
4 Government Income Fund continued
- -------------------------------------------------------------------------------
Mortgage-related securities can offer attractive yields, but carry additional
risks.The prices and yields of mortgage-related securities typically assume that
the securities will be redeemed at a given time before maturity. When interest
rates fall substantially, these securities are usually redeemed early because
the underlying mortgages are often prepaid. The fund would then have to reinvest
the money at a lower rate. In addition, the price or yield of mortgage-related
securities may fall if they are redeemed after that date.
The success of the investment strategy depends largely on the fund's skill in
assessing the direction and impact of interest rate movements and the
creditworthiness of the fund's non-U.S. government securities.
Information on other securities and risks appears on page 26.
A "snapshot" of the funds investments may be found in the current annual or
semiannual report (see back cover).
[graphic of "The Thinker"]
Investment
Management
The fund's investment manager is State Street Research & Management Company. The
firm traces its heritage back to 1924 and the founding of one of America's first
mutual funds. Today the firm has more than $__ billion in assets under
management (as of [DATE]), including more than $___ billion in mutual funds.
John H. Kallis has been responsible for the fund's day-to-day portfolio
management since its inception in March 1987. A senior vice president, he joined
the firm in 1987 and has worked as an investment professional since 1963.
<PAGE>
Investor Expenses 5
- -------------------------------------------------------------------------------
Class descriptions begin on page 12
----------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C>
Shareholder fees are paid directly Shareholder Fees (% of offering price)(1) Class A Class B Class C(2) Class S(2)
by investors. ------------------------------------------------------------------------------------------
Maximum front-end sales charge 4.50 0.00 0.00 0.00
Maximum deferred sales charge 0.00(3) 5.00 1.00 0.00
Annual fund expenses are deducted Annual Fund Expenses (% of average net assets) Class A Class B Class C Class S
from fund assets. ------------------------------------------------------------------------------------------
Management fee 0.65 0.65 0.65 0.65
Marketing (12b-1) fees(4) 0.25 1.00 1.00 0.00
Other expenses 0.18 0.18 0.18 0.18
---- ---- ---- ----
Total annual fund expenses 1.08 1.83 1.83 0.83
==== ==== ==== ====
Example Here is what you would pay Year Class A Class B(6) Class C(6) Class S
if you invested $1,000 over the years ------------------------------------------------------------------------------------------
indicated. The example is for compari- 1 $56 $69/$19 $29/$19 $8
son only and does not represent the 3 $78 $88/$58 $58/$58 $26
fund's actual expenses, either past or 5 $102 $119/$99 $99/$99 $46
future(5). 10 $171 $195/$195 $215/$215 $103
</TABLE>
(1) Not charged on reinvestments or exchanges.
(2) Before November 1, 1997, Class C shares were designated Class D and Class S
shares were desig-nated Class C.
(3) Except for investments of $1 million or more; see page 14.
(4) For share classes that have 12b-1 fees, long-term shareholders may pay more
than the equivalent of the regulatory maximum sales charge.
(5) Example assumes dividend reinvestment, hypothetical 5% annual return,
maximum applicable sales charges and conversion of Class B shares to Class
A after eight years.
(6) The first number assumes you sold all your shares at the end of the period,
the second assumes you stayed in the fund.
<PAGE>
6 Financial Highlights
- -------------------------------------------------------------------------------
The information in these tables has been audited by Price Waterhouse LLP, the
fund's independent accountants. The top section of each table shows information
for a single share of the fund. Total return figures assume reinvestment of all
distributions.
<TABLE>
<CAPTION>
Years ended October 31
-----------------------------------------------------------------------------------------
Class A 1988 1989 1990 1991 1992 1993 1994(2) 1995(2) 1996(2) 1997(2)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year ($) 11.66 11.64 11.63 11.28 12.14 12.38 12.92 11.68 12.58 12.43
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net investment income ($) 1.12 1.05 0.96 0.93 0.90 0.84 0.81 0.83 0.81 0.80
Net realized and unrealized gain (loss) on
investments, options, forward contracts
and foreign currency ($) (0.03) -- (0.35) 0.84 0.26 0.56 (1.26) 0.88 (0.17) 0.22
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment operations ($) 1.09 1.05 0.61 1.77 1.16 1.40 (0.45) 1.71 0.64 1.02
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Dividends from net investment income ($) (1.11) (1.06) (0.96) (0.91) (0.91) (0.84) (0.79) (0.81) (0.79) (0.80)
Distributions from capital gains ($) -- -- -- -- (0.01) (0.02) -- -- -- --
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions ($) (1.11) (1.06) (0.96) (0.91) (0.92) (0.86) (0.79) (0.81) (0.79) (0.80)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end of year ($) 11.64 11.63 11.28 12.14 12.38 12.92 11.68 12.58 12.43 12.65
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return (3)(%) 9.77 9.62 5.54 16.25 9.86 11.63 (3.58) 15.07 5.28 8.52
Ratios/Supplemental Data:
Net assets at end of year
($ thousands) 1,529,640 1,134,786 894,074 762,517 798,705 868,556 638,418 655,045 584,313 524,565
Expense ratio (%) 1.04 1.06 1.03 1.05 1.05 1.05 1.07 1.10 1.09 1.08
Ratio of net investment income to
average net assets (%) 9.54 9.26 8.53 7.98 7.25 6.59 6.54 6.83 6.50 6.44
Portfolio turnover rate (%) 59.63 65.48 63.30 29.20 97.33 103.49 134.41 105.57 88.79 124.95
</TABLE>
<PAGE>
7
---
<TABLE>
<CAPTION>
Years ended October 31
------------------------------------------------------
Class B 1993(1) 1994(2) 1995(2) 1996(2) 1997(2)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ($) 12.67 12.91 11.66 12.55 12.40
----- ----- ----- ----- -----
Net investment income ($) 0.30 0.72 0.73 0.71 0.70
Net realized and unrealized gain (loss) on
investments, options, forward contracts
and foreign currency ($) 0.24 (1.27) 0.87 (0.16) 0.22
----- ----- ----- ----- -----
Total from investment operations ($) 0.54 (0.55) 1.60 0.55 0.92
----- ----- ----- ----- -----
Dividends from net investment income ($) (0.30) (0.70) (0.71) (0.70) (0.71)
----- ----- ----- ----- -----
Total distributions ($) (0.30) (0.70) (0.71) (0.70) (0.71)
----- ----- ----- ----- -----
Net asset value, end of year ($) 12.91 11.66 12.55 12.40 12.61
===== ===== ===== ===== =====
Total return (3)(%) 4.32(4) (4.38) 14.15 4.51 7.66
Ratios/Supplemental Data:
Net assets at end of year ($ thousands) 26,578 52,319 87,908 95,218 97,253
Expense ratio (%) 1.81(5) 1.82 1.85 1.84 1.83
Ratio of net investment income to
average net assets (%) 5.67(5) 5.86 6.01 5.75 5.68
Portfolio turnover rate (%) 103.49 134.41 105.57 88.79 124.95
</TABLE>
(1) June 1, 1993 (commencement of share class designations) to October 31, 1993.
(2) Per-share figures have been calculated using the average shares method.
(3) Does not reflect any front-end or contingent deferred sales charge.
(4) Not annualized.
(5) Annualized.
<PAGE>
<TABLE>
<CAPTION>
8 Financial Highlights continued
- --------------------------------------------------------------------------------
Years ended October 31
------------------------------------------------------
Class C (formerly Class D) 1993(1) 1994(2) 1995(2) 1996(2) 1997(2)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ($) 12.67 12.91 11.66 12.56 12.41
----- ----- ----- ----- -----
Net investment income ($) 0.30 0.72 0.74 0.71 0.70
Net realized and unrealized gain (loss) on
investments, options, forward contracts
and foreign currency ($) 0.24 (1.27) 0.87 (0.16) 0.22
----- ----- ----- ----- -----
Total from investment operations ($) 0.54 (0.55) 1.61 0.55 0.92
----- ----- ----- ----- -----
Dividends from net investment income ($) (0.30) (0.70) (0.71) (0.70) (0.71)
----- ----- ----- ----- -----
Total distributions ($) (0.30) (0.70) (0.71) (0.70) (0.71)
----- ----- ----- ----- -----
Net asset value, end of year ($) 12.91 11.66 12.56 12.41 12.62
===== ===== ===== ===== =====
Total return (3)(%) 4.32(4) (4.38) 14.24 4.51 7.65
Ratios/Supplemental Data:
Net assets at end of year ($ thousands) 12,101 13,425 13,033 14,473 16,301
Expense ratio (%) 1.88(5) 1.82 1.85 1.84 1.83
Ratio of net investment income
to average net assets (%) 5.59(5) 5.84 6.08 5.76 5.68
Portfolio turnover rate (%) 103.49 134.41 105.57 88.79 124.95
</TABLE>
<PAGE>
9
---
<TABLE>
<CAPTION>
Years ended October 31
------------------------------------------------------
Class S (formerly Class C) 1993(1) 1994(2) 1995(2) 1996(2) 1997(2)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ($) 12.67 12.92 11.67 12.57 12.42
----- ----- ----- ----- -----
Net investment income ($) 0.19 0.84 0.90 0.84 0.80
Net realized and unrealized gain (loss) on
investments, options, forward contracts
and foreign currency ($) 0.42 (1.27) 0.84 (0.17) 0.25
----- ----- ----- ----- -----
Total from investment operations ($) 0.61 (0.43) 1.74 0.67 1.05
----- ----- ----- ----- -----
Dividends from net investment income ($) (0.36) (0.82) (0.84) (0.82) (0.83)
----- ----- ----- ----- -----
Total distributions ($) (0.36) (0.82) (0.84) (0.82) (0.83)
----- ----- ----- ----- -----
Net asset value, end of year ($) 12.92 11.67 12.57 12.42 12.64
===== ===== ===== ===== =====
Total return (3)(%) 4.82(4) (3.42) 15.37 5.55 8.80
Ratios/Supplemental Data:
Net assets at end of year ($ thousands) 36 203 5,036 7,767 32,115
Expense ratio (%) 0.80(5) 0.82 0.85 0.84 0.82
Ratio of net investment income to
average net assets (%) 6.59(5) 8.01 6.79 6.78 6.66
Portfolio turnover rate (%) 103.49 134.41 105.57 88.79 124.95
</TABLE>
(1) June 1, 1993 (commencement of share class designations) to October 31, 1993.
(2) Per-share figures have been calculated using the average shares method.
(3) Does not reflect any front-end or contingent deferred sales charge.
(4) Not annualized.
(5) Annualized.
<PAGE>
10 Performance and Volatility
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
As of October 31, 1997
----------------------------
Average Annual Total Return(1) 1 Year 5 Years 10 Years
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A (%) 3.64 6.21 8.16
Class B (%) 2.66 6.12 8.28
Class C (%) 6.65 6.45 8.29
Class S (%) 8.80 7.41 8.77
Merrill Lynch Government Master Index (%) 8.67 7.33 8.90
Lipper General U.S. Government Funds Index (%) 8.04 6.07 7.82
</TABLE>
[bar chart]
<TABLE>
<CAPTION>
Years ended October 31
----------------------------------------------------------------------------
Class A Year-by-Year Total Return(1) 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9.77 9.62 5.54 16.25 9.86 11.63 (3.58) 15.07 5.28 8.52
</TABLE>
(1) Fund returns include performance from before the creation of share classes
in 1993. Because Classes B and C involve higher marketing fees (as
described on page 5), performance since that time is somewhat lower for
these classes.
<PAGE>
11
---
[graphic of magnifying glass and page]
Understanding
Performance
and Volatility
The information on the opposite page is designed to show two aspects of the
fund's track record:
[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.
[bullet] The graph of year-by-year returns shows how volatile the fund has been:
how much the difference has been, historically, between its best years
and worst years. In general, funds with higher average annual total
returns will also have higher volatility. The graph includes the
effects of fund expenses, but not sales charges.
Also included are two independent measures of performance. The Merrill Lynch
Government Master Index is an unmanaged index of fixed-rate U.S. Treasury and
agency securities. The Lipper General U.S. Govern-ment Funds Index shows the
performance of a category of mutual funds with similar goals. The Lipper index,
which is also unmanaged, 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 any
index, these indices can be used as rough guides when gauging the return of this
and other investments. When making comparisons, keep in mind that none of the
indices includes the effects of sales charges. Also, even if your bond portfolio
were identical to the Merrill Lynch Government Master Index, your returns would
always be lower, because this index does not include brokerage and
administrative expenses.
<PAGE>
12 Your Account
- -------------------------------------------------------------------------------
[graphic of a key]
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.
[graphic of pencil and paper]
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
Class A -- Front Load
[bullet] Initial sales charge of 4.5% or less; schedule on page 14
[bullet] Lower sales charges for larger investments; see sidebar on facing page
and sales charge schedule
[bullet] Lower annual expenses than Class B or C shares due to lower marketing
(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; schedule on page 14
[bullet] Annual marketing (12b-1) fee
[bullet] Automatic conversion to Class A shares after eight years, reducing
future annual expenses
Class C(1) -- 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 marketing (12b-1) fee
[bullet] No conversion to Class A shares after eight years, so annual expenses
do not decrease
(1) Before November 1, 1997, these were designated Class D
<PAGE>
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.
Class S(2) -- No Load
[bullet] No sales charges of any kind
[bullet] No marketing (12b-1) fees; annual expenses are lower than other share
classes
[bullet] Available through certain retirement accounts, advisory accounts of the
investment manager and special programs, including broker programs with
record-keeping and other services; these programs usually involve
special conditions and separate fees. (contact your financial
professional for information)
(2) Before November 1, 1997, these were designated Class C
[graphic of magnifying glass and page]
Class A Sales
Charge Reductions
and Waivers
[bullet] Substantial investments receive lower sales charge rates; see
information on the following page.
[bullet] The "right of accumulation" allows you to include your existing State
Street Research investments (except Money Market Fund Class E shares)
as part of your current investment for sales charge purposes.
[bullet] A "letter of intent" allows you to count all investments in this or
other State Street Research funds over the next 13 months as if you
were making them all at once, for purposes of calculating sales
charges.
To take advantage of right of accumulation or letter of intent waivers,
consult your financial professional or State Street Research.
<PAGE>
14 Your Account continued
- -------------------------------------------------------------------------------
Sales Charges
Class A -- Front Load
when you invest this % is which equals
this amount deducted this % of
for sales your net
charges investment
- ------------------------------------------------------
Up to $99,999 4.50 4.71
$100,000 - $249,999 3.50 3.63
$250,000 - $499,999 2.50 2.56
$500,000 - $999,999 2.00 2.04
$1 million or more see next column
With Class A shares, you pay a sales charge only when you buy shares.
If you are investing $1 million or more (either as a lump sum or through any of
the methods described on the previous page), you can purchase Class A shares
without any sales charge. However, you may be charged a "contingent deferred
sales charge" (CDSC) if you sell any shares you have held for less than one
year. Policies regarding the calculation of the CDSC are the same as for Class
B.
Class A shares are also offered with low or no sales charges through various
wrap-fee programs and other sponsored arrangements (contact your financial
professional for information).
Class B -- Back Load
this % of net asset value
when you sell shares at the time of purchase (or
in this year after you of sale, if lower) is deduct-
bought them ed from your proceeds
- ----------------------------------------------------------------
First year 5.00
Second year 4.00
Third year 3.00
Fourth year 3.00
Fifth year 2.00
Sixth year or later None
With Class B shares, you pay no sales charge when you invest, but you are
charged a "contingent deferred sales charge" (CDSC) when you sell shares you
have held for five years or less, as described in the table above. Any shares
acquired through reinvestment are not subject to the CDSC. There is no CDSC on
exchanges into other State Street Research funds, and the
<PAGE>
15
---
date of your initial investment will continue to be used as the basis for CDSC
calculations when you exchange. To ensure that you pay the lowest CDSC possible,
the fund will always use the shares with the lowest CDSC to fill your sell
requests.
The CDSC is waived on shares sold for mandatory retirement distributions or
because of disability or death. Consult your financial professional or the State
Street Research Service Center.
Class B shares automatically convert to Class A shares after eight years,
lowering your annual expenses from that time on.
Class C (Formerly Class D) -- Level Load
this % of net asset value
when you sell shares at the time of purchase (or
in this year after you of sale, if lower) is deduct-
bought them ed from your proceeds
- -------------------------------------------------------
First year 1.00
Second year or later None
With Class C shares, you pay no sales charge when you invest, but you are
charged a "contingent deferred sales charge" (CDSC) when you sell shares you
have held for one year or less, as described in the table above. Policies
regarding the calculation of the CDSC are the same as for Class B.
Class C shares currently have the same annual expenses as Class B shares, but
never convert to Class A shares (with their lower annual expenses).
Class S (Formerly Class C) -- No Load
Class S shares have no sales charges or CDSC.
<PAGE>
16 Your Account continued
- -------------------------------------------------------------------------------
[graphic of adding machine]
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 by State Street Research before 4:00
p.m. eastern time will be executed the same day, at that day's closing share
price. Orders received after 4:00 p.m. will be executed the following day, at
that day's closing share price.
Wire Transactions Funds may be wired between 8:00 a.m. and 4:00 p.m. eastern
time. To make a same-day wire investment, please notify State Street Research by
12:00 noon of your intention to wire funds, and make sure your wire arrives by
4:00 p.m. Your bank may charge a fee for wiring money.
<PAGE>
Buying Shares 17
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
To Open an Account To Add to an Account
<S> <C> <C> <C>
[graphic of Through a Contact your financial professional. Contact your financial professional.
briefcase] Financial
Professional
By Mail [graphic of Make your check payable to "State Fill out the investment stub from an account
mailbox] Street Research Funds." Forward the statement, or indicate the fund name and account
check and your application to State number on your check. Make your check payable to
Street Research. "State Street Research Funds." Forward the check
and stub to State Street Research.
[graphic of By Federal Forward your application to State Call State Street Research to obtain a control
building] Funds Wire Street Research, then call to number. Instruct your bank to wire funds to:
obtain an account number. Wire [bullet] State Street Bank and Trust Company, Boston, MA
funds using the instructions at [bullet] ABA: 011000028
right. [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 Electronic [graphic Verify that your bank is a member Call State Street Research to verify that the
Funds Transfer of electrical of the ACH (Automated Clearing necessary bank information is on file for your
(ACH) plug] House) system. Forward your account. If it is, you may request a transfer with
application to State Street the same phone call. If not, please ask State
Research. Please be sure to include Street Research to provide you with an EZ Trader
the appropriate bank information. application.
Call State Street Research to
request a purchase.
[graphic of By Investamatic Forward your application, with all Call State Street Research to verify that
calendar] appropriate sections completed, to Investamatic is in place on your account, or to
State Street Research, along with a request a form to add it. Investments are
check for your initial investment automatic once Investamatic is in place.
payable to "State Street Research
Funds."
By Exchange [graphic of Call State Street Research or visit Call State Street Research or visit our website.
arrows] our website.
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 Account continued
- -------------------------------------------------------------------------------
[graphic of adding machine]
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 $50,000 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 4:00 p.m. eastern time will be executed the same day, at that day's
closing share price. Requests received after 4:00 p.m. will be executed the
following day, at that day's closing share price.
Wire Transactions Proceeds sent by federal funds wire must total at least
$5,000. A fee of $7.50 will be deducted from all proceeds sent by wire, and your
bank may charge an additional fee to receive wired funds.
Selling Recently Purchased Shares If you sell shares before the check or
electronic funds transfer (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>
Selling Shares 19
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
To Sell Some or All of Your Shares
<S> <C> <C>
[graphic of Through a Contact your financial professional.
briefcase] Financial
Professional
By Mail [graphic of Send a letter of instruction, an endorsed stock power or share certificates (if you hold
mailbox] certificate shares) to State Street Research. Specify the fund, the account number and the
dollar value or number of shares. Be sure to include all necessary signatures and any
additional documents, as well as signature guarantees if required (see facing page).
[graphic of By Federal Check with State Street Research to make sure that wire redemption privileges are in place
building] Funds Wire on your account. Once these privileges are established, you may place your request to sell
shares with State Street Research. Proceeds will be wired to your pre-designated bank
account. (See "Wire Transactions" on facing page.)
By Electronic [graphic Check with State Street Research to make sure that the EZ Trader feature and a bank
Funds Transfer of electrical designation is in place on your account. Once one of these is established, you may place
(ACH) plug] your request to sell shares with State Street Research. Proceeds will be wired to your
pre-designated bank account.
[graphic of By Telephone As long as your request does not require a written request (see facing page), you can sell
telephone] shares by calling State Street Research. A check will be mailed to you on the following
business day.
By Exchange [graphic of Read the prospectus for the fund into which you are exchanging. Call State Street Research
arrows] or visit our website.
[graphic of By Systematic See plan information on page 23.
calendar] 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 Account continued
- -------------------------------------------------------------------------------
[graphic of papers]
Account Policies
The Fund's Business Hours The fund is open the same days as the New York Stock
Exchange (generally Monday through Friday). Fund representatives are available
from 8:00 a.m. to 6:00 p.m. eastern time on these days.
Calculating Share Price The fund calculates its net asset value per share (NAV)
every business day at the close of regular trading on the New York Stock
Exchange (usually at 4:00 p.m. eastern time). Each class's share price is
calculated by dividing its net assets by the number of its shares outstanding.
Telephone Requests When you open an account you automatically receive telephone
privileges, allowing you to place requests on your account by telephone. Your
broker can also use these privileges to request exchanges on your account. For
your protection, all telephone calls are recorded.
As long as State Street Research takes certain measures to authenticate
telephone requests on your account, you may be held responsible for unauthorized
requests. Unauthorized telephone requests are rare, but if you want to protect
yourself completely, you can decline the telephone privilege on your
application. The fund may suspend or eliminate the telephone privilege at any
time.
Exchange Privileges There is no fee to exchange shares among State Street
Research funds. Your new fund shares will be the equivalent class as your
current shares. Any contingent deferred sales charges will continue to be
calculated from the date of your initial investment.
Frequent exchanges can interfere with fund management and drive up costs for all
shareholders. Because of this, the fund currently limits each account, or group
of accounts under common ownership or control, to six exchanges per calendar
year. The fund may change or eliminate the exchange privilege at any time, may
limit or cancel any shareholder's exchange privilege and may refuse to
<PAGE>
21
---
accept any exchange request, particularly those associated with "market timing"
strategies.
For Merrill Lynch customers, exchange privileges extend to Summit Cash Reserves
Fund, which is related to the fund for purposes of investment and investor
services.
Accounts with Low Balances If the value of your account falls below $1,500,
State Street Research may mail you a notice asking you to bring the account back
up to $1,500 or close it out. If you do not take action within 60 days, State
Street Research may either sell your shares and mail the proceeds to you at the
address of record or may deduct an annual maintenance fee (currently $18).
Reinstating Recently Sold Shares For 120 days after you sell shares, you have
the right to "reinstate" your investment by putting some or all of the proceeds
into any currently available State Street Research fund at net asset value. Any
CDSC you paid on the amount you are reinstating will be credited to your
account. You may only use this privilege once in any twelve-month period with
respect to your shares of a given fund.
[graphic of Uncle Sam]
Distributions and Taxes
Income and Capital Gains Distributions The fund distributes its net income and
net capital gains to shareholders. Using projections of its future income, the
fund declares dividends daily and pays them monthly. Net capital gains, if any,
are distributed in December, after the end of the fund's fiscal year, which is
October 31.
You may have your distributions reinvested in the fund, invested in a different
State Street Research fund, deposited in a bank account or mailed out by check.
If you do not give State Street Research other instructions, your distributions
will automatically be reinvested in the fund.
<PAGE>
22 Your Account continued
- -------------------------------------------------------------------------------
[graphic of magnifying glass and page]
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 (if the fund makes a capital gains 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)
Tax Effects of Distributions and Transactions In general, any dividends and
short-term capital gain distributions you receive from the fund are taxable as
ordinary income. Distributions of other net capital gains are generally taxable
as capital gains. This is true no matter how long you have owned your shares and
whether you reinvest your distributions or take them in cash.
Every year, the fund will send you information detailing the amount of ordinary
income and capital gains distributed to you for the previous year.
The sale of shares in your account may produce a gain or loss, and is a taxable
event. For tax purposes, an exchange is the same as a sale.
Your investment in the fund could have additional tax consequences. Please
consult your tax professional for assistance.
Backup Withholding By law, the fund must withhold 31% of your distributions and
proceeds if you have not provided complete, correct taxpayer information.
<PAGE>
23
---
[graphic of handshake]
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, and you can skip an investment with three days notice. Not
available with Class S shares.
Systematic Withdrawal Program This plan is designed for retirees and other
investors who want regular withdrawals from a fund account. The plan is free and
allows you to withdraw up to 8% of your fund assets a year without incurring any
contingent deferred sales charges. Certain terms and minimums apply.
Dividend Allocation Plan This plan automatically invests your distributions
from the fund into another fund of your choice, without any fees or sales
charges.
Automatic Bank Connection This plan lets you route any distributions or
Systematic Withdrawal Program payments directly to your bank account.
State Street Research also offers a full range of prototype retirement plans for
individuals, sole proprietors, partnerships, corporations and employees. Call
1-800-562-0032 for information on retirement plans or any of the services
described above.
<PAGE>
24 Fund Details
- --------------------------------------------------------------------------------
[graphic of column]
Business Structure
Formed in 1987, the fund is a diversified series of State Street Research
Financial Trust, an open-end management investment company that is organized as
a Massachusetts business trust. A board of trustees representing shareholder
interests oversees the fund's operations, including the hiring of the investment
manager and other service providers.
The fund does not hold regular shareholder meetings, but may call meetings when
matters arise that require shareholder approval. These may include amendments to
the investment management agreement, the election of trustees or proposed
changes in the fund's fundamental goal, which cannot be changed without
shareholder approval.
The investment manager is responsible for the fund's investment and business
activities, and receives the management fee as compensation (0.65% of fund
assets, annually). The investment manager and the distributor are subsidiaries
of Metropolitan Life Insurance Company.
Brokers for Portfolio Trades
When placing trades for the fund's portfolio, State Street Research chooses
brokers that provide the best execution (a term defined by service as well as
price), but may also consider a broker's sales of fund shares.
Investment Manager
State Street Research & Management Company
One Financial Center, Boston, MA 02111
Distributor
State Street Research Investment Services, Inc.
One Financial Center, Boston, MA 02111
Shareholder Services
State Street Research Service Center
P.O. Box 8408, Boston, MA 02266
Custodian
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110
<PAGE>
25
---
[graphic of check]
Dealer Compensation
Dealers who sell shares of the fund and perform services for fund
investors receive sales commissions and annual fees. These are paid by the
fund's distributor, using money from sales charges, marketing (12b-1) fees and
its other resources.
<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>
Additional Policies Please note that the fund maintains additional policies and
reserves certain rights, including:
[bullet] The fund may vary its initial or additional investments in the case of
exchanges, reinvestments, periodic investment plans, retirement and
employee benefit plans, sponsored arrangements and other similar
programs.
[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] To permit investors to obtain the current price, dealers are
responsible for transmitting all orders to the State Street Research
Service Center promptly.
[bullet] Dealers may impose a transaction fee on the purchase or sale of shares
by shareholders.
[bullet] The distributor may pay its affiliate MetLife Securities, Inc.
additional compensation of up to 0.25% of certain sales or assets.
(1) If your broker declines this commission, the one-year CDSC on your
investment is waived.
<PAGE>
26 Other Securities and Risks
- -------------------------------------------------------------------------------
[graphic of certificates]
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. A table of limitations follows.
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.
Foreign Investments Foreign securities are generally more volatile than their
domestic counterparts, in part because of higher political and economic risks,
lack of reliable information, and fluctuations in currency exchange rates. These
risks are usually higher in less developed countries. The fund may use foreign
currencies and related instruments to hedge its foreign investments.
In addition, foreign securities may be more difficult to resell and the markets
for them less efficient than
<PAGE>
27
---
for comparable U.S. securities. Even where a foreign security increases in price
in its local currency, the appreciation may be diluted by the negative effect of
exchange rates when the security's value is converted to U.S. dollars. Foreign
withholding taxes also may apply and errors and delays may occur in the
settlement process for foreign securities.
Derivatives Derivatives, a category that includes options and futures, are
financial instruments whose value derives from another security or an index. The
fund may use derivatives for hedging (attempting to offset a potential loss in
one position by establishing an interest in an opposite position). The fund may
also use derivatives for speculation (investing for potential income or capital
gain).
While hedging can guard against potential risks, it adds to the fund's expenses
and can eliminate some opportunities for gains. There is also a risk that a
derivative intended as a hedge may not perform as expected.
The main risk with derivatives is that some types can amplify a gain or loss,
potentially earning or losing substantially more money than the actual cost of
the derivative.
With all derivatives, whether used for hedging or speculation, there is also the
risk that the counterparty may fail to honor its contract terms, causing a loss
for the fund.
Securities Lending The fund may seek additional income by lending portfolio
securities to qualified institutions. By reinvesting collateral it receives in
these transactions, the fund could magnify any gain or loss it realizes on the
underlying investment. If the borrower fails to return the securities and the
collateral is insufficient to cover the loss, the fund could lose money.
When-issued Securities The fund may invest in securities prior to their date of
issue. These securities could fall in value by the time they are actually
issued, which may be anytime from a few days to over a year.
Short-term Trading While the fund ordinarily does not trade securities for
short-term profits, it will sell any security at the time it believes best,
which may result in short-term trading. Short-term trading can increase the
fund's brokerage costs and its shareholders' tax liabilities.
Repurchase Agreements The fund may buy securities with the understanding
<PAGE>
28 Other Securities and Risks continued
- -------------------------------------------------------------------------------
that
the seller will buy them back with interest at a later date. If the seller is
unable to honor its commitment to repurchase the securities, the fund could lose
money.
Zero (or Step) Coupons A zero coupon security is a debt security that is
purchased and traded at a discount to its face value because it pays no interest
for some or all of its life. Interest, however, is reported as income to the
fund and the fund is required to distribute to shareholders an amount equal to
the amount reported. Those distributions may force the fund to liquidate
portfolio securities at a disadvantageous time.
Defensive Investing During
unusual market conditions, the fund may place up to 100% of total assets in cash
or quality short-term debt securities.
Investment Limitations
<TABLE>
<CAPTION>
Limitation at the time of investment
------------------------------------
Practice % of total assets % of net assets
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Investing in securities of any given issuer (other
than the U.S. government and its agencies)(1) 5(2) --
Investing in any given industry(1) 25 --
Lending securities 33-1/3 --
Lending money(1) Prohibited --
Repurchase agreements 30 --
Security
- -------------------------------------------------------------------------------------------
Commodity futures contracts and options contracts
(for non-hedging purposes) -- 5(3)
Other options contracts (for non-hedging purposes) -- 5(3)
Swap arrangements 5 --
Illiquid securities -- 15(4)
Restricted securities 10(5) --
Foreign securities 20(6) --
</TABLE>
(1) Fundamental policy; may not be changed without shareholder approval.
(2) Applies only to 75% of fund's total assets. The fund is also prohibited
from investing in more than 10% of an issuer's voting securities.
(3) Initial margin deposits plus premiums may not exceed 5% of the market value
of the fund's net assets in non-hedging transactions. No limits apply when
used in hedging strategies.
(4) Includes repurchase agreements extending over more than seven days.
(5) Does not include Rule 144A securities.
(6) Applies to all direct and indirect interests in securities of non-U.S.
issuers; includes a 5% total asset limitation on investments in developing
countries.
<PAGE>
Notes 29
- -------------------------------------------------------------------------------
<PAGE>
[back cover]
For Additional Information
- -------------------------------------------------------------------------------
You can obtain a free copy of the
current annual/semiannual report
or SAI by contacting:
[logo] STATE STREET RESEARCH
Service Center
P.O. Box 8408, Boston, MA 02266
Telephone: 1-800-562-0032
Internet: www.ssrfunds.com
Or you can visit the SEC website at:
www.sec.gov
Control Number: xxxx-xxxxxx(xxxx)SSR-LD
You can find additional information on the fund's structure and its performance
in the following documents:
Annual/Semiannual Reports While the prospectus describes the fund's potential
investments, these reports detail the fund's actual investments as of the report
date. Reports include a discussion by fund management of recent economic and
market trends and fund performance. The annual report also includes the report
of the fund's independent accountants.
Statement of Additional Information (SAI) A supplement to the prospectus, the
SAI contains further information about the fund and its investment limitations
and policies. It also includes the most recent annual report and the independent
accountants' report. A current SAI for this fund is on file with the Securities
and Exchange Commission and is incorporated by reference (is legally part of
this prospectus).
prospectus
- -------------------------------------------
EIN-xxxx-xxxxx
<PAGE>
STATE STREET RESEARCH GOVERNMENT INCOME FUND
a Series of
STATE STREET RESEARCH FINANCIAL TRUST
STATEMENT OF ADDITIONAL INFORMATION
March 1, 1998
TABLE OF CONTENTS
Page
INVESTMENT OBJECTIVE.....................................................2
ADDITIONAL INVESTMENT POLICIES AND RESTRICTIONS..........................2
ADDITIONAL INFORMATION CONCERNING CERTAIN INVESTMENT TECHNIQUES..........5
DEBT INSTRUMENTS AND PERMITTED CASH INVESTMENTS.........................16
THE TRUST, THE FUND AND ITS SHARES......................................20
TRUSTEES AND OFFICERS...................................................21
INVESTMENT ADVISORY SERVICES............................................27
PURCHASE AND REDEMPTION OF SHARES.......................................28
SHAREHOLDER ACCOUNTS....................................................34
NET ASSET VALUE.........................................................38
PORTFOLIO TRANSACTIONS..................................................39
CERTAIN TAX MATTERS.....................................................42
DISTRIBUTION OF SHARES OF THE FUND......................................44
CALCULATION OF PERFORMANCE DATA.........................................49
CUSTODIAN...............................................................55
INDEPENDENT ACCOUNTANTS.................................................55
FINANCIAL STATEMENTS....................................................55
The following Statement of Additional Information is not a Prospectus.
It should be read in conjunction with the Prospectus of State Street Research
Government Income Fund (the "Fund") dated March 1, 1998 which may be obtained
without charge from the offices of State Street Research Financial Trust (the
"Trust") or State Street Research Investment Services, Inc. (the "Distributor"),
One Financial Center, Boston, Massachusetts 02111- 2690.
CONTROL NUMBER: 1285F-960301(398)SSR-LD GI-879D-397
1
<PAGE>
INVESTMENT OBJECTIVE
As set forth under "Government Income Fund--Goal and Strategy--
Fundamental Goal" in the Prospectus of State Street Research Government Income
Fund (the "Fund"), the Fund's investment goal, which is to seek high current
income, is fundamental and may not be changed 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 "Government Income Fund--Portfolio Risks" and "Other
Securities and Risks" in the Fund's Prospectus, the Fund has adopted certain
investment restrictions, and those restrictions are either fundamental or not
fundamental. Fundamental restrictions may not be changed 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 purchase a security of any one issuer (other than
securities issued or guaranteed as to principal or interest by
the U.S. Government or its agencies or instrumentalities or
mixed-ownership Government corporations) if such purchase
would, with respect to 75% of the Fund's total assets, cause
more than 5% of the Fund's total assets to be invested in the
securities of such issuer or cause more than 10% of the voting
securities of such issuer to be held by the Fund;
(2) not to issue senior securities, except that the Fund may
borrow money and engage in reverse repurchase agreements in
amounts up to one-third of the value of the Fund's net assets
including the amounts borrowed (provided that reverse
repurchase agreements shall be limited to 5% of the Fund's
total assets);
(3) not to underwrite any issue of securities, except as it may be
deemed to be an underwriter under the Securities Act of 1933
in connection with the sale of securities in accordance with
its investment objective, policies and limitations;
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(4) not to purchase or sell real estate, although it may invest in
securities of companies whose business involves the purchase
or sale of real estate or in securities which are secured by
real estate or interests 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 lend money; however, the Fund may lend portfolio
securities and purchase bonds, debentures, notes and similar
obligations (and enter into repurchase agreements with respect
thereto);
(7) not to sell securities short;
(8) not to invest in oil, gas or other mineral exploration or
development programs (provided that the Fund may invest in
securities issued by or which are based, directly or
indirectly, on the credit of companies which invest in or
sponsor such programs);
(9) not to make any investment which would cause more than 25% of
the value of the Fund's total assets to be invested in
securities of issuers principally engaged in any one industry
(for purposes of this restriction, (a) utilities will be
divided according to their services so that, for example, gas,
gas transmission, electric and telephone companies will each
be deemed in a separate industry, (b) oil and oil related
companies will be divided by type so that, for example, oil
production companies, oil service companies and refining and
marketing companies will each be deemed in a separate
industry, (c) finance companies will be classified according
to the industry of their parent companies, and (d) securities
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities (including repurchase agreements
collateralized by U.S. Government securities) shall be
excluded);
(10) not to borrow money (through reverse repurchase agreements or
otherwise) except for emergency purposes or to facilitate
management of the portfolio by enabling the Fund to meet
redemption requests when the liquidation of portfolio accounts
is determined to be inconvenient or disadvantageous, provided
that additional investments will be suspended during any
period when borrowings exceed 5% of the Fund's net assets, and
provided further that reverse repurchase agreements shall not
exceed 5% of the Fund's total assets; (during
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the period in which any reverse repurchase agreements are
outstanding, the Fund will restrict the purchase of portfolio
instruments to money market instruments maturing on or before
the expiration date of the reverse repurchase agreements. Such
purchases will be made only to the extent necessary to assure
completion of the reverse repurchase agreement);
(11) not to purchase securities on margin other than in connection
with the purchase of put options on financial futures
contracts, but the Fund may obtain such short-term credits as
are necessary for clearance of transactions; and
(12) not to hypothecate, mortgage or pledge any of its assets
except to secure permitted borrowings and then not in excess
of 10% of such Fund's total assets, at the time of the
borrowing [as a matter of interpretation which is not part of
the fundamental policy, futures, options and forward
commitments, 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 such investments, are not deemed to involve a
hypothecation, mortgage or pledge of assets].
The following investment restrictions are not fundamental. Under these
restrictions, it is the Fund's policy:
(1) not to purchase any security or enter into a repurchase
agreement if as a result more than 15% of its net assets would
be invested in securities that are illiquid (including
repurchase agreements not entitling the holder to payment of
principal and interest within seven days); and
(2) 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.
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ADDITIONAL INFORMATION CONCERNING
CERTAIN INVESTMENT TECHNIQUES
The Fund may buy and sell certain types of derivatives, such as
options, futures contracts, options on futures contracts, and swaps under
circumstances in which such instruments are expected by the State Street
Research & Management Company (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 an expected decline in the market value of an asset or group of
assets which the Fund does not own or expected increases in the market value of
an asset which it does not plan to acquire. Information about specific types of
instruments is provided below.
Futures Contracts
Futures contracts are publicly traded contracts to buy or sell an
underlying asset or group of assets, such as a currency, or an index of
securities, at a future time at a specified price. A contract to buy establishes
a long position while a contract to sell establishes a short position.
The purchase of a futures contract on an equity security or an index of
equity securities normally enables a buyer to participate in the market movement
of the underlying asset or index after paying a transaction charge and posting
margin in an amount equal to a small percentage of the value of the underlying
asset or index. The Fund will initially be required to
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deposit with the Trust's custodian or the broker effecting the futures
transaction an amount of "initial margin" in cash or securities, as permitted
under applicable regulatory policies.
Initial margin in futures transactions is different from margin in
securities transactions in that the former does not involve the borrowing of
funds by the customer to finance the transaction. Rather, the initial margin is
like a performance bond or good faith deposit on the contract. Subsequent
payments (called "maintenance margin") to and from the broker will be made on a
daily basis as the price of the underlying asset fluctuates. This process is
known as "marking to market." For example, when the Fund has taken a long
position in a futures contract and the value of the underlying asset has risen,
that position will have increased in value and the
Fund will receive from the broker a maintenance margin payment equal to the
increase in value of the underlying asset. Conversely, when the Fund has taken a
long position in a futures contract and the value of the underlying instrument
has declined, the position would be less valuable, and the Fund would be
required to make a maintenance margin payment to the broker.
At any time prior to expiration of the futures contract, the Fund may
elect to close the position by taking an opposite position which will terminate
the Fund's position in the futures 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
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purchased put increases in value as the value of the underlying security falls
and a purchased call increases in value as the value of the underlying security
rises.
The principal reason to write options is to generate extra income (the
premium paid by the buyer). Written options have varying degrees of risk. An
uncovered written call option theoretically carries unlimited risk, as the
market price of the underlying asset could rise far above the exercise price
before its expiration. This risk is tempered when the call option is covered,
that is, when the option writer owns the underlying asset. In this case, the
writer runs the risk of the lost opportunity to participate in the appreciation
in value of the asset rather than the risk of an out-of-pocket loss. A written
put option has defined risk, that is, the difference between the agreed-upon
price that the Fund must pay to the buyer upon exercise of the put and the
value, which could be zero, of the asset at the time of exercise.
The obligation of the writer of an option continues until the writer
effects a closing purchase transaction or until the option expires. To secure
its obligation to deliver the underlying asset in the case of a call option, or
to pay for the underlying asset in the case of a 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.
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Limitations and Risks of Options and Futures Activity
The Fund may not establish a position in a commodity futures contract
or purchase or sell a commodity option contract for other than bona fide hedging
purposes if immediately thereafter the sum of the amount of initial margin
deposits and premiums required to establish such positions for such nonhedging
purposes would exceed 5% of the market value of the Fund's net assets. The Fund
applies a similar policy to options that are not commodities.
As noted above, the Fund may engage in both hedging and nonhedging
strategies. Although effective hedging can generally capture the bulk of a
desired risk adjustment, no hedge is completely effective. The Fund's ability to
hedge effectively through transactions in futures and options depends on the
degree to which price movements in its holdings correlate with price movements
of the futures and options.
Nonhedging strategies typically involve special risks. The
profitability of the Fund's nonhedging 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 the Fund to deposit cash to meet
applicable margin requirements. The Fund will enter into an option or futures
position only if it appears to be a liquid investment.
Swaps
The Fund may enter into various forms of swap arrangements with
counterparties with respect to interest rates, currency rates or indices,
including the purchase of caps, floors and collars as described below. In an
interest rate swap the Fund could agree for a specified period to pay a bank or
investment banker the floating rate of interest on a so-called notional
principal amount (i.e., an assumed figure selected by the parties for this
purpose) in exchange for agreement by the bank or investment banker to pay the
Fund a fixed rate of interest on the notional principal amount. In a currency
swap the Fund would agree with the other party to exchange cash flows based on
the relative differences in values of a notional amount of two (or more)
currencies; in an index swap, the Fund would agree to exchange cash flows on a
notional amount based on changes in the values of the selected indices. Purchase
of a cap
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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
for entities which are not commodity pool operators, such as the Fund. In
entering a swap arrangement, the Fund is dependent upon the creditworthiness and
good faith of the counterparty. The Fund attempts to reduce the risks of
nonperformance by the counterparty by dealing only with established, reputable
institutions. The swap market is still relatively new and emerging; positions in
swap arrangements may become illiquid to the extent that nonstandard
arrangements with one counterparty are not readily transferable to another
counterparty or if a market for the transfer of swap positions does not develop.
The use of interest rate swaps is a highly specialized activity which involves
investment techniques and risks different from those associated with ordinary
portfolio securities transactions. If the Investment Manager is incorrect in its
forecasts of market values, interest rates and other applicable factors, the
investment performance of the Fund would diminish compared with what it would
have been if these investment techniques were not used. Moreover, even if the
Investment Manager is correct in its forecasts, there is a risk that the swap
position may correlate imperfectly with the price of the asset or liability
being hedged.
Currency Transactions
The Fund may engage in currency exchange transactions in order to
protect against the effect of uncertain future exchange rates on securities
denominated in foreign currencies. The
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Fund will conduct its currency exchange transactions either on a spot (i.e.,
cash) basis at the rate prevailing in the currency exchange market, or by
entering into forward contracts to purchase or sell currencies. The Fund's
dealings in forward currency exchange contracts will be limited to hedging
involving either specific transactions or aggregate portfolio positions. A
forward currency contract involves an obligation to purchase or sell a specific
currency at a future date, which may be any fixed number of days from the date
of the contract agreed upon by the parties, at a price set at the time of the
contract. These contracts are not commodities and are entered into in the
interbank market conducted directly between currency traders (usually large
commercial banks) and their customers. In entering a forward currency contract,
the Fund is dependent upon the creditworthiness and good faith of the
counterparty. The Fund attempts to reduce the risks of nonperformance by the
counterparty by dealing only with established, reputable institutions. Although
spot and forward contracts will be used primarily to protect the Fund from
adverse currency movements, they also involve the risk that anticipated currency
movements will not be accurately predicted, which may result in losses to the
Fund. This method of protecting the value of the Fund's portfolio securities
against a decline in the value of a currency does not eliminate fluctuations in
the underlying prices of the securities. It simply establishes a rate of
exchange that can be achieved at some future point in time. Although such
contracts tend to minimize the risk of loss due to a decline in the value of
hedged currency, they tend to limit any potential gain that might result should
the value of such currency increase.
Repurchase Agreements
The Fund may enter into repurchase agreements. Repurchase agreements
occur when the Fund acquires a security and the seller, which may be either (i)
a primary dealer in U.S. Government securities or (ii) an FDIC-insured bank
having gross assets in excess of $500 million, simultaneously commits to
repurchase it at an agreed-upon price on an agreed-upon date within a specified
number of days (usually not more than seven) from the date of purchase. The
repurchase price reflects the purchase price plus an agreed-upon market rate of
interest which is unrelated to the coupon rate or maturity of the acquired
security. The Fund will only enter into repurchase agreements involving U.S.
Government securities. Repurchase agreements could involve certain risks in the
event of default or insolvency of the other party, including possible delays or
restrictions upon the Fund's ability to dispose of the underlying securities.
Repurchase agreements will be limited to 30% of the Fund's total assets, except
that repurchase agreements extending for more than seven days when combined with
any other illiquid securities held by the Fund will be limited to 15% of the
Fund's total assets.
Reverse Repurchase Agreements
The Fund may enter into reverse repurchase agreements. However, the
Fund may not engage in reverse repurchase agreements in excess of 5% of the
Fund's total assets. 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
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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 at 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 in the U.S. Treasury
market when dealers begin to trade a new issue of bonds or notes shortly after a
Treasury financing is announced, but prior to the actual sale of the securities.
Similarly, securities to be created by a merger of companies may also be traded
prior to the actual consummation of the merger. Such transactions may involve a
risk of loss if the value of the securities falls below the price committed to
prior to actual issuance. The Trust's custodian will establish a segregated
account when the Fund purchases securities on a when-issued basis consisting of
cash or liquid securities equal to the amount of the when-issued commitments.
Securities transactions involving delayed deliveries or forward commitments are
frequently characterized as when-issued transactions and are similarly treated
by the Fund.
Restricted Securities
It is the Fund's policy not to make an investment in restricted
securities, including restricted securities sold in accordance with Rule 144A
under the Securities Act of 1933 ("Rule 144A Securities") if, as a result, more
than 35% of the Fund's total assets are invested in restricted securities,
provided not more than 10% of the Fund's total assets are invested in restricted
securities other than Rule 144A Securities.
Securities may be resold pursuant to Rule 144A under certain
circumstances only to qualified institutional buyers as defined in the rule, and
the markets and trading practices for such securities are relatively new and
still developing; depending on the development of such markets, Rule 144A
Securities may be deemed to be liquid as determined by or in accordance with
methods adopted by the Trustees. Under such methods the following factors are
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
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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.
Mortgage-Related Securities
The Fund may also invest in mortgage-related securities which represent
interests in pools of mortgage loans and provide the Fund with a flow-through of
interest and principal payments as such payments are received with respect to
the mortgages in the pool. Mortgage-related securities may be issued by private
entities such as investment banking firms and insurance companies. An issuer may
offer senior or subordinated securities backed by the same pool of mortgages.
The senior securities have priority to the interest and/or principal payments on
the mortgages in the pool; the subordinate securities have less priority to such
payments on the mortgages in the pool. The mortgage-related securities in which
the Fund invests will be rated in the AAA major rating category by S&P or Aaa
major rating category by Moody's or not rated but considered by the Investment
Manager to be of equivalent investment quality to comparably rated securities.
Mortgage-related securities and certain U.S. Government securities
which are based on mortgages currently offer yields higher than those available
from other kinds of government securities, but because of the possibility of
prepayment of the underlying mortgages, they may be less effective than other
types of securities as a means of locking in attractive long-term interest
rates. This is caused by the need to reinvest prepayments of principal generally
and the possibility of significant unscheduled payments resulting from a decline
in mortgage rates. As a result, mortgage-related securities may have less
potential for capital appreciation during periods of declining interest rates
than other securities with comparable maturities, while having a comparable risk
of decline during periods of rising interest rates.
Zero Coupon Securities
Fixed income securities in which the Fund may invest include zero or
step coupon securities. Zero or step coupon securities 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 or 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 amount of the discount fluctuates with the market value of
such
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securities, which may be more volatile than that of securities which pay
interest at regular intervals.
Foreign Investments
The Fund reserves the right to invest without limitation in securities
of non-U.S. issuers directly, or indirectly in the form of American Depositary
Receipts ("ADRs") and European Depositary Receipts ("EDRs"). Under current
policy, however, the Fund limits such investments, including ADRs and EDRs, to a
maximum of 20% of its total assets.
ADRs are receipts, typically issued by a U.S. bank or trust company,
which evidence ownership of underlying securities issued by a foreign
corporation or other entity. EDRs are receipts issued in Europe which evidence a
similar ownership arrangement. Generally, ADRs in registered form are designed
for use in U.S. securities markets and EDRs are designed for use in European
securities markets. The underlying securities are not always denominated in the
same currency as the ADRs or EDRs. Although investment in the form of ADRs or
EDRs facilitates trading in foreign securities, it does not mitigate all the
risks associated with investing in foreign securities.
ADRs are available through facilities which may be either "sponsored"
or "unsponsored." In a sponsored arrangement, the foreign issuer establishes the
facility, pays some or all of the depository's fees, and usually agrees to
provide shareholder communications. In an unsponsored arrangement, the foreign
issuer is not involved, and the ADR holders pay the fees of the depository.
Sponsored ADRs are generally more advantageous to the ADR holders and the issuer
than are unsponsored ADRs. More and higher fees are generally charged in an
unsponsored program compared to a sponsored facility. Only sponsored ADRs may be
listed on the New York or American Stock Exchanges. Unsponsored ADRs may prove
to be more risky due to (a) the additional costs involved to the Fund; (b) the
relative illiquidity of the issue in U.S. markets; and (c) the possibility of
higher trading costs in the over-the-counter market as opposed to exchange based
tradings. The Fund will take these and other risk considerations into account
before making an investment in an unsponsored ADR.
The risks associated with investments in foreign securities include
those resulting from fluctuations in currency exchange rates, revaluation of
currencies, future political and economic developments, including the risks of
nationalization or expropriation, the possible imposition of currency exchange
blockages, higher operating expenses, foreign withholding and other taxes which
may reduce investment return, reduced availability of public information
concerning issuers, the difficulties in obtaining and enforcing a judgment
against a foreign issuer and the fact that foreign issuers are not generally
subject to uniform accounting, auditing and financial reporting standards or to
other regulatory practices and requirements comparable to those applicable to
domestic issuers. Moreover, securities of many foreign issuers may be
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less liquid and their prices more volatile than those of securities of
comparable domestic issuers.
It is anticipated that a majority of the foreign investments by the
Fund will consist of securities of issuers in countries with developed
economies. However, the Fund may also invest in the securities of issuers in
countries with less developed economies as deemed appropriate by the Investment
Manager, although the Fund presently does not expect to invest more than 5% of
its total assets in issuers in such less developed countries. Such countries
include countries that have an emerging stock market that trades a small number
of securities; countries with low- to middle-income economies; and/or countries
with economies that are based on only a few industries. Eastern European
countries are considered to have less developed capital markets.
Securities Lending
The Fund 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 or certain unaffiliated mutual funds, irrevocable stand-by
letters of credit issued by a bank, or repurchase agreements, or other similar
investments. The investing of cash collateral received from loaning portfolio
securities involves leverage which magnifies the potential for gain or loss on
monies invested and, therefore, results in an increase in the volatility of the
Fund's outstanding securities. Such loans may be terminated at any time.
The Fund will retain 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 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
involves greater transaction costs, relative to other funds in general, and may
have tax and other consequences.
14
<PAGE>
Temporary and Defensive Investments
The Fund may hold up to 100% of its assets in cash or short-term debt
securities for temporary defensive purposes. The Fund will adopt a temporary
defensive position when, in the opinion of the Investment Manager, such a
position is more likely to provide protection against adverse market conditions
than adherence to the Fund's other investment policies. The types of short-term
instruments in which the Fund may invest for such purposes include short-term
money market securities, such as repurchase agreements, and securities issued or
guaranteed by the U.S. Government or its agencies or instrumentalities,
certificates of deposit, time deposits and bankers' acceptances of certain
qualified financial institutions and corporate commercial paper, which at the
time of purchase are rated at least within the "A" major rating category by S&P
or the "Prime" major rating category by Moody's, or, if not rated, issued by
companies having an outstanding long-term unsecured debt issued rated at least
within the "A" category by S&P or Moody's.
Industry Classifications
In determining how much of the Fund's portfolio is invested in a given
industry, the following industry classifications are currently used. Securities
issued or guaranteed as to principal or interest by the U.S. Government or its
agencies or instrumentalities or mixed-ownership Government corporations or
sponsored enterprises (including repurchase agreements involving U.S. Government
securities to the extent excludable under relevant regulatory interpretations)
are excluded. Securities issued by foreign governments are also excluded.
Companies engaged in the business of financing may be classified according to
the industries of their parent or sponsor companies or industries that otherwise
most affect such financing companies. Issuers of asset-backed pools will be
classified as separate industries based on the nature of the underlying assets,
such as mortgages and credit card receivables. "Asset-backed-Mortgages" includes
private pools of nongovernment backed mortgages.
<TABLE>
<CAPTION>
<S> <C> <C>
Aerospace Electric Oil Refining & Marketing
Airline Electric Equipment Oil Service
Asset-backed--Mortgages Electronic Components Paper Products
Asset-backed--Credit Card Electronic Equipment Personal Care
Receivables Entertainment Photography
Automotive Financial Service Plastics
Automotive Parts Food & Beverage Printing & Publishing
Bank Forest Products Railroad
Building Gaming & Lodging Real Estate & Building
Business Services Gas Recreation
Cable Gas Transmission Retail Trade
Capital Goods & Equipment Grocery Savings & Loan
Chemical Healthcare & Hospital Shipping & Transportation
Computer Software & Management Technology &
Service Hospital Supply Communications
Conglomerate Hotel & Restaurant Telephone
Consumer Goods & Insurance Textile & Apparel
Services Machinery Tobacco
Container Media Truckers
Cosmetics Metal & Mining Trust Certificates--
Diversified Office Equipment Government Related
Drug Oil Production Lending
</TABLE>
15
<PAGE>
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:
[bullet] direct obligations of the U.S. Treasury, i.e., U.S. Treasury bills,
notes, certificates and bonds;
[bullet] 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
[bullet] 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
16
<PAGE>
has no legal obligation to do so. Obligations such as those of the Federal Home
Loan Banks, the Federal Farm Credit Banks, the Federal National Mortgage
Association and the Federal Home Loan Mortgage Corporation are backed by the
credit of the agency or instrumentality issuing the obligations. Certain
obligations of Resolution Funding Corporation, a mixed-ownership Government
corporation, are backed with respect to interest payments by the U.S. Treasury,
and with respect to principal payments by U.S. Treasury obligations held in a
segregated account with a Federal Reserve Bank. Except for certain
mortgage-related securities, the Fund will only invest in obligations issued by
mixed-ownership Government corporations where such securities are guaranteed as
to payment of principal or interest by the U.S. Government or a U.S. Government
agency or instrumentality, and any unguaranteed principal or interest is
otherwise supported by U.S. Government obligations held in a segregated account.
Treasury STRIPS and Custodial Receipts. 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
17
<PAGE>
or foreign bank, including a U.S. branch or agency of a foreign bank. The
borrower is liable for payment as well as the bank, which unconditionally
guarantees to pay the draft at its face amount on the maturity date. Most
acceptances have maturities of six months or less and are traded in secondary
markets prior to maturity. Time deposits are nonnegotiable deposits for a fixed
period of time at a stated interest rate. The Fund will not invest in any such
bank money investment unless the investment is issued by a U.S. bank that is a
member of the Federal Deposit Insurance Corporation ("FDIC"), including any
foreign branch thereof, a U.S. branch or agency of a foreign bank, a foreign
branch of a foreign bank, or a savings bank or savings and loan association that
is a member of the FDIC and which at the date of investment has capital, surplus
and undivided profits (as of the date of its most recently published financial
statements) in excess of $50 million. The Fund will not invest in time deposits
maturing in more than seven days and will not invest more than 10% of its total
assets in time deposits maturing in two to seven days.
U.S. branches and agencies of foreign banks are offices of foreign
banks and are not separately incorporated entities. They are chartered and
regulated either federally or under state law. U.S. federal branches or agencies
of foreign banks are chartered and regulated by the Comptroller of the Currency,
while state branches and agencies are chartered and regulated by authorities of
the respective states or the District of Columbia. U.S. branches of foreign
banks may accept deposits and thus are eligible for FDIC insurance; however, not
all such branches elect FDIC insurance. Unlike U.S. branches of foreign banks,
U.S. agencies of foreign banks may not accept deposits and thus are not eligible
for FDIC insurance. Both branches and agencies can maintain credit balances,
which are funds received by the office incidental to or arising out of the
exercise of their banking powers and can exercise other commercial functions,
such as lending activities.
Short-Term Corporate Debt Instruments. Short-term corporate debt
instruments include commercial paper to finance short-term credit needs (i.e.,
short-term, unsecured promissory notes) issued by corporations including but not
limited to (a) domestic or foreign bank holding companies or (b) their
subsidiaries or affiliates where the debt instrument is guaranteed by the bank
holding company or an affiliated bank or where the bank holding company or the
affiliated bank is unconditionally liable for the debt instrument. Commercial
paper is usually sold on a discounted basis and has a maturity at the time of
issuance not exceeding nine months.
Commercial Paper Ratings. Commercial paper investments at the time of
purchase will be rated within the "A" major rating category by S&P or within the
"Prime" major rating category by Moody's, or, if not rated, issued by companies
having an outstanding long-term unsecured debt issue rated at least within the
"A" category by S&P or by Moody's. The money market investments in corporate
bonds and debentures (which must have maturities at the date of settlement of
one year or less) must be rated at the time of purchase at least within the "A"
category by S&P or within the "Prime" category by Moody's.
18
<PAGE>
Commercial paper rated within the "A" category (highest quality) by S&P
is issued by entities which have liquidity ratios which are adequate to meet
cash requirements. Long-term senior debt is rated within the "A" category or
better, although in some cases credits within the "BBB" category may be allowed.
The issuer has access to at least two additional channels of borrowing. Basic
earnings and cash flow have an upward trend with allowance made for unusual
circumstances. Typically, the issuer's industry is well established and the
issuer has a strong position within the industry. The reliability and quality of
management are unquestioned. The relative strength or weakness of the above
factors determines whether the issuer's commercial paper is rated A-1, A-2 or
A-3. (Those A-1 issues determined to possess overwhelming safety characteristics
are denoted with a plus (+) sign: A-1+.)
The rating Prime is the highest commercial paper rating category
assigned by Moody's. Among the factors considered by Moody's in assigning
ratings are the following: evaluation of the management of the issuer; economic
evaluation of the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain areas; evaluation of the
issuer's products in relation to competition and customer acceptance; liquidity;
amount and quality of long-term debt; trend of earnings over a period of 10
years; financial management of obligations which may be present or may arise as
a result of public interest questions and preparations to meet such obligations.
These factors are all considered in determining whether the commercial paper is
rated Prime-1, Prime-2 or Prime-3.
In the event the lowering of ratings of debt instruments held by the
Fund by applicable rating agencies results in a material decline in the overall
quality of the Fund's portfolio, the Trustees of the Trust will review the
situation and take such action as they deem in the best interests of the Fund's
shareholders, including, if necessary, changing the composition of the
portfolio.
THE TRUST, THE FUND AND ITS SHARES
State Street Research Financial Trust currently is comprised of the
following series: State Street Research Government Income Fund, State Street
Research Strategic Portfolios: Conservative, State Street Research Strategic
Portfolios: Moderate and State Street Research Strategic Portfolios: Aggressive.
The Trustees of the Trust have authority to issue an unlimited number of shares
of beneficial interest of separate series, $.001 par value per share. The
Trustees also have authority, without the necessity of a shareholder vote, to
create any number of new series or classes or to commence the public offering of
shares of any previously established series or class. A "series" is a separate
pool of assets of the Trust which is separately managed and has a different
investment objective and different investment policies from those of another
series.
The Trustees have authorized shares of the Fund to be issued in four
classes: Class A, Class B, Class C and Class S shares. Prior to November 1,
1997, the Fund's current Class C
19
<PAGE>
shares were designated as Class D shares and the Fund's current Class S shares
were designated as Class C shares.
Each share of each class of shares represents an identical legal
interest in the same portfolio of investments of the Fund, has the same rights
and is identical in all respects, except that Class A, Class B and Class C
shares bear the expenses of the deferred sales arrangement and any expenses
(including the higher service and distribution fees) resulting from such sales
arrangement, and certain other incremental expenses related to a class. Each
class will have exclusive voting rights with respect to provisions of the Rule
12b-1 distribution plan pursuant to which the service and distribution fees, if
any, are paid. Although the legal rights of holders of each class of shares are
identical, it is likely that the different expenses borne by each class will
result in different net asset values and dividends. The different classes of
shares of the Fund also have different exchange privileges. Except for those
differences between classes of shares described above, in the Fund's Prospectus
and otherwise this Statement of Additional Information, each share of the Fund
has equal dividend, redemption and liquidation rights with other shares of the
Fund, and when issued, is fully paid and nonassessable by the Fund.
The rights of holders of shares may be modified by the Trustees at any
time, so long as such modifications do not have a material, adverse effect on
the rights of any shareholder. On any matter submitted to the shareholders, the
holder of a Fund share is entitled to one vote per share (with proportionate
voting for fractional shares) regardless of the relative net asset value
thereof.
Under the Master Trust Agreement, no annual or regular meeting of
shareholders is required. Thus, there ordinarily will be no shareholder meetings
unless required by the 1940 Act. Except as otherwise provided under the 1940
Act, the Board of Trustees will be a self-perpetuating body until fewer than
two-thirds of the Trustees serving as such are Trustees who were elected by
shareholders of the Trust. In the event less than a majority of the Trustees
serving as such were elected by shareholders of the Trust, a meeting of
shareholders will be 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
20
<PAGE>
the Fund would be unable to meet its obligations. The Investment Manager
believes that, in view of the above, the risk of personal liability to
shareholders is remote.
TRUSTEES AND OFFICERS
The Trustees and principal officers of the Trust, their addresses, and
their principal occupations and positions with certain affiliates of the
Investment Manager are set forth below.
*+Peter C. Bennett, One Financial Center, Boston, MA 02111, serves as
Vice President of the Trust. He is 59. His principal occupation is Executive
Vice President and Director of State Street Research & Management Company.
During the past five years he has also served as Senior Vice President of State
Street Research & Management Company. Mr. Bennett's other principal business
affiliation is Director, State Street Research Investment Services, Inc.
+Steve A. Garban, The Pennsylvania State University, 210 Old Main,
University Park, PA 16802, serves as Trustee of the Trust. He is 60. He is
retired and was formerly Senior Vice President for Finance and Operations and
Treasurer of The Pennsylvania State University.
+Malcolm T. Hopkins, 14 Brookside Road, Biltmore Forest, Asheville, NC
28803, serves as Trustee of the Trust. He is 69. He is engaged principally in
private investments. Previously, he was Vice Chairman of the Board and Chief
Financial Officer of St. Regis Corp.
*+John H. Kallis, One Financial Center, Boston, MA 02111, serves as
Vice President of the Trust. He is 57. His principal occupation is Senior Vice
President of State Street Research & Management Company. During the past five
years he has also served as portfolio manager for State Street Research &
Management Company.
+Edward M. Lamont, Box 1234, Moores Hill Road, Syosset, NY 11791,
serves as Trustee of the Trust. He is 71. He is engaged principally in private
investments and civic affairs, and is an author of business history. Previously,
he was with Morgan Guaranty Trust Company of New York.
- ------------------------
* or +, see footnotes on page 24.
21
<PAGE>
+Robert A. Lawrence, Saltonstall & Co., 50 Congress Street, Boston, MA
02109, serves as Trustee of the Trust. He is 71. His principal occupation is
Associate of Saltonstall & Co., a private investment firm. During the past five
years he has also served as Partner of that firm.
*+Gerard P. Maus, One Financial Center, Boston, MA 02111, serves as
Treasurer of the Trust. He is 46. His principal occupation is Executive Vice
President, Treasurer, Chief Financial Officer and Director of State Street
Research & Management Company. During the past five years he has also served as
Executive Vice President and Chief Financial Officer of New England Investment
Companies and as Senior Vice President and Vice President of New England Mutual
Life Insurance Company. Mr. Maus's other principal business affiliations include
Executive Vice President, Treasurer, Chief Financial Officer and Director of
State Street Research Investment Services, Inc.
*+Francis J. McNamara, III, One Financial Center, Boston, MA 02111,
serves as Secretary and General Counsel of the Trust. He is 42. His principal
occupation is Executive Vice President, General Counsel and Secretary of State
Street Research & Management Company. During the past five years he has also
served as Senior Vice President of State Street Research & Management Company
and as Senior Vice President, General Counsel and Assistant Secretary of The
Boston Company, Inc., Boston Safe Deposit and Trust Company and The Boston
Company Advisors, Inc. Mr. McNamara's other principal business affiliations
include Senior Vice President, Clerk and General Counsel of State Street
Research Investment Services, Inc.
+Dean O. Morton, 3200 Hillview Avenue, Palo Alto, CA 94304, serves as
Trustee of the Trust. He is 65. He is retired, and was formerly Executive Vice
President, Chief Operating Officer and Director of Hewlett-Packard Company.
+Thomas L. Phillips, 141 Spring Street, Lexington, MA 02173, serves as
Trustee of the Trust. He is 73. He is retired and was formerly Chairman of the
Board and Chief Executive Officer of Raytheon Company, of which he remains a
Director.
- ------------------------
* or +, see footnotes on page 24.
22
<PAGE>
+Toby Rosenblatt, 3409 Pacific Avenue, San Francisco, CA 94118, serves
as Trustee of the Trust. He is 59. His principal occupations during the past
five years have been President of The Glen Ellen Company, a private investment
company, and Vice President of Founders Investments Ltd.
+Michael S. Scott Morton, Massachusetts Institute of Technology, 77
Massachusetts Avenue, Cambridge, MA 02139, serves as Trustee of the Trust. He is
60. His principal occupation during the past five years has been Jay W.
Forrester Professor of Management at Sloan School of Management, Massachusetts
Institute of Technology.
*+Thomas A. Shively, One Financial Center, Boston, MA 02111, serves as
Vice President of the Trust. He is 43. His principal occupation is Executive
Vice President and Director of State Street Research & Management Company.
During the past five years he has also served as Senior Vice President of State
Street Research & Management Company. Mr. Shively's other principal business
affiliations include Director of State Street Research Investment Services, Inc.
*+Ralph F. Verni, One Financial Center, Boston, MA 02111, serves as
Chairman of the Board, President, Chief Executive Officer and Trustee of the
Trust. He is 55. His principal occupation currently, and during the past five
years, is 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.
+Jeptha H. Wade, 251 Old Billerica Road, Bedford, MA 01730, serves as
Trustee of the Trust. He is 72. He is retired and was formerly Of Counsel for
the law firm Choate, Hall & Stewart. He was a partner of that firm from 1960 to
1987.
- ------------------------
* or +, see footnotes on page 24.
23
<PAGE>
- -------------
* These Trustees and/or officers are or may be deemed to be "interested
persons" of the Trust under the 1940 Act because of their affiliations
with the Fund's investment adviser.
+ Serves as a Trustee/Director and/or officer of one or more of the
following investment companies, each of which has a direct or indirect
advisory relationship with the Investment Manager or its affiliates:
State Street Research Equity Trust, State Street Research Financial
Trust, State Street Research Income Trust, State Street Research Money
Market Trust, State Street Research Tax-Exempt Trust, State Street
Research Capital Trust, State Street Research Exchange Trust, State
Street Research Growth Trust, State Street Research Master Investment
Trust, State Street Research Securities Trust, State Street Research
Portfolios, Inc. and Metropolitan Series Fund, Inc.
24
<PAGE>
Record ownership of shares of the Fund as of November 30, 1997 was as
follows:
Class Holder % of Class
A Merrill Lynch 38.51
B Merrill Lynch 17.10
C(a) Merrill Lynch 60.05
S(a) Chase Manhattan Bank 6.93
State Street Bank 6.52
Amalgamated Bank 12.87
Metropolitan 69.40
The full name and address of the above persons or institutions are:
Merrill Lynch, Pierce, Fenner & Smith, Inc. (b)
One Liberty Plaza, 165 Broadway, New York, NY 10080
State Street Bank and Trust Company (b)(c)
225 Franklin Street, Boston, MA 02111
Amalgamated Bank of New York (b)(d)
P.O. Box 370, Cooper Station, New York, NY 10003
Chase Manhattan Bank, N.A. (b)(e)
770 Broadway, New York, NY 10003
Metropolitan Life Insurance Company
303 Perimeter Center N. Suite 500, Atlanta, GA 30346
(a) Prior to November 1, 1997, the Fund's current Class C shares were
designated as Class D shares and the Fund's current Class S shares were
designated as Class C shares.
(b) The Fund believes that each named recordholder does not have beneficial
ownership of such shares.
(c) State Street Bank and Trust Company holds such shares as custodian for
individual retirement accounts.
(d) Amalgamated Bank holds such shares as custodian for various retirement
accounts.
(e) Chase Manhattan Bank holds such shares as trustee under certain employee
benefit plans serviced by Metropolitan Life Insurance Company
("Metropolitan").
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 November 30, 1997, the Trustees and principal officers of the
Trust as a group owned less than 1% of the outstanding Class A shares of the
Fund, and owned none of the outstanding Class B, Class C or Class S shares.*
______________
* Prior to November 1, 1997, the Fund's current Class C shares were
designated as Class D shares and the Fund's current Class S shares were
designated as Class C shares.
25
<PAGE>
The Trustees were compensated as follows:
Total
Compensation
Aggregate From Trust and
Compensation Complex Paid
Name of Trustee From Trust(a) to Trustees(b)
Steve A. Garban $ 5,459 $______
Malcolm T. Hopkins $ 6,059 $______
Edward M. Lamont $ 9,700 $______
Robert A. Lawrence $10,100 $______
Dean O. Morton $10,900 $______
Thomas L. Phillips $10,100 $______
Toby Rosenblatt $ 9,700 $______
Michael S. Scott Morton $12,100 $______
Ralph F. Verni $ 0 $ 0
Jeptha H. Wade $11,300 $______
(a) For the Fund's fiscal year ended October 31, 1997. Includes
compensation received from multiple series of the Trust. See "The
Trust, the Fund and its Shares" in this Statement of Additional
Information for a listing of series.
(b) Includes compensation on behalf of all series of 12 investment
companies for which the Investment Manager served directly or
indirectly as investment adviser or for which the Investment Manager
served as sub-investment adviser, and series of State Street Research
Portfolios, Inc., for which State Street Research Investment Services,
Inc. served as distributor. "Total Compensation from Trust and Complex
Paid to Trustees" for the 12 months ended December 31, 1997. The Trust
does not provide any pension or retirement benefits for the Trustees.
26
<PAGE>
INVESTMENT ADVISORY SERVICES
State Street Research & Management Company, the Investment Manager, a
Delaware corporation, with offices at One Financial Center, Boston,
Massachusetts 02111-2690, acts as investment adviser to the Fund. The Investment
Manager was founded by Paul Cabot, Richard Saltonstall and Richard Paine to
serve as investment adviser to one of the nation's first mutual funds, presently
known as State Street Research Investment Trust, which they had formed in 1924.
Their investment management philosophy emphasized comprehensive
fundamental research and analysis, including meetings with the management of
companies under consideration for investment. The Investment Manager's portfolio
management group has extensive investment industry experience managing equity
and debt securities. In managing debt securities, if any, for a portfolio, the
Investment Manager may consider yield curve positioning, sector rotation and
duration, among other factors.
The Advisory Agreement provides that the Investment Manager shall
furnish the Fund with an investment program, office facilities and such
investment advisory, research and administrative services as may be required
from time to time. The Investment Manager compensates all executive and clerical
personnel and Trustees of the Trust if such persons are employees of the
Investment Manager or its affiliates. The Investment Manager is an indirect
wholly-owned subsidiary of Metropolitan.
The advisory fee payable monthly by the Fund to the Investment Manager
is computed as a percentage of the average of the value of the net assets of the
Fund as determined at the close of regular trading on the New York Stock
Exchange (the "NYSE") on each day the NYSE is open for trading, at the annual
rate of 0.65% of the net assets of the Fund.
The advisory fees paid by the Fund to the Investment Manager for the
last three fiscal years, prior to the assumption of fees or expenses, were as
follows: 1997, $4,364,193; 1996, $4,723,842; and 1995, $4,651,813
The Advisory Agreement provides that it shall continue in effect from
year to year with respect to the Fund as long as it is approved at least
annually both (i) by a vote of a majority of the outstanding voting securities
of the Fund (as defined in the 1940 Act) or by the Trustees of the Trust, and
(ii) in either event by a vote of a majority of the Trustees who are not parties
to the Advisory Agreement or "interested persons" of any party thereto, cast in
person at a meeting called for the purpose of voting on such approval. The
Advisory Agreement may be terminated on 60 days' written notice by either party
and will terminate automatically in the event of its assignment, as defined
under the 1940 Act and regulations thereunder. Such regulations provide that a
transaction which does not result in a change of actual control or management of
an adviser is not deemed an assignment.
27
<PAGE>
Under the Fund's Administration Agreement between the Investment
Manager and the Distributor, the Distributor provides assistance to the
Investment Manager in performing certain fund administration services for the
Trust, such as assistance in determining the daily net asset value of shares of
each series of the Trust and in preparing various reports required by
regulations.
Under a Shareholders' Administrative Services Agreement between the
Trust and the Distributor, the Distributor provides shareholders' administrative
services, such as responding to inquiries and instructions from investors
respecting the purchase and redemption of shares of the Fund, and is entitled to
reimbursements of its costs for providing such services. Under certain
arrangements for Metropolitan to provide subadministration services,
Metropolitan may receive a fee for the maintenance of certain share ownership
records for participants in sponsored arrangements, such as employee benefit
plans, through or under which the Fund's shares may be purchased.
Under the Code of Ethics of the Investment Manager, investment
management personnel are only permitted to engage in personal securities
transactions in accordance with certain conditions relating to such person's
position, the identity of the security, the timing of the transaction, and
similar factors. Such personnel must report their personal securities
transactions quarterly and supply broker confirmations of such transactions to
the Investment Manager.
PURCHASE AND REDEMPTION OF SHARES
Shares of the Fund are distributed by State Street Research Investment
Services, Inc., the Distributor. The Fund offers four classes of shares which
may be purchased at the next determined net asset value per share plus, in the
case of all classes except Class S shares, a sales charge which, at the election
of the investor, may be imposed (i) at the time of purchase (the Class A shares)
or (ii) on a deferred basis (the Class B and Class C shares). General
information on how to buy shares of the Fund, as well as sales charges involved,
are set forth under "Your Account" in the Prospectus. The following supplements
that information.
Public Offering Price. The public offering price for each class of
shares is based on their net asset value determined as of the close of 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.
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Class A Shares--Reduced Sales Charges. The reduced sales charges set
forth under "Your Account--Class A Sales Charge Reductions and Waivers" in the
Fund's Prospectus apply to purchases made at any one time by any "person," which
includes: (i) an individual, or an individual combining with his or her spouse
and their children and purchasing for his, her or their own account; (ii) a
"company" as defined in Section 2(a)(8) of the 1940 Act; (iii) a trustee or
other fiduciary purchasing for a single trust estate or single fiduciary account
(including a pension, profit sharing or other employee benefit trust created
pursuant to a plan qualified under Section 401 of the Internal Revenue Code);
(iv) a tax-exempt organization under Section 501(c)(3) or (13) of the Internal
Revenue Code; and (v) an employee benefit plan of a single employer or of
affiliated employers.
Investors may purchase Class A shares of the Fund at reduced sales
charges by executing a Letter of Intent to purchase no less than an aggregate of
$100,000 of the Fund or any combination of Class A shares of "Eligible Funds"
(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
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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 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.
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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 a 1% annual fee with
respect to such outstanding shares until the shares convert to Class A shares.
The proceeds of the contingent deferred sales charges and the distribution fees
are used to offset distribution expenses and thereby permit the sale of Class B
and Class C shares without an initial sales charge.
In determining the applicability and rate of any contingent deferred
sales charge of Class B or Class C shares, it will be assumed that a redemption
of the shares is made first of those shares having the greatest capital
appreciation, next of shares representing reinvestment of dividends and capital
gains distributions and finally of remaining shares held by shareholder for the
longest period of time. Class B shares that are redeemed within a five-year
period after their purchase, and Class C shares that are redeemed within a
one-year period after their purchase, will not be subject to a contingent
deferred sales charge to the extent that the value of such shares represents (1)
capital appreciation of Fund assets or (2) reinvestment of dividends or capital
gains distributions. The holding period for purposes of applying a contingent
deferred sales charge for a particular class of shares of the Fund acquired
through an exchange from another Eligible Fund will be measured from the date
that such shares were initially acquired in the other Eligible Fund, and shares
of the same class being redeemed will be considered to represent, as applicable,
capital appreciation or dividend and capital gains distribution reinvestments in
such other Eligible Fund. These determinations will result in any contingent
deferred sales charge being imposed at the lowest possible rate. For federal
income tax purposes, the amount of the contingent deferred sales charge will
reduce the gain or increase the loss, as the case may be, on the amount realized
on redemption.
Contingent Deferred Sales Charge Waivers. With respect to Class A
shares (on sales of $1 million or more and which do not involve an initial sales
charge), and Class B and Class C shares of the Fund, the contingent deferred
sales charge does not apply to exchanges or to redemptions under a systematic
withdrawal plan which meets certain conditions. In addition, the contingent
deferred sales charge will be waived for: (i) redemptions made within one year
of the death or total disability, as defined by the Social Security
Administration, of all shareholders of an account; (ii) redemptions made after
attainment of a specific age in an amount which represents the minimum
distribution required at such age under Section 401(a)(9) of the Internal
Revenue Code of 1986, as amended, for retirement accounts or plans (e.g., age
70 1/2 for Individual Retirement Accounts and Section 403(b) plans), calculated
solely on the basis of assets invested in the Fund or other Eligible Funds; and
(iii) a redemption resulting from a tax-free return of an excess contribution to
an Individual Retirement Account. (The foregoing waivers do not apply to a
tax-free rollover or transfer of assets out of the Fund). The Fund may modify or
terminate the waivers at any time; for example, the Fund
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may limit the application of multiple waivers and establish other conditions for
employee benefit plans.
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.
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
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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 Account--Investor Services--Investamatic
Program" in the Fund's Prospectus) and the Systematic Withdrawal Plan at the
same time.
Request to Dealer to Repurchase. For the convenience of shareholders,
the Fund has authorized the Distributor as its agent to accept orders from
dealers by wire or telephone for the repurchase of shares by the Distributor
from the dealer. The Fund may revoke or suspend this authorization at any time.
The repurchase price is the net asset value for the applicable shares next
determined following the time at which the shares are offered for repurchase by
the dealer to the Distributor. The dealer is responsible for promptly
transmitting a shareholder's order to the Distributor.
Signature Guarantees. Signature guarantees are required for, among
other things: (1) written requests for redemptions for more than $50,000; (2)
written requests for redemptions for any amount if the proceeds are transmitted
to other than the current address of record (unchanged in the past 30 days); (3)
written requests for redemptions for any amount submitted by corporations and
certain fiduciaries and other intermediaries; and (4) requests to transfer the
registration of shares to another owner. Signatures must be guaranteed by a
bank, a member firm of a national stock exchange, or other eligible guarantor
institution. The Transfer Agent will not accept guarantees (or notarizations)
from notaries public. The above requirements may be waived in certain instances.
Dishonored Checks. If a purchaser's check is not honored for its full
amount, the purchaser could be subject to additional charges to cover collection
costs and any investment loss, and the purchase may be canceled.
Processing Charges. Purchases and redemptions processed through
securities dealers may be subject to processing charges imposed by the
securities dealer in addition to sales charges that may be imposed by the Fund
or the Distributor.
SHAREHOLDER ACCOUNTS
General information on shareholder accounts is included in the Fund's
Prospectus under "Your Account." The following supplements that information.
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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.
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
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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.
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.
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<PAGE>
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.
The exchange privilege may be terminated or suspended or its terms
changed at any time, subject, if required under applicable regulations, to 60
days' prior notice. New accounts established for investments upon exchange from
an existing account in another fund will have the same telephone privileges with
respect to the Fund (see "Your Account--Account Policies--Telephone Requests" in
the Fund's Prospectus and "--Telephone Privileges," below) as the existing
account unless 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
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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 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. Unless a shareholder declines telephone
privileges that are offered with his or her Account, (see "Your Account--Account
Policies--Telephone Requests"), he or she is deemed to authorize the Service
Center and the Transfer Agent to: (1) act upon the telephone instructions of any
person purporting to be the shareholder to redeem, or purporting to be the
shareholder or the shareholder's dealer to exchange, shares from any account;
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, except 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, Presidents
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day.
The net asset value per share of the Fund is computed by dividing the
sum of the value of the securities held by the Fund plus any cash or other
assets minus all liabilities by the total number of outstanding shares of the
Fund at such time. Any expenses, except for extraordinary or nonrecurring
expenses, borne by the Fund, including the investment management fee payable to
the Investment Manager, are accrued daily.
In determining the values of portfolio assets as provided below, the
Trustees utilize one or more pricing services in lieu of market quotations for
certain securities which are not readily available on a daily basis. Such
services utilize information with respect to market transactions, quotations
from dealers and various relationships among securities in determining value and
may provide prices determined as of times prior to the close of the NYSE.
In general, securities are valued as follows. Securities which are
listed or traded on the New York or American Stock Exchange are valued at the
price of the last quoted sale on the respective exchange for that day.
Securities which are listed or traded on a national securities exchange or
exchanges, but not on the New York or American Stock Exchange, are valued at the
price of the last quoted sale on the exchange for that day prior to the close of
the NYSE. Securities not listed on any national securities exchange which are
traded "over the counter" and for which quotations are available on the National
Association of Securities Dealers, Inc.'s (the "NASD") NASDAQ System are valued
at the closing price supplied through such system for that day at the close of
the NYSE. Other securities are, in general, valued at the mean of the bid and
asked quotations last quoted prior to the close of the NYSE if there are market
quotations readily available, or in the absence of such market quotations, then
at the fair value thereof as determined by or under authority of the Trustees of
the Trust with the use of such pricing services as may be deemed appropriate or
methodologies approved by the Trustees.
The Trustees have authorized the use of the amortized cost method to
value short-term debt instruments issued with a maturity of one year or less and
having a remaining maturity of
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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 Fund's portfolio turnover rates for the fiscal years ended
October 31, 1996 and 1997, respectively, were as follows: 88.79% and 124.95%.
The Fund's portfolio turnover rate for the most recent fiscal year was
significantly higher than the portfolio turnover rate for the previous fiscal
year because of measures taken in light of interest rate movements and
expectations. The Fund reduced its exposure to mortgage-backed and mortgage-
related securities as interest rate spreads tightened and mortgage re-financings
became more likely. In that context, the Fund also took steps to move to a
slightly longer duration based on the weakness of the bond market.
Brokerage Allocation
The Investment Manager's policy is to seek for its clients, including
the Fund, what in the Investment Manager's judgment will be the best overall
execution of purchase or sale orders and the most favorable net prices in
securities transactions consistent with its judgment as to the business
qualifications of the various broker or dealer firms with whom the Investment
Manager may do business, and the Investment Manager may not necessarily choose
the broker offering the lowest available commission rate. Decisions with respect
to the market where the transaction is to be completed, to the form of
transaction (whether principal or agency), and to the allocation of orders among
brokers or dealers are made in accordance with this policy. In selecting brokers
or dealers to effect portfolio transactions, consideration is given to their
proven integrity and financial responsibility, their demonstrated execution
experience and capabilities both generally and with respect to particular
markets or securities, the competitiveness of their commission rates in agency
transactions (and their net prices in principal transactions), their willingness
to commit capital, and their clearance and settlement capability. The Investment
Manager makes every effort to keep informed of commission rate structures and
prevalent bid/ask spread characteristics of the markets and securities in which
the 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.
39
<PAGE>
When it appears that a number of firms could satisfy the required
standards in respect of a particular transaction, consideration may also be
given to services other than execution services which certain of such firms have
provided in the past or may provide in the future. Negotiated commission rates
and prices, however, are based upon the Investment Manager's judgment of the
rate which reflects the execution requirements of the transaction without regard
to whether the broker provides services in addition to execution. Among such
other services are the supplying of supplemental investment research; general
economic, political and business information; analytical and statistical data;
relevant market information, quotation equipment and services; reports and
information about specific companies, industries and securities; purchase and
sale recommendations for stocks and bonds; portfolio strategy services;
historical statistical information; market data services providing information
on specific issues and prices; financial publications; proxy voting data and
analysis services; technical analysis of various aspects of the securities
markets, including technical charts; computer hardware used for brokerage and
research purposes; computer software and databases (including those used for
portfolio analysis and modeling, and including software providing investment
personnel with efficient access to current and historical data from a variety of
internal and external sources) and portfolio evaluation services and relative
performance of accounts.
In the case of the Fund and other registered investment companies
advised by the Investment Manager or its affiliates, the above services may
include data relating to performance, expenses and fees of those investment
companies and other investment companies; this information is used by the
Trustees or Directors of the investment companies to fulfill their
responsibility to oversee the quality of the Investment Manager's advisory
contracts between the investment companies and the Investment Manager. The
Investment Manager considers these investment company services only in
connection with the execution of transactions on behalf of its investment
company clients and not its other clients.
Certain of the nonexecution services provided by broker-dealers may in
turn be obtained by the broker-dealers from third parties who are paid for such
services by the broker-dealers. The Investment Manager has an investment in less
than ten percent of the outstanding equity of one such third party which is
engaged in the development and licensing of trading systems which include
portfolio analysis and modeling and other research and investment
decision-making capabilities. The Investment Manager may allocate brokerage to
broker-dealers who in turn pay this third party for the portion of the third
party's trading system provided to the Investment Manager, which is estimated by
the Investment Manager to provide appropriate assistance in the investment
decision-making process. Because of its minority interest in the third party,
the Investment Manager could be said to benefit indirectly from such brokerage
allocation.
The Investment Manager regularly reviews and evaluates the services
furnished by broker-dealers. Among other measures, the Investment Manager's
investment management personnel seek to evaluate the quality of research and
other services received, and the results
40
<PAGE>
of this effort are made available to the equity trading department, which
sometimes uses this information as consideration in the selection of brokers to
execute portfolio transactions.
Some services furnished by broker-dealers may be used for research and
investment decision-making purposes, and also for marketing or administrative
purposes. Under these circumstances, the Investment Manager allocates the cost
of such services to determine the appropriate proportion of the cost which is
allocable to purposes other than research or investment decision-making and the
Investment Manager pays for that portion directly from its own funds. Some
research and execution services may benefit the Investment Manager's clients as
a whole, while others may benefit a specific segment of clients. Not all such
services will necessarily be used exclusively in connection with the accounts
which pay the commissions to the broker-dealer producing the services.
The Investment Manager has no fixed agreements or understandings with
any broker-dealer as to the amount of brokerage business which the firm may
expect to receive for services supplied to the Investment Manager or otherwise.
There may be, however, understandings with certain firms that in order for such
firms to be able to continuously supply certain services, they need to receive
allocation of a specified amount of brokerage business. These understandings are
honored to the extent possible in accordance with the policies set forth above.
It is not the Investment Manager's policy to intentionally pay a firm a
brokerage commission higher than that which another firm would charge for
handling the same transaction in recognition of services (other than execution
services) provided. However, the Investment Manager is aware that this is an
area where differences of opinion as to fact and circumstances may exist, and in
such circumstances, if any, the Investment Manager relies on the provisions of
Section 28(e) of the Securities Exchange Act of 1934, to the extent applicable.
The Fund did not pay any brokerage commission in secondary trading during the
fiscal years ended October 31, 1995, 1996, and 1997.
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.
41
<PAGE>
When more than one client of the Investment Manager is seeking to buy
or sell the same security, the sale or purchase is carried out in a manner which
is considered fair and equitable to all accounts. In allocating investments
among various clients (including in what sequence orders for trades are placed),
the Investment Manager will use its best business judgment and will take into
account such factors as the investment objectives of the clients, the amount of
investment funds available to each, the amount already committed for each client
to a specific investment and the relative risks of the investments, all in order
to provide on balance a fair and equitable result to each client over time.
Although sharing in large transactions may sometimes affect price or volume of
shares acquired or sold, overall it is believed there may be an advantage in
execution. The Investment Manager may follow the practice of grouping orders of
various clients for execution to get the benefit of lower prices or commission
rates. In certain cases where the aggregate order may be executed in a series of
transactions at various prices, the transactions are allocated as to amount and
price in a manner considered equitable to each so that each receives, to the
extent practicable, the average price of such transactions. Exceptions may be
made based on such factors as the size of the account and the size of the trade.
For example, the Investment Manager may not aggregate trades where it believes
that it is in the best interests of clients not to do so, including situations
where aggregation might result in a large number of small transactions with
consequent increased custodial and other transactional costs which may
disproportionately impact smaller accounts. Such disaggregation, depending on
the circumstances, may or may not result in such accounts receiving more or less
favorable execution relative to other clients.
CERTAIN TAX MATTERS
Federal Income Taxation of the Fund--in General
The Fund intends to qualify and elect to be treated each taxable year
as a "regulated investment company" under Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Code"), although it cannot give complete
assurance that it will do so. Accordingly, the Fund must, among other things,
(a) derive at least 90% of its gross income in each taxable year from dividends,
interest, payments with respect to securities loans, gains from the sale or
other disposition of stock, securities or foreign currencies, or other income
(including, but not limited to, gains from options, futures or forward
contracts) derived with respect to its business of investing in such stock,
securities or currencies (the "90% test"); (b) satisfy certain diversification
requirements; and (c) in order to be entitled to utilize the dividends paid
deduction, distribute annually at least 90% of its investment company taxable
income (determined without regard to the deduction for dividends paid).
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
42
<PAGE>
will be taxable to shareholders as ordinary income to the extent of the Fund's
current or accumulated earnings and profits. Also, the shareholders, if they
received a distribution in excess of current or accumulated earnings and
profits, would receive a return of capital that would reduce the basis of their
shares of the Fund to the extent thereof. Any distribution in excess of a
shareholder's basis in the shareholder's shares would be taxable as gain
realized from the sale of such shares.
The Fund will be liable for a nondeductible 4% excise tax on amounts
not distributed (or deemed distributed) on a timely basis in accordance with a
calendar year distribution requirement. To avoid the tax, during each calendar
year the Fund must distribute (or be deemed to have distributed) an amount equal
to at least 98% of the sum of its ordinary income (not taking into account any
capital gains or losses) for the calendar year, and its capital gain net income
for the 12-month period ending on October 31, in addition to any undistributed
portion of the respective balances from the prior year. For that 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.
Federal Income Taxation of the Fund's Investments
Original Issue Discount. For federal income tax purposes, debt
securities purchased by the Fund may be treated as having original issue
discount. Original issue discount represents interest for federal income tax
purposes and can generally be defined as the excess of the stated redemption
price at maturity of a debt obligation over the issue price. Original issue
discount is treated for federal income tax purposes as income earned by the
Fund, whether or not any income is actually received, and therefore is subject
to the distribution requirements of the Code. Generally, the amount of original
issue discount is determined on the basis of a constant yield to maturity which
takes into account the compounding of accrued interest. Under section 1286 of
the Code, an investment in a stripped bond or stripped coupon may result in
original issue discount.
Debt securities may be purchased by the Fund at a discount that exceeds
the original issue discount plus previously accrued original issue discount
remaining on the securities, if any, at the time the Fund purchases the
securities. This additional discount represents market discount for federal
income tax purposes. In the case of any debt security issued after July 18,
1984, having a fixed maturity date of more than one year from the date of issue
and having market discount, the gain realized on disposition will be treated as
interest to the extent it does not exceed the accrued market discount on the
security (unless the Fund elects to include such accrued market discount in
income in the tax year to which it is attributable). Generally, market discount
is accrued on a daily basis. The Fund may be required to capitalize, rather than
deduct currently, part or all of any direct interest expense incurred or
continued to purchase or carry any debt security having market discount, unless
the Fund makes the election to include market discount currently. Because the
Fund must include original issue discount in income, it will be more difficult
for the Fund to make the distributions required for the Fund to
43
<PAGE>
maintain its status as a regulated investment company under Subchapter M of the
Code or to avoid the 4% excise tax described above.
Options and Futures Transactions. Certain of the Fund's investments may
be subject to provisions of the Code that (i) require inclusion of unrealized
gains or losses in the Fund's income for purposes of the 90% test, the excise
tax and the distribution requirements applicable to regulated investment
companies; (ii) defer recognition of realized losses; and (iii) characterize
both realized and unrealized gain or loss as short-term or long-term gain or
loss. Such provisions generally apply to, among other investments, options on
debt securities, indices on securities and futures contracts.
Federal Income Taxation of Shareholders
Dividends paid by the Fund may be eligible for the 70%
dividends-received deduction for corporations. The percentage of the Fund's
dividends eligible for such tax treatment may be less than 100% to the extent
that less than 100% of the Fund's gross income may be from qualifying dividends
of domestic corporations. Any dividend declared in October, November or December
and made payable to shareholders of record in any such month is treated as
received by such shareholder on December 31, provided that the Fund pays the
dividend during January of the following calendar year.
Distributions by the Fund can result in a reduction in the fair market
value of the Fund's shares. Should a distribution reduce the fair market value
below a shareholder's cost basis, such distribution nevertheless may be taxable
to the shareholder as ordinary income or long-term capital gain, even though,
from an investment standpoint, it may constitute a partial return of capital. In
particular, investors should be careful to consider the tax implications of
buying shares just prior to a taxable distribution. The price of shares
purchased at that time includes the amount of any forthcoming distribution.
Those investors purchasing shares just prior to a taxable distribution will then
receive a return of investment upon distribution which will nevertheless be
taxable to them.
DISTRIBUTION OF SHARES OF THE FUND
The Trust has entered into a Distribution Agreement with State Street
Research Investment Services, Inc., as Distributor, whereby the Distributor acts
as agent to sell and distribute shares of the Fund. Shares of the Fund are sold
through dealers who have entered into sales agreements with the Distributor. The
Distributor distributes shares of the Fund on a continuous basis at an offering
price which is based on the net asset value per share of the Fund plus (subject
to certain exceptions) a sales charge which, at the election of the investor,
may be imposed (i) at the time of purchase (the Class A shares) or (ii) on a
deferred basis (Class B and Class C shares). The Distributor may reallow all or
portions of such sales charges as concessions to dealers.
44
<PAGE>
Total sales charges on Class A shares paid to the Distributor for the
last three fiscal years were as follows: 1997, $403,481; 1996, $724,878; and
1995, $572,439.
For the same periods, the Distributor retained the following amounts
after reallowance of concessions to dealers: 1997, $50,558; 1996, $89,615; and
1995, $70,689.
The differences in the price at which the Fund's Class A shares are
offered due to scheduled variations in sales charges, as described in the Fund's
Prospectus, result from cost savings inherent in economies of scale. Management
believes that the cost of sales efforts of the Distributor and broker-dealers
tends to decrease as the size of purchases increases, or does not involve any
incremental sales expenses as in the case of, for example, exchanges,
reinvestments or dividend investments at net asset value. Similarly, no
significant sales effort is necessary for sales of shares at net asset value to
certain Directors, Trustees, officers, employees, their relatives and other
persons directly or indirectly related to the Fund or associated entities. Where
shares of the Fund are offered at a reduced sales charge or without a sales
charge pursuant to sponsored arrangements, managed fee-based programs and
so-called "mutual fund supermarkets," among other programs, the amount of the
sales charge reduction will similarly reflect the anticipated reduction in sales
expenses associated with such arrangements. The reductions in sales expenses,
and therefore the reduction in sales charges, will vary depending on factors
such as the size and other characteristics of the organization or program, and
the nature of its membership or the participants. The Fund reserves the right to
make variations in, or eliminate, sales charges at any time or to revise the
terms of or to suspend or discontinue sales pursuant to sponsored arrangements
or similar programs at any time.
On any sale of Class A shares to a single investor in the amount of
$1,000,000 or more, the Distributor will pay the authorized securities dealer
making such sale a commission based on the aggregate of such sales. Such
commission also is payable to authorized securities dealers upon sales of Class
A shares made pursuant to a Letter of Intent to purchase shares having a net
asset value of $1,000,000 or more. Shares sold with such commissions payable are
subject to a one-year contingent deferred sales charge of 1.00% on any portion
of such shares redeemed within one year following their sale. After a particular
purchase of Class A shares is made under the Letter of Intent, the commission
will be paid only in respect of that particular purchase of shares. If the
Letter of Intent is not completed, the commission paid will be deducted from any
discounts or commissions otherwise payable to such dealer in respect of shares
actually sold. If an investor is eligible to purchase shares at net asset value
on account of the Right of Accumulation, the commission will be paid only in
respect of the incremental purchase at net asset value.
For the periods shown below, the Distributor received contingent
deferred sales charges upon redemption of Class A, Class B and Class C shares of
the Fund and paid initial commissions to securities dealers for sales of such
Class A, Class B and Class C shares as follows:
45
<PAGE>
<TABLE>
<CAPTION>
Fiscal Year Fiscal Year Fiscal Year
Ended October 31, 1997 Ended October 31, 1996 Ended October 31, 1995
---------------------- ---------------------- ----------------------
Contingent Commissions Contingent Commissions Contingent Commissions
Deferred Paid to Deferred Paid to Deferred Paid to
Sales Charges Dealers Sales Charges Dealers Sales Charges Dealers
------------- ----------- ------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Class A $ 0 $352,923 $ 0 $635,263 $ 180 $501,750
Class B $287,730 $506,486 $372,729 $973,303 $262,267 $423,866
Class C $ 3,988 $ 46,920 $ 1,828 $ 55,368 $ 1,189 $ 0
</TABLE>
The Fund has adopted a "Plan of Distribution Pursuant to Rule 12b-1"
(the "Distribution Plan") under which the Fund may engage, directly or
indirectly, in financing any activities primarily intended to result in the sale
of Class A, Class B and Class C shares, including, but not limited to, (1) the
payment of commissions and/or reimbursement to underwriters, securities dealers
and others engaged in the sale of shares, including payments to the Distributor
to be used to pay commissions and/or reimbursement to securities dealers (which
securities dealers may be affiliates of the Distributor) engaged in the
distribution and marketing of shares and furnishing ongoing assistance to
investors, (2) reimbursement of direct out-of-pocket expenditures incurred by
the Distributor in connection with the distribution and marketing of shares and
the servicing of investor accounts including expenses relating to the
formulation and implementation of marketing strategies and promotional
activities such as direct mail promotions and television, radio, newspaper,
magazine and other mass media advertising, the preparation, printing and
distribution of Prospectuses of the Fund and reports for recipients other than
existing shareholders of the Fund, and obtaining such information, analyses and
reports with respect to marketing and promotional activities and investor
accounts as the Fund may, from time to time, deem advisable, and (3)
reimbursement of expenses incurred by the Distributor in connection with the
servicing of shareholder accounts including payments to securities dealers and
others in consideration of the provision of personal service to investors and/or
the maintenance or servicing of shareholder accounts and expenses associated
with the provision of personal service by the Distributor directly to investors.
In addition, the Distribution Plan is deemed to authorize the Distributor and
the Investment Manager to make payments out of general profits, revenues or
other sources to underwriters, securities dealers and others in connection with
sales of shares, to the extent, if any, that such payments may be deemed to be
within the scope of Rule 12b-1 under the 1940 Act.
Some or all of the service fees are used to pay or reimburse dealers
(including dealers that are affiliates of the Distributor) or others for
personal services and/or the maintenance of shareholder accounts. A portion of
any initial commission paid to dealers for the sale of shares of the Fund
represents payment for personal services and/or the maintenance or servicing of
shareholder accounts by such dealers. Dealers who have sold Class A shares are
eligible for further reimbursement commencing as of the time of such sale.
Dealers who have sold Class B and Class C shares are eligible for further
reimbursement after the first year during which such shares have been held of
record by such dealer as nominee for its clients (or by such clients directly).
Any service fees received by the Distributor and not allocated to dealers may be
46
<PAGE>
applied by the Distributor in reduction of expenses incurred by it directly for
personal services and the maintenance or servicing of shareholder accounts.
The distribution fees are used primarily to offset initial and ongoing
commissions paid to dealers for selling such shares. Any distribution fees
received by the Distributor and not allocated to dealers may be applied by the
Distributor in connection with sales or marketing efforts, including special
promotional fees and cash and noncash incentives based upon sales by dealers.
The Distributor provides distribution services on behalf of other funds
having distribution plans and receives similar payments from, and incurs similar
expenses on behalf of, such other funds. When expenses of the Distributor cannot
be identified as relating to a specific 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
47
<PAGE>
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.
During the fiscal year ended October 31, 1997, the Fund paid the
Distributor fees under the Distribution Plan and the Distributor used all of
such payments for expenses incurred on behalf of the Fund as follows:
Class A Class B Class C
---------- -------- --------
Advertising $ $ $3,873
Printing and mailing of prospectuses to
other than current shareholders 1,445
Compensation to dealers 1,362,695 947,297 131,656
Compensation to sales personnel 11,724
Interest
Carrying or other financing charges
Other expenses: marketing; general 5,619
_____ _____ _____
Total fees $1,362,695 $947,297 $154,317
========== ======== ========
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.
48
<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 General U.S.
Government Funds Average.
The average annual total return ("standard total return") and yield of
the Class A, Class B, Class C and Class S shares of the Fund will be calculated
as set forth below. Total return and yield are computed separately for each
class of shares of the Fund. Performance data for a specified class includes
periods prior to the adoption of class designations on June 1, 1993, when
designations were assigned based on the pricing and Rule 12b-1 fees applicable
to shares sold thereafter. The application of the additional Rule 12b-1 fees, if
any, of up to 1% will, for periods after 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.
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<PAGE>
The performance data below reflect Rule 12b-1 fees and, where
applicable, sales charges as follows:
Rule 12b-1 Fees Sales Charges
-------------------------------------- -----------------------------
Class Amount Period
- ----- ------ ------
A 0.25% Since commencement of Maximum 4.5% sales charge
operations to present reflected
B 1.00% 0.25% until June 1, 1993; 1- and 5-year periods reflect
1.00% June 1, 1993 to present; a 5% and a 2% contingent
fee will reduce performance deferred sales charge,
for periods after June 1, 1993 respectively
C* 1.00% 0.25% until June 1, 1993; 1-year period reflects a 1%
1.00% June 1, 1993 to present; contingent deferred sales
fee will reduce performance charge
for periods after June 1, 1993
S* None 0.25% until June 1, 1993; None
0% thereafter
___________________
* Prior to November 1, 1997, the Fund's current Class C shares were
designated as Class D shares and the Fund's current Class S shares were
designated as Class C shares.
All calculations of performance data in this section reflect the
voluntary measures, if any, by the Fund's affiliates to reduce fees or expenses
relating to the Fund; see "--Accrued Expenses and Recurring Charges" later in
this section.
Total Return
The Fund's standard average annual total returns ("standard total
return") of each class of shares were as follows:
50
<PAGE>
Ten Years Five Years One Year
Ended Ended Ended
Fund October 31, 1997 October 31, 1997 October 31, 1997
- ---- ---------------- ---------------- ----------------
Class A 8.16% 6.21% 3.64%
Class B 8.28% 6.12% 2.66%
Class C* 8.29% 6.45% 6.65%
Class S* 8.77% 7.41% 8.80%
______________
* Prior to November 1, 1997, the Fund's current Class C shares were
designated as Class D shares and the Fund's current Class S shares were
designated as Class C shares.
Standard total return is computed separately for each class of shares
by determining the average annual compounded rates of return over the designated
periods that, if applied to the initial amount invested, would produce the
ending redeemable value in accordance with the following formula:
n
P(1+T) = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of the designated
period assuming a hypothetical $1,000 payment made at
the beginning of the designated period
The calculation is based on the further assumptions that the highest
applicable initial or contingent deferred sales charge is deducted, and that all
dividends and distributions by the Fund are reinvested at net asset value on the
reinvestment dates during the periods. All accrued expenses and recurring
charges are also taken into account as described later herein.
Yield
The annualized yield of each class of shares of the Fund based on the
month of October 1997 was as follows:
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<PAGE>
Class A 5.76%
Class B 5.30%
Class C* 5.31%
Class S* 6.30%
- ------------
* Prior to November 1, 1997, the Fund's current Class C shares were
designated as Class D shares and the Fund's current Class S shares were
designated as Class C shares.
Yield for the Fund's Class A, Class B, Class C and Class S shares is
computed by dividing the net investment income per share earned during a recent
month or other specified 30-day period by the maximum offering price per share
on the last day of the period and annualizing the result in accordance with the
following formula:
6
YIELD = 2[( a-b + 1) -1]
----
cd
Where: a = dividends and interest earned during the period
b = expenses accrued for the period (net of voluntary expense
reductions by the Investment Manager)
c = the average daily number of shares outstanding during the period
that were entitled to receive dividends
d = the maximum offering price per share on the last day of the
period
To calculate interest earned (for the purpose of "a" above) on debt
obligations, the Fund computes the yield to maturity of each obligation held by
the Fund based on the market value of the obligation (including actual accrued
interest) at the close of the last business day of the preceding period, or,
with respect to obligations purchased during the period, the purchase price
(plus actual accrued interest). The yield to maturity is then divided by 360 and
the quotient is multiplied by the market value of the obligation (including
actual accrued interest) to determine the interest income on the obligation for
each day of the period that the obligation is in the portfolio. Dividend income
is recognized daily based on published rates.
With respect to the treatment of discount and premium on mortgage or
other receivables-backed obligations which are expected to be subject to monthly
payments of principal and interest ("paydowns"), the Fund accounts for gain or
loss attributable to actual monthly paydowns as realized capital gain or loss
during the period. The Fund has elected not to amortize discount or premium on
such securities.
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<PAGE>
Undeclared earned income, computed in accordance with generally
accepted accounting principles, may be subtracted from the maximum offering
price. Undeclared earned income is the net investment income which, at the end
of the base period, has not been declared as a dividend, but is reasonably
expected to be declared as a dividend shortly thereafter. The maximum offering
price includes, as applicable, a maximum sales charge of 4.5%.
All accrued expenses and recurring charges are taken into account as
described later herein.
Yield information is useful in reviewing the Fund's performance, but
because yields fluctuate, such information cannot necessarily be used to compare
an investment in the Fund's shares with bank deposits, savings accounts and
similar investment alternatives which often are insured and/or provide an agreed
or guaranteed fixed yield for a stated period of time. Shareholders should
remember that yield is a function of the kind and quality of the instruments in
the Fund's portfolio, portfolio maturity and operating expenses and market
conditions.
Accrued Expenses and Recurring Charges
Accrued expenses include all recurring charges that are charged to all
shareholder accounts in proportion to the length of the base period. The
standard total return and yield results take sales charges, if applicable, into
account, although the results do not take into account recurring and
nonrecurring charges for optional services which only certain shareholders elect
and which involve nominal fees, such as the $7.50 fee for wire orders.
Accrued expenses do not include the subsidization, if any, by
affiliates of fees or expenses during the subject period. In the absence of such
subsidization, the performance of the Fund would have been lower.
Nonstandardized Total Return
The Fund may provide the above described standard total return results
for Class A, Class B, Class C and Class S shares for periods which end no
earlier than the most recent calendar quarter end and which begin twelve months
before, five years before and ten years before. In addition, the Fund may
provide nonstandardized total return results for differing periods, such as for
the most recent six months, and/or without taking sales charges into account.
Such nonstandardized total return is computed as otherwise described under
"--Total Return" except the result may or may not be annualized, and as noted
any applicable sales charge may not be taken into account and therefore not
deducted from the hypothetical initial payment of $1,000. For example, the
Fund's nonstandardized total returns for the six months ended October 31, 1997,
without taking sales charges into account, were as follows:
53
<PAGE>
Class A 7.00%
Class B 6.62%
Class C* 7.14%
Class S* 6.62%
__________________
* Prior to November 1, 1997, the Fund's current Class C shares were
designated as Class D shares and the Fund's current Class S shares were
designated as Class C shares.
Distribution Rates
The Fund may also quote its distribution rate for each class of shares.
The distribution rate is calculated by annualizing the latest per-share
distribution from ordinary income and dividing the result by the maximum
offering price per share as of the end of the period to which the distribution
relates. A distribution can include gross investment income from debt
obligations purchased at a premium and in effect include a portion of the
premium paid. A distribution can also include nonrecurring, gross short-term
capital gains without recognition of any unrealized capital losses. Further, a
distribution can include income from the sale of options by the Fund even though
such option income is not considered investment income under generally accepted
accounting principles.
Because a distribution can include such premiums, capital gains and
option income, the amount of the distribution may be susceptible to control by
the Investment Manager through transactions designed to increase the amount of
such items. Also, because the distribution rate is calculated in part by
dividing the latest distribution by the offering price, which is based on net
asset value plus any applicable sales charge, the distribution rate will
increase as the net asset value declines. A distribution rate can be greater
than the yield rate calculated as described above.
The distribution rate of each class of the Fund, based on the quarter
ended October 31, 1997, was as follows:
Class A 5.89%
Class B 5.42%
Class C* 6.43%
Class S* 5.42%
__________________
* Prior to November 1, 1997, the Fund's current Class C shares were
designated as Class D shares and the Fund's current Class S shares were
designated as Class C shares.
54
<PAGE>
CUSTODIAN
State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, is the Trust's custodian. As custodian, State Street Bank
and Trust Company is responsible for, among other things, safeguarding and
controlling the Fund's cash and securities, handling the receipt and delivery of
securities and collecting interest and dividends on the Fund's investments.
State Street Bank and Trust Company is not an affiliate of the Investment
Manager or its affiliates.
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP, 160 Federal Street, Boston, Massachusetts 02110,
serves as the Trust's independent accountants, providing professional services
including (1) audits of the Fund's annual financial statements, (2) assistance
and consultation in connection with SEC filings and (3) review of the annual
income tax returns filed on behalf of the Fund.
FINANCIAL STATEMENTS
In addition to the reports provided to holders of record on a
semiannual basis, other supplementary financial reports may be made available
from time to time through electronic or other media. Shareholders with
substantial holdings in one or more State Street Research Funds may also receive
reports and other information which reflect or analyze their positions in a
consolidated manner. For more information, call State Street Research Service
Center.
The following financial statements are for the Fund's fiscal year ended
October 31, 1997:
55
<PAGE>
STATE STREET RESEARCH GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
- --------------------------------------------------------------------------------
October 31, 1997
Principal Maturity Value
Amount Date (Note 1)
------------- ------------ --------------
U.S. GOVERNMENT SECURITIES 71.2%
U.S. Treasury 41.5%
U.S. Treasury Bond, 13.75% ...... $ 7,725,000 8/15/2004 $ 11,092,637
U.S. Treasury Bond, 11.625% ...... 24,900,000 11/15/2004 33,031,344
U.S. Treasury Bond, 10.75% ...... 21,500,000 8/15/2005 27,916,460
U.S. Treasury Bond, 12.00% ...... 12,000,000 8/15/2013 17,583,720
U.S. Treasury Bond, 9.875% ...... 8,500,000 11/15/2015 11,893,370
U.S. Treasury Bond, 9.25% ......... 17,000,000 2/15/2016 22,668,480
U.S. Treasury Bond, 8.75% ......... 11,225,000 5/15/2017 14,438,156
U.S. Treasury Bond, 8.125% ...... 43,400,000 8/15/2021 53,510,895
U.S. Treasury Bond, 6.25% ......... 14,050,000 8/15/2023 14,100,440
U.S. Treasury Bond, 7.50% ......... 20,000,000 11/15/2024 23,334,400
U.S. Treasury Note Inflation
Indexed, 3.375% ............... 3,399,580 1/15/2007 3,353,890
U.S. Treasury Note, 6.625% ...... 3,900,000 7/31/2001 4,013,334
U.S. Treasury Note, 6.25% ......... 3,450,000 2/28/2002 3,511,445
U.S. Treasury Note, 7.875% ...... 13,825,000 11/15/2004 15,412,663
U.S. Treasury Note, 6.50% ......... 4,575,000 8/15/2005 4,746,563
U.S. Treasury Note, 6.875% ...... 7,150,000 5/15/2006 7,606,957
U.S. Treasury STRIPS, 0.00% ...... 13,000,000 11/15/2001 10,333,180
------------
278,547,934
------------
U.S. Agency Mortgage 26.5%
Federal Home Loan Mortgage
Corp. FHA-VA, 9.00% ............ 5,325,142 12/01/2009 5,664,354
Federal Home Loan Mortgage
Corp. Series 29-H PAC,
6.50% ........................... 5,525,000 3/25/2023 5,537,045
Federal Housing Administration
Court Yard Project, 10.75% ...... 6,477,776 8/01/2032 7,174,137
Federal Housing Administration
East Bay Manor Project,
10.00% ........................ 6,748,516 3/01/2033 7,414,932
Federal Housing Administration
Charles River Project,
9.625% ........................ 9,453,561 12/01/2033 10,398,917
Federal National Mortgage
Association, 8.50% ............ 10,000,000 2/01/2005 10,459,300
Federal National Mortgage
Association, 7.50% ............ 10,880,196 6/01/2010 11,206,602
Federal National Mortgage
Association, 7.00% ............ 40,118 2/01/2024 40,431
Federal National Mortgage
Association FHA-VA, 8.00% ....... 4,141,193 4/01/2008 4,328,872
Federal National Mortgage
Association FHA-VA, 8.00% ....... 5,865,417 6/01/2008 6,131,237
Principal Maturity Value
Amount Date (Note 1)
------------- ------------ --------------
Federal National Mortgage
Association FHA-VA, 8.50% ....... $ 7,665,481 2/01/2009 $ 8,053,508
Federal National Mortgage
Association FHA-VA, 9.00% ....... 7,138,894 5/01/2009 7,582,862
Federal National Mortgage
Association FHA-VA, 9.00% ....... 1,660,462 4/01/2016 1,763,726
Federal National Mortgage
Association TBA, 7.50% ......... 6,250,000 12/15/2012 6,402,344
Government National Mortgage
Association, 7.50% ............ 10,456,865 6/15/2009 10,793,367
Government National Mortgage
Association, 9.50% ............ 2,770,840 9/15/2009 3,006,139
Government National Mortgage
Association, 9.50% ............ 4,958,526 10/15/2009 5,378,432
Government National Mortgage
Association, 9.50% ............ 2,254,638 11/15/2009 2,446,102
Government National Mortgage
Association, 9.00% ............ 1,783,238 4/15/2017 1,934,046
Government National Mortgage
Association, 8.00% ............ 1,735,198 10/15/2017 1,826,834
Government National Mortgage
Association, 9.50% ............ 12,231,956 11/15/2017 13,224,871
Government National Mortgage
Association, 9.50% ............ 248,451 9/15/2019 269,768
Government National Mortgage
Association, 7.50% ............ 2,655,950 9/15/2021 2,729,626
Government National Mortgage
Association, 7.50% ............ 1,310,682 1/15/2023 1,344,261
Government National Mortgage
Association, 10.00% ............ 28,545,686 6/15/2023 30,094,763
Government National Mortgage
Association, 7.50% ............ 736,003 8/15/2023 754,859
Government National Mortgage
Association, 7.50% ............ 780,210 10/15/2023 800,199
Government National Mortgage
Association, 7.50% ............ 534,501 12/15/2023 548,195
Government National Mortgage
Association, 7.50% ............ 715,792 1/15/2024 733,679
Government National Mortgage
Association, 7.50% ............ 9,085,943 4/15/2024 9,313,001
------------
177,356,409
------------
The accompanying notes are an integral part of the financial statements.
56
<PAGE>
STATE STREET RESEARCH GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Maturity Value
Amount Date (Note 1)
------------------- ------------ ----------------
<S> <C> <C> <C>
U.S. Agency 3.2%
Federal Home Loan Mortgage
Corp. Deb., 7.24% ............ $10,020,000 5/15/2002 $ 10,074,809
Guaranteed Export Trust Notes
Series 95-A, 6.28% ............ 7,411,765 6/15/2004 7,488,402
Guaranteed Export Trust Notes
Series 96-A, 6.55% ............ 3,747,055 6/15/2004 3,817,462
------------
21,380,673
------------
Total U.S. Government Securities (Cost $457,523,646) ............ 477,285,016
------------
OTHER INVESTMENTS 26.4%
Trust Certificates 12.9%
Cooperative Utility Trust
Certificates, 9.50% ............ 25,499,000 2/15/2017 26,969,272
Cooperative Utility Trust
Certificates, 10.11% ......... 1,500,000 12/15/2017 1,582,005
Cooperative Utility Trust
Certificates, 9.52% ............ 24,525,000 3/15/2019 25,986,690
Government Backed Trust Class
T-3, 9.625% .................. 8,420,577 5/15/2002 8,925,054
Government Trust Certificates
Class 2-E, 9.40% ............... 21,939,540 5/15/2002 23,275,658
------------
86,738,679
------------
Foreign Government 7.9%
Australian Dollar
Commonwealth of Australia,
9.00% ........................ 19,950,000 9/15/2004 16,560,825
Canadian Dollar
Government of Canada, 0.00% 5,875,000 2/05/1998 4,128,153
New Zealand Dollar
Government of New Zealand,
10.00% ........................ 9,625,000 3/15/2002 6,715,102
Government of New Zealand,
8.00% ........................ 9,500,000 11/15/2006 6,484,273
Pound Sterling
United Kingdom Treasury,
8.50% ........................ 10,000,000 12/07/2005 18,733,130
------------
52,621,483
============
Principal Maturity Value
Amount Date (Note 1)
------------------- ------------ ----------------
<S> <C> <C> <C>
Finance/Mortgage 5.6%
Chase Mortgage Finance Corp.
Series 93L-5, 6.25% ............ $ 5,000,000 10/25/2024 $ 4,951,562
CWMBS Inc. Series 1994-9 A-2
PAC, 6.50% ..................... 6,844,898 5/25/2024 6,857,732
GE Capital Mortgage Services
Inc., 5.85% .................. 3,647,520 9/25/2023 3,633,842
Prudential Home Mortgage
Securities Co. Series 93-29
A-6 PAC, 6.75% ............... 8,089,032 8/25/2008 8,139,589
Residential Funding Corp.
Series 93-S25 A-1, 6.50% ...... 7,323,294 7/25/2008 7,336,989
Structured Asset Securities
Corp. Series 97-LL1-A1,
Certificates Series 97-LLI,
6.79% ........................ 6,625,000 10/15/2034 6,717,412
------------
37,637,126
------------
Total Other Investments (Cost $177,693,180) ........................ 176,997,288
------------
SHORT-TERM OBLIGATIONS 1.9%
Federal Home Loan Bank, 5.50% 4,253,000 11/04/1997 4,251,051
Federal Home Loan Bank, 5.47% 8,100,000 11/05/1997 8,095,077
------------
Total Short-Term Obligations (Cost $12,346,128) .................... 12,346,128
------------
Total Investments (Cost $647,562,954)--99.5% ....................... 666,628,432
Cash and Other Assets, Less Liabilities--0.5% ....................... 3,604,290
------------
Net Assets--100.0% .................................................. $670,232,722
============
Federal Income Tax Information:
At October 31, 1997, the net unrealized appreciation of
investments based on cost for Federal income tax
purposes of $647,562,954 was as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of value
over tax cost .................................................... $ 22,467,765
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax
cost over value .............................. (3,402,287)
------------
$ 19,065,478
============
</TABLE>
- --------------------------------------------------------------------------------
TBA Represents "TBA" (to be announced) purchase commitment to purchase
securities for a fixed unit price at a future date beyond customary
settlement time. Although the unit price has been established, the
principal value has not been finalized and may vary by no more than 1%.
The accompanying notes are an integral part of the financial statements.
57
<PAGE>
STATE STREET RESEARCH GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO (cont'd)
- --------------------------------------------------------------------------------
Forward currency exchange contracts outstanding at October 31, 1997 are as
follows:
<TABLE>
<CAPTION>
Unrealized
Appreciation
Total Value Contract Price (Depreciation) Delivery Date
-------------------- --------------- ---------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Sell Australian dollars, Buy U.S. dollars 1,272,000 AUD .73565 AUD $ 40,960 11/14/97
Sell Australian dollars, Buy U.S. dollars 11,783,000 AUD .70850 AUD 44,357 1/23/98
Sell Australian dollars, Buy U.S. dollars 4,000,000 AUD .73289 AUD 116,058 12/10/97
Sell Australian dollars, Buy U.S. dollars 4,910,000 AUD .73480 AUD 151,835 12/10/97
Sell British pounds, Buy U.S. dollars 10,687,000 GBP 1.62700 GBP (479,216) 1/23/98
Sell New Zealand dollars, Buy U.S. dollars 10,700,000 NZD .62300 NZD 37,918 1/23/98
Sell New Zealand dollars, Buy U.S. dollars 10,310,000 NZD .62414 NZD 48,290 1/23/98
---------
$ (39,798)
=========
</TABLE>
Written put option transactions during the year ended October 31, 1997 were as
follows:
Principal
Amount Premiums
---------------- -------------
Outstanding, beginning of year -- --
Options written $ 16,500,000 $ 101,876
Options expired -- --
Options closed (16,500,000) (101,876)
------------- ----------
Outstanding, end of year $ -- $ --
============= ==========
The accompanying notes are an integral part of the financial statements.
58
<PAGE>
STATE STREET RESEARCH GOVERNMENT INCOME FUND
- ---------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES STATEMENT OF OPERATIONS
- ---------------------------------------------------------------------------
October 31, 1997 For the year ended October 31, 1997
Assets
Investments, at value (Cost $647,562,954) (Note 1) ......... $ 666,628,432
Cash ......................................................... 150,428
Receivable for securities sold .............................. 29,114,789
Interest receivable .......................................... 11,517,167
Receivable for open forward contracts ........................ 439,418
Receivable for fund shares sold .............................. 179,448
Other assets ................................................ 5,396
-------------
708,035,078
Liabilities
Payable for securities purchased ........................... 33,634,280
Dividends payable .......................................... 2,040,973
Payable for fund shares redeemed ........................... 552,035
Payable for open forward contracts ........................... 479,216
Accrued management fee (Note 2) .............................. 368,054
Accrued transfer agent and shareholder services
(Note 2) ................................................... 264,200
Accrued distribution and service fees (Note 3) ............... 206,647
Accrued trustees' fees (Note 2) .............................. 8,516
Other accrued expenses ....................................... 248,435
-------------
37,802,356
-------------
Net Assets $ 670,232,722
=============
Net Assets consist of:
Undistributed net investment income ........................ $ 2,339,029
Unrealized appreciation of investments ..................... 19,065,478
Unrealized depreciation of forward contracts and
foreign currency .......................................... (34,015)
Accumulated net realized loss .............................. (39,689,487)
Shares of beneficial interest .............................. 688,551,717
-------------
$ 670,232,722
=============
Net Asset Value and redemption price per share of
Class A shares ($524,564,649 [divided by] 41,460,715 shares
of beneficial interest) .................................... $ 12.65
=============
Maximum Offering Price per share of Class A shares
($12.65 [divided by] .955) ................................. $ 13.25
=============
Net Asset Value and offering price per share of Class
B shares ($97,252,569 [divided by] 7,709,687 shares of
beneficial interest)* .................................... $ 12.62
=============
Net Asset Value and offering price per share of Class
C shares ($16,300,666 [divided by] 1,291,316 shares of
beneficial interest)* .................................... $ 12.62
=============
Net Asset Value, offering price and redemption price
per share of Class S shares ($32,114,838 [divided by]
2,540,378 shares of beneficial interest) .................. $ 12.64
=============
_____________________________________
* Redemption price per share for Class B and Class C is equal to net asset
value less any applicable contingent deferred sales charge.
Investment Income
Interest ................................................ $50,464,680
Expenses
Management fee (Note 2) ................................. 4,364,193
Transfer agent and shareholder services (Note 2) ......... 686,265
Custodian fee .......................................... 226,325
Service fee-Class A (Note 3) ........................... 1,362,695
Distribution and service fees-Class B (Note 3) ......... 947,297
Distribution and service fees-Class C (Note 3) ......... 154,317
Reports to shareholders ................................. 120,433
Registration fees ....................................... 53,334
Audit fee ................................................ 43,561
Trustees' fees (Note 2) ................................. 34,065
Legal fees ............................................. 13,590
Miscellaneous .......................................... 33,406
-----------
8,039,481
-----------
Net investment income .................................... 42,425,199
-----------
Realized and Unrealized Gain (Loss) on
Investments, Options, Forward Contracts
and Foreign Currency
Net realized gain on investments (Notes 1 and 4) ......... 5,443,859
Net realized gain on written options ..................... 92,892
Net realized gain on forward contracts and foreign
currency (Note 1) .................................... 3,226,994
-----------
Total net realized gain ................................. 8,763,745
-----------
Net unrealized appreciation of investments (Note 5) . 2,636,837
Net unrealized depreciation of forward contracts and
foreign currency ....................................... (79,138)
-----------
Total net unrealized appreciation ..................... 2,557,699
-----------
Net gain on investments, options, forward contracts
and foreign currency ................................. 11,321,444
-----------
Net increase in net assets resulting from operations . $53,746,643
===========
The accompanying notes are an integral part of the financial statements.
59
<PAGE>
STATE STREET RESEARCH GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
October 31, 1997
Years ended October 31
----------------------------------
1996 1997
--------------- ----------------
Increase (Decrease) in Net Assets
Operations:
Net investment income ......... $ 46,482,643 $ 42,425,199
Net realized gain (loss) on
investments, options,
forward contracts and
foreign currency ............ (3,552,004) 8,763,745
Net unrealized appreciation
(depreciation) of
investments, forward
contracts and foreign
currency ..................... (6,405,085) 2,557,699
------------ -------------
Net increase resulting from
operations .................. 36,525,554 53,746,643
------------ -------------
Dividends from net
investment income:
Class A ........................ (39,055,243) (35,201,643)
Class B ........................ (5,188,785) (5,410,928)
Class C ........................ (773,463) (880,065)
Class S ........................ (404,930) (1,061,597)
------------ -------------
(45,422,421) (42,554,233)
------------ -------------
Net decrease from fund share
transactions (Note 6) ......... (50,352,743) (42,731,617)
------------ -------------
Total decrease in net assets .... (59,249,610) (31,539,207)
Net Assets
Beginning of year ............... 761,021,539 701,771,929
------------ -------------
End of year (including
undistributed net
investment income of
$100,856 and $2,339,029,
respectively) ............... $701,771,929 $ 670,232,722
============ =============
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
October 31, 1997
Note 1
State Street Research Government Income Fund (the "Fund") is a series of State
Street Research Financial Trust (the "Trust"), which was organized as a
Massachusetts business trust in November, 1986 and is registered under the
Investment Company Act of 1940, as amended, as an open-end management
investment company. The Fund commenced operations in March, 1987. The Trust
consists presently of four separate funds: State Street Research Government
Income Fund, State Street Research Strategic Portfolios: Moderate, State Street
Research Strategic Portfolios: Conservative and State Street Research Strategic
Portfolios: Aggressive.
The investment objective of the Fund is to seek high current income. In seeking
to achieve its investment objective, the Fund invests primarily in U.S.
Government securities.
The Fund offers four classes of shares. Before November 1, 1997, Class C shares
were designated Class D and Class S shares were designated Class C. Class A
shares are subject to an initial sales charge of up to 4.50% and an annual
service fee of 0.25% of average daily net assets. Class B shares are subject to
a contingent deferred sales charge on certain redemptions made within five
years of purchase and pay annual distribution and service fees of 1.00%. Class
B shares automatically convert into Class A shares (which pay lower ongoing
expenses) at the end of eight years after the issuance of the Class B shares.
Class C shares are subject to a contingent deferred sales charge of 1.00% on
any shares redeemed within one year of their purchase. Class C shares also pay
annual distribution and service fees of 1.00%. Class S shares are only offered
through certain retirement accounts, advisory accounts of State Street Research
& Management Company (the "Adviser") and special programs. No sales charge is
imposed at the time of purchase or redemption of Class S shares. Class S shares
do not pay any distribution or service fees. The Fund's expenses are borne
pro-rata by each class, except that each class bears expenses, and has
exclusive voting rights with respect to provisions of the Plan of Distribution,
related specifically to that class. The Trustees declare separate dividends on
each class of shares.
The following significant accounting policies are consistently followed by the
Fund in preparing its financial statements, and such policies are in conformity
with generally accepted accounting principles for investment companies.
A. Investment Valuation
Securities are valued by a pricing service, which utilizes market transactions,
quotations from dealers, and various relationships among securities in
determining value. Securities for which there is no such valuation, if any, are
valued at their fair value as determined in accordance with established methods
consistently applied. Short-term securities maturing within sixty days are
valued at amortized cost. Securities quoted in foreign currencies are
translated into U.S. dollars at the current exchange rate.
B. Security Transactions
Security transactions are accounted for on the trade date (date the order to
buy or sell is executed). Realized gains or losses are reported
The accompanying notes are an integral part of the financial statements.
60
<PAGE>
STATE STREET RESEARCH GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
on the basis of identified cost of securities delivered. Gains and losses
that arise from changes in exchange rates are not segregated from gains
and losses that arise from changes in market prices of investments.
C. Net Investment Income
Net investment income is determined daily and consists of interest accrued and
discount earned, less the estimated daily expenses of the Fund. Interest income
is accrued daily as earned. Accretion of discount is computed under the
effective yield method. The Fund is charged for expenses directly attributable
to it, while indirect expenses are allocated among all funds in the Trust.
D. Dividends
Dividends are declared daily based upon projected net investment income and are
paid or reinvested monthly. Net realized capital gains, if any, are distributed
annually, unless additional distributions are required for compliance with
applicable tax regulations.
Income dividends and capital gain distributions are determined in accordance
with Federal income tax regulations which may differ from generally accepted
accounting principles. The difference is primarily due to differing treatments
for foreign currency transactions.
E. Federal Income Taxes
No provision for Federal income taxes is necessary because the Fund has elected
to qualify under Subchapter M of the Internal Revenue Code and its policy is to
distribute all of its taxable income, including net realized capital gains, if
any, within the prescribed time periods. At October 31, 1997, the Fund had a
capital loss carryforward of $39,689,487 available, to the extent provided in
regulations, to offset future capital gains, if any, of which $18,353,379,
$17,196,293 and $4,139,815 expires on October 31, 1998, 2002 and 2004,
respectively. The Fund had a capital loss carryforward of $40,525,802 expire on
October 31, 1997. In addition, as part of a merger that occurred on May 12,
1995, the Fund acquired from MetLife-State Street Research Government
Securities Fund a capital loss carryforward of $5,100,777, of which $3,074,207
and $2,026,570 expires on October 31, 2001 and 2002, respectively. The Fund's
use of such capital loss carryforward may be limited under current tax laws.
F. Forward Contracts and Foreign Currencies
The Fund enters into forward foreign currency exchange contracts in order to
hedge its exposure to changes in foreign currency exchange rates on its foreign
portfolio holdings and to hedge certain purchase and sale commitments
denominated in foreign currencies. A forward foreign currency exchange contract
is an obligation by the Fund to purchase or sell a specific currency at a
future date, which may be any fixed number of days from the origination date of
the contract. Forward foreign currency exchange contracts establish an exchange
rate at a future date. These contracts are transferable in the interbank market
conducted directly between currency traders (usually large commercial banks)
and their customers. Risks may arise from the potential inability of a
counterparty to meet the terms of a contract and from unanticipated movements
in the value of foreign currencies relative to the U.S. dollar. The aggregate
principal amount of forward currency exchange contracts is recorded in the
Fund's accounts. All commitments are marked-to-market at the applicable
transaction rates resulting in unrealized gains or losses. The Fund records
realized gains or losses at the time the forward contracts are extinguished by
entry into a closing contract or by delivery of the currency. Neither spot
transactions nor forward currency exchange contracts eliminate fluctuations in
the prices of the Fund's portfolio securities or in foreign exchange rates, or
prevent loss if the price of these securities should decline.
G. Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates.
H. Written Put Options
The Fund may write put options to enhance return and to hedge against
unfavorable market conditions. A written put option is a contract in which the
option writer grants the option buyer the right to sell back to the writer a
designated security at a specified price and time. The premium paid by the
buyer is recorded in the Fund's accounts as a liability and subsequently marked
to the current market value of the written option resulting in an unrealized
gain or loss. Exchange traded written options are valued at the last sale
price, or if no sales are reported, the last ask price. If the written option
expires unexercised, the Fund will realize a gain in the amount of the premium.
If the option is closed, the Fund will recognize a gain or loss based on the
difference between the cost of closing the option and the premium. If the
option is exercised, the Fund's cost basis of the acquired security will be the
exercise price decreased by the premium. The Fund accepts the risk of a decline
in value of the underlying security below the exercise price and the risk that
an illiquid secondary market will limit the Fund's ability to close the option
contract.
Note 2
The Trust and the Adviser, an indirect wholly owned subsidiary of Metropolitan
Life Insurance Company ("Metropolitan"), have entered into an agreement under
which the Adviser earns monthly fees at an annual rate of 0.65% of the Fund's
average daily net assets. In consideration of these fees, the Adviser furnishes
the Fund with management, investment advisory, statistical and research
facilities and services. The Adviser also pays all salaries, rent and certain
other expenses of management. During the year ended October 31, 1997, the fees
pursuant to such agreement amounted to $4,364,193.
State Street Research Service Center, a division of State Street Research
Investment Services, Inc., the Trust's principal underwriter (the
"Distributor"), an indirect wholly owned subsidiary of Metropolitan, provides
certain shareholder services to the Fund such as responding to inquiries and
instructions from investors with respect to the purchase and redemption of
shares of the Fund. In addition, Metropolitan receives a fee for maintenance of
the accounts of certain shareholders who are participants in sponsored
arrangements, employee benefit plans and similar programs or
61
<PAGE>
STATE STREET RESEARCH GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
NOTES (cont'd)
- --------------------------------------------------------------------------------
plans, through or under which shares of the Trust may be purchased. During the
year ended October 31, 1997, the amount of such expenses was $242,080.
The fees of the Trustees not currently affiliated with the Adviser amounted to
$34,065 during the year ended October 31, 1997.
Note 3
The Trust has adopted a Plan of Distribution Pursuant to Rule 12b-1 (the
"Plan") under the Investment Company Act of 1940. Under the Plan, the Fund pays
annual service fees to the Distributor at a rate of 0.25% of average daily net
assets for Class A, Class B and Class C shares. In addition, the Fund pays
annual distribution fees of 0.75% of average daily net assets for Class B and
Class C shares. The Distributor uses such payments for personal service and/or
the maintenance or servicing of shareholder accounts, to reimburse securities
dealers for distribution and marketing services, to furnish ongoing assistance
to investors and to defray a portion of its distribution and marketing
expenses. For the year ended October 31, 1997, fees pursuant to such plan
amounted to $1,362,695, $947,297 and $154,317 for Class A, Class B and Class C
shares, respectively.
The Fund has been informed that the Distributor and MetLife Securities, Inc., a
wholly owned subsidiary of Metropolitan, earned initial sales charges
aggregating $50,558 and $258,372, respectively, on sales of Class A shares of
the Fund during the year ended October 31, 1997, and that MetLife Securities,
Inc. earned commissions aggregating $253,677 on sales of Class B shares, and
that the Distributor collected contingent deferred sales charges aggregating
$287,730 and $3,988 on redemptions of Class B and Class C shares, respectively,
during the same period.
Note 4
For the year ended October 31, 1997, purchases and sales of securities,
exclusive of short-term obligations, aggregated $813,782,491 and $860,992,919
(including $745,334,612 and $697,592,306 of U.S. Government obligations),
respectively.
Note 5
On June 20, 1997, the Fund acquired the assets and liabilities of State Street
Research International Fixed Income Fund ("International Fixed Income Fund") in
exchange for shares of each class of the Fund. The acquisition was accounted
for as a tax-free exchange of 122,345 Class A shares, 226,623 Class B shares,
46,221 Class C shares and 1,845,952 Class S shares of the Fund for the net
assets of International Fixed Income Fund which amounted to $1,514,628,
$2,798,800, $571,293 and $22,834,432 for Class A, Class B, Class D and Class C
shares, respectively. The net assets of International Fixed Income Fund
included $801,654 of unrealized appreciation at the close of business on June
20, 1997. The net assets of the Fund immediately after the acquisition were
$680,812,302.
Note 6
The Trustees have the authority to issue an unlimited number of shares of
beneficial interest, $.001 par value per share. At October 31, 1997, the
Distributor owned 12,241 Class A shares and Metropolitan owned 1,768,508 Class
S shares of the Fund.
Share transactions were as follows:
<TABLE>
<CAPTION>
Years ended October 31
---------------------------------
1996
---------------------------------
Class A Shares Amount
- ------------------------------------------------------------------------- --------------- -----------------
<S> <C> <C>
Shares sold ............................................................ 2,386,852 $ 29,601,645
Issued in connection with acquisition of International Fixed Income Fund -- --
Issued upon reinvestment of dividends ................................. 1,707,616 21,188,423
Shares repurchased ...................................................... (9,183,464) (113,908,052)
---------- --------------
Net decrease ............................................................ (5,088,996) $ (63,117,984)
========== ==============
Class B Shares Amount
- ------------------------------------------------------------------------- ---------- --------------
Shares sold ............................................................ 2,341,362 $ 29,026,329
Issued in connection with acquisition of International Fixed Income Fund -- --
Issued upon reinvestment of dividends ................................. 275,775 3,412,679
Shares repurchased ...................................................... (1,940,555) (24,024,991)
---------- --------------
Net increase ............................................................ 676,582 $ 8,414,017
========== ==============
Class C (Formerly Class D) Shares Amount
- ------------------------------------------------------------------------- ---------- --------------
Shares sold ............................................................ 520,289 $ 6,453,505
Issued in connection with acquisition of International Fixed Income Fund -- --
Issued upon reinvestment of dividends ................................. 43,660 539,841
Shares repurchased ...................................................... (435,567) (5,400,796)
---------- --------------
Net increase ............................................................ 128,382 $ 1,592,550
========== ==============
Class S (Formerly Class C) Shares Amount
- ------------------------------------------------------------------------- ---------- --------------
Shares sold ............................................................ 518,980 $ 6,381,030
Issued in connection with acquisition of International Fixed Income Fund -- --
Issued upon reinvestment of dividends ................................. 30,667 379,365
Shares repurchased ...................................................... (324,941) (4,001,721)
---------- --------------
Net increase ............................................................ 224,706 $ 2,758,674
========== ==============
<CAPTION>
1997
---------------------------------
Class A Shares Amount
- ------------------------------------------------------------------------- --------------- -----------------
<S> <C> <C>
Shares sold ............................................................ 1,724,885 $ 21,326,126
Issued in connection with acquisition of International Fixed Income Fund 122,345 1,514,628
Issued upon reinvestment of dividends ................................. 1,617,477 20,020,535
Shares repurchased ...................................................... (8,994,512) (111,248,439)
---------- --------------
Net decrease ............................................................ (5,529,805) $ (68,387,150)
========== ==============
Class B Shares Amount
- -------------------------------------------------------------------------- ---------- --------------
Shares sold ............................................................ 1,428,886 $ 17,617,666
Issued in connection with acquisition of International Fixed Income Fund 226,623 2,798,800
Issued upon reinvestment of dividends ................................. 289,207 3,569,308
Shares repurchased ...................................................... (1,914,285) (23,580,814)
---------- --------------
Net increase ............................................................ 30,431 $ 404,960
========== ==============
Class C (Formerly Class D) Shares Amount
- -------------------------------------------------------------------------- ---------- --------------
Shares sold ............................................................ 463,886 $ 5,714,578
Issued in connection with acquisition of International Fixed Income Fund 46,221 571,293
Issued upon reinvestment of dividends ................................. 51,335 634,002
Shares repurchased ...................................................... (436,411) (5,400,255)
---------- --------------
Net increase ............................................................ 125,031 $ 1,519,618
========== ==============
Class S (Formerly Class C) Shares Amount
- -------------------------------------------------------------------------- ---------- --------------
Shares sold ............................................................ 211,412 $ 2,620,092
Issued in connection with acquisition of International Fixed Income Fund 1,845,952 22,834,432
Issued upon reinvestment of dividends ................................. 42,472 525,501
Shares repurchased ...................................................... (184,733) (2,249,070)
---------- --------------
Net increase ............................................................ 1,915,103 $ 23,730,955
========== ==============
</TABLE>
62
<PAGE>
STATE STREET RESEARCH GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
For a share outstanding throughout each year:
<TABLE>
<CAPTION>
Class A
--------------------------------------------------------------
Years ended October 31
--------------------------------------------------------------
1993 1994(1) 1995(1) 1996(1) 1997(1)
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ($) 12.38 12.92 11.68 12.58 12.43
------ ------ ------ ----- ------
Net investment income ($) 0.84 0.81 0.83 0.81 0.80
Net realized and unrealized gain (loss) on investments,
options, forward contracts and foreign currency ($) 0.56 ( 1.26) 0.88 (0.17) 0.22
------ ------ ------ ----- ------
Total from investment operations ($) 1.40 ( 0.45) 1.71 0.64 1.02
------ ------ ------ ----- ------
Dividends from net investment income ($) ( 0.84) ( 0.79) ( 0.81) (0.79) ( 0.80)
Distributions from capital gains ($) ( 0.02) -- -- -- --
------ ------ ------ ----- ------
Total distributions ($) ( 0.86) ( 0.79) ( 0.81) (0.79) ( 0.80)
------ ------ ------ ----- ------
Net asset value, end of year ($) 12.92 11.68 12.58 12.43 12.65
====== ====== ====== ===== ======
Total return(3)(%) 11.63 ( 3.58) 15.07 5.28 8.52
Ratios/supplemental data:
Net assets at end of year ($ thousands) 868,556 638,418 655,045 584,313 524,565
Ratio of operating expenses to average net assets (%) 1.05 1.07 1.10 1.09 1.08
Ratio of net investment income to average net assets (%) 6.59 6.54 6.83 6.50 6.44
Portfolio turnover rate (%) 103.49 134.41 105.57 88.79 124.95
</TABLE>
<TABLE>
<CAPTION>
Class B
---------------------------------------------------------------
Years ended October 31
---------------------------------------------------------------
1993(2) 1994(1) 1995(1) 1996(1) 1997(1)
-------------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ($) 12.67 12.91 11.66 12.55 12.40
------- ------ ------ ----- ------
Net investment income ($) 0.30 0.72 0.73 0.71 0.70
Net realized and unrealized gain (loss) on investments,
options, forward contracts and foreign currency ($) 0.24 ( 1.27) 0.87 (0.16) 0.22
------- ------ ------ ----- ------
Total from investment operations ($) 0.54 ( 0.55) 1.60 0.55 0.92
------- ------ ------ ----- ------
Dividends from net investment income ($) ( 0.30) ( 0.70) ( 0.71) (0.70) ( 0.71)
------- ------ ------ ----- ------
Total distributions ($) ( 0.30) ( 0.70) ( 0.71) (0.70) ( 0.71)
------- ------ ------ ----- ------
Net asset value, end of year ($) 12.91 11.66 12.55 12.40 12.61
======= ====== ====== ===== ======
Total return(3)(%) 4.32(4) ( 4.38) 14.15 4.51 7.66
Ratios/supplemental data:
Net assets at end of year ($ thousands) 26,578 52,319 87,908 95,218 97,253
Ratio of operating expenses to average net assets (%) 1.81(5) 1.82 1.85 1.84 1.83
Ratio of net investment income to average net assets (%) 5.67(5) 5.86 6.01 5.75 5.68
Portfolio turnover rate (%) 103.49 134.41 105.57 88.79 124.95
</TABLE>
- --------------------------------------------------------------------------------
(1) Per-share figures have been calculated using the average shares method.
(2) June 1, 1993 (commencement of share class designations) to October 31,
1993.
(3) Does not reflect any front-end or contingent deferred sales charges.
(4) Not annualized.
(5) Annualized.
63
<PAGE>
STATE STREET RESEARCH GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class C (Formerly Class D)
---------------------------------------------------------------
Years ended October 31
---------------------------------------------------------------
1993(2) 1994(1) 1995(1) 1996(1) 1997(1)
-------------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ($) 12.67 12.91 11.66 12.56 12.41
------- ------ ------ ----- ------
Net investment income ($) 0.30 0.72 0.74 0.71 0.70
Net realized and unrealized gain (loss) on investments,
options, forward contracts and foreign currency ($) 0.24 ( 1.27) 0.87 (0.16) 0.22
------- ------ ------ ----- ------
Total from investment operations ($) 0.54 ( 0.55) 1.61 0.55 0.92
------- ------ ------ ----- ------
Dividends from net investment income ($) ( 0.30) ( 0.70) ( 0.71) (0.70) ( 0.71)
------- ------ ------ ----- ------
Total distributions ($) ( 0.30) ( 0.70) ( 0.71) (0.70) ( 0.71)
------- ------ ------ ----- ------
Net asset value, end of year ($) 12.91 11.66 12.56 12.41 12.62
======= ====== ====== ===== ======
Total return(3)(%) 4.32(4) ( 4.38) 14.24 4.51 7.65
Ratios/supplemental data:
Net assets at end of year ($ thousands) 12,101 13,425 13,033 14,473 16,301
Ratio of operating expenses to average net assets (%) 1.88(5) 1.82 1.85 1.84 1.83
Ratio of net investment income to average net assets (%) 5.59(5) 5.84 6.08 5.76 5.68
Portfolio turnover rate (%) 103.49 134.41 105.57 88.79 124.95
</TABLE>
<TABLE>
<CAPTION>
Class S (Formerly Class C)
---------------------------------------------------------------
Years ended October 31
---------------------------------------------------------------
1993(2) 1994(1) 1995(1) 1996(1) 1997(1)
-------------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ($) 12.67 12.92 11.67 12.57 12.42
------ ------ ------ ----- ------
Net investment income ($) 0.19 0.84 0.90 0.84 0.80
Net realized and unrealized gain (loss) on investments,
options, forward contracts and foreign currency ($) 0.42 ( 1.27) 0.84 (0.17) 0.25
------ ------ ------ ----- ------
Total from investment operations ($) 0.61 ( 0.43) 1.74 0.67 1.05
------ ------ ------ ----- ------
Dividends from net investment income ($) ( 0.36) ( 0.82) ( 0.84) (0.82) ( 0.83)
------ ------ ------ ----- ------
Total distributions ($) ( 0.36) ( 0.82) ( 0.84) (0.82) ( 0.83)
------ ------ ------ ----- ------
Net asset value, end of year ($) 12.92 11.67 12.57 12.42 12.64
====== ====== ====== ===== ======
Total return(3)(%) 4.82(4) ( 3.42) 15.37 5.55 8.80
Ratios/supplemental data:
Net assets at end of year ($ thousands) 36 203 5,036 7,767 32,115
Ratio of operating expenses to average net assets (%) 0.80(5) 0.82 0.85 0.84 0.82
Ratio of net investment income to average net assets (%) 6.59(5) 8.01 6.79 6.78 6.66
Portfolio turnover rate (%) 103.49 134.41 105.57 88.79 124.95
</TABLE>
- --------------------------------------------------------------------------------
(1) Per-share figures have been calculated using the average shares method.
(2) June 1, 1993 (commencement of share class designations) to October 31,
1993.
(3) Does not reflect any front-end or contingent deferred sales charges.
(4) Not annualized.
(5) Annualized.
64
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Trustees of State Street Research
Financial Trust and the Shareholders of
State Street Research Government Income Fund
In our opinion, the accompanying statement of assets and liabilities, including
the investment portfolio, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of State Street Research Government
Income Fund (a series of State Street Research Financial Trust, hereafter
referred to as the "Trust") at October 31, 1997, and the results of its
operations, the changes in its net assets and the financial highlights for the
periods indicated, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Trust's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at October
31, 1997 by correspondence with the custodian and brokers and the application of
alternative auditing procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
December 12, 1997
65
<PAGE>
STATE STREET RESEARCH GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
- --------------------------------------------------------------------------------
Government Income Fund had a strong year. Class A shares of the Fund returned
+8.52% [without sales charge] for the 12 months ended October 31, 1997. This
total return performance was higher than that of the average U.S. government
income fund tracked by Lipper Analytical Services, which returned +7.99% for the
same period. The Merrill Lynch Government Master Index was up 8.67%.
The Fund's current portfolio consists primarily of U.S. Treasury bonds and
bonds issued or backed by agencies of the U.S. government.
A generally favorable environment and a shift from mortgage bonds to longer
duration U.S. Treasuries helped the Fund. The manager reduced the portfolio's
mortgage exposure from 37% to 27%, and reinvested the proceeds in U.S.
Treasuries. The Fund benefited as long-term bonds gained the most as interest
rates came down during the year and fewer new bonds were issued, the result of
a reduced budget deficit.
The Fund's foreign bond investments also added value. The manager increased the
Fund's exposure to foreign bonds and hedged the positions to protect returns
against a rising dollar.
October 31, 1997
All returns represent past performance, which is no guarantee of future
results. The investment return and principal value of an investment made in the
Fund will fluctuate, and shares, when redeemed, may be worth more or less than
their original cost. All returns assume reinvestment of capital gain
distributions and income dividends. Investments in the Fund are not insured or
guaranteed by the U.S. government or any other entity. Performance for a class
includes periods prior to the adoption of class designations. "S" shares,
offered without a sales charge, are available only through employee benefit
plans and special programs. Performance for "B" and "C" shares prior to class
designations in 1993 reflects annual 12b-1 fees of .25%, and performance
thereafter reflects annual 12b-1 fees of 1%, which will reduce subsequent
performance. Performance reflects maximum 4.5% "A" share front-end sales charge
or 5% "B" share or 1% "C" share contingent deferred sales charges, where
applicable. Before November 1, 1997, Class C shares were designated Class D and
Class S shares were designated Class C. The Merrill Lynch Government Master and
Blended Indices are commonly used measures of bond market performance. The
indices are unmanaged and do not take sales charges into consideration. Direct
investment in the indices is not possible; results are for illustrative
purposes only.
Change In Value Of $10,000 Based On
The Merrill Lynch Blended Index And
The Merrill Lynch Government Master Index
Compared To Change In Value Of $10,000 Invested
In Government Income Fund
********************************[MOUNTAIN CHARTS:]*****************************
Class A Shares
Average Annual Total Return
1 Year 5 Years 10 Years
+3.64% +6.21% +8.16%
Government
Income ML Government ML Blended
Fund Master Index Index
10/87 9550 10000 10000
10/88 10483 11113 10973
10/89 11492 12393 12291
10/90 12128 13233 13022
10/91 14099 15259 14928
10/92 15489 16760 16472
10/93 17291 18672 18614
10/94 16671 18043 17808
10/95 19183 20797 20553
10/96 20196 21966 21590
10/97 21917 23900 23463
- --------------------------------------------------------------------------------
Class B Shares
Average Annual Total Return
1 Year 5 Years 10 Years
+2.66% +6.12% +8.28%
Government
Income ML Government ML Blended
Fund Master Index Index
10/87 10000 10000 10000
10/88 10977 11113 10973
10/89 12033 12393 12291
10/90 12700 13233 13022
10/91 14763 15259 14928
10/92 16219 16760 16472
10/93 18037 18672 18614
10/94 17248 18043 17808
10/95 19689 20797 20553
10/96 20577 21966 21590
10/97 22153 23900 23463
- --------------------------------------------------------------------------------
Class C Shares
Average Annual Total Return
1 Year 5 Years 10 Years
+6.65% +6.45% +8.29%
Government
Income ML Government ML Blended
Fund Master Index Index
10/87 10000 10000 10000
10/88 10977 11113 10973
10/89 12033 12393 12291
10/90 12700 13233 13022
10/91 14763 15259 14928
10/92 16219 16760 16472
10/93 18037 18672 18614
10/94 17247 18043 17808
10/95 19703 20797 20553
10/96 20591 21966 21590
10/97 22167 23900 23463
- --------------------------------------------------------------------------------
Class D Shares
Average Annual Total Return
1 Year 5 Years 10 Years
+8.80% +7.41% +8.77%
Government
Income ML Government ML Blended
Fund Master Index Index
10/87 10000 10000 10000
10/88 10977 11113 10973
10/89 12033 12393 12291
10/90 12700 13233 13022
10/91 14763 15259 14928
10/92 16219 16760 16472
10/93 18124 18672 18614
10/94 17503 18043 17808
10/95 20193 20797 20553
10/96 21313 21966 21590
10/97 23189 23900 23463
- --------------------------------------------------------------------------------
66
<PAGE>
METLIFE - STATE STREET FINANCIAL TRUST
PART C
OTHER INFORMATION
Item 24: Financial Statements and Exhibits
(a) Financial Statements
(1) Financial Statements included in PART A (Prospectus) of this
Registration Statement:
Financial Highlights for State Street Research Government
Income Fund for the fiscal years ended October 31, 1988
through October 31, 1997.
Financial Highlights for State Street Research Strategic
Portfolios: Moderate for the period September 28, 1993
(commencement of operations) through October 31, 1996
incorporated by reference from Post-Effective Amendment No. 16.
Financial Highlights for State Street Research Strategic
Portfolios: Conservative and State Street Research Strategic
Portfolios: Aggressive for the period May 16, 1994
(commencement of operations) through October 31, 1996
incorporated by reference from Post-Effective Amendment No. 16.
(2) Financial Statements included in PART B (Statement of
Additional Information) of this Registration Statement:
For State Street Research Government Income Fund, for the
fiscal year ended October 31, 1997 (except as provided below):
Investment Portfolio
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets (fiscal years
ended October 31, 1997 and 1996
Notes to Financial Statements (including financial
highlights)
Report of Independent Accountants
Management's Discussion of Fund Performance
Financial Statements for State Street Research Strategic
Portfolios: Moderate, State Street Research Strategic
Portfolios: Conservative and State Street Research Strategic
Portfolios: Aggressive for the fiscal year ended October 31,
1996 (except as provided below) are incorporated by reference
from Post-Effective Amendment No. 16.
Investment Portfolo
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets (fiscal years ended
October 31, 1996 and 1995)
Notes to Financial Statements (including financial highlights)
Report of Independent Accountants
Management's Discussion of Fund Performance
Report of Special Meeting of Shareholders
C-1
<PAGE>
(b) Exhibits*
(1)(a) First Amended and Restated Master Trust Agreement and
Amendment No. 1 and Amendment No. 2 to First Amended and
Restated Master Trust Agreement (15)
(1)(b) Amendment No. 3 to First Amended and Restated Master Trust
Agreement(16)
(2)(a) By-Laws of the Registrant(1)**
(2)(b) Amendment No. 1 to By-Laws effective September 30, 1992(8)**
(3) Not applicable
(4) Deleted
(5)(a) Advisory Agreement with MetLife - State Street Investment
Services, Inc.(2)**
(5)(c) Transfer and Assumption of Responsibilities and Rights
relating to the Advisory Agreement between State Street
Financial Services, Inc. and State Street Research &
Management Company(8)**
(5)(d) Letter Agreement with respect to the Advisory Agreement
relating to MetLife - State Street Research Balanced Fund(11)**
C-2
<PAGE>
(5)(e) Letter Agreement with respect to the Advisory Agreement
relating to State Street Research Strategic Portfolios:
Conservative and State Street Research Strategic Portfolios:
Aggressive(13)**
(6)(a) First Amended and Restate Distribution Agreement with State
Street Research Investment Services, Inc.(16)
(6)(b) Form of Selected Dealer Agreement(15)
(6)(c) Form of Bank and Bank-Affiliated Broker-Dealer Agreement(13)**
(6)(d) Form of Revised Supplement No. 1 to Selected Dealer
Agreement(16)
(7) Not applicable
(8)(a) Custodian Contract with State Street Bank and Trust
Company(2)**
(8)(b) Letter Agreement with respect to Custodian Contract relating to
MetLife - State Street Research Balanced Fund(11)**
(8)(c) Letter Agreement with respect to the Custodian Contract
relating to State Street Research Strategic Portfolios:
Conservative and State Street Research Strategic Portfolios:
Aggressive(13)**
(8)(d) Amendment to the Custodian Contract with State Street Bank and
Trust Company(5)**
(9) Not applicable
(10) Opinion and consent of Goodwin, Procter & Hoar LLP(12)**
(11) Consent of Price Waterhouse LLP
(12) Not applicable
(13)(a) Purchase Agreement and Investment Letter(1)**
(13)(b) Purchase Agreement and Investment Letter(2)**
(13)(c) Subscription and Investment Letter -- MetLife - State Street
Research Balanced Fund(11)**
(13)(d) Subscription and Investment Letters -- Street Research
Strategic Portfolios: Conservative and State Street Research
Strategic Portfolios: Aggressive(13)**
(14)(a) State Street Research IRA: Disclosure Statement, Forms Booklet
and Transfer of Assets/Direct Rollover Form(15)
(14)(b) State Street Research 403(b): Brochure, Maximum Salary
Reduction Worksheet, Account Application, Salary Reduction
Agreement and Transfer of 403(b) Assets Form(16)
(14)(c) State Street Research SIMPLE IRA: Application, Terms and
Conditions and Disclosure Statement
(15)(a) Amended and Restated Plan of Distribution Pursuant to Rule
12b-1(10)**
(15)(b) Letter Agreement with respect to Amended and Restated Plan of
Distribution Pursuant to Rule 12b-1 relating to MetLife -
State Street Research Balanced Fund(11)**
C-3
<PAGE>
(15)(c) Letter Agreement with respect to Amended and Restated Plan of
Distribution Pursuant to Rule 12b-1 relating to State Street
Research Strategic Portfolios: Conservative and State Street
Research Strategic Portfolios: Aggressive(13)**
(16)(a) Calculation of Performance Data relating to State Street
Research Government Income Fund(5)**
(16)(b) Calculation of Distribution Rate relating to State Street
Research Government Income Fund(6)**
(16)(c) Calculation of Performance Data relating to State Street
Research Strategic Portfolios: Conservative, State Street
Research Strategic Portfolios: Moderate and State Street
Research Strategic Portfolios: Aggressive(14)**
(17) First Amended and Restated Multiple Class Expense Allocation
Plan Adopted Pursuant to Rule 18f-2(16)
(18) Powers of Attorney
(19) Certificate of Board Resolution Respecting Powers of
Attorney
(20)(a) Application Form
(20)(b) MetLife Securities, Inc. Application Form
(20)(c) Additional Services Application Form
(27) Financial Data Schedules
- ---------------
* 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 most recent name change accordingly refer
to MetLife - State Street Investment Services, Inc. or State Street
Financial Services, Inc. The Series of the Registrant have changed their
names at various times. Documents in this listing of Exhibits which were
immediately effective prior to the most recent name change accordingly
refer to a prior name of a securities.
** Restated in electronic format in Post-Effective Amendment No. 17 filed
on December 31, 1997.
C-4
<PAGE>
Filed as part of the Registration Statement as noted below and incorporated
herein by reference:
Footnote Securities Act of 1933
Reference Registration/Amendment Date Filed
1 Initial Registration November 21, 1986
2 Pre-Effective Amendment No. 1 February 13, 1987
3 Post-Effective Amendment No. 1 August 27, 1987
4 Post-Effective Amendment No. 2 June 3, 1988
5 Post-Effective Amendment No. 3 February 22, 1989
6 Post-Effective Amendment No. 4 February 28, 1990
7 Post-Effective Amendment No. 5 February 26, 1991
8 Post-Effective Amendment No. 7 February 26, 1993
9 Post-Effective Amendment No. 8 April 2, 1993
10 Post-Effective Amendment No. 9 July 8, 1993
11 Post-Effective Amendment No. 10 February 9, 1994
12 Post-Effective Amendment No. 11 February 18, 1994
13 Post-Effective Amendment No. 13 November 30, 1994
14 Post-Effective Amendment No. 14 January 31, 1995
15 Post-Effective Amendment No. 15 December 28, 1995
16 Post-Effective Amendment No. 16 February 27, 1997
Item 25. Persons Controlled by or under Common Control with Registrant
Not applicable.
Item 26. Number of Holders of Securities
As of November 30, 1997 the numbers of record holders of shares of the
Registrant's Fund was as follows:
(1) (2)
Number of
Title of Class Record Holders
- --------------------------------------------------------------------------------
Shares of Beneficial Interest
State Street Research Government Income Fund
Class A 13,316
Class B 3,814
Class C 226
Class S 204
C-5
<PAGE>
State Street Research Strategic Portfolios: Moderate
Class A 0
Class B 0
Class C 0
Class S 10
State Street Research Strategic Portfolios: Conservative
Class A 0
Class B 0
Class C 0
Class S 5
State Street Research Strategic Portfolios: Aggressive
Class A 0
Class B 0
Class C 0
Class S 5
Item 27. Indemnification
Under Article VI of the Registrant's Master Trust Agreement each of its
Trustees and officers or persons serving in such capacity with another entity at
the request of the Registrant ("Covered Person") shall be indemnified against
all liabilities, including, but not limited to, amounts paid in satisfaction of
judgments, in compromises 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 person may be or may have been involved as a
party or otherwise or with which such Covered Person may be or may have been
threatened, while in office or thereafter, by reason of being or having been
such a Trustee or officer, director or trustee, except with respect to any
matter as to which it has been determined that such Covered Person had acted
with willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of such Covered Person's office (such conduct
referred to hereafter as "Disabling Conduct"). A determination that the Covered
Person is entitled to indemnification may be made by (i) a final decision on the
merits by a court or other body before 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
C-6
<PAGE>
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-7
<PAGE>
Item 28. Business and Other Connections of Investment Adviser
Describe any other business, profession, vocation or employment of a
substantial nature in which each investment adviser of the Registrant, and each
director, officer or partner of any such investment adviser, is or has been, at
any time during the past two fiscal years, engaged for his own account or in the
capacity of director, officer, employee, partner or trustee.
<TABLE>
<CAPTION>
Principal business
Name Connection Organization address of organization
- ---- ---------- ------------ -----------------------
<S> <C> <C> <C>
State Street Research & Investment Adviser Various investment advisory Boston, MA
Management Company clients
Arpiarian, Tanya None
Vice President
Bangs, Linda L. None
Vice President
Bennett, Peter C. Executive Vice President GFM International Investors Limited London, England
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 Boston Private Bank & Trust Co. Boston, MA
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
Director State Street Research Investment Services, Inc. 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
Vice President (until 6/97)
Bray, Michael J. Employee Merrill Lynch & Co. Boston, MA
Vice President (until 7/96)
Brown, Susan H. None
Vice President
Buffum, Andrea Project Manager BankBoston Boston, MA
(until 12/96)
Burbank, John F. None
Senior Vice President
(Vice President
until 7/96)
Cabrera, Jesus A. Vice President First Chicago Investment Management Co. Chicago, IL
Vice President (until 5/96)
Vice President State Street Research Capital Trust Boston, MA
Canavan, Joseph W. Assistant Treasurer State Street Research Equity Trust Boston, MA
Vice President Assistant Treasurer State Street Research Financial Trust Boston, MA
Assistant Treasurer State Street Research Income Trust Boston, MA
Assistant Treasurer State Street Research Money Market Trust Boston, MA
Assistant Treasurer State Street Research Tax-Exempt Trust Boston, MA
Assistant Treasurer State Street Research Capital Trust Boston, MA
Assistant Treasurer State Street Research Exchange Trust Boston, MA
Assistant Treasurer State Street Research Growth Trust Boston, MA
Assistant Treasurer State Street Research Master Investment Trust Boston, MA
Assistant Treasurer State Street Research Securities Trust Boston, MA
Assistant Treasurer State Street Research Portfolios, Inc. Boston, MA
C-8
<PAGE>
Principal business
Name Connection Organization address of organization
- ---- ---------- ------------ -----------------------
Carstens, Linda C. None
Vice President
Clifford, Jr., Paul J. Vice President State Street Research Tax-Exempt Trust Boston, MA
Vice President
Coleman, Thomas J. Account Manager MetLife Investment Management New York, NY
Vice President (until 9/96)
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. None
Senior Vice President
Drake, Susan W. Vice President State Street Research Tax-Exempt Trust Boston, MA
Vice President (until 2/96)
Duggan, Peter J. None
Senior Vice President
Even, Karen K. None
Vice President
Federoff, Alex G. None
Vice President
Fee, Richard E. CIGNA Retirement and Investment Services Hartford, CT
Vice President
Feliciano, Rosalina None
Vice President
Gardner, Michael D. Partner Prism Group Seattle, WA
Senior Vice President
Geer, Bartlett R. Vice President State Street Research Equity Trust Boston, MA
Senior Vice President Vice President State Street Research Income Trust Boston, MA
Vice President State Street Research Securities Trust Boston, MA
Giroux, June M. None
Vice President
Govoni, Electra None
Vice President
C-9
<PAGE>
Principal business
Name Connection Organization address of organization
- ---- ---------- ------------ -----------------------
Granger, Allison None
Vice President
Hamilton, Jr., William A. Treasurer and Director Ellis Memorial and Eldredge House Boston, MA
Senior Vice President Treasurer and Director Nautical and Aviation Publishing Company, Inc. Baltimore, MD
Treasurer and Director North Conway Institute Boston, MA
Hanson, Phyllis None
Vice President
Haverty, Jr., Lawrence J. None
Senior Vice President
Heineke, George R. None
Vice President
Jackson, Jr., Certain trusts of related and
F. Gardner Trustee non-related individuals
Senior Vice President Trustee and Chairman of the
Board Vincent Memorial Hospital Boston, MA
Jamieson, Frederick H. Vice President and Asst.
Senior Vice President Treasurer State Street Research Investment Services, Inc. Boston, MA
Vice President and Asst.
Treasurer SSRM Holdings, Inc. Boston, MA
Vice President and Controller MetLife Securities, Inc. New York, NY
Senior Vice President GFM International Investors Limited London, England
Kallis, John H. Vice President State Street Research Financial Trust Boston, MA
Senior Vice President Vice President State Street Research Income Trust Boston, MA
Vice President State Street Research Money Market Trust Boston, MA
Vice President State Street Research Portfolios, Inc. Boston, MA
Vice President State Street Research Tax-Exempt Trust Boston, MA
Vice President State Street Research Securities Trust Boston, MA
Trustee 705 Realty Trust Washington, D.C.
Director and President K&G Enterprises Washington, D.C.
Kasper, M. Katherine None
Vice President
C-10
<PAGE>
Principal business
Name Connection Organization address of organization
- ---- ---------- ------------ -----------------------
Kluiber, Rudolph K. Vice President State Street Research Capital Trust Boston, MA
Vice President
Langholm, Knut Director State Street Research Luxembourg
Vice President
Leary, Eileen M. None
Vice President
Maisonneuve, Virginie Portfolio Manager Batterymarch Financial Management Boston, MA
Vice President (until 6/97)
Vice President GFM International Investors, Limited London, England
McNamara, III, Francis J. Director and Executive GFM International Investors, Limited London, England
Executive Vice Vice President
President, Secretary Executive Vice President, State Street Research Investment Services, Inc. Boston, MA
and General Counsel Clerk and General Counsel
(Senior Vice President Secretary and General Counsel State Street Research Master Investment Trust Boston, MA
until 7/96) 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
C-11
<PAGE>
Principal business
Name Connection Organization address of organization
- ---- ---------- ------------ -----------------------
Maus, Gerard P. Executive Vice President GFM International Investors, Limited London, England
Director, Executive and Director
Vice President Treasurer State Street Research Equity Trust Boston, MA
Treasurer, Chief Treasurer State Street Research Financial Trust Boston, MA
Financial Officer and Treasurer State Street Research Income Trust Boston, MA
Chief Administrative Treasurer State Street Research Money Market Trust Boston, MA
Officer Treasurer State Street Research Tax-Exempt Trust Boston, MA
Treasurer State Street Research Capital Trust Boston, MA
Treasurer State Street Research Exchange Trust Boston, MA
Treasurer State Street Research Growth Trust Boston, MA
Treasurer State Street Research Master Investment Trust Boston, MA
Treasurer State Street Research Portfolios, Inc. Boston, MA
Treasurer State Street Research Securities Trust Boston, MA
Director, Executive Vice 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
Miles, Deborah C. Vice President Scudder, Stevens & Clark Boston, MA
(until 9/97)
Employee L.L. Bean, Inc. Freeport, ME
Miller, Joan D. Senior Vice President State Street Research Investment Services, Inc. Boston, MA
Senior Vice President
(Vice President
until 7/96)
Moore, Jr., Thomas P.
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. Vice President State Street Research Money Market Trust Boston, MA
Senior Vice President
(Vice President
until 7/96)
Orr, Stephen C. Member Technology Analysts of Boston Boston, MA
Vice President Member Electro-Science Analysts (of NYC) New York, NY
C-12
<PAGE>
Principal business
Name Connection Organization address of organization
- ---- ---------- ------------ -----------------------
Paddon, Steven W. Employee Metropolitan Life Insurance Company New York, NY
Vice President (until 10/96)
Pannell, James C. None
Senior Vice President
(Vice President
until 4/97)
Peters, Kim M. Vice President State Street Research Securities Trust Boston, MA
Senior 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, Easton Senior Vice President GFM International Investors, Limited London, England
Senior Vice President
(Vice President
until 7/96)
Rawlins, Jeffrey A. None
Senior Vice President
(Vice President
until 7/96)
Rice III, Daniel Joseph Vice President State Street Research Equity Trust Boston, MA
Senior Vice President
Richards, Scott None
Vice President
Romich, Douglas A. Vice President GFM International Investors Limited London, England
Vice President Assistant Treasurer State Street Research Equity Trust Boston, MA
Assistant Treasurer State Street Research Financial Trust Boston, MA
Assistant Treasurer State Street Research Income Trust Boston, MA
Assistant Treasurer State Street Research Money Market Trust Boston, MA
Assistant Treasurer State Street Research Tax-Exempt Trust Boston, MA
Assistant Treasurer State Street Research Capital Trust Boston, MA
Assistant Treasurer State Street Research Exchange Trust
Assistant Treasurer State Street Research Growth Trust Boston, MA
Assistant Treasurer State Street Research Master Investment Trust Boston, MA
Assistant Treasurer State Street Research Securities Trust Boston, MA
Assistant Treasurer State Street Research Portfolios, Inc. Boston, MA
Saperstone, Paul None
Vice President
C-13
<PAGE>
Principal business
Name Connection Organization address of organization
- ---- ---------- ------------ -----------------------
Schrage, Michael None
Vice President
Schultz, David C. Director and Treasurer Mafraq Hospital Association Mafraq, Jordan
Executive Vice 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
President and Chief John Hancock Funds, Inc. Boston, MA
Executive Officer
(until 1/96)
Shean, William G. None
Vice President
Shively, Thomas A. Vice President State Street Research Financial Trust Boston, MA
Director and Vice President State Street Research Money Market Trust Boston, MA
Executive Vice Vice President State Street Research Tax-Exempt Trust Boston, MA
President Director State Street Research Investment Services, Inc Boston, MA
Vice President State Street Research Securities Trust Boston, MA
Shoemaker, Richard D. Senior Vice President GFM International Investors, Limited London, England
Senior Vice President
Stambaugh, Kenneth None
Vice President
(Assistant Vice
President until 9/97)
Strelow, Dan R. None
Senior Vice President
C-14
<PAGE>
Principal business
Name Connection Organization address of organization
- ---- ---------- ------------ -----------------------
Swanson, Amy McDermott None
Senior Vice President
Trebino, Anne M. Vice President SSRM Holdings, Inc. Boston, MA
Senior Vice President
Verni, Ralph F. Chairman, President, CEO GFM International Investors, Limited London, England
Chairman, President, and Director
Chief Executive Chairman, President, Chief State Street Research Capital Trust Boston, MA
Officer and Executive Officer and Trustee
Director Chairman, President, Chief State Street Research Exchange Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief State Street Research Growth Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief State Street Research Master Investment Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief State Street Research Securities Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief State Street Research Equity Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief State Street Research Financial Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief State Street Research Income Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief State Street Research Money Market Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief State Street Research Portfolios, Inc. Boston, MA
Executive Officer and Director
Chairman, President, Chief State Street Research Tax-Exempt Trust Boston, MA
Executive Officer and Trustee
Chairman and Director State Street Research Investment Services, Inc. Boston, MA
(President and Chief Executive
Officer until 2/96)
Chairman and Director Metric Holdings, Inc. San Francisco, CA
Director and Officer Certain wholly-owned subsidiaries
of Metric Holdings, Inc.
Chairman of the Board 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-15
<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
Weiss, James M. Vice President State Street Research Exchange Trust Boston, MA
Senior Vice President Vice President State Street Research Growth Trust Boston, MA
Vice President State Street Research Securities Trust Boston, MA
Vice President State Street Research Capital Trust Boston, MA
Vice President State Street Research Equity Trust Boston, MA
Vice President State Street Research Master Investment Trust Boston, MA
Westvold, Vice President State Street Research Securities Trust Boston, MA
Elizabeth McCombs
Senior Vice President
(Vice President
until 7/96)
Wilkins, Kevin Vice President State Street Research Investment Boston, MA
Vice President Services, Inc.
Vice President Fidelity Investments Boston, MA
(until 7/97)
Various Positions Fidelity Investments Boston, MA
(until 10/96)
Wilson, John T. Vice President State Street Research Equity Trust Boston, MA
Vice President Vice President State Street Research Master Investment Trust Boston, MA
Vice President Phoenix Investment Counsel, Inc. Hartford, CT
(until 6/96)
Wing, Darman A. Senior Vice President and State Street Research Investment Services, Inc. Boston, MA
Vice President, Asst. Clerk
Assistant Secretary Assistant Secretary State Street Research Capital Trust Boston, MA
and Assistant Assistant Secretary State Street Research Exchange Trust Boston, MA
General Counsel Assistant Secretary State Street Research Growth Trust Boston, MA
Assistant Secretary State Street Research Master Investment Trust Boston, MA
Assistant Secretary State Street Research Securities Trust Boston, MA
Assistant Secretary State Street Research Equity Trust Boston, MA
Assistant Secretary State Street Research Financial Trust Boston, MA
Assistant Secretary State Street Research Income Trust Boston, MA
Assistant Secretary State Street Research Money Market Trust Boston, MA
Assistant Secretary State Street Research Tax-Exempt Trust Boston, MA
Assistant Secretary State Street Research Portfolios, Inc. Boston, MA
Assistant Secretary SSRM Holdings, Inc. Boston, MA
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
C-16
<PAGE>
Principal business
Name Connection Organization address of organization
- ---- ---------- ------------ -----------------------
Wu, Norman N. Partner Atlantic-Acton Realty Framingham, MA
Senior Vice President Director Bond Analysts Society of Boston Boston, MA
</TABLE>
C-17
<PAGE>
Item 29. Principal Underwriters
(a) State Street Research Investment Services, Inc. serves as principal
underwriter for State Street Research Equity Trust, State Street Research
Financial Trust, State Street Research Income Trust, State Street Research Money
Market Trust, State Street Research Tax-Exempt Trust, State Street Research
Capital Trust, State Street Research Growth Trust, State Street Research Master
Investment Trust, State Street Research Securities Trust and State Street
Research Portfolios, Inc.
(b) Directors and Officers of State Street Research Investment
Services, Inc. are as follows:
(1) (2) (3)
Positions Positions
Name and Principal and Offices and Offices
Business Address with Underwriter with Registrant
Ralph F. Verni Chairman of the Chairman of
One Financial Center Board and Director the Board,
Boston, MA 02111 President,
Chief Executive
Officer and
Trustee
Peter C. Bennett Director Vice President
One Financial Center
Boston, MA 02111
Gerard P. Maus Executive Vice Treasurer
One Financial Center President, Treasurer,
Boston, MA 02111 Chief Financial
Officer and Director
Thomas A. Shively Director None
One Financial Center
Boston, MA 02111
C. Troy Shaver, Jr. President, None
One Financial Center Chief Executive
Boston, MA 02111 Officer and
Executive Vice President
Francis J. McNamara, III Executive Vice Secretary
One Financial Center President and
Boston, MA 02111 Clerk
Peter Borghi Senior Vice President None
One Financial Center
Boston, MA 02111
C-18
<PAGE>
Paul V. Daly Senior Vice President None
One Financial Center
Boston, MA 02111
Susan M.W. DiFazio Senior Vice President None
One Financial Center
Boston, MA 02111
Gregory R. McMahan Senior Vice President None
One Financial Center
Boston, MA 02111
Joan D. Miller Senior Vice President None
One Financial Center
Boston, MA 02111
Darman A. Wing Senior Vice President, Assistant
One Financial Center Assistant General Counsel Secretary
Boston, MA 02111 and Assistant Clerk
Robert M. Gunville Vice President None
One Financial Center
Boston, MA 02111
Frederick H. Jamieson Vice President and None
One Financial Center Assistant Treasurer
Boston, MA 02111
Susan V. Martin Vice President None
One Financial Center
Boston, MA 02111
Deborah C. Miles Vice President None
One Financial Center
Boston, MA 02111
Amy L. Simmons Vice President Assistant
One Financial Center Secretary
Boston, MA 02111
C-19
<PAGE>
Kevin Wilkins Vice President None
One Financial Center
Boston, MA 02111
Item 30. Location of Accounts and Records
Gerard P. Maus
State Street Research & Management Company
One Financial Center
Boston, MA 02111
Item 31. Management Services
Inapplicable.
Item 32. Undertakings
(a) Inapplicable.
(b) Deleted.
(c) The Registrant undertakes to hold a special meeting of shareholders
for the purpose of voting upon the question of removal of any trustee or
trustees when requested in writing to do so by the record holders of not less
than 10 per centum of the outstanding shares of the 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.
(d) The Registrant has elected to include the information required by Item
5A of Form N-1A in its annual report to shareholders. The Registrant undertakes
to furnish each person to whom a prospectus is delivered with a copy of the
applicable fund's latest annual report to shareholders upon request and without
charge.
C-20
<PAGE>
NOTICE
A copy of the Master Trust Agreement of the Registrant is on file with the
Secretary of State of the Commonwealth of Massachusetts and notice is hereby
given that the obligations of the Registrant hereunder, and the authorization,
execution and delivery of this Registration Statement and Amendment, shall not
be binding upon any of the Trustees, shareholders, nominees, officers, agents or
employees of the Registrant as individuals or personally, but shall bind only
the property of the series of the Registrant, as provided in the Master Trust
Agreement. Each series of the Registrant shall be solely and exclusively
responsible for all of its direct or indirect debts, liabilities, and
obligations, and no other series shall be responsible for the same.
C-21
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it has duly caused
this Post-Effective Amendment No. 17 to its Registration Statement on Form N-1A
to be signed on its behalf by the undersigned, thereto duly authorized, in the
City of Boston and the Commonwealth of Massachusetts on the 29th day of
December, 1997.
STATE STREET RESEARCH FINANCIAL 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:
* Trustee, Chairman of the Board
- ---------------------------------- and Chief Executive Officer
Ralph F. Verni (principal executive officer)
* Treasurer (principal financial
- ---------------------------------- and accounting officer)
Gerard P. Maus
*
- ---------------------------------- Trustee
Steve A. Garban
*
- ---------------------------------- Trustee
Malcolm T. Hopkins
*
- ---------------------------------- Trustee
Edward M. Lamont
* Trustee
- ----------------------------------
Robert A. Lawrence
* Trustee
- ----------------------------------
Dean O. Morton
* Trustee
- ----------------------------------
Thomas L. Phillips
*
- ---------------------------------- Trustee
Toby Rosenblatt
* Trustee
- ----------------------------------
Michael S. Scott Morton
<PAGE>
* Trustee
- ----------------------------------
Jeptha H. Wade
*By: /s/ Francis J. McNamara, III
----------------------------
Francis J. McNamara, III,
Attorney-in-Fact under Powers of
Attorney filed herein.
C-22
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1933 Act Registration No. 33-10327
1940 Act File No. 811-4911
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. ____ [ ]
Post-Effective Amendment No. 17 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 18 [X]
____________________
STATE STREET RESEARCH FINANCIAL TRUST
(Exact Name of Registrant as Specified in Declaration of Trust)
____________________
EXHIBITS
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INDEX TO EXHIBITS
(2)(a) By-Laws of the Registrant*
(2)(b) Amendment No. 1 to By-Laws effective September 30, 1992*
(5)(a) Advisory Agreement with MetLife-State Street Investment Services
Inc.*
(5)(c) Transfer and Assumption of Responsibilities and Rights relating to
the Advisory Agreement between State Street Financial Services, Inc.
and State Street Research & Management Company*
(5)(d) Letter Agreement with respect to the Advisory Agreement relating
to MetLife-State Street Research Balanced Fund*
(5)(e) Letter Agreement with respect to the Advisory Agreement relating to
State Street Research Strategic Portfolios: Conservative and State
Street Research Strategic Portfolios: Aggressive*
(6)(c) Form of Bank and Bank-Affiliated Broker-Dealer Agreement*
(8)(a) Custodian Contract with State Street Bank and Trust Company*
(8)(b) Letter Agreement with respect to Custodian Contract relating to
MetLife-State Street Research Balanced Fund*
(8)(c) Letter Agreement with respect to Custodian Contract relating to
State Street Research Strategic Portfolios: Conservative and State
Street Research Strategic Portfolios: Aggressive*
(8)(d) Amendment to Custodian Contract with State Street Bank and Trust*
(10) Consent of Goodwin, Procter & Hoar*
(11) Consent of Price Waterhouse
(13)(a) Purchase Agreement and Investment Letter*
(13)(b) Purchase Agreement and Investment Letter*
(13)(c) Subscription and Investment Letter--MetLife-State Street Research
Balanced Fund*
(13)(d) Subscription and Investment Letters--State Street Research Strategic
Portfolios: Conservative and State Street Research Strategic
Portfolios: Aggressive*
(14)(c) State Street Research SIMPLE IRA Application, Terms and Conditions
and Disclosure Statement
(15)(a) First Amended and Restated Plan of Distribution Pursuant to
Rule 12b-1*
(15)(b) Letter Agreement with respect to Amended and Restated Plan of
Distribution Pursuant to Rule 12b-1 relating to MetLife-State
Street Research Balanced Fund*
(15)(c) Letter Agreement with respect to the Amended and Restated Plan of
Distribution Pursuant to Rule 12b-1 relating to State Street
Research Strategic Portfolios: Conservative and State Street
Research Strategic Portfolios: Aggressive*
(16)(a) Calculation of Performance Data relating to State Street Research
Government Income Fund*
(16)(b) Calculation of Distribution Rate relating to State Street Research
Government Income Fund*
(16)(c) Calculation of Performance Data relating to State Street Research
Strategic Portfolios: Conservative, State Street Research Strategic
Portfolios: Moderate and State Street Research Strategic Portfolios:
Aggressive*
(18) Powers of Attorney
(19) Certificate of Board Resoluting Respecting Powers of Attorney
(20)(a) Application Form
(20)(b) MetLife Securities, Inc. Application Form
(20)(c) Additional Services Application Form
(27) Financial Data Schedules
*Restated in electronic format
BY-LAWS
0F
METLIFE - STATE STREET FIXED INCOME TRUST
ARTICLE 1
Agreement and Declaration
of Trust; Principa1 Office
1.1 Agreement and Declaration of Trust. These By-Laws shall be subject
to the Agreement and Declaration of Trust (also referred to as the Master Trust
Agreement), as from time to time in effect (the "Declaration of Trust"), of
MetLife-State Street Fixed Income Trust, the Massachusetts business trust
established by the Declaration of Trust (the "Trust").
1.2 Principal Office of the Trust. The principal office of the Trust
shall be located in Boston, Massachusetts.
ARTICLE 2
Meetings of Trustees
2.1 Regular Meetings. Regular meetings of the Trustees may be held
without call or notice at such places and at such times as the Trustees may from
time to time determine, provided that notice of the first regular meeting
following any such determination shall be given to absent Trustees.
2.2 Specia1 Meetings. Special meetings of the Trustees may be held at
any time and at any place designated in the call of the meeting when called by
the Chairman of the Board of Trustees, the President or the Treasurer or by two
or more Trustees, sufficient notice thereof being given to each Trustee by the
Secretary or an Assistant Secretary or by the officer or the Trustees calling
the meeting.
2.3 Notice. It shall be sufficient notice to a Trustee of a special
meeting to send notice by mail at least forty-eight hours or by telegram at
least twenty-four hours before the meeting addressed to the Trustee at his usual
or last known business or residence address or to give notice to him in person
or by telephone at least twenty-four hours before the meeting. Notice of a
meeting need not be given to any Trustee if a written waiver of notice, executed
by him before or after the meeting, is filed with the records of the meeting, or
to any Trustee who attends the meeting without protesting prior
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thereto or at the commencement thereof the lack of notice to him. Neither notice
of a meeting nor a waiver of a notice need specify the purposes of the meeting.
2.4 Quorum. At any meeting of the Trustees one-half of the Trustees
then in office shall constitute a quorum. Any meeting may be adjourned from time
to time by a majority of the votes cast upon the question, whether or not a
quorum is present, and the meeting may be held as adjourned without further
notice.
2.5 Participation by Telephone. One or more of the Trustees or of any
committee of the Trustees may participate in a meeting thereof by means of a
conference telephone or similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time. Participation
by such means shall constitute presence in person at a meeting.
ARTICLE 3
Officers
3.1 Enumeration; Qualification. The officers of the Trust shall be a
President, a Treasurer, a Secretary and such other officers, including a
Chairman of the Board of Trustees, one or more Vice Presidents, one or more
Assistant Treasurers and one or more Assistant Secretaries, if any, as the
Trustees from time to time may in their discretion elect. The Trust may also
have such agents as the Trustees from time to time may in their discretion
appoint. The Chairman of the Board of Trustees shall be a Trustee and may, but
need not be, a shareholder of the Trust; and any other officer may, but need not
be, a Trustee or shareholder of the Trust. Any two or more offices may be held
by the same person.
3.2 Election. The President, the Treasurer and the Secretary shall be
elected annually by the Trustees at a meeting held within the first four months
of the Trust's fiscal year. The meeting at which the officers are elected shall
be known as the annual meeting of Trustees. Other officers, if any, may be
elected or appointed by the Trustees at said meeting or at any other time.
Vacancies in any office may be filled at any time.
3.3 Tenure. The President, the Treasurer and the Secretary shall hold
office until the next annual meeting of the Trustees and until their respective
successors are chosen and qualified, or in each case until he sooner dies,
resigns, is removed or becomes disqualified. Each other officer shall hold
office and each agent shall retain authority at the pleasure of the Trustees.
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3.4 Powers. Subject to the other provisions of these By-Laws, each
officer shall have, in addition to the duties and powers herein and in the
Declaration of Trust set forth, such duties and powers as are commonly incident
to the office occupied by him as if the Trust were organized as a Massachusetts
business corporation and such other duties and powers as the Trustees may from
time to time designate.
3.5 Chairman of the Board of Trustees. The Chairman of the Board of
Trustees, if any, shall preside at all meetings of the shareholders and of the
Trustees unless otherwise provided by the Trustees, and shall perform such other
duties and shall have such other powers as the Trustees may determine from time
to time.
3.6 President. The President shall be the chief executive officer of
the Trust. In the absence of the Chairman of the Board of Trustees, the
President shall preside at meetings of the shareholders and of the Trustees
unless otherwise provided by the Trustees.
3.7 Vice President. The Vice President, or if there be more than one
Vice President, the Vice Presidents in the order determined by the Trustees (or
if there be no such determination, then in the order of their election), shall
in the absence of the President or in the event of his inability or refusal to
act, perform the duties of the President, and when so acting, shall have all the
powers of and be subject to all the restrictions upon the President. The Vice
Presidents shall perform such other duties and have such other powers as the
Board of Trustees may from time to time prescribe.
3.8 Treasurer. The Treasurer shall be the chief financial and
accounting officer of the Trust, and shall, subject to the provisions of the
Declaration of Trust and to any arrangement made by the Trustees with a
custodian, investment adviser or manager, or transfer, shareholder servicing or
similar agent, be in charge of the valuable papers, books of account and
accounting records of the Trust, and shall have such other duties and powers as
may be designated from time to time by the Trustees or by the President.
3.9 Assistant Treasurer. The Assistant Treasurer, or if there shall be
more than one, the Assistant Treasurers in the order determined by the Trustees
(or if there be no such determination, then in the order of their election),
shall, in the absence of the Treasurer or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the Treasurer and
shall perform such other duties and have such other powers as the Board of
Trustees may from time to time prescribe.
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3.10 Secretary. The Secretary shall record all proceedings of the
shareholders and the Trustees in books to be kept therefor, which books or a
copy thereof shall be kept at the principal office of the Trust. In the absence
of the Secretary from any meeting of the shareholders or Trustees, an Assistant
Secretary, or if there be none or if he is absent, a temporary secretary chosen
at such meeting, shall record the proceedings thereof in the aforesaid books.
3.11 Assistant Secretary. The Assistant Secretary, or if there be more
than one, the Assistant Secretaries in the order determined by the Trustees (or
if there be no determination, then in the order of their election), shall, in
the absence of the Secretary or in the event of his inability or refusal to act,
perform the duties and exercise the powers of the Secretary and shall perform
such other duties and have such other powers as the Board of Trustees may from
time to time prescribe.
3.12 Resignations and Removals. Any Trustee or officer may resign at
any time by written instrument signed by him and delivered to the Chairman of
the Board of Trustees, the President or the Secretary or to a meeting of the
Trustees. Such resignation shall be effective upon receipt unless specified to
be effective at some other time. The Trustees may remove any officer elected by
them with or without cause. Except to the extent expressly provided in a written
agreement with the Trust, no Trustee or officer resigning and no officer removed
shall have any right to any compensation for any period following his
resignation or removal, or any right to damages on account of such removal.
ARTICLE 4
Committees
4.1 General. The Trustees, by vote of a majority of the Trustees then
in office, may elect from their number an Executive Committee or other
committees and may delegate thereto some or all of their powers except those
which by law, by the Declaration of Trust, or by these By-Laws may not be
delegated. Except as the Trustees may otherwise determine, any such committee
may make rules for the conduct of its business, but unless otherwise provided by
the Trustees or in such rules, its business shall be conducted so far as
possible in the same manner as is provided by these By-Laws for the Trustees
themselves. All members of such committees shall hold such offices at the
pleasure of the Trustees. The Trustees may abolish any such committee at any
time. Any committee to which the Trustees delegate any of their powers or duties
shall keep records of its meetings and shall report its action to the
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Trustees. The Trustees shall have power to rescind any action of any committee,
but no such rescission shall have retroactive effect.
ARTICLE 5
Reports
5.1 General. The Trustees and officers shall render reports at the time
and in the manner required by the Declaration of Trust or any applicable law.
Officers and committees shall render such additional reports as they may deem
desirable or as may from time to time be required by the Trustees.
ARTICLE 6
Fiscal Year
6.1 General. The fiscal year of the Trust shall be fixed by resolution
of the Trustees.
ARTICLE 7
Seal
7.1 General. The seal of the Trust shall consist of a flat-faced die
with the word "Massachusetts", together with the name of the Trust and the year
of its organization cut or engraved thereon, but, unless otherwise required by
the Trustees, the seal shall not be necessary to be placed on, and its absence
shall not impair the validity of, any document, instrument or other paper
executed and delivered by or on behalf of the Trust.
ARTICLE 8
Execution of Papers
8.1 General. Except as the Trustees may generally or in particular
cases authorize the execution thereof in some other manner, all deeds, leases,
contracts, notes and other obligations made by the Trustees shall be signed by
the President, any Vice President, or by the Treasurer and need not bear the
seal of the Trust.
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ARTICLE 9
Issuance of Share Certificates
9.1 Share Certificates. In lieu of issuing certificates for shares, the
Trustees or the transfer agent may either issue receipts therefor or may keep
accounts upon the books of the Trust for the record holders of such shares, who
shall in either case be deemed, for all purposes hereunder, to be the holders of
certificates for such shares as if they had accepted such certificates and shall
be held to have expressly assented and agreed to the terms hereof.
The Trustees may at any time authorize the issuance of share
certificates either in limited cases or to all shareholders. In that event, a
shareholder may receive a certificate stating the number of shares owned by him,
in such form as shall be prescribed from time to time by the Trustees. Such
certificate shall be signed by the President or a Vice President and by the
Treasurer or Assistant Treasurer. Such signatures may be facsimiles if the
certificate is signed by a transfer agent, or by a registrar, other than a
Trustee, officer or employee of the Trust. In case any officer who has signed or
whose facsimile signature has been placed on such certificate shall cease to be
such officer before such certificate is issued, it may be issued by the Trust
with the same effect as if he were such officer at the time of its issue.
9.2 Loss of Certificates. In case of the alleged loss or destruction or
the mutilation of a share certificate, a duplicate certificate may be issued in
place thereof, upon such terms as the Trustees shall prescribe.
9.3 Issuance of New Certificate to Pledgee. A pledgee of shares
transferred as collateral security shall be entitled to a new certificate if the
instrument of transfer substantially describes the debt or duty that is intended
to be secured thereby. Such new certificate shall express on its face that it is
held as collateral security, and the name of the pledgor shall be stated
thereon, who alone shall be liable as a shareholder, and entitled to vote
thereon.
9.4 Discontinuance of Issuance of Certificates. The Trustees may at any
time discontinue the issuance of share certificates and may, by written notice
to each shareholder, require the surrender of shares certificates to the Trust
for cancellation. Such surrender and cancellation shall not affect the ownership
of shares in the Trust.
6
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ARTICLE 10
Dealings with Trustees and Officers
10.1 General. Any Trustee, officer or other agent of the Trust may
acquire, own and dispose of shares of the Trust to the same extent as if he were
not a Trustee, officer or agent; and the Trustees may accept subscriptions to
shares or repurchase shares from any firm or company in which any Trustee,
officer or other agent of the Trust may have an interest.
ARTICLE 11
Amendments to the By-Laws
11.1 General. These By-Laws may be amended or repealed, in whole or in
part, by a majority of the Trustees then in office at any meeting of the
Trustees, or by one or more writings signed by such a majority.
The foregoing By-Laws were adopted by the Board of Trustees on
November 19, 1986.
/s/ Constantine Hutchins, Jr.
Constantine Hutchins, Jr.
Secretary
7
MetLife - State Street Fixed Income Trust
Amendment No. 1 to the By-Laws
That the first sentence of Section 3.6 of Article III of the By-Laws of
the MetLife - State Street Fixed Income Trust is hereby amended to read as
follows:
"Unless otherwise determined by the Trustees, the President shall be
the Chief Executive Officer of the Trust."
Effective as of /s/ Constantine Hutchins, Jr.
September 30, 1992 Constantine Hutchins, Jr.
Secretary
ADVISORY AGREEMENT
ADVISORY AGREEMENT made as of this 12th day of February, 1987, by and
between METLIFE - STATE STREET INVESTMENT SERVICES, INC., a corporation
organized under the laws of the Commonwealth of Massachusetts having its
principal place of Business in Boston, Massachusetts (the "Manager"), and
METLIFE - STATE STREET FIXED INCOME TRUST, a Massachusetts business trust having
its principal place of business in Boston, Massachusetts (the "Trust").
WHEREAS, the Trust is engaged in business as an open-end diversified
management investment company and is registered as such under the Investment
Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Manager is engaged principally in the business of
rendering investment management services and is registered as an investment
adviser under the Investment Advisers Act of 1940, as amended; and
WHEREAS, the Trust is authorized to issue shares of beneficial interest
in separate series with each such series representing interests in a separate
portfolio of securities and other assets; and
WHEREAS, the Trust has established one series, the MetLife - State
Street Government Income Fund, such series (the "Initial Fund"), together with
all other series subsequently established by the Trust with respect to which the
Manager renders management and investment advisory services pursuant to the
terms of this Agreement, being herein collectively referred to as the "Funds"
and individually as a "Fund."
NOW, THEREFORE, WITNESSETH: That it is hereby agreed between the
parties hereto as follows:
1. APPOINTMENT OF MANAGER.
(a) Initial Fund. The Trust hereby appoints the Manager to act as
manager and investment adviser to the Initial Fund for the period and on the
terms herein set forth. The Manager accepts such appointment and agrees to
render the services herein set forth, for the compensation herein provided.
(b) Additional Funds. In the event that the Trust establishes one or
more series of shares other than the Initial
<PAGE>
Fund with respect to which it desires to retain the Manager to render management
and investment advisory services hereunder, it shall so notify the Manager in
writing, indicating the advisory fee to be payable with respect to the
additional series of shares. If the Manager is willing to render such services,
it shall so notify the Trust in writing, whereupon such series of shares shall
become a Fund hereunder. In such event a writing signed by both the Trust and
the Manager shall be annexed hereto as a part hereof indicating that such
additional series of shares has become a Fund hereunder and reflecting the
agreed-upon fee schedule for such Fund to the extent the provisions of Section 4
shall not apply with respect thereto.
2. DUTIES OF MANAGER.
The Manager, at its own expense, shall furnish the following services
and facilities to the Trust:
(a) Investment Program. The Manager shall (i) furnish continuously an
investment program for each Fund, (ii) determine (subject to the overall
supervision and review of the Board of Trustees of the Trust) what investments
shall be purchased, held, sold or exchanged by each Fund and what portion, if
any, of the assets of each Fund shall be held uninvested, and (iii) make changes
on behalf of the Trust in the investments of each Fund. The Manager shall also
manage, supervise and conduct the other affairs and business of the Trust and
each Fund thereof and matters incidental thereto, subject always to the control
of the Board of Trustees of the Trust and to the provisions of the Master Trust
Agreement and By-laws of the Trust, as amended, and the Prospectus of the Trust
as from time to time amended and in effect and the 1940 Act. Subject to the
foregoing, the Manager shall have the authority to engage one or more
sub-advisers in connection with the management of the Funds, which sub-advisers
may be affiliates of the Manager.
(b) Regulatory Reports. The Manager shall furnish to the Trust
necessary assistance in:
(i) the preparation of all reports now or hereafter required by
federal or other laws; and
(ii) the preparation of prospectuses, registration statements and
amendments thereto that may be required by federal or other laws or by the rules
or regulations of any duly authorized commission or administrative body.
(c) Office Space and Facilities. The Manager shall furnish the Trust
office space in the offices of the Manager, or in such other place or places as
may be agreed upon from time to time, and all necessary office facilities,
simple business
2
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equipment, supplies, utilities, and telephone service for managing the affairs
and investments of the Trust.
(d) Services of Personnel. The Manager shall provide all necessary
executive and administrative personnel for managing the affairs of the Trust,
including personnel to perform clerical, bookkeeping, accounting and other
office functions. These services are exclusive of the bookkeeping and accounting
services of any dividend disbursing agent, transfer agent, registrar or
custodian. The Manager shall compensate all personnel, officers and Trustees of
the Trust if such persons are also employees of the Manager or its affiliates.
(e) Fidelity Bond. The Manager shall arrange for providing and
maintaining a bond issued by a reputable insurance company authorized to do
business in the place where the bond is issued against larceny and embezzlement
covering each officer and employee of the Trust and/or the Manager who may
singly or jointly with others have access to funds or securities of the Trust,
with direct or indirect authority to draw upon such funds or to direct generally
the disposition of such funds. The bond shall be in such reasonable amount as a
majority of the Trustees who are not "interested persons" of the Trust, as
defined in the 1940 Act, shall determine, with due consideration given to the
aggregate assets of the Trust to which any such officer or employee may have
access. The premium for the bond shall be payable by the Trust in accordance
with paragraph 3(o).
(f) Portfolio Transactions. The Manager shall place all orders for the
purchase and sale of portfolio securities for the account of each Fund with
brokers or dealers selected by the Manager, although the Trust will pay the
actual brokerage commissions on portfolio transactions in accordance with
paragraph 3(d).
3. ALLOCATION OF EXPENSE
Except for the services and facilities to be provided by the Manager as
set forth in paragraph 2 above, the Trust assumes and shall pay all expenses for
all other Trust operations and activities and shall reimburse the Manager for
any such expenses incurred by the Manager (it being understood that the Trust
shall allocate such expenses between or among its Funds to the extent
contemplated by its Master Trust Agreement). The expenses to be borne by the
Trust shall include, without limitation:
(a) all expenses of organizing the Trust or forming any Fund thereof;
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(b) the charges and expenses of any registrar, stock transfer or
dividend disbursing agent, shareholder servicing agent, custodian, or depository
appointed by the Trust for the safekeeping of its cash, portfolio securities and
other property, including the costs of servicing shareholder investment accounts
and bookkeeping, accounting and pricing services;
(c) the charges and expenses of auditors;
(d) brokerage commissions and other costs incurred in connection with
transactions in the portfolio securities of the Trust, including any portion of
such commissions attributable to brokerage and research services as defined in
Section 28(e) of the Exchange Act;
(e) taxes, including issuance and transfer taxes, and corporate
registration, filing or other fees payable by the Trust to federal, state or
other governmental agencies;
(f) expenses, including the cost of printing certificates, relating to
the issuance of shares of the Trust;
(g) expenses involved in registering and maintaining registrations of
the Trust and of its shares with the Securities and Exchange Commission and
various states and other jurisdictions, including reimbursement of actual
expenses incurred by the Manager in performing such functions for the Trust, and
including compensation of persons who are employees of the Manager, in
proportion to the relative time spent on such matters;
(h) expenses related to the redemption of shares of the Trust,
including expenses attributable to any program of periodic redemption;
(i) expenses of shareholders' and Trustees' meetings, including
meetings of committees, and of preparing, printing and mailing proxy statements,
quarterly reports, semi-annual reports, annual reports and other communications
to existing shareholders;
(j) expenses of preparing and setting in type prospectuses, and
expenses of printing and mailing the same to existing shareholders (but not
expenses of printing and mailing of prospectuses and literature used for
promotional purposes);
(k) compensation and expenses of Trustees who are not "interested
persons" within the meaning of the 1940 Act;
(1) expense of maintaining shareholder accounts and furnishing, or
causing to be furnished, to each shareholder a statement of his account,
including the expense of mailing;
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(m) charges and expenses of legal counsel in connection with matters
relating to the Trust, including, without limitation, legal services rendered in
connection with the Trust's corporate and financial structure and relations with
its shareholders, issuance of shares of the Trust, and registration and
qualification of securities under federal, state and other laws;
(n) the cost and expense of maintaining the books and records of the
Trust, including general ledger accounting;
(o) insurance premiums on fidelity, errors and omissions and other
coverages including the expense of obtaining and maintaining a fidelity bond as
required by Section 17(g) of the 1940 Act;
(p) interest payable on Trust borrowings; and
(q) such other non-recurring expenses of the Trust as may arise,
including expenses of actions, suits, or proceedings to which the Trust is a
party and expenses resulting from the legal obligation which the Trust may have
to provide indemnity with respect thereto.
4. ADVISORY FEE.
For the services and facilities to be provided by the Manager as set
forth in paragraph 2 hereof, the Trust agrees that each Fund shall pay to the
Manager a monthly fee as soon as practical after the last day of each calendar
month, which fee shall be paid at a rate equal to sixty-five one hundredths of
one percent (.65%) on an annual basis of the average daily net asset value of
such Fund for such calendar month, commencing as of the date on which this
Agreement becomes effective with respect to such Fund.
In the case of commencement or termination of this Agreement with
respect to any Fund during any calendar month, the fee with respect to such Fund
for that month shall be reduced proportionately based upon the number of
calendar days during which this Agreement is in effect with respect to such
Fund, and the fee shall be computed based upon the average daily net asset value
of such Fund during such period.
5. EXPENSE LIMITATION.
The Manager agrees that if the total expenses of any Fund (exclusive of
interest, taxes, payments to fund certain distribution expenses pursuant to the
Trust's 12b-1 Distribution Plan, brokerage expenses and extraordinary items such
as litigation expenses) for any fiscal year of the Trust exceed the lowest
expense limitation imposed in any jurisdiction in which that Fund is then making
sales of its shares or in which its
5
<PAGE>
shares are then qualified for sale, if any, the Manager will pay or reimburse
such Fund for that excess up to the amount of its advisory fees payable with
respect to that Fund during that fiscal year. The amount of the monthly advisory
fee payable by any Fund under paragraph 4 hereof shall be reduced to the extent
that the monthly expenses of that Fund, on an annualized basis, would exceed the
foregoing limitation. At the end of each fiscal year of the Trust, if the
aggregate annual expenses chargeable to any Fund for that year exceed the
foregoing limitation based upon the average of the monthly average net asset
values of that Fund for the year, the Manager will promptly reimburse that Fund
for the amount of such excess to the extent not already reimbursed by reduction
of the monthly advisory fee, but if such expenses are within the foregoing
limitation, any excess amount previously withheld from the monthly advisory fee
during that fiscal year will be promptly paid over to the Manager.
In the event that this Agreement (i) is terminated with respect to any
one or more Funds as of a date other than the last day of the fiscal year of the
Trust or (ii) commences with respect to one or more Funds as of a date other
than the first day of the fiscal year of the Trust, then the expenses of such
Fund or Funds shall be annualized and the Manager shall pay to, or receive from,
the applicable Fund or Funds a pro rata portion of the amount that the Manager
would have been required to pay or would have been entitled to receive, if any,
had this Agreement been in effect with respect to such Fund or Funds for the
full fiscal year.
6. RELATIONS WITH TRUST.
Subject to and in accordance with the Master Trust Agreement and By-laws
of the Trust and the Articles of Organization and By-laws of the Manager, it is
understood that Trustees, officers, agents and shareholders of the Trust are or
may be interested in the Manager (or any successor thereof) as directors,
officers or otherwise, that directors, officers, agents and shareholders of the
Manager (or any successor thereof) are or may be interested in the Trust as
Trustees, officers, agents, shareholders or otherwise, that the Manager (or any
such successor thereof) is or may be interested in the Trust as a shareholder or
otherwise and that the effect of any such adverse interests shall be governed by
said Master Trust Agreement, Articles of Organization and By-laws.
7. LIABILITY OF MANAGER.
The Manager shall not be liable to the Trust for any error of judgment or
mistake of law or for any loss suffered by the Trust in connection with the
matters to which this Agreement relates; provided, however, that no provision of
this Agreement
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shall be deemed to protect the Manager against any liability to the Trust or its
shareholders to which it might otherwise be subject by reason of any willful
misfeasance, bad faith or gross negligence in the performance of its duties or
the reckless disregard of its obligations and duties under this Agreement, nor
shall any provision hereof be deemed to protect any Trustee or officer of the
Trust against any such liability to which he might otherwise be subject by
reason of any willful misfeasance, bad faith or gross negligence in the
performance of his duties or the reckless disregard of his obligations and
duties. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby.
8. DURATION AND TERMINATION OF THIS AGREEMENT.
(a) Duration. This Agreement shall become effective with respect to the
Initial Fund on the later of (i) the date on which a Registration Statement with
respect to its shares under the Securities Act of 1933, as amended, is first
declared effective by the Securities and Exchange Commission or (ii) the date on
which such Initial Fund commences offering its shares to the public, and, with
respect to any additional Fund, on the date of receipt by the Trust of notice
from the Manager in accordance with paragraph l(b) hereof that the Manager is
willing to serve as Manager with respect to such Fund. Unless terminated as
herein provided, this Agreement shall remain in full force and effect with
respect to the Initial Fund until the date which is two years after the date of
this Agreement with respect to such Initial Fund and, with respect to each
additional Fund, for two years from the date on which such Fund becomes a Fund
hereunder. Subsequent to such initial periods of effectiveness this Agreement
shall continue in full force and effect, subject to Section 8(c), for successive
one-year periods with respect to each Fund so long as such continuance with
respect to such Fund is approved at least annually (a) by either the Trustees of
the Trust or by vote of a majority of the outstanding voting securities (as
defined in the 1940 Act) of such Fund, and (b) in either event, by the vote of a
majority of the Trustees of the Trust who are not parties to this Agreement or
"interested persons" (as defined in the 1940 Act) of any such party, cast in
person at a meeting called for the purpose of voting on such approval.
Notwithstanding the foregoing provisions of this Section 8(a), the continuance
of this Agreement with respect to the Initial Fund or any additional Fund is
subject to the approval of this Agreement by a majority of the outstanding
voting securities thereof (as defined in the 1940 Act) at the initial meeting of
shareholders after this Agreement becomes effective with respect thereto.
(b) Amendment. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by
7
<PAGE>
an instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought, and no amendments of this
Agreement shall be effective with respect to any Fund until approved by vote of
the holders of a majority of that Fund's outstanding voting securities (as
defined in the 1940 Act).
(c) Termination. This Agreement may be terminated with respect to any
Fund at any time, without payment of any penalty, by vote of the Trustees or by
vote of a majority of the outstanding voting securities (as defined in the 1940
Act) of that Fund, or by the Manager, in each case on sixty (60) days' prior
written notice to the other party.
(d) Automatic Termination. This Agreement shall automatically and
immediately terminate in the event of its assignment (as defined in the 1940
Act).
(e) Approval, Amendment or Termination by Individual Fund. Any
approval, amendment or termination of this Agreement by the holders of a
majority of the outstanding voting securities (as defined in the 1940 Act) of
any Fund shall be effective to continue, amend or terminate this Agreement with
respect to such Fund notwithstanding (i) that such action has not been approved
by the holders of a majority of the outstanding voting securities of any other
Fund affected thereby, and (ii) that such action has not been approved by the
vote of a majority of the outstanding voting securities of the Trust, unless
such action shall be required by any applicable law or otherwise.
9. SERVICES NOT EXCLUSIVE.
The services of the Manager to the Trust hereunder are not to be deemed
exclusive, and the Manager shall be free to render similar services to others so
long as its services hereunder are not impaired thereby.
10. NAME OF TRUST.
It is understood that the names "State Street" and "MetLife" and any
logos associated with those names are the valuable property of, respectively,
State Street Research & Management Company ("SSRM"), the parent company of the
Manager, and Metropolitan Life Insurance Company, the ultimate parent company of
SSRM, and that the Trust has the right to include such names as a part of its
name and the names of its Funds only so long as this Agreement shall continue.
Upon termination of this Agreement the Trust shall forthwith cease to use the
State Street and MetLife names and logos and shall amend
8
<PAGE>
its Master Trust Agreement to change the Trust's name and the names of any Funds
then utilizing such name or names or any portion thereof.
11. PRIOR AGREEMENTS SUPERSEDED.
This Agreement supersedes any prior agreement relating to the subject
matter hereof between the parties hereto.
12. NOTICES.
Notices under this Agreement shall be in writing and shall be
addressed, and delivered or mailed postage prepaid, to the other party at such
address as such other party may designate from time to time for the receipt of
such notices. Until further notice to the other party, the address of each party
to this Agreement for this purpose shall be One Financial Center, Boston,
Massachusetts 02111.
13. GOVERNING LAW; COUNTERPARTS.
This Agreement shall be construed in accordance with the laws of the
Commonwealth of Massachusetts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one instrument.
14. LIMITATION OF LIABILITY.
The term "MetLife - State Street Fixed Income Trust" means and refers
to the Trustees from time to time serving under the Master Trust Agreement of
the Trust dated November 19, 1986 as the same may subsequently thereto have
been, or subsequently hereto may be, amended. It is expressly agreed that the
obligations of the Trust hereunder shall not be binding upon any of the
Trustees, shareholders, nominees, officers, agents or employees of the Trust as
individuals or personally, but shall bind only the trust property of the Trust,
as provided in the Master Trust Agreement of the Trust. The execution and
delivery of this Agreement have been authorized by the Trustees of the Trust and
signed by the President of the Trust, acting as such, and neither such
authorization nor such execution and delivery shall be deemed to have been made
individually or to impose any personal liability, but shall bind only the trust
property of the Trust as provided in its Master Trust Agreement. The Master
Trust Agreement of the Trust provides, and it is expressly agreed, that each
Fund of the Trust shall be solely and exclusively responsible for the payment of
its debts, liabilities and obligations, and that no other Fund shall be
responsible for the same.
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first set forth above.
METLIFE - STATE STREET
Attest: INVESTMENT SERVICES, INC.
/s/ Constantine Hutchins, Jr. By: /s/ Robert A. Lawrence
Constantine Hutchins, Jr., Robert A. Lawrence,
Clerk Vice Chairman
METLIFE - STATE STREET
Attest: FIXED INCOME TRUST
/s/ Constantine Hutchins, Jr. By: /s/ Charles L. Smith, Jr.
Constantine Hutchins, Jr., Charles L. Smith, Jr.,
Clerk President
TRANSFER AND ASSUMPTION OF RESPONSIBILITIES AND RIGHTS
In accordance with the vote unanimously adopted by all of the Trustees
of MetLife - State Street Fixed Income Trust ("Trust") who were present at a
meeting of such Trustees duly called and held on September 14, 1992, being a
majority of such Trustees, including a majority of Trustees who are not parties
to the attached Advisory Agreement dated February 12, 1987, by and between State
Street Financial Services, Inc. (formerly MetLife-State Street Investment
Services, Inc.) and the Trust ("Advisory Agreement"), or "interested persons"
(as defined in the Investment Company Act of 1940) of any such party, effective
as of the commencement of business on July 1, 1992, all of the duties and
responsibilities of the Manager to provide services and facilities to the Trust
as set forth in the Advisory Agreement and all the rights of the Manager,
including but not limited to the right to be compensated by the Trust as
described in the Advisory Agreement, are hereby transferred from State Street
Financial Services, Inc., a Massachusetts corporation, to State Street Research
& Management Company, a Delaware corporation, formerly sub-adviser to the Trust,
and State Street Research & Management Company hereby assumes such
responsibilities and rights, all of the foregoing transactions being effected in
reliance on Rule 2a-6 under the Investment Company Act of 1940, as amended.
STATE STREET FINANCIAL
SERVICES, INC.
by /s/ Donald E. Webber
Donald E. Webber,
President and
Chief Executive Officer
STATE STREET RESEARCH &
MANAGEMENT COMPANY
by /s/ Ralph F. Verni
Ralph F. Verni,
Chairman and
Chief Executive Officer
Dated: October 6, 1992.
METLIFE - STATE STREET FINANCIAL TRUST
One Financial Center
Boston, MA 02111
September 6, 1993
State Street Research &
Management Company
One Financial Center
Boston, MA 02111-2690
Gentlemen:
This letter is to confirm to you that MetLife - State Street Financial
Trust (the "Trust") has created a new series of shares to be known as MetLife -
State Street Research Balanced Fund (the "Fund"), and that pursuant to Section
l(b) of the Advisory Agreement dated as of February 12, 1987 which was
transferred to and assumed by you (the "Agreement"), the Trust desires to retain
you to render management and investment advisory services under the Agreement to
the Fund as a "Series" thereunder for a fee egual to 0.65% on an annual basis of
the average daily net asset value of the Fund. Any provisions of the Agreement
requiring an initial approval of the shareholders of the Fund shall not apply.
Please indicate your acceptance of this responsibility in accordance
with the terms of the Agreement by signing this letter as indicated below.
The term "MetLife - State Street Financial Trust" means and refers to
the Trustees from time to time serving under the First Amended and Restated
Master Trust Agreement dated June 1, 1993 ("Master Trust Agreement"), as the
same may subsequently thereto have been, or subsequently hereto may be, amended.
It is expressly agreed that the obligations of the Trust hereunder shall not be
binding upon any of the Trustees, shareholders, nominees, officers, agents or
employees of the Trust as individuals or personally, but shall bind only the
trust property of the Trust, as provided in the Master Trust Agreement of the
Trust. The execution and delivery of this Agreement have been authorized by the
Trustees of the Trust and signed by a duly authorized officer of the Trust,
acting as such, and neither such authorization nor such execution and delivery
shall be deemed to have been made individually or to impose any personal
liability, but shall bind only the trust
<PAGE>
property of the Trust as provided in its Master Trust Agreement. The Master
Trust Agreement of the Trust provides, and it is expressly agreed, that each
Fund of the Trust shall be solely and exclusively responsible for the payment of
its debts, liabilities and obligations, and that no other fund shall be
responsible for the same.
METLIFE - STATE STREET
FINANCIAL TRUST
By: /s/ Gerard P. Maus
ACCEPTED AND AGREED TO:
STATE STREET RESEARCH &
MANAGEMENT COMPANY
By: /s/ Ralph F. Verni
2
METLIFE - STATE STREET FINANCIAL TRUST
One Financial Center
Boston, MA 02111
May 16, 1994
State Street Research &
Management Company
One Financial Center
Boston, MA 02111-2690
Gentlemen:
This letter is to confirm to you that MetLife - State Street Financial
Trust (the "Trust") has created two (2) new series of shares to be known as
State Street Research Strategic Portfolios: Conservative and State Street
Research Strategic Portfolios: Aggressive (the "Funds"), and that pursuant to
Section l(b) of the Advisory Agreement dated as of February 12, 1987 which was
transferred to and assumed by you (the "Agreement"), the Trust desires to retain
you to render management and investment advisory services under the Agreement to
each Fund as a "Series" thereunder for a fee equal to 0.60% on an annual basis
of the average daily net asset value of State Street Research Strategic
Portfolios: Conservative and 0.75% on an annual basis of the average daily net
asset value of State Street Research Strategic Portfolios: Aggressive. Any
provisions of the Agreement requiring an initial approval of the shareholders of
the Funds shall not apply.
Please indicate your acceptance of this responsibility in accordance
with the terms of the Agreement by signing this letter as indicated below.
The term "MetLife - State Street Financial Trust" means and refers to
the Trustees from time to time serving under the First Amended and Restated
Master Trust Agreement dated June 1, 1993 ("Master Trust Agreement"), as the
same may subsequently thereto have been, or subsequently hereto may be, amended.
It is expressly agreed that the obligations of the Trust hereunder shall not be
binding upon any of the Trustees, shareholders, nominees, officers, agents or
employees of the Trust as individuals or personally, but shall bind only the
trust property of the Trust, as provided in the Master Trust Agreement of the
Trust. The execution and delivery of this Agreement have been authorized by the
Trustees of the Trust and signed by a duly authorized officer of the Trust,
acting as such, and neither such authorization nor such execution and delivery
shall be deemed to have been made individually or to impose any personal
liability, but shall bind only the trust property of the Trust as provided in
its Master Trust Agreement. The Master Trust Agreement of the Trust provides,
and it is expressly agreed, that each Fund of the Trust shall be solely and
exclusively responsible for the payment of its debts, liabilities and
obligations, and that no other fund shall be responsible for the same.
<PAGE>
METLIFE - STATE STREET
FINANCIAL TRUST
By: /s/ Gerard P. Maus
ACCEPTED AND AGREED TO:
STATE STREET RESEARCH &
MANAGEMENT COMPANY
By: /s/ Ralph F. Verni
2
BANK AND BANK AFFILIATED BROKER-DEALER AGREEMENT
(FULLY DISCLOSED BASIS)
Dated as of: ___________________________
To: ______________________________________________
(Exact legal name of bank or bank affiliate)
______________________________________________
(Address)
______________________________________________
______________________________________________
(Attn)
We have been appointed to serve as an agent and a principal underwriter
as defined in the Investment Company Act of 1940 (the "1940 Act") for the
purpose of selling and distributing shares (the "Shares") of each of the
portfolio series, as specified from time to time, of certain investment
companies, including, but not limited to, the MetLife-State Street trusts, the
State Street trusts and MetLife Portfolios, Inc. Hereinafter the specified
portfolio series shall be denoted individually as "Fund" and collectively as
"Funds," and the investment companies shall be denoted individually as
"Investment Company" and collectively as "Investment Companies" solely for
purposes of this agreement. We are hereby inviting you, subject to the terms and
conditions set forth below, to make available to your customers Shares of the
Funds.
1. Acceptance of Orders.
(a) The customers in question are for all purposes your customers
and not our customers. We shall execute transactions for each of your customers
only upon your
<PAGE>
authorization, it being understood in all cases that (i) you are acting as the
agent for the customer; (ii) the transactions are subject to the federal and
state securities laws without recourse against you by the customer; (iii) as
between you and the customer, the customer will have beneficial ownership of the
securities; (iv) each transaction is initiated solely upon the order of the
customer; (v) each transaction is for the account of the customer and not for
your account; and (vi) you shall not have any authority in any transactions to
act as our agent or agent of the Funds.
(b) Orders received from you will be accepted by us and the
Investment Companies only at the public offering price applicable to each order.
The public offering price shall be the net asset value per Share plus any sales
charge payable upon the purchase of Shares of such Fund or class thereof as
specified in the then current prospectus applicable to such Shares, as amended
and in effect from time to time (the "Prospectus"). The public offering price
may reflect scheduled variations in, or the elimination of the sales charge on
sales of the Shares either generally to the public or in connection with special
purchase plans, as described in the Prospectus and related Statement of
Additional Information. You agree that you will apply any scheduled variation
in, or elimination of, the sales charge uniformly to all offerees in the class
specified in the Prospectus. Upon acceptance of an order we shall confirm the
order directly to the customer on a fully disclosed basis in writing and a copy
of each confirmation shall be sent simultaneously to you. The procedures
relating to the handling of orders shall be subject to instructions which we
shall provide from time to time to you. We and the Investment Companies reserve
the right to reject any purchase request in our sole discretion.
2. Agency Commission. Any compensation received by you with respect to
the sale of shares of a Fund shall be deemed to be charged by you to your
customer as an agency commission. The schedule of sales charges, commissions and
dealer concessions described in the applicable Prospectus and related Statement
of Additional Information shall apply and the amount of the agency commission
shall equal the applicable amount payable as compensation to a dealer in
connection with the sale of shares of a Fund. You agree that you will not
combine customer orders to reach breakpoints in commissions for any purpose
unless authorized by the Prospectus or in writing. You agree that you will apply
any scheduled variation, or elimination of, the sales charge uniformly to all
offerees in the class specified in the
2
<PAGE>
Prospectus. All compensation amounts are subject to change without notice by us.
3. Rule l2b-1 Plans.
(a) As consideration for your providing services in our
promotion of the sale of Shares of certain Funds or classes thereof which have a
sales charge and which have adopted Distribution Plans pursuant to Rule 12b-1
under the 1940 Act, and for providing personal services to, and/or the
maintenance of the accounts of, your customers who invest in and own such Shares
of such Funds or classes thereof, we shall pay you such fee as is described in
the applicable Prospectus and otherwise established by us from time to time, on
Shares which are owned of record by your firm as nominee for your customers or
which are owned by those customers of your firm whose records, as maintained by
such Fund or its agent, designate your firm as the customer's dealer of record.
The fees payable hereunder shall be computed and accrued daily and for each
month shall be based on the average daily net asset value of the relevant Shares
which remain outstanding during such month. No such fee will be paid to you with
respect to Shares redeemed or repurchased by such Fund within seven business
days after the date of our confirmation of such purchase. No such fee will be
paid to you with respect to any of your customers if the amount of such fee
based upon the value of such customer's Shares will be less than $1.00.
(b) The provisions of this Paragraph 3 may be terminated with
respect to any Fund or class thereof in accordance with the provisions of Rule
12b-1 under the 1940 Act or the rules of the National Association of Securities
Dealers, Inc. (the "NASD") and thereafter no such fee will be paid to you.
(c) Consistent with NASD policies as amended or interpreted
from time to time (i) you waive payment of amounts due from us which are funded
by fees we receive under such Distribution Plans until we are in receipt of the
fees on the relevant shares of a Fund, and (ii) our liability for amounts
payable to you is limited solely to the proceeds of the fees receivable to us on
the relevant shares.
4. Redemption and Repurchase of Shares. If any Shares with a sales
charge are sold through you hereunder and are redeemed by such Fund or
repurchased by us as agent for such Fund within seven business days after
confirmation of the original purchase, it is agreed that you shall forfeit your
right to the entire agency commission and any other related
3
<PAGE>
commission received by you on such Shares. We will notify you of any such
repurchase or redemption within ten business days from the date thereof and you
shall forthwith refund to us the entire agency commission and other commission,
if any, received by you on such sale. We agree, in the event of any such
repurchase or redemption, to refund to such Fund our share of the sales charge
retained by us, if any, and upon receipt from you of the refund of the agency
commission allowed to you, to pay such refund forthwith to such Fund.
If you purchase Shares from any customer in connection with repurchase
arrangements offered by an Investment Company, you agree to pay such customer
not less than the applicable repurchase price as established by the Prospectus.
If you act as agent for your customer in selling Shares to a Fund, you agree not
to charge your customer more than a fair commission for handling the
transaction. Any order placed by you for the repurchase of Shares of a Fund is
subject to the timely receipt by the Fund's transfer agent of all required
documents in good order. If such documents are not received within a reasonable
time after the order is placed, the order is subject to cancellation, in which
case you agree to be responsible for any loss resulting to the Fund or to us
from such cancellation.
5. Payment for Shares.
(a) Payment for Shares sold through you shall be made on or
before the settlement date specified in the applicable confirmation, at the
office of our clearing agent, and by check payable to the order of such Fund or,
if applicable, by Federal Funds wire for credit to such Fund in accordance with
the procedures and conditions described in the Prospectus. Each Fund reserves
the right to delay issuance or transfer of Shares until such check has cleared.
If such payment is not received by us, we reserve the right, without notice,
forthwith to cancel the sale. Unless other instructions are received by us on or
before the settlement date, orders accepted by us may be placed in an Open
Account in your name. If such payment or instructions are not timely received by
us, we may hold you responsible for any expense or loss, including loss of
profit, suffered by us or by such Fund resulting from your failure to make
payment as aforesaid.
(b) You will also act as agent in all purchases by a
shareholder for whom, on the records of the Fund or its Shareholders' Servicing
and Transfer Agent as defined in the Prospectus, you are the designated dealer
of record of Shares where payments are sent directly by such shareholders to the
4
<PAGE>
Agent, and you authorize and appoint the Agent to execute and confirm such
purchases to such shareholder on your behalf.
6. Manner of Offering.
(a) No person is authorized to make any representations
concerning Shares except those contained in the then current applicable
Prospectuses and in sales literature and other materials issued by us
supplemental to such Prospectuses. Shares of Funds shall only be offered by
means of the then current applicable Prospectus and you shall be obligated to
deliver such Prospectus to your customers in accordance with all applicable
federal and state securities laws. All offerings of Shares by you shall be
subject to the conditions set forth in the applicable Prospectus (including the
condition relating to minimum purchases) and to the terms and conditions herein
set forth. We will furnish additional copies of the Prospectuses and such sales
literature and other material issued by us in reasonable quantities upon
request. You will provide all customers with the applicable Prospectus prior to
or at the time such customer purchases Shares and will forward promptly to us
any customer request for a copy of the applicable Statement of Additional
Information. Sales and exchanges of Shares may only be made in those states and
jurisdictions where the Shares are registered or qualified for sale to the
public. We agree to advise you currently of the identity of those states and
jurisdictions in which the Shares are registered or qualified for sale, and you
agree to indemnify us and/or the Funds for any claim, liability, expense or loss
in any way arising out of a sale of Shares in any state or jurisdiction in which
such Shares are not so registered or qualified.
(b) You agree to conform to any compliance or offering
standards that we may establish from time to time, including without limitation
standards as to when classes of Shares may appropriately be sold to particular
investors.
(c) We recognize that you may be subject to the provisions of
the Glass-Steagall Act and other laws governing, among other things, the conduct
of activities by federal or state chartered or supervised banks and affiliated
organizations. BECAUSE ONLY YOU WILL HAVE A DIRECT RELATIONSHIP WITH YOUR
CUSTOMER, YOU COVENANT AND AGREE TO COMPLY WITH ALL LAWS AND REGULATIONS
INCLUDING THOSE OF THE REGULATORY AUTHORITIES DIRECTLY APPLICABLE TO YOU AND ANY
OTHER FEDERAL OR STATE REGULATORY BODY HAVING JURISDICTION OVER YOU OR YOUR
CUSTOMERS TO THE EXTENT APPLICABLE TO SECURITIES PURCHASES HEREUNDER FOR THE
ACCOUNT OF YOUR CUSTOMER.
5
<PAGE>
(d) We and the Investment Companies shall have the right to
accept or reject orders for the purchase of Shares of any Fund or class thereof.
It is understood that for the purposes hereof no Share shall be considered to
have been sold by you and no compensation will be payable to you with respect to
any order for Shares which is rejected by us or an Investment Company. Any
consideration which you may receive in connection with a rejected purchase order
is to be returned promptly by you. Confirmations of all accepted purchase orders
will be transmitted by the applicable Investment Company or us to investors, or,
if so directed, to any duly appointed transfer or shareholder servicing agent of
the Fund or class of Shares thereof.
7. Your Status.
Nothing herein shall make you a partner with us or render our
relationship an association. You are responsible for your own conduct, for the
employment, control and conduct of your employees and agents and for injury to
such employees or agents or to others through such employees or agents. You
assume full responsibility for your employees and agents under applicable laws
and agree to pay all employer taxes relating thereto.
8. No Liability.
As distributor of the Shares, we shall have full authority to take such
action as we may deem advisable in respect of all matters pertaining to the
distribution of such Shares. We shall not be under any liability to you, except
for lack of good faith and for obligations expressly assumed by us in this
Agreement; provided, however, that nothing in this sentence shall be deemed to
relieve any of us from any liability imposed by the Securities Act of 1933, as
amended.
9. Term of Contract; Amendments; Termination.
This Agreement shall become effective on the date hereof. We and each
Fund reserve the right, in our discretion upon notice to you, to amend, modify
or terminate this Agreement at any time, to change the sales charges,
commissions, concessions and other fees described in the applicable Prospectus
or to suspend sales or withdraw the offering of Shares of a Fund or class of
Shares thereof entirely. You agree that any order to purchase Shares placed by
you after notice of any amendment to this Agreement has
6
<PAGE>
been sent to you shall constitute your agreement to such amendment.
10. Miscellaneous.
This Agreement supersedes any and all prior agreements between us.
References to a Selected Dealer Agreement, dealer agreement or sales agreement
contained in a Prospectus, new account Application, Statement of Additional
Information or related documents with respect to Shares shall be deemed to
include this Agreement and references to dealer(s) or securities dealer(s) shall
be deemed to include you. All communications to us should be sent to the above
address. Any notice to you shall be duly given if mailed or telefacsmiled to you
at the address specified by you above. This Agreement shall be effective when
accepted by you below and shall be construed under the laws of the Commonwealth
of Massachusetts.
11. Rank or Rank Affiliate.
Check applicable box:
[ ] (a) You represent and warrant that you are a member of the NASD or
in the alternative, that you are a foreign dealer not eligible for membership in
the NASD. You and we agree to abide by the Rules and Regulations of the NASD
including Rule 26 of its Rules of Fair Practice, and all applicable federal,
state, and foreign laws, rules and regulations.
[ ] (b) [Note: This box relates to "banks." Before checking this box,
please be aware that certain financial institutions such as savings and loan
associations and credit unions are not deemed to be a "bank" under the Exchange
Act of 1934, as amended (the "Exchange Act") and may need to register as a
broker/dealer with the Securities and Exchange Commission.] You represent and
warrant to us that (i) you are a "bank" as such term is defined in Section
3(a)(6) of the Exchange Act; (ii) you are a duly organized and validly existing
"bank" in good standing under the laws of the jurisdiction in which you are
organized; (iii) all authorization (if any) required for your lawful execution
of this Agreement and your performance hereunder have been obtained; and (iv)
this Agreement will constitute a valid and binding agreement, enforceable
against you in accordance with its terms. You agree to give written notice to us
promptly in the event that you cease to be a "bank" as such term is defined in
Section 3(a)(6) of the Exchange Act. Upon such
7
<PAGE>
written notice, this Agreement shall automatically terminate. You also agree to
abide by all of the Rules of Fair Practice of the NASD applicable to the sale of
investment company shares to your customers.
The following provision, as marked, applies to this Agreement.
[ ] This document constitutes an amendment to and restatement of the
Agreement currently in effect between you and us.
[ ] Please confirm your agreement hereto by signing and returning the
enclosed counterpart of this Agreement at once to: State Street Research
Investment Services, Inc., One Financial Center, Boston, Massachusetts 02111,
Attention: President. Upon receipt thereof, this Agreement and such signed
duplicate copy will evidence the agreement between us.
State Street Research
Investment Services, Inc.
(Distributor)
By: ________________________________
We have checked box ll(a) or ll b) above and accept this Agreement:
*____________________________________________*
(Exact legal name of bank or bank affiliate)
By: ________________________________
8
CUSTODIAN CONTRACT
Between
METLIFE-STATE STREET FIXED INCOME TRUST
and
STATE STREET BANK AND TRUST COMPANY
<PAGE>
TABLE OF CONTENTS
Page
1. Employment of Custodian and Property to be Held By It ...................1
2. Duties of the Custodian with Respect to Property
of the Fund Held by the Custodian ........................................2
2.1 Holding Securities...................................................2
2.2 Delivery of Securities...............................................2
2.3 Registration of Securities...........................................7
2.4 Bank Accounts........................................................7
2.5 Payments for Shares..................................................8
2.6 Investment and Availability of Federal Funds.........................9
2.7 Collection of Income.................................................9
2.8 Payment of Fund Moneys..............................................10
2.9 Liability for Payment in Advance of Receipt of
Securities Purchased................................................12
2.10 Payments for Repurchases or Redemptions
of Shares of the Fund ..............................................13
2.11 Appointment of Agents ..............................................13
2.12 Deposit of Fund Assets in Securities System.........................14
2.13 Segregated Account .................................................17
2.14 Ownership Certificates for Tax Purposes ............................18
2.15 Proxies ............................................................18
2.16 Communications Relating to Fund Portfolio Securities ...............18
2.17 Proper Instructions ................................................l9
2.18 Actions Permitted Without Express Authority.........................20
2.19 Evidence of Authority ..............................................21
3. Duties of Custodian With Respect to the Book of Account
and Calculation of Net Asset Value and Net Income........................21
4. Records..................................................................22
5. Opinion of Fund's Independent Accountants................................22
6. Reports to Fund by Independent Public Accountants....................... 23
7. Compensation of Custodian............................................... 23
8. Responsibility of Custodian..............................................23
9. Effective Period, Termination and Amendment..............................25
10. Successor Custodian......................................................26
11. Interpretive and Additional Provisions...................................27
12. Additional Funds.........................................................28
13. Massachusetts Law to Apply...............................................28
14. Prior Contracts..........................................................28
<PAGE>
CUSTODIAN CONTRACT
This Contract between MetLife-State Street Fixed Income Trust, a
business trust organized and existing under the laws of Massachusetts, having
its principal place of business at One Financial Center, Boston, Massachusetts,
02111 hereinafter called the "Fund", and State Street Bank and Trust Company, a
Massachusetts corporation, having its principal place of business at 225
Franklin Street, Boston, Massachusetts, 02110, hereinafter called the
Custodian",
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in separate series,
with each such series representing interests in a separate portfolio of
securities and other assets; and
WHEREAS the Fund intends to initially offer shares in one series, the
Government Income Fund (such series together with all other series subsequently
established by the Fund and made subject to this Contract in accordance with
paragraph 12, being herein referred to as the "Fund(s)");
NOW THEREFOR, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
The Fund hereby employs the Custodian as the custodian of its assets
pursuant to the provisions of the Declaration of Trust. The Fund agrees to
deliver to the Custodian all securities and cash owned by it, and all payments
of income,
<PAGE>
payments of principal or capital distributions received by it with respect to
all securities owned by the Fund from time to time, and the cash consideration
received by it for such new or treasury shares of beneficial interest ("Shares")
of the Fund as may be issued or sold from time to time. The Custodian shall not
be responsible for any property of the Fund held or received by the Fund and not
delivered to the Custodian.
Upon receipt of "Proper Instructions" (within the meaning of Section
2.17), the Custodian shall from time to time employ one or more sub-custodians,
but only in accordance with an applicable vote by the Trustees of the Fund, and
provided that the Custodian shall have no more or less responsibility or
liability to the Fund on account of any actions or omissions of any
sub-custodian so employed than any such sub-custodian has to the Custodian.
2. Duties of the Custodian with Respect to Property of the Fund Held By the
Custodian
2.1 Holding Securities. The Custodian shall hold and physically segregate
for the account of the Fund all non-cash property, including all
securities owned by the Fund, other than securities which are
maintained pursuant to Section 2.12 in a clearing agency which acts as
a securities depository or in a book-entry system authorized by the
U.S. Department of the Treasury, collectively referred to herein as
"Securities System".
2.2 Delivery of Securities. The Custodian shall release and deliver
securities owned by the Fund held by the
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Custodian or in a Securities System account of the Custodian only upon
receipt of Proper Instructions, which may be continuing instructions
when deemed appropriate by the parties, and only in the following
cases:
1) Upon sale of such securities for the account of the Fund and
receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the Fund;
3) In the case of a sale effected through a Securities System, in
accordance with the provisions of Section 2.12 hereof;
4) To the depository agent in connection with tender or other
similar offers for portfolio securities of the Fund;
5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable; provided
that, in any such case, the cash or other consideration is to be
delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer into the name
of the Fund or into the name of any nominee or nominees of the
Custodian or into the name or nominee name of any agent appointed
pursuant to Section 2.11 or into the name or nominee name of any
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<PAGE>
sub-custodian appointed pursuant to Article 1; or for exchange
for a different number of bonds, certificates or other evidence
representing the same aggregate face amount or number of units;
provided that, in any such case, the new securities are to be
delivered to the Custodian;
7) To the broker selling the same for examination in accordance with
the "street delivery" custom;
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment
of the securities of the issuer of such securities, or pursuant
to provisions for conversion contained in such securities, or
pursuant to any deposit agreement; provided that, in any such
case, the new securities and cash, if any, are to be delivered to
the Custodian;
9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for definitive securities; provided that, in
any such case, the new securities and cash, if any, are to be
delivered to the Custodian;
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<PAGE>
10) For delivery in connection with any loans of securities made by
the Fund, but only against receipt of adequate collateral as
agreed upon from time to time by the Custodian and the Fund,
which may be in the form of cash or obligations issued by the
United States government, its agencies or instrumentalities,
except that in connection with any loans for which collateral is
to be credited to the Custodlan's account in the book-entry
system authorized by the U.S. Department of the Treasury, the
Custodian will not be held liable or responsible for the delivery
of securities owned by the Fund prior to the receipt of such
collateral;
11) For delivery as security in connection with any borrowings by the
Fund requiring a pledge of assets by the Fund, but only against
receipt of amounts borrowed;
12) For delivery in accordance with the provisions of any agreement
among the Fund, the Custodian and a broker-dealer registered
under the Securities Exchange Act of 1934 (the "Exchange Act")
and a member of The National Association of Securities Dealers,
Inc. ("NASD"), relating to compliance with the rules of The
Options Clearing Corporation
-5-
<PAGE>
and of any registered national securities exchange, or of any
similar organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Fund;
13) For delivery in accordance with the provisions of any agreement
among the Fund, the Custodian, and a Futures Commission Merchant
registered under the Commodity Exchange Act, relating to
compliance with the rules of the Commodity Futures Trading
Commission and/or any Contract Market, or any similar
organization or organizations, regarding account deposits in
connection with transactions by the Fund;
14) Upon receipt of instructions from the transfer agent ("Transfer
Agent") for the Fund, for delivery to such Transfer Agent or to
the holders of shares in connection with distributions in kind,
as may be described from time to time in the Fund's currently
effective prospectus and statement of additional information
("prospectus"), in satisfaction of requests by holders of Shares
for repurchase or redemption; and
15) For any other proper corporate purpose, but only upon receipt of,
in addition to Proper
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<PAGE>
Instructions, a certified copy of a resolution of the Trustees or
of the Executive Committee signed by an officer of the Fund and
certified by the Secretary or an Assistant Secretary, specifying
the securities to be delivered, setting forth the purpose for
which such delivery is to be made, declaring such purpose to be a
proper corporate purpose, and naming the person or persons to
whom delivery of such securities shall be made.
2.3 Registration of Securities. Securities held by the Custodian (other
than bearer securities) shall be registered in the name of the Fund or
in the name of any nominee of the Fund or of any nominee of the
Custodian which nominee shall be assigned exclusively to the Fund,
unless the Fund has authorized in writing the appointment of a nominee
to be used in common with other registered investment companies having
the same investment adviser as the Fund, or in the name or nominee
name of any agent appointed pursuant to Section 2.11 or in the name or
nominee name of any sub-custodian appointed pursuant to Article 1. All
securities accepted by the Custodian on behalf of the Fund under the
terms of this Contract shall be in "street name" or other good
delivery form.
2.4 Bank Accounts. The Custodian shall open and maintain a separate bank
account or accounts in the name of the
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<PAGE>
Fund, subject only to draft or order by the Custodian acting pursuant
to the terms of this Contract, and shall hold in such account or
accounts, subject to the provisions hereof, all cash received by it
from or for the account of the Fund, other than cash maintained by the
Fund in a bank account established and used in accordance with Rule
17f-3 under the Investment Company Act of 1940. Funds held by the
Custodian for the Fund may be deposited by it to its credit as
Custodian in the Banking Department of the Custodian or in such other
banks or trust companies as it may in its discretion deem necessary or
desirable; provided, however, that every such bank or trust company
shall be qualified to act as a custodian under the Investment Company
Act of 1940 and that each such bank or trust company and the funds to
be deposited with each such bank or trust company shall be approved by
vote of a majority of the Trustees of the Fund. Such funds shall be
deposited by the Custodian in its capacity as Custodian and shall be
withdrawable by the Custodian only in that capacity.
2.5 Payments for Shares. The Custodian shall receive from the distributor
for the Fund's Shares or from the Transfer Agent of the Fund and
deposit into the Fund's account such payments as are received for
Shares of the Fund issued or sold from time to time by the Fund. The
Custodian will provide timely notification to the Fund and the
Transfer Agent of any receipt by it of payments for Shares of the
Fund.
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<PAGE>
2.6 Investment and Availability of Federal Funds. Upon mutual agreement
between the Fund and the Custodian, the Custodian shall, upon the
receipt of Proper Instructions, make federal funds available to the
Fund as of specified times agreed upon from time to time by the Fund
and the Custodian in the amount of checks received in payment for
Shares of the Fund which are deposited into the Fund's account.
2.7 Collection of Income. The Custodian shall collect on a timely basis
all income and other payments with respect to registered securities
held hereunder to which the Fund shall be entitled either by law or
pursuant to custom in the securities business, and shall collect on a
timely basis all income and other payments with respect to bearer
securities if, on the date of payment by the issuer, such securities
are held by the Custodian or its agent thereof and shall credit such
income, as collected, to the Fund's custodian account. Without
limiting the generality of the foregoing, the Custodian shall detach
and present for payment all coupons and other income items requiring
presentation as and when they become due and shall collect interest
when due on securities held hereunder. Income due the Fund on
securities loaned pursuant to the provisions of Section 2.2 (10) shall
be the responsibility of the Fund. The Custodian will have no duty or
responsibility in connection therewith, other than to provide the Fund
with such information or data as
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<PAGE>
may be necessary to assist the Fund in arranging for the timely
delivery to the Custodian of the income to which the Fund is properly
entitled.
2.8 Payment of Fund Moneys. Upon receipt of Proper Instructions, which may
be continuing instructions when deemed appropriate by the parties, the
Custodian shall pay out moneys of the Fund in the following cases
only:
1) Upon the purchase of securities, futures contracts or options on
futures contracts for the account of the Fund but only (a)
against the delivery of such securities, or evidence of title to
futures contracts or options on futures contracts, to the
Custodian (or any bank, banking firm or trust company doing
business in the United States or abroad which is qualified under
the Investment Company Act of 1940, as amended, to act as a
custodian and has been designated by the Custodian as its agent
for this purpose) registered in the name of the Fund or in the
name of a nominee of the Custodian referred to in Section 2.3
hereof or in proper form for transfer; (b) in the case of a
purchase effected through a Securities System, in accordance with
the conditions set forth in Section 2.12 hereof or (c) in the
case of repurchase agreements entered into between the Fund and
the
-10-
<PAGE>
Custodian, or another bank, or a broker-dealer which is a member
of NASD, (i) against delivery of the securities either in
certificate form or through an entry crediting the Custodian's
account at the Federal Reserve Bank with such securities or (ii)
against delivery of the receipt evidencing purchase by the Fund
of securities owned by the Custodian along with written evidence
of the agreement by the Custodian to repurchase such securities
from the Fund;
2) In connection with conversion, exchange or surrender of
securities owned by the Fund as set forth in Section 2.2 hereof;
3) For the redemption or repurchase of Shares issued by the Fund as
set forth in Section 2.10 hereof;
4) For the payment of any expense or liability incurred by the Fund,
including but not limited to the following payments for the
account of the Fund: interest, taxes, management, accounting,
transfer agent and legal fees, and operating expenses of the Fund
whether or not such expenses are to be in whole or part
capitalized or treated as deferred expenses;
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<PAGE>
5) For the payment of any dividends declared pursuant to the
governing documents of the Fund;
6) For payment of the amount of dividends received in respect of
securities sold short;
7) For any other proper purpose, but only upon receipt of, in
addition to Proper Instructions, a certified copy of a resolution
of the Trustees or of the Executive Committee of the Fund signed
by an officer of the Fund and certified by its Secretary or an
Assistant Secretary, specifying the amount of such payment,
setting forth the purpose for which such payment is to be made,
declaring such purpose to be a proper purpose, and naming the
person or persons to whom such payment is to be made.
2.9 Liability for Payment in Advance of Receipt of Securities Purchased.
In any and every case where payment for purchase of securities for the
account of the Fund is made by the Custodian in advance of receipt of
the securities purchased in the absence of specific written
instructions from the Fund to so pay in advance, the Custodian shall
be absolutely liable to the Fund for such securities to the same
extent as if the securities had been received by the Custodian.
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<PAGE>
2.10 Payments for Repurchases or Redemptions of Shares of the Fund. From
such funds as may be available for the purpose but subject to the
limitations of the Declaration of Trust and any applicable votes of
the Trustees of the Fund pursuant thereto, the Custodian shall, upon
receipt of instructions from the Transfer Agent, make funds available
for payment to holders of Shares who have delivered to the Transfer
Agent a request for redemption or repurchase of their Shares. In
connection with the redemption or repurchase of Shares of the Fund,
the Custodian is authorized upon receipt of instructions from the
Transfer Agent to wire funds to or through a commercial bank
designated by the redeeming shareholders. In connection with the
redemption or repurchase of Shares of the Fund, the Custodian shall
honor checks drawn on the Custodian by a holder of Shares, which
checks have been furnished by the Fund to the holder of Shares, when
presented to the Custodian in accordance with such procedures and
controls as are mutually agreed upon from time to time between the
Fund and the Custodian.
2.11 Appointment of Agents. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or
trust company which is itself qualified under the Investment Company
Act of 1940, as amended, to act as a custodian, as its agent to carry
out such of the provisions of this Article 2 as the Custodian
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<PAGE>
may from time to time direct; provided, however, that the appointment
of any agent shall not relieve the Custodian of its responsibilities
or liabilities hereunder.
2.12 Deposit of Fund Assets in Securities Systems. The Custodian may
deposit and/or maintain securities owned by the Fund in a clearing
agency registered with the Securities and Exchange Commission under
Section 17A of the Securities Exchange Act of 1934, which acts as a
securities depository, or in the book-entry system authorized by the
U.S. Department of the Treasury and certain federal agencies,
collectively referred to herein as "Securities System" in accordance
with applicable Federal Reserve Board and Securities and Exchange
Commission rules and regulations, if any, and subject to the following
provisions:
1) The Custodian may keep securities of the Fund in a Securities
System provided that such securities are represented in an
account ("Account") of the Custodian in the Securities System
which shall not include any assets of the Custodian other than
assets held as a fiduciary, custodian or otherwise for customers;
2) The records of the Custodian with respect to securities of the
Fund which are maintained in a Securities System shall identify
by book-entry those securities belonging to the Fund;
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<PAGE>
3) The Custodian shall pay for securities purchased for the account
of the Fund upon (i) receipt of advice from the Securities System
that such securities have been transferred to the Account, and
(ii) the making of an entry on the records of the Custodian to
reflect such payment and transfer for the account of the Fund.
The Custodian shall transfer securities sold for the account of
the Fund upon (i) receipt of advice from the Securities System
that payment for such securities has been transferred to the
Account, and (ii) the making of an entry on the records of the
Custodian to reflect such transfer and payment for the account of
the Fund. Copies of all advices from the Securities System of
transfers of securities for the account of the Fund shall
identify the Fund, be maintained for the Fund by the Custodian
and be provided to the Fund at its request. Upon request, the
Custodian shall furnish the Fund confirmation of each transfer to
or from the account of the Fund in the form of a written advice
or notice and shall furnish to the Fund copies of daily
transaction sheets reflecting each day's transactions in the
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<PAGE>
Securities System for the account of the Fund.
4) The Custodian shall provide the Fund with any report obtained by
the Custodian on the Securities System's accounting system,
internal accounting control and procedures for safeguarding
securities deposited in the Securities System;
5) The Custodian shall have received the initial or annual
certificate, as the case may be, required by Article 9 hereof;
6) Anything to the contrary in this Contract notwithstanding, the
Custodian shall be liable to the Fund for any loss or damage to
the Fund resulting from use of the Securities System by reason of
any negligence, misfeasance or misconduct of the Custodian or any
of its agents or of any of its or their employees or from failure
of the Custodian or any such agent to enforce effectively such
rights as it may have against the Securities System; at the
election of the Fund, it shall be entitled to be subrogated to
the rights of the Custodian with respect to any claim against the
Securities System or any other person which the Custodian may
have as a consequence of any such loss or damage if and to the
extent that the Fund has not been made whole for any such loss or
damage.
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<PAGE>
2.13 Segregated Account. The Custodian shall upon receipt of Proper
Instructions establish and maintain a segregated account or accounts
for and on behalf of the Fund, into which account or accounts may be
transferred cash and/or securities, including securities maintained in
an account by the Custodian pursuant to Section 2.12 hereof, (i) in
accordance with the provisions of any agreement among the Fund, the
Custodian and a broker-dealer registered under the Exchange Act and a
member of the NASD (or any futures commission merchant registered
under the Commodity Exchange Act), relating to compliance with the
rules of The Options Clearing Corporation and of any registered
national securities exchange (or the Commodity Futures Trading
Commission or any registered contract market), or of any similar
organization or organizations, regarding escrow or other arrangements
in connection with transactions by the Fund, (ii) for purposes of
segregating cash or government securities in connection with options
purchased, sold or written by the Fund or commodity futures contracts
or options thereon purchased or sold by the Fund, (iii) for the
purposes of compliance by the Fund with the procedures required by
Investment Company Act Release No. 10666, or any subsequent release or
releases of the Securities and Exchange Commission relating to the
maintenance of segregated accounts by registered investment companies
and (iv) for other proper corporate purposes, but only, in the case of
clause (iv),
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<PAGE>
upon receipt of, in addition to Proper Instructions, a certified copy
of a resolution of the Trustees or of the Executive Committee signed
by an officer of the Fund and certified by the Secretary or an
Assistant Secretary, setting forth the purpose or purposes of such
segregated account and declaring such purposes to be proper corporate
purposes.
2.14 Ownership Certificates for Tax Purposes. The Custodian shall execute
ownership and other certificates and affidavits for all federal and
state tax purposes in connection with receipt of income or other
payments with respect to securities of the Fund held by it and in
connection with transfers of securities.
2.15 Proxies. The Custodian shall, with respect to the securities held
hereunder, cause to be promptly executed by the registered holder of
such securities, if the securities are registered otherwise than in
the name of the Fund or a nominee of the Fund, all proxies, without
indication of the manner in which such proxies are to be voted, and
shall promptly deliver to the Fund such proxies, all proxy soliciting
materials and all notices relating to such securities.
2.16 Communications Relating to Fund Portfolio Securities. The Custodian
shall transmit promptly to the Fund all written information
(including, without limitation, pendency of calls and maturities of
securities and expirations of rights in connection therewith and
notices
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of exercise of call and put options written by the Fund and the
maturity of futures contracts purchased or sold by the Fund) received
by the Custodian from issuers of the securities being held for the
Fund. With respect to tender or exchange offers, the Custodian shall
transmit promptly to the Fund all written information received by the
Custodian from issuers of the securities whose tender or exchange is
sought and from the party (or his agents) making the tender or
exchange offer. If the Fund desires to take action with respect to any
tender offer, exchange offer or any other similar transaction, the
Fund shall notify the Custodian at least three business days prior to
the date on which the Custodian is to take such action.
2.17 Proper Instructions. Proper Instructions as used throughout this
Article 2 means a writing signed or initialled by one or more person
or persons as the Trustees shall have from time to time authorized.
Each such writing shall set forth the specific transaction or type of
transaction involved, including a specific statement of the purpose
for which such action is requested. Oral instructions will be
considered Proper Instructions if the Custodian reasonably believes
them to have been given by a person authorized to give such
instructions with respect to the transaction involved. The Fund shall
cause all oral instructions to be confirmed in writing. Upon receipt
of a certificate of the Secretary or an Assistant Secretary as to the
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authorization by the Trustees of the Fund accompanied by a detailed
description of procedures approved by the Trustees, Proper
Instructions may include communications effected directly between
electro-mechanical or electronic devices provided that the Trustees
and the Custodian are satisfied that such procedures afford adequate
safeguards for the Fund's assets.
2.18 Actions Permitted without Express Authority. The Custodian may in its
discretion, without express authority from the Fund:
1) make payments to itself or others for minor expenses of handling
securities or other similar items relating to its duties under
this Contract, provided that all such payments shall be accounted
for to the Fund;
2) surrender securities in temporary form for securities in
definitive form;
3) endorse for collection, in the name of the Fund, checks, drafts
and other negotiable instruments; and
4) in general, attend to all non-discretionary details in connection
with the sale, exchange, substitution, purchase, transfer and
other dealings with the securities and property of the Fund
except as otherwise directed by the Trustees of the Fund.
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2.19 Evidence of Authority. The custodian shall be protected in acting upon
any instructions, notice, request, consent, certificate or other
instrument or paper believed by it to be genuine and to have been
properly executed by or on behalf of the Fund. The Custodian may
receive and accept a certified copy of a vote of the Trustees of the
Fund as conclusive evidence (a) of the authority of any person to act
in accordance with such vote or (b) of any determination or of any
action by the Trustees pursuant to the Declaration of Trust as
described in such vote, and such vote may be considered as in full
force and effect until receipt by the Custodian of written notice to
the contrary.
3. Duties of Custodian with Respect to the Books of Account and Calculation of
Net Asset Value and Net Income.
The Custodian shall cooperate with and supply necessary information to the
entity or entities appointed by the Trustees of the Fund to keep the books of
account of the Fund and/or compute the net asset value per share of the
outstanding shares of the Fund or, if directed in writing to do so by the Fund,
shall itself keep such books of account and/or compute such net asset value per
share. If so directed, the Custodian shall also calculate daily the net income
of the Fund as described in the Fund's currently effective prospectus and shall
advise the Fund and the Transfer Agent daily of the total amounts of such net
income and, if instructed in writing by an officer of the Fund to do so, shall
advise the Transfer Agent periodically of the
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division of such net income among its various components. The calculations of
the net asset value per share and the daily income of the Fund shall be made at
the time or times described from time to time in the Fund's currently effective
prospectus.
4. Records
The Custodian shall create and maintain all records relating to its activities
and obligations under this Contract in such manner as will meet the obligations
of the Fund under the Investment Company Act of 1940, with particular attention
to Section 31 thereof and Rules 31a-1 and 31a-2 thereunder, applicable federal
and state tax laws and any other law or administrative rules or procedures which
may be applicable to the Fund. All such records shall be the property of the
Fund and shall at all times during the regular business hours of the Custodian
be open for inspection by duly authorized officers, employees or agents of the
Fund and employees and agents of the Securities and Exchange Commission. The
Custodian shall, at the Fund's request, supply the Fund with a tabulation of
securities owned by the Fund and held by the Custodian and shall, when requested
to do so by the Fund and for such compensation as shall be agreed upon between
the Fund and the Custodian, include certificate numbers in such tabulations.
5. Opinion of Fund's Independent Accountant
The Custodian shall take all reasonable action, as the Fund may from time to
time request, to obtain from year to year favorable opinions from the Fund's
independent accountants with respect to its activities hereunder in connection
with the
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preparation of the Fund's Form N-1A, and Form N-SAR or other annual reports to
the Securities and Exchange Commission and with respect to any other
requirements of such Commission.
6. Reports to Fund by Independent Public Accountants
The Custodian shall provide the Fund, at such times as the Fund may reasonably
require, with reports by independent public accountants on the accounting
system, internal accounting control and procedures for safeguarding securities,
futures contracts and options on futures contracts, including securities
deposited and/or maintained in a Securities System, relating to the services
provided by the Custodian under this Contract; such reports, shall be of
sufficient scope and in sufficient detail, as may reasonably be required by the
Fund to provide reasonable assurance that any material inadequacies would be
disclosed by such examination, and, if there are no such inadequacies, the
reports shall so state.
7. Compensation of Custodian
The Custodian shall be entitled to reasonable compensation for its services and
expenses as Custodian, as agreed upon from time to time between the Fund and the
Custodian.
8. Responsibility of Custodian
So long as and to the extent that it is in the exercise of reasonable care, the
Custodian shall not be responsible for the title, validity or genuineness of any
property or evidence of title thereto received by it or delivered by it pursuant
to this Contract and shall be held harmless in acting upon any notice, request,
consent, certificate or other instrument reasonably
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believed by it to be genuine and to be signed by the proper party or parties.
The Custodian shall be held to the exercise of reasonable care in carrying out
the provisions of this Contract, but shall be kept indemnified by and shall be
without liability to the Fund or any action taken or omitted by it in good faith
without negligence. It shall be entitled to rely on and may act upon advice of
counsel (who may be counsel for the Fund) on all matters, and shall be without
liability for any action reasonably taken or omitted pursuant to such advice.
Notwithstanding the foregoing, the responsibility of the Custodian with respect
to redemptions effected by check shall be in accordance with a separate
Agreement entered into between the Custodian and the Fund.
If the Fund requires the Custodian to take any action with respect to
securities, which action involves the payment of money or which action may, in
the opinion of the Custodian, result in the Custodian or its nominee assigned to
the Fund being liable for the payment of money or incurring liability of some
other form, the Fund, as a prerequisite to requiring the Custodian to take such
action, shall provide indemnity to the Custodian in an amount and form
satisfactory to it.
If the Fund requires the Custodian to advance cash or securities for any purpose
or in the event that the Custodian or its nominee shall incur or be assessed any
taxes, charges, expenses, assessments, claims or liabilities in connection with
the performance of this Contract, except such as may arise from its or its
nominee's own negligent action, negligent failure to
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act or willful misconduct, any property at any time held for the account of the
Fund shall be security therefor and should the Fund fail to repay the Custodian
promptly, the Custodian shall be entitled to utilize available cash and to
dispose of Fund assets to the extent necessary to obtain reimbursement.
9. Effective Period, Termination and Amendment
This Contract shall become effective as of its execution, shall continue in full
force and effect until terminated as hereinafter provided, may be amended at any
time by mutual agreement of the parties hereto and may be terminated by either
party by an instrument in writing delivered or mailed, postage prepaid to the
other party, such termination to take effect not sooner than thirty (30) days
after the date of such delivery or mailing; provided, however that the Custodian
shall not act under Section 2.12 hereof in the absence of receipt of an initial
certificate of the Secretary or an Assistant Secretary that the Trustees of the
Fund have approved the initial use of a particular Securities System and the
receipt of an annual certificate of the Secretary or an Assistant Secretary that
the Trustees have reviewed the use by the Fund of such Securities System, as
required in each case by Rule 17f-4 under the Investment Company Act of 1940, as
amended; provided further, however, that the Fund shall not amend or terminate
this Contract in contravention of any applicable federal or state regulations,
or any provision of the Declaration of Trust, and further provided, that the
Fund may at any time by action of its Trustees (i) substitute another bank or
trust company for the Custodian by
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<PAGE>
giving notice as described above to the Custodian, or (ii) immediately terminate
this Contract in the event of the appointment of a conservator or receiver for
the Custodian by the Comptroller of the Currency or upon the happening of a like
event at the direction of an appropriate regulatory agency or court of competent
jurisdiction.
Upon termination of the Contract, the Fund shall pay to the Custodian such
compensation as may be due as of the date of such termination and shall likewise
reimburse the Custodian for its costs, expenses and disbursements.
10. Successor Custodian
If a successor custodian shall be appointed by the Trustees of the Fund, the
Custodian shall, upon termination, deliver to such successor custodian at the
office of the Custodian, duly endorsed and in the form for transfer, all
securities then held by it hereunder and shall transfer to an account of the
successor custodian all of the Fund's securities held in a Securities System.
If no such successor custodian shall be appointed, the Custodian shall, in like
manner, upon receipt of a certified copy of a vote of the Trustees of the Fund,
deliver at the office of the Custodian and transfer such securities, funds and
other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Trustees shall have been delivered to the
Custodian on or before the date when such termination shall become effective,
then the Custodian
-26-
<PAGE>
shall have the right to deliver to a bank or trust company, which is a "bank" as
defined in the Investment Company Act of 1940, doing business in Boston,
Massachusetts, of its own selection, having an aggregate capital, surplus, and
undivided profits, as shown by its last published report, of not less than
$25,000,000, all securities, funds and other properties held by the Custodian
and all instruments held by the Custodian relative thereto and all other
property held by it under this Contract and to transfer to an account of such
successor custodian all of the Fund's securities held in any Securities System.
Thereafter, such bank or trust company shall be the successor of the Custodian
under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to or of
the Trustees to appoint a successor custodian, the Custodian shall be entitled
to fair compensation for its services during such period as the Custodian
retains possession of such securities, funds and other properties and the
provisions of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.
11. Interpretive and Additional Provisions
In connection with the operation of this Contract, the Custodian and the Fund
may from time to time agree on such provisions interpretive of or in addition to
the provisions of this Contract as may in their joint opinion be consistent with
-27-
<PAGE>
the general tenor of this Contract. Any such interpretive or additional
provisions shall be in a writing signed by both parties and shall be annexed
hereto, provided that no such interpretive or additional provisions shall
contravene any applicable federal or state regulations or any provision of the
Declaration of Trust of the Fund. No interpretive or additional provisions made
as provided in the preceding sentence shall be deemed to be an amendment of this
Contract.
12. Additional Funds
In the event that the Fund establishes one or more series of Shares in addition
to the Government Income Fund with respect to which it desires to have the
Custodian render services as custodian under the terms hereof, it shall so
notify the Custodian in writing, and if the Custodian agrees in writing to
provide such services, such series of Shares shall become a Fund hereunder.
13. Massachusetts Law to Apply
This Contract shall be construed and the provisions thereof interpreted under
and in accordance with laws of The Commonwealth of Massachusetts.
14. Prior Contracts
This Contract supersedes and terminates, as of the date hereof, all prior
contracts between the Fund and the Custodian relating to the custody of the
Fund's assets.
-28-
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the 12th day of February, 1987.
ATTEST METLIFE-STATE STREET FIXED INCOME TRUST
________________________ By /s/ Charles L. Smith, Jr.
ATTEST STATE STREET BANK AND TRUST COMPANY
________________________ By /s/ Charles Connelly, Jr. 1/16/87
Assistant Secretary Vice President
METLIFE - STATE STREET FINANCIAL TRUST
One Financial Center
Boston, MA 02111
September 6, 1993
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
Gentlemen:
This letter is to confirm to you that MetLife - State Street Financial
Trust (the "Trust") has created a new series of shares to be known as MetLife -
State Street Research Balanced Fund (the "Fund"), and that pursuant to paragraph
12 of the Custodian Contract dated as of February 12, 1987 between the Trust and
you (the "Agreement"), the Trust desires to retain you to act as Custodian of
the assets of the Fund as set forth in the Custodian Contract.
Please indicate your acceptance of the above in accordance with the
terms of the Agreement by signing this letter as indicated below.
The term "MetLife - State Street Financial Trust" means and refers to
the Trustees from time to time serving under the First Amended and Restated
Master Trust Agreement dated June 1, 1993 ("Master Trust Agreement") as the same
may subsequently thereto have been, or subsequently hereto may be, amended. It
is expressly agreed that the obligations of the Trust hereunder shall not be
binding upon any of the Trustees, shareholders, nominees, officers, agents or
employees of the Trust as individuals or personally, but shall bind only the
trust property of the Trust, as provided in the Master Trust Agreement of the
Trust. The execution and delivery of this Agreement have been authorized by the
Trustees of the Trust and signed by the a duly authorized officer of the Trust,
acting as such, and neither such authorization nor such execution and delivery
shall be deemed to have been made individually or to impose any personal
liability, but shall bind only the trust property of the Trust as provided in
its Master Trust Agreement. The Master Trust Agreement of the Trust provides,
and it is expressly agreed, that each fund of the Trust shall
<PAGE>
be solely and exclusively responsible for the payment of its debts, liabilities
and obligations, and that no other fund shall be responsible for the same.
METLIFE - STATE STREET
FINANCIAL TRUST
By: /s/ Gerard P. Maus
ACCEPTED AND AGREED TO:
STATE STREET BANK AND TRUST
COMPANY
By: /s/ Michael Hayes
Vice President
METLIFE - STATE STREET FINANCIAL TRUST
One Financial Center
Boston, MA 02111
May 16, 1994
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
Gentlemen:
This letter is to confirm to you that MetLife - State Street Financial
Trust (the "Trust") has created two (2) new series of shares to be known as
State Street Research Strategic Portfolios: Conservative and State Street
Research Strategic Portfolios: Aggressive (the "Funds"), and that pursuant to
paragraph 12 of the Custodian Contract dated as of February 12, 1987 between the
Trust and you (the "Agreement"), the Trust desires to retain you to act as
Custodian of the assets of the Funds as set forth in the Custodian Contract.
Please indicate your acceptance of the above in accordance with the
terms of the Agreement by signing this letter as indicated below.
The term "MetLife - State Street Financial Trust" means and refers to
the Trustees from time to time serving under the First Amended and Restated
Master Trust Agreement dated June 1, 1993 ("Master Trust Agreement") as the
same may subsequently thereto have been, or subsequently hereto may be, amended.
It is expressly agreed that the obligations of the Trust hereunder shall not be
binding upon any of the Trustees, shareholders, nominees, officers, agents or
employees of the Trust as individuals or personally, but shall bind only the
trust property of the Trust, as provided in the Master Trust Agreement of the
Trust. The execution and delivery of this Agreement have been authorized by the
Trustees of the Trust and signed by a duly authorized officer of the Trust,
acting as such, and neither such authorization nor such execution and delivery
shall be deemed to have been made individually or to impose any personal
liability, but shall bind only the trust property of the Trust as provided in
its Master Trust Agreement. The Master Trust Agreement of the Trust provides,
and it is expressly agreed, that each fund of the Trust shall be solely and
exclusively responsible for the payment of its debts, liabilities and
obligations, and that no other fund shall be responsible for the same.
<PAGE>
METLIFE - STATE STREET FINANCIAL
TRUST
By: /s/ Constantine Hutchins, Jr.
Constantine Hutchins, Jr.
ACCEPTED AND AGREED TO: Secretary
STATE STREET BANK AND
TRUST COMPANY
By: /s/ Timothy Panaro
54661.cl
Amendment
To
Custodian Contract
AGREEMENT made this 12th day of January, 1989 by and between STATE STREET BANK
AND TRUST COMPANY ("Custodian") and METLIFE-STATE STREET FIXED INCOME TRUST
("the FUND").
WITNESSETH THAT:
WHEREAS, the Custodian and the Fund are parties to a Custodian Contract
dated February 12, 1987 (as amended to date, the "Contract") which governs the
terms and conditions under which the Custodian maintains custody of the
securities and other assets of the Fund:
NOW THEREFORE, the Custodian and the Fund hereby amend the terms of the
Custodian Contract and mutually agree to the following:
I. Section 2.1 is hereby amended to read in its entirety as follows:
"Holding Securities. The Custodian shall hold and physically segregate
for the account of the Fund all non-cash property, including all
securities owned by the Fund, other than (a) securities which are
maintained pursuant to
<PAGE>
Section 2.12 in a clearing agency which acts as a securities
depository or in a book-entry system authorized by the U.S. Department
of the Treasury, collectively referred to herein as "Securities
System" and (b) commercial paper of an issuer for which State Street
Bank and Trust Company acts as issuing and paying agent ("Direct
Paper") which is deposited and/or maintained in the Direct Paper
System of the Custodian pursuant to Section 2.12.A."
II. Section 2.2 is hereby amended to read in its entirety as follows:
"Delivery of Securities. The Custodian shall release and deliver
securities owned by the Fund held by the Custodian or in a Securities
System account of the Custodian or in the Custodian's Direct Paper
book-entry system account ("Direct Paper System Account") only upon
receipt of Proper Instructions, which may be continuing instructions
when deemed appropriate by the parties, and only in the following
cases:
1) Upon sale of such securities for the account of the Fund and
receipt of payment therefor;
2) Upon the receipt of payment in connection with any repurchase
agreement related to such securities entered into by the Fund;
-2-
<PAGE>
3) In the case of a sale effected through a Securities System,
including in the Direct Paper System Account, in accordance with
the provisions of Section 2.12 or 2.12.A hereof;
4) To the depository agent in connection with tender or other
similar offers for portfolio securities of the Fund;
5) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable; provided
that, in any such case, the cash or other consideration is to be
delivered to the Custodian;
6) To the issuer thereof, or its agent, for transfer into the name
of the Fund or into the name of any nominee or nominees of the
Custodian or into the name or nominee name of any agent appointed
pursuant to Section 2.11 or into the name or nominee name of any
sub-custodian appointed pursuant to Article 1; or for exchange
for a different number of bonds, certificates or other evidence
representing the same aggregate face amount or number of units;
provided that, in any such case, the new securities are to be
delivered to the Custodian;
7) To the broker selling the same for examination in accordance with
the "street delivery" custom;
-3-
<PAGE>
8) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment
of the securities of the issuer of such securities, or pursuant
to provisions for conversion contained in such securities, or
pursuant to any deposit agreement; provided that, in any such
case, the new securities and cash, if any, are to be delivered
to the Custodian;
9) In the case of warrants, rights or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for definitive securities; provided that, in
any such case, the new securities and cash, if any, are to be
delivered to the Custodian;
10) For delivery in connection with any loans of securities made by
the Fund, but only against receipt of adequate collateral as
agreed upon from time to time by the Custodian and the Fund,
which may be in the form of cash or obligations issued by the
United States government, its agencies or instrumentalities,
except that in connection with any loans for which collateral is
to be credited to the Custodian's account in
-4-
<PAGE>
the book-entry system authorized by the U.S. Department of the
Treasury, the Custodian will not be held liable or responsible
for the delivery of securities owned by the Fund prior to the
receipt of such collateral;
13) For delivery as security in connection with any borrowings by the
Fund requiring a pledge of assets by the Fund, but only against
receipt of amounts borrowed;
12) For delivery in accordance with the provisions of any agreement
among the Fund, the Custodian and a broker-dealer registered
under the Securities Exchange Act of 1934 (the "Exchange Act")
and a member of The National Association of Securities Dealers,
Inc. ("NASD"), relating to compliance with the rules of The
Options Clearing Corporation and of any registered national
securities exchange, or of any similar organization or
organizations, regarding escrow or other arrangements in
connection with the transactions by the Fund;
13) For delivery in accordance with the provisions of any agreement
among the Fund, the Custodian, and a Futures Commission Merchant
registered under the Commodity Exchange Act, relating to
compliance with the rules of the Commodity
-5-
<PAGE>
Futures Trading Commission and/or any Contract Market, or any
similar organization or organizations, regarding account deposits
in connection with transactions by the Fund;
14) Upon receipt of instructions from the transfer agent ("Transfer
Agent") for the Fund, for delivery to such Transfer Agent or to
the holders of shares in connection with distributions in kind,
as may be described from time to time in the Fund's currently
effective prospectus and statement of additional information
("prospectus"), in satisfaction of requests by holders of Shares
for repurchase or redemption; and
15) For any other proper corporate purpose, but only upon receipt of,
in addition to Proper Instructions, a certified copy of a
resolution of the Trustees or of the Executive Committee signed
by an officer of the Fund and certified by the Secretary or an
Assistant Secretary, specifying the securities to be delivered,
setting forth the purpose for which such delivery is to be made,
declaring such purposes to be proper corporate purposes, and
naming the person or persons to whom delivery of such securities
shall be made."
-6-
<PAGE>
III. Section 2.8 (1) is amended to read in its entirety as follows:
"Payment of Fund Moneys. Upon receipt of Proper Instructions, which
may be continuing instructions when deemed appropriate by the parties,
the Custodian shall pay out moneys of the Fund in the following cases
only:
1) Upon the purchase of securities, futures contracts or options on
futures contracts for the account of the Fund but only (a)
against the delivery of such securities, or evidence of title to
futures contracts or options on futures contracts, to the
Custodian (or any bank, banking firm or trust company doing
business in the United States or abroad which is qualified under
the Investment Company Act of 1940, as amended, to act as a
custodian and has been designated by the Custodian as its agent
for this purpose) registered in the name of the Fund or in the
name of a nominee of the Custodian referred to in Section 2.3
hereof or in proper form for transfer; (b) in the case of a
purchase effected through a Securities System, in accordance with
the conditions set forth in Section 2.12 hereof or (c) in the
case of a
-7-
<PAGE>
purchase involving the Direct Paper System, in accordance with
the conditions set forth in Section 2.12.A or (d) in the case of
repurchase agreements entered into between the Fund and the
Custodian, or another bank, or a broker-dealer which is a member
of NASD, (i) against delivery of the securities either in
certificate form or through an entry crediting the Custodian's
account at the Federal Reserve Bank with such securities or (ii)
against delivery of the receipt evidencing purchase by the Fund
of securities owned by the Custodian along with written evidence
of the agreement by the Custodian to repurchase such securities
from the Fund;"
IV. Following Section 2.12 there is inserted a new Section 2.12.A to read
as follows:
"Fund Assets Held in the Custodian's Direct Paper System. The
Custodian may deposit and/or maintain securities owned by the Fund in
the Direct Paper System of the Custodian subject to the following
provisions:
1) No transaction relating to securities in the Direct Paper System
will be effected in the
-8-
<PAGE>
absence of Proper Instructions;
2) The Custodian may keep securities of the Fund in the Direct Paper
System only if such securities are represented in an account
("Account") of the Custodian in the Direct Paper System which
shall not include any assets of the Custodian other than assets
held as a fiduciary, custodian or otherwise for customers;
3) The records of the Custodian with respect to securities of the
Fund which are maintained in the Direct Paper System shall
identify by book-entry those securities belonging to the Fund;
4) The Custodian shall pay for securities purchased for the account
of the Fund upon the making of an entry on the records of the
Custodian to reflect such payment and transfer of securities to
the account of the Fund. The Custodian shall transfer securities
sold for the account of the Fund upon the making of an entry on
the records of the Custodian to reflect such transfer and receipt
of payment for the account of the Fund;
-9-
<PAGE>
5) The Custodian shall furnish the Fund confirmation of each
transfer to or from the account of the Fund, in the form of a
written advice or notice, of Direct Paper on the next business
day following such transfer and shall furnish to the Fund copies
of daily transaction sheets reflecting each day's transaction in
the Securities System for the account of the Fund;
6) The Custodian shall provide the Fund with any report on its
system of internal accounting control as the Fund may reasonably
request from time to time."
V. Section 9 is hereby amended in its entirety to read as follows:
"Effective Period, Termination and Amendment
This Contract shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter provided, may
be amended at any time by mutual agreement of the parties hereto and may be
terminated by either party by an instrument in writing delivered or mailed,
postage prepaid to the other party, such termination to take effect not sooner
than thirty (30) days after the date of such delivery or mailing; provided,
however that the Custodian shall not act under
-10-
<PAGE>
Section 2.12 hereof in the absence of receipt of an initial
certificate of the Secretary or an Assistant Secretary that the
Trustees of the Fund have approved the initial use of a particular
Securities System and the receipt of an annual certificate of the
Secretary or an Assistant Secretary that the Trustees have reviewed
the use by the Fund of such Securities System, as required in each
case by Rule 17f-4 under the Investment Company Act of 1940, as
amended and that the Custodian shall not act under Section 2.12.A
hereof in the absence of receipt of an initial certificate of the
Secretary or an Assistant Secretary that the Trustees of the Fund have
approved the initial use of the Direct Paper System and the receipt of
an annual certificate of the Secretary or an Assistant Secretary that
the Trustees have reviewed the use by the Fund of the Direct Paper
System; provided further, however, that the Fund shall not amend or
terminate this Contract in contravention of any applicable federal or
state regulations, or any provision of the Master Trust Agreement, and
further provided, that the Fund may at any time by action of its
Trustees (i) substitute another bank or trust company for the
Custodian by giving notice as described above to the Custodian, or
(ii) immediately terminate this Contract in the event of the
appointment of a conservator or receiver for the Custodian by the
Comptroller of the Currency or upon the happening of a like event at
the direction of an appropriate regulatory agency or court of
competent jurisdiction.
-11-
<PAGE>
Upon termination of the Contract, the Fund shall pay to the Custodian
such compensation as may be due as of the date of such termination and shall
likewise reimburse the Custodian for its costs, expenses and disbursements."
VI. Following Section 14, there is inserted a new Section 15 to read as
follows:
"Disclaimer
It is expressly agreed that the obligations of the Fund hereunder, and
the authorization, execution and delivery of this document, shall not be binding
upon any of the Trustees, shareholders, nominees, officers, agents or employees
of the Fund as individuals or personally, but shall bind only the property of
the Portfolio of the Fund, as provided in the Master Trust Agreement of the
Fund. The Master Trust Agreement of the Fund provides, and it is expressly
agreed, that the Portfolio of the Fund shall be solely and exclusively
responsible for the payment of any direct or indirect debts, liabilities and
obligations relating to the Portfolio, and that no other portfolios shall be
responsible for the same."
Except as otherwise expressly amended and modified herein, the
provisions of the Custodian Contract shall remain in full force and effect.
-12-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the 12th day of January, 1989.
Attest MetLife - State Street
Fixed Income Trust
/s/ Darman A. Wing /s/ Constantine Hutchins, Jr.
Assistant Secretary Secretary
Attest State Street Bank and Trust Company
/s/ Joseph P. Vinich /s/ M.J. Hayes
Assistant Secretary Vice President
[Letterhead: Goodwin, Procter & Hoar]
GOODWIN, PROCTER & HOAR
A PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS
COUNSELLORS AT LAW
EXCHANGE PLACE
BOSTON, MASSACHUSETTS 02109-2881
April 19, 1994 TELEPHONE (617) 570-1000
TELECOPIER (617) 523-1231
TELEX 94-0640
CABLE - GOODPROCT.BOSTON
MetLife - State Street Financial Trust
One Financial Center
Boston, MA 02111-2690
Gentlemen:
As counsel to MetLife - State Street Financial Trust, a voluntary
association of the type commonly known as a business trust organized under the
laws of the Commonwealth of Massachusetts (the "Trust"), we have been asked to
render our opinion in connection with the proposed issuance by the Trust of
shares of beneficial interest of MetLife - State Street Research Strategic
Portfolios: Conservative and MetLife - State Street Research Strategic
Portfolios: Aggressive (the "Funds"), which are series of the Trust which have
been established and designated pursuant to Section 4.2 of Article IV of the
Trust's Master Trust Agreement dated January 25, 1994, as amended, all as more
fully described in the Prospectus and Statement of Additional Information
contained in Post-Effective Amendment No. 11 to the Registration Statement on
Form N-1A to be filed by the Trust (as amended, the "Registration Statement").
We wish to advise you that we have examined such documents and
questions of law we have deemed necessary for purposes of this opinion. Based
upon the foregoing, we are of the opinion that:
1. The Trust has been duly organized and is validly existing pursuant
to the laws of the Commonwealth of Massachusetts; and
2. The shares of beneficial interest of the Funds which are described
in the foregoing Registration Statement will, when sold in accordance with the
terms of the Prospectus and Statement of Additional Information in effect at the
time of the sale, be legally issued, fully paid and non-assessable by the Trust.
We consent to being named in the Prospectus and Statement of Additional
Information and to a copy of this opinion being filed as an exhibit to the
foregoing Registration Statement. We also consent to the incorporation by
reference of our opinion with respect to the legality of the shares of the Trust
representing interests in the MetLife - State Street Research Strategic
Portfolios: Moderate (formerly, MetLife - State Street Research Balanced Fund),
which opinion was filed with Post-Effective Amendment No. 9 to the foregoing
Registration Statement.
Very truly yours,
/s/ Goodwin, Procter & Hoar
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of Additional Information
constituting part of this Post-Effective Amendment No. 17 to the registration
statement (No. 33-10327) on Form N-1A (the "Registration Statement") of our
report dated December 12, 1997 relating to the financial statements and
financial highlights of State Street Research Government Income Fund (a series
of State Street Research Financial Trust), which appear in such Statement of
Additional Information and to the incorporation by reference of our report into
the Prospectus which constitutes part of this Registration Statement. We also
consent to the reference to us under the heading "Independent Accountants" in
such Statement of Additional Information and to the reference to us under the
heading "Financial Highlights" in such Prospectus.
Price Waterhouse LLP
Boston, Massachusetts
December 29, 1997
PURCHASE AGREEMENT
MetLife - State Street Fixed Income Trust (the "Trust"), an
unincorporated association of the type commonly referred to as a business trust
organized under the laws of the Commonwealth of Massachusetts, and MetLife -
State Street Investment Services, Inc., a Massachusetts corporation ("Investment
Services"), hereby agree with each other as follows:
1. The Trust hereby offers Investment Services and Investment Services
hereby purchases: one (l) share of beneficial interest (par value $.001) in the
Trust's Government Securities Income Fund (the "Share"), at a price of $10.00
per Share. The Trust hereby acknowledges receipt from Investment Services of
payment in full for the Share.
2. Investment Services represents and warrants to the Trust that the
Shares are being acquired for investment purposes and not with a view to the
distribution thereof.
3. The names "MetLife - State Street Fixed Income Trust" and "Trustees
of MetLife - State Street Fixed Income Trust" refer, respectively, to the Trust
and the Trustees of the Trust, as trustees but not individually or personally,
acting from time to time under the Trust's Agreement and Declaration of Trust
dated November 12, 1986, which is hereby referred to and a copy of which is on
file at the office of the Secretary
<PAGE>
of the Commonwealth of Massachusetts and the principal office of the Trust. The
obligations of "MetLife - State Street Fixed Income Trust" entered into in the
name or on behalf thereof by any of the Trustees, representatives or agents of
the Trust are made not individually, but in such capacities, and are not binding
upon any of the Trustees, holders of shares of beneficial interest or
representatives of the Trustees personally, but bind only the trust estate, and
all persons dealing with the Trust must look solely to the trust property for
the enforcement of any claims against the Trust. The Agreement and Declaration
of Trust of the Trust further provides, and it is expressly agreed, that the
MetLife - State Street Government Securities Income Fund shall be solely and
exclusively responsible for the payment of its debts, liabilities and
obligations and that no other fund of the trust, if any, shall be responsible or
liable for the same.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the 19th day of November, 1986.
METLIFE - STATE STREET
FIXED INCOME TRUST
ATTEST:
/s/ Constantine Hutchins, Jr. By: /s/ Charles L. Smith, Jr.
METLIFE - STATE STREET
INVESTMENT SERVICES, INC.
ATTEST:
/s/ Constantine Hutchins, Jr. By: /s/ David P. McLean
President
-2-
<PAGE>
November 19, 1986
MetLife - State Street Fixed Income Trust
One Financial Center
Boston, Massachusetts 02111
Gentlemen:
In connection with your sale to us today of one (1) share of beneficial
interest in the MetLife - State Street Government Securities Income Fund of the
MetLife - State Street Fixed Income Trust (the "Shares"), we understand that:
(i) the Share has not been registered under the Securities Act of 1933, as
amended (the "1933 Act"); (ii) your sale of the Share to us is made in reliance
on such sale being exempt under Section 4(2) of the 1933 Act as not involving
any public offering; and (iii) in part, your reliance on such exemption is
predicated on our representation, which we hereby confirm, that we are acquiring
the Share for investment for our own account as the sole beneficial owner
thereof, and not with a view to or in connection with any resale or distribution
of any or all of the Shares or of any interest therein. We hereby agree that we
will not sell, assign or transfer the Share or any interest therein, except upon
repurchase or redemption by MetLife-State Street Fixed Income Trust or as
contemplated by the immediately preceding sentence, unless and until the Share
has been registered under the 1933 Act or you have received an opinion of your
counsel indicating to your satisfaction that said sale, assignment or transfer
will not violate the provisions of the 1933 Act or any rules or regulations
promulgated thereunder.
This letter is intended to take effect as an instrument under seal,
shall be construed under the laws of the Commonwealth of Massachusetts, and is
delivered at Boston, Massachusetts, as of the date above written.
METLIFE - STATE STREET
INVESTMENT SERVICES, INC.
By: /s/ David P. McLean
President
PURCHASE AGREEMENT
MetLife - State Street Fixed Income Trust (the "Trust"), an unincorporated
association of the type commonly referred to as a business trust organized under
the laws of the Commonwealth of Massachusetts and MetLife - State Street
Investment Services, Inc., a Massachusetts corporation ("MLSSIS"), hereby agree
with each other as follows:
1. The Trust hereby offers MLSSIS and MLSSIS hereby purchases: 8,000
shares of beneficial interest (par value $.00l) in the Trust's Government Income
Fund, at a price of $12.5O per Share. The Trust hereby acknowledges receipt from
MLSSIS of payment in full for the Shares.
2. MLSSIS represents and warrants to the Trust that the Shares are
being acquired for investment purposes and not with a view to the distribution
thereof.
3. The names "MetLife - State Street Fixed Income Trust" and "Trustees
of MetLife - State Street Fixed Income Trust" refer, respectively, to the Trust
and the Trustees of the Trust, as trustees but not individually or personally,
acting from time to time under the Trust's Agreement and Declaration of Trust
dated November 19, 1986, as amended, which is hereby referred to and a copy of
which is on file at the office of the Secretary of the Commonwealth of
Massachusetts and the principal office of the Trust. The obligations of
"MetLife-
<PAGE>
State Street Fixed Income Trust" entered into in the name or on behalf thereof
by any of the Trustees, representatives or agents of the Trust are made not
individually, but in such capacities, and are not binding upon any of the
Trustees, holders of shares of beneficial interest or representatives of the
Trustees personally, but bind only the trust estate, and all persons dealing
with the Trust must look solely to the trust property for the enforcement of
any claims against the Trust. The Agreement and Declaration of Trust of the
Trust further provides, and it is expressly agreed, that the Fund of the Trust
shall be solely and exclusively responsible for the payment of its debts,
liabilities and obligations and that no other Fund subsequently established
under the Trust shall be responsible or liable for the same.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the 3rd day of February, 1987.
METLIFE - STATE STREET
FIXED INCOME TRUST
ATTEST:
/s/ Constantine Hutchins, Jr. By: /s/ Charles L. Smith, Jr.
Constantine Hutchins, Jr. Charles L. Smith, Jr.
Secretary President
METLIFE - STATE STREET
INVESTMENT SERVICES, INC.
ATTEST:
/s/ Constantine Hutchins, Jr. By: /s/ David P. McLean
Constantine Hutchins, Jr.
Clerk
<PAGE>
February 3, 1986
MetLife - State Street Fixed Income Trust
One Financial Center
Boston, Massachusetts 02111
Gentlemen:
In connection with your sale to us today of 8,000 shares of beneficial
interest in the MetLife - State Street Government Income Fund of MetLife - State
Street Fixed Income Trust (the "Shares"), we understand that: (i) the Shares
have not been registered under the Securities Act of 1933, as amended (the "1933
Act"); (ii) your sale of the Shares to us is made in reliance on such sale being
exempt under Section 4(2) of the 1933 Act as not involving any public offering;
and (iii) in part, your reliance on such exemption is predicated on our
representation, which we hereby confirm, that we are acquiring the Shares for
investment for our own account as the sole beneficial owner thereof, and not
with a view to or in connection with any resale or distribution of any or all of
the Shares or of any interest therein. We hereby agree that we will not sell,
assign or transfer the Shares or any interest therein, except upon repurchase or
redemption by MetLife-State Street Fixed Income Trust, unless and until the
Shares have been registered under the 1933 Act or you have received an opinion
of your counsel indicating to your satisfaction that said sale, assignment or
transfer will not violate the provisions of the 1933 Act or any rules or
regulations promulgated thereunder.
This letter is intended to take effect as an instrument under seal,
shall be construed under the laws of the Commonwealth of Massachusetts, and is
delivered at Boston, Massachusetts, as of the date above written.
METLIFE - STATE STREET
INVESTMENT SERVICES, INC.
By: /s/ David P. McLean
SUBSCRIPTION
September 2, 1993
To: The Trustees of the MetLife -
State Street Financial Trust
One Financial Center
Boston, Massachusetts 02111-2690
Dear Sirs:
The undersigned hereby subscribes to one Class C share of beneficial
interest of MetLife - State Street Research Balanced Fund series, having a par
value of $.001, at a price of $9.55 per share and agrees to pay therefor upon
demand in cash the amount of $9.55.
Very truly yours,
STATE STREET RESEARCH &
MANAGEMENT COMPANY
By: /s/ Ralph F. Verni
<PAGE>
September 2, 1993
MetLife - State Street Financial Trust
One Financial Center
Boston, Massachusetts 02110-2690
Gentlemen:
In connection with your sale to us today of one Class C share(s) of
beneficial interest of MetLife - State Street Research Balanced Fund (the
"Shares"), we understand that: (i) the Shares have not been registered under the
Securities Act of 1933, as amended (the "1933 Act"); (ii) your sale of the
Shares to us is made in reliance on such sale being exempt under Section 4(2) of
the 1933 Act as not involving any public offering; and (iii) in part, your
reliance on such exemption is predicated on our representation, which we hereby
confirm, that we are acquiring the Shares for investment for our own account as
the sole beneficial owner thereof, and not with a view to or in connection with
any resale or distribution of the Shares or of any interest therein. We hereby
agree that we will not sell, assign or transfer the Shares or any interest
therein, except upon repurchase or redemption by MetLife - State Street Research
Balanced Fund, unless and until the Shares have been registered under the 1933
Act or you have received an opinion of your counsel indicating to your
satisfaction that said sale, assignment or transfer will not violate the
provisions of the 1933 Act or any rules or regulations promulgated thereunder.
STATE STREET RESEARCH &
MANAGEMENT COMPANY
By: /s/ Ralph F. Verni
[Letterhead & Logo STATE STREET RESEARCH
& MANAGEMENT COMPANY]
SUBSCRIPTION
May 12, 1994
To: The Trustees of the MetLife - State
Street Financial Trust
One Financial Center
Boston, Massachusetts 02111-2690
The undersigned hereby subscribes to one Class A share of beneficial
interest of State Street Research Strategic Portfolios: Aggressive, having a par
value of $.001, at a price of $9.55 per share and agrees to pay therefor upon
demand in cash the amount of $9.55.
Very truly yours,
STATE STREET RESEARCH &
MANAGEMENT COMPANY
By: /s/ Ralph F. Verni
<PAGE>
[Letterhead & Logo STATE STREET RESEARCH
& MANAGEMENT COMPANY]
May 12, 1994
MetLife - State Street Financial Trust
One Financial Center
Boston, Massachusetts 02111-2690
In connection with your sale to us of one Class A share of beneficial
interest of State Street Research Strategic Portfolios: Aggressive (the
"Share"), we understand that: (i) the Share has not been registered under the
Securities Act of 1933, as amended (the "1933 Act"); (ii) your sale of the Share
to us is made in reliance on such sale being exempt under Section 4(2) of the
1933 Act as not involving any public offering; and (iii) in part, your reliance
on such exemption is predicated on our representation, which we hereby confirm,
that we are acquiring the Share for investment for our own account as the sole
beneficial owner thereof, and not with a view to or in connection with any
resale or distribution of the Share or of any interest therein. We hereby agree
that we will not sell, assign or transfer the Share or any interest therein,
except upon repurchase or redemption by the Fund, unless and until the Share has
been registered under the 1933 Act or you have received an opinion of your
counsel indicating to your satisfaction that said sale, assignment or transfer
will not violate the provisions of the 1933 Act or any rules or regulations
promulgated thereunder.
STATE STREET RESEARCH &
MANAGEMENT COMPANY
By: /s/ Ralph F. Verni
<PAGE>
SUBSCRIPTION
May 12, 1994
To: The Trustees of the MetLife - State
Street Financial Trust
One Financial Center
Boston, Massachusetts 02111-2690
The undersigned hereby subscribes to 10,471.204 Class C shares of
beneficial interest of State Street Research Strategic Portfolios: Aggressive,
having a par value of $.001, at a price of $9.55 per share and agrees to
exchange therefor upon demand shares of State Street Research Capital Fund equal
in value to $100,000.
Very truly yours,
METROPOLITAN LIFE INSURANCE
COMPANY
By: /s/ Joseph Panetta
<PAGE>
May 12, 1994
MetLife - State Street Financial Trust
One Financial Center
Boston, Massachusetts 02111-2690
In connection with your exchange with us of 10,471.204 Class C shares
of beneficial interest of State Street Research Strategic Portfolios: Aggressive
(the "Shares"), for shares of State Street Research Capital Fund equal in value
to $100,000 we understand that: (i) the Shares have not been registered under
the Securities Act of 1933, as amended (the "1933 Act"); (ii) your exchange of
the Shares with us is made in reliance on such exchange being exempt under
Section 4(2) of the 1933 Act as not involving any public offering; and (iii) in
part, your reliance on such exemption is predicated on our representation, which
we hereby confirm, that we are acquiring the Shares for investment for our own
account as the sole beneficial owner thereof, and not with a view to or in
connection with any resale or distribution of the Shares or of any interest
therein. We hereby agree that we will not sell, assign or transfer the Shares or
any interest therein, except upon repurchase or redemption by the Fund, unless
and until the Shares have been registered under the 1933 Act or you have
received an opinion of your counsel indicating to your satisfaction that said
sale, assignment or transfer will not violate the provisions of the 1933 Act or
any rules or regulations promulgated thereunder.
METROPOLITAN LIFE INSURANCE
COMPANY
By: /s/ Joseph Panetta
<PAGE>
[Letterhead & Logo STATE STREET RESEARCH
& MANAGEMENT COMPANY]
SUBSCRIPTION
May 12, 1994
To: The Trustees of the MetLife - State
Street Financial Trust
One Financial Center
Boston, Massachusetts 02111-2690
The undersigned hereby subscribes to one Class A share of beneficial
interest of State Street Research Strategic Portfolios: Conservative, having a
par value of $.001, at a price of $9.55 per share and agrees to pay therefor
upon demand in cash the amount of S9.55.
Very truly yours,
STATE STREET RESEARCH &
MANAGEMENT COMPANY
By: /s/ Ralph F. Verni
<PAGE>
[Letterhead & Logo STATE STREET RESEARCH
& MANAGEMENT COMPANY]
May 12, 1994
MetLife - State Street Financial Trust
One Financial Center
Boston, Massachusetts 02111-2690
In connection with your sale to us of one Class A share of beneficial
interest of State Street Research Strategic Portfolios: Conservative (the
"Share"), we understand that: (i) the Share has not been registered under the
Securities Act of 1933, as amended (the "1933 Act"); (ii) your sale of the Share
to us is made in reliance on such sale being exempt under Section 4(2) of the
1933 Act as not involving any public offering; and (iii) in part, your reliance
on such exemption is predicated on our representation, which we hereby confirm,
that we are acquiring the Share for investment for our own account as the sole
beneficial owner thereof, and not with a view to or in connection with any
resale or distribution of the Share or of any interest therein. We hereby agree
that we will not sell, assign or transfer the Share or any interest therein,
except upon repurchase or redemption by the Fund, unless and until the Share has
been registered under the 1933 Act or you have received an opinion of your
counsel indicating to your satisfaction that said sale, assignment or transfer
will not violate the provisions of the 1933 Act or any rules or regulations
promulgated thereunder.
STATE STREET RESEARCH &
MANAGEMENT COMPANY
By: /s/ Ralph F. Verni
<PAGE>
SUBSCRIPTION
May 12, 1994
To: The Trustees of the MetLife - State
Street Financial Trust
One Financial Center
Boston, Massachusetts 02111-2690
The undersigned hereby subscribes to 10,471.204 Class C shares of
beneficial interest of State Street Research Strategic Portfolios: Conservative,
having a par value of $.001, at a price of $9.55 per share and agrees to
exchange therefor upon demand shares of State Street Research Capital Fund equal
in value to $100,000.
Very truly yours,
METROPOLITAN LIFE INSURANCE
COMPANY
By: /s/ Joseph Panetta
<PAGE>
May 12, 1994
MetLife - State Street Financial Trust
One Financial Center
Boston, Massachusetts 02111-2690
In connection with your exchange with us of 10,471.204 Class C shares
of beneficial interest of State Street Research Strategic Portfolios:
Conservative (the "Shares"), for shares of State Street Research Capital Fund
equal in value to $100,000 we understand that: (i) the Shares have not been
registered under the Securities Act of 1933, as amended (the "1933 Act"); (ii)
your exchange of the Shares with us is made in reliance on such exchange being
exempt under Section 4(2) of the 1933 Act as not involving any public offering;
and (iii) in part, your reliance on such exemption is predicated on our
representation, which we hereby confirm, that we are acquiring the Shares for
investment for our own account as the sole beneficial owner thereof, and not
with a view to or in connection with any resale or distribution of the Shares or
of any interest therein. We hereby agree that we will not sell, assign or
transfer the Shares or any interest therein, except upon repurchase or
redemption by the Fund, unless and until the Shares have been registered under
the 1933 Act or you have received an opinion of your counsel indicating to your
satisfaction that said sale, assignment or transfer will not violate the
provisions of the 1933 Act or any rules or regulations promulgated thereunder.
METROPOLITAN LIFE INSURANCE
COMPANY
By: /s/ Joseph Panetta
EXHIBIT (14)(c)
[logo] STATE STREET RESEARCH IRA
SIMPLE IRA Application
Upon completion, send this application to the address listed on the back.
(1) What type of SIMPLE IRA are you opening?
[ ] Check if this IRA will receive contributions under your employer's SIMPLE
IRA plan, and complete the following employer information:
- -------------------------------------------------(---)-------------------------
Name of employer Telephone
- -------------------------------------------------------------------------------
Address
- -------------------------------------------------------------------------------
[ ] Check if this IRA will receive a transfer or a rollover from another
SIMPLE IRA to which contributions were made by your current or former
employer under a SIMPLE IRA plan, and complete the following:
- Amount to be transferred: $___________________________
- Date of first contribution to your other SIMPLE IRA under
the employer's SIMPLE IRA plan:__________________________________.
Your employer must complete the following to verify the date.
Verification: On behalf of the employer maintaining the SIMPLE IRA plan, I
verify that the date stated above (the date of the first contribution to the
Depositor's prior SIMPLE IRA under the employer's SIMPLE IRA plan) is correct.
I acknowledge that verifying an incorrect date may result in additional
income taxes or penalties.
- -------------------------------------------------------------------------------
Name of Employer: _____________________________________________________________
By: ___________________________________________________________________________
Authorized Officer
Note: For a transfer directly from the current SIMPLE IRA custodian or
trustee, complete the Transfer of Assets/Rollover Form. For a rollover (which
is a distribution from the current SIMPLE IRA custodian or trustee to you,
followed by a contribution on that amount by you to this SIMPLE IRA),
complete the Transfer of Assets/Rollover Form and attach the check for the
amount rolled over, payable to "State Street Bank and Trust Company,
Trustee." Consult your tax advisor on IRS requirements for a valid rollover.
(2) What is your name and address?
(Please print.)
/ /
- -------------------------------------------------------------------------------
Your name Date of birth
- -------------------------------------------------------------------------------
Street address
- -------------------------------------------------------------------------------
City State ZIP
- -------------------------------------------------------------------------------
Daytime telephone number Evening telephone number
- -------------------------------------------------------------------------------
Social security number/taxpayer identification number
(3) What fund(s) have you selected?
- -------------------------------------------------------------------------------
Fund name
[ ] A [ ] B [ ] D
- -------------------------------------------------------------------------------
Percentage Share class**
- -------------------------------------------------------------------------------
Fund name
[ ] A [ ] B [ ] D
- -------------------------------------------------------------------------------
Percentage Share class**
- -------------------------------------------------------------------------------
Fund name
[ ] A [ ] B [ ] D
- -------------------------------------------------------------------------------
Percentage Share class**
[ ] $ _______________________
Total proceeds enclosed
**Investments in Money Market Fund will purchase class E shares.
If a check is enclosed, make it payable to "State Street Bank and Trust Company,
Trustee." Please add $10 for the first year's fiduciary fee; otherwise, the fee
will be deducted from your account at year end.
<PAGE>
(4) Who is your beneficiary?
Primary beneficiary
(Only one required per account. If you have more than
two, include them on a separate sheet. If two or more
are named, they will receive equal amounts unless you
specify otherwise; also if one of the named primary
beneficiaries predeceases you, that person's share will
be distributed pro-rata to the other primary beneficiaries
who survive you, unless you specify otherwise.)
- -------------------------------------------------------------------------------
Name
- -------------------------------------------------------------------------------
Address
- -------------------------------------------------------------------------------
City State ZIP
/ /
- -------------------------------------------------------------------------------
Social security number/taxpayer identification number Date of birth
- -------------------------------------------------------------------------------
Name
- -------------------------------------------------------------------------------
Address
- -------------------------------------------------------------------------------
City State ZIP
/ /
- -------------------------------------------------------------------------------
Social security number/taxpayer identification number Date of birth
Second beneficiary
(If the person(s) named as primary beneficiary fails to
survive you.)
- -------------------------------------------------------------------------------
Name
- -------------------------------------------------------------------------------
Address
- -------------------------------------------------------------------------------
City State ZIP
/ /
- -------------------------------------------------------------------------------
Social security number/taxpayer identification number Date of birth
(5) We need your signature.
I hereby establish a State Street Research SIMPLE IRA, appoint
State Street Bank and Trust Company as Trustee, direct that contributions to
my SIMPLE IRA be invested as specified by this application, and designate the
individual(s) named above, or in any signed attachment, as my
beneficiary(ies). I have received a current prospectus for the Fund(s)
indicated above and the Terms and Conditions of the State Street Research
SIMPLE IRA (which are incorporated herein by reference) and have read its
Disclosure Statement.
Under penalties of perjury, I certify that: (1) the number shown on this form
is my correct taxpayer identification number (or I am waiting for a number to
be issued to me), and (2) I am not subject to backup withholding because (a)
I am exempt from backup withholding, or (b) I have not been notified by the
Internal Revenue Service that I am subject to backup withholding as a result
of a failure to report all interest or dividends, or (c) the IRS has notified
me that I am no longer subject to backup withholding. (You must cross out
item (2) above if you have been notified by the IRS that you are currently
subject to backup withholding because of under-reporting interest or
dividends on your tax return.)
I confirm that all the information, instructions and agreements set forth
hereon shall apply to the account, and if applicable, shall also apply to any
other fund account with shares acquired upon exchange of share of the Fund.
[graphic of pencil] -----------------------------------------------------------
Signature Date
Signature Guarantee
(fill out if your Dealer does not complete section)
- -------------------------------------------------------------------------------
Name of bank or eligible guarantor
- -------------------------------------------------------------------------------
Authorized signature of bank or eligible guarantor
- -------------------------------------------------------------------------------
Street address
- -------------------------------------------------------------------------------
City State ZIP
<PAGE>
(6) Dealer information
- -------------------------------------------------------------------------------
Dealer name
- -------------------------------------------------------------------------------
Street address of home office
- -------------------------------------------------------------------------------
City State ZIP
- -------------------------------------------------------------------------------
Authorized signature of dealer
- -------------------------------------------------------------------------------
Agency/branch office number
- -------------------------------------------------------------------------------
Street address of agency/branch office servicing account
- -------------------------------------------------------------------------------
City State ZIP
- -------------------------------------------------------------------------------
Registered representative's name and number
If this application is for an account introduced through the above-named
Dealer, the Dealer further agrees to all applicable provisions in this
application and in the Prospectus. The Dealer warrants that this application
is completed in accordance with the shareholder's instructions and agrees to
indemnify the Transfer Agent, the Fund, any other eligible Funds, State
Street Research Shareholder Services, the Investment Manager or the
Distributor for any loss or liability from acting or relying upon such
instructions and information. The terms and conditions of the currently
effective Selected Dealer Agreement or sales agreement are included by
reference in this section. The dealer represents that it may lawfully sell
shares of the designated Fund(s) in the state designated as the Applicant's
address of record, and that it has a currently effective selected dealer
agreement with a Distributor authorizing the Dealer to sell shares of the
Fund and the Eligible Funds.
Telephone Exchange Privilege
Telephone Exchange By Shareholder OR DEALER
State Street Research Shareholder Services may effect exchanges for my account
according to telephone instructions FROM ME OR MY DEALER as set forth in the
Prospectus, and may register the shares of the fund to be acquired exactly the
same as my existing account. Authorizing an exchange constitutes an
acknowledgement that I have received the current prospectus of the Fund to be
acquired.
I will not hold the Transfer Agent, the Fund, any other Eligible Funds, State
Street Research Shareholder Services, the Investment Manager or the Distributor
liable for any loss, injury, damage or expense as a result of acting upon any
telephone instructions or responsible for the authenticity of any telephone
instructions. I understand that all telephone calls are tape recorded. My
liability shall be subject to the use of reasonable procedures to confirm that
instructions communicated by telephone are genuine.
The account will automatically have this privilege unless you expressly decline
it by providing your initials below.
I do not want the Telephone Exchange Privilege.
[graphic of pencil] (initial here.)__________________
State Street Bank and Trust Company, Trustee:
You are hereby authorized and appointed on behalf of the above-signed dealer to
execute the purchase transactions in accordance with the terms and conditions of
this Application, and to confirm each purchase.
Acceptance by the Trustee:
This plan shall be deemed to have been accepted by the Trustee, State Street
Bank and Trust Company, after all necessary forms, properly completed, are
received by State Street Research Shareholder Services, and delivered by
Shareholder Services to the agent for the Trustee.
Once completed, send application and check (if you are making a contribution at
this time) made payable to "State Street Bank and Trust Company, Trustee" to:
State Street Research Shareholder Services
P.O. Box 8408
Boston, MA 02266-8408
<PAGE>
Control Number: 3720-970130(0298)SSR-LD IR-567E-0197
<PAGE>
[logo] STATE STREET RESEARCH IRA
SIMPLE IRA Terms & Conditions
These Terms and Conditions are in the form promulgated by the Internal Revenue
Service in Form 5305-S for use in establishing a simple individual retirement
trust account.
ARTICLE I.
The Trustee will accept cash contributions made on behalf of the Participant by
the Participant's employer under the terms of a SIMPLE plan described in section
408(p). In addition, the Trustee will accept transfers or rollovers from other
SIMPLE IRAs of the Participant. No other contributions will be accepted by the
Trustee.
ARTICLE II.
The Participant's interest in the balance in the custodial account is
nonforfeitable.
ARTICLE III.
1. No part of the custodial funds may be invested in life insurance contracts,
nor may the assets of the custodial account be commingled with other property
except in a common trust fund or common investment fund (within the meaning of
section 408(a)(5)).
2. No part of the custodial funds may be invested in collectibles (within the
meaning of section 408(m)) except as otherwise permitted by section 408(m)(3)
which provides an exception for certain gold and silver coins and coins issued
under the laws of any state.
ARTICLE IV.
1. Notwithstanding any provision of this agreement to the contrary, the
distribution of the Participant's interest in the custodial account shall be
made in accordance with the following requirements and shall otherwise comply
with section 408(a)(6) and Proposed Regulations section 1.408-8, including the
incidental death benefit provisions of Proposed Regulations section
1.401(a)(9)-2, the provisions of which are herein incorporated by reference.
2. Unless otherwise elected by the time distributions are required to begin to
the Participant under paragraph 3, or to the surviving spouse under paragraph 4,
other than in the case of life annuity, life expectancies shall be recalculated
annually. Such election shall be irrevocable as to the Participant and the
surviving spouse and shall apply to all subsequent years. The life expectancy of
a nonspouse beneficiary may not be recalculated.
3. The Participant's entire interest in the custodial account must be, or begin
to be, distributed by the Participant's required beginning date (April 1
following the calendar year end in which the Participant reaches age 70-1/2).
By that date, the Participant may elect, in a manner acceptable to the Trustee,
to have the balance in the custodial account distributed in:
(a) A single sum payment
(b) An annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the life of the Participant.
(c) An annuity contract that provides equal or substantially equal monthly,
quarterly, or annual payments over the joint and last survivor lives of the
Participant and his or her designated beneficiary.
(d) Equal or substantially equal annual payments over a specified period
that may not be longer than the Participant's life expectancy.
(e) Equal or substantially equal annual payments over a specified period
that may not be longer than the joint life and last survivor expectancy of
the Participant and his or her designated beneficiary.
4. If the Participant dies before his or her entire interest is distributed to
him or her, the entire remaining interest will be distributed as follows:
(a) If the Participant dies on or after distribution of his or her interest
has begun, distribution must continue to be made in accordance with
paragraph 3.
(b) If the Participant dies before distribution of his or her interest has
begun, the entire remaining interest will, at the election of the
Participant or, if the Participant has not so elected, at the election of
the beneficiary or beneficiaries, either
(i) Be distributed by the December 31 of the year containing the fifth
anniversary of the Participant's death, or
(ii) Be distributed in equal or substantially equal payments over the
life or life expectancy of the designated beneficiary or beneficiaries
starting by December 31 of the year following the year of the
Participant's death. If, however, the beneficiary is the Participant's
surviving spouse, then this distribution is not required to begin
before December 31 of the year in which the Participant would have
turned age 70-1/2.
(c) Except where distribution in the form of an annuity meeting the
requirements of section 408(b)(3) and its related regulations has
irrevocably commenced, distributions are treated as having begun on the
Participant's required beginning date, even though payments may actually
have been made before that date.
(d) If the Participant dies before his or her entire interest has been
distributed and if the beneficiary is other than the surviving spouse, no
additional cash contributions or rollover contributions may be accepted in
the account.
5. In the case of distribution over life expectancy in equal or substantially
equal annual payments, to determine the minimum annual payment for each year,
divide the Participant's entire interest in the custodial account as of the
close of business on December 31 of the preceding year by the life expectancy of
the Participant (or the joint life and last survivor expectancy of the
Participant and the Participant's designed beneficiary, or the life expectancy
of the designated beneficiary, whichever applies). In the case of distributions
under paragraph 3, determine the initial life expectancy (or joint life and last
survivor expectancy) using the attained ages of the Participant and designated
beneficiary as of their birthdays in the year the Participant reaches age
70-1/2. In the case of a distribution in accordance with paragraph 4(b)(ii),
determine life expectancy using the attained age of the designated beneficiary
as of the beneficiary's birthday in the year distributions are required to
commence.
6. The owner of two or more individual retirement accounts may use the
"alternative method" described in Notice 88-38, 1988-1 C. B. 524, to satisfy the
minimum distribution requirements described above. This method permits an
individual to satisfy these requirements by taking from one individual
retirement account the amount required to satisfy the requirement for another.
ARTICLE V.
1. The Participant agrees to provide the Trustee with information necessary for
the Trustee to prepare any reports required under section 408(i) and Regulations
sections 1.408-5 and 1.408-6.
2. The Trustee agrees to submit reports to the Internal Revenue Service and the
Participant as prescribed by the Internal Revenue Service.
3. The Trustee also agrees to provide the Participant's employer the summary
description described in section 408(1)(2) unless this SIMPLE IRA is a transfer
SIMPLE IRA.
-1-
<PAGE>
ARTICLE VI.
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through III and this sentence will be controlling. Any
additional articles that are not consistent with section 408(a) and 408(p) and
related regulations will be invalid.
ARTICLE VII.
This agreement will be amended from time to time to comply with the provisions
of the Code and related regulations. Other amendments may be made with the
consent of the persons whose signatures appear below. article VIII.
1. The amount of each contribution credited to the Participant's individual
retirement trust account shall (except to the extent applied to pay fees or
other charges under section 7 below) be applied to purchase full and fractional
shares of beneficial interest of one or more classes in one or more mutual funds
(hereinafter collectively the "Funds" or individually a "Fund"), as designated
from time to time by State Street Research Investment Services, Inc. ("SSRIS")
as available for investment under this agreement (provided always that such
shares may legally be offered for sale in the state of the Participant's
residence), in accordance with instructions of the Participant given under
Section 3 below. The Trustee (or any party appointed to act as agent for the
Trustee under section 16 of this Article VIII-the "Agent"; whenever an Agent is
acting for the Trustee, references to the Trustee will be deemed to include the
Agent) may retain the Participant's initial deposit for a period of up to ten
days after receipt thereof without liability for any loss of interest, earnings
or appreciation, and may invest such initial deposit at the end of such period
if the Participant has not revoked his account. If and to the extent permitted
by IRS regulations or rulings pertaining to SIMPLE IRA accounts under Code
Section 408(p), the Participant may revoke the account by following such
procedures as may be specified in applicable regulations or rulings (if any),
with such time limits as are provided in such regulations or rulings. Upon
revocation, the amount of the Participant's initial deposit will be returned to
him as provided in such regulations or rulings.
2. All dividends and capital gain distributions received on the shares of a
particular class of any Fund held in the Participant's account shall be retained
in the account and (unless received in additional shares of such class) shall be
reinvested in full and fractional shares of such class of such Fund.
3. For each contribution, the Participant shall designate the portion that will
be invested in each Fund. A contribution may be invested entirely in one Fund,
or may be invested in two or more Funds. However, investment designations will
be subject to any minimum initial or additional investment rules applicable to a
Fund. In addition, the Participant shall designate which class of shares of each
such Fund the Participant's contribution shall be invested in.
The Participant shall make such designation on the State Street Research
Simple Individual Retirement Account Application or other written notice
acceptable to the Trustee.
4. Subject to the minimum initial or additional investment, minimum balance
and other exchange rules applicable to a Fund, the Participant may at any time
direct the Trustee to exchange all or a specified portion of the shares of a
Fund in the Participant's account for shares and fractional shares of one or
more other Funds.
The Participant shall give such directions by written, telephonic,
electronic or other notice acceptable to the Trustee and the Trustee will
process such directions as soon as practicable after receipt thereof.
If any investment designation or direction relating to investments under
these Terms and Conditions is, in the opinion of the Trustee (or SSRIS or the
Agent), ambiguous or incomplete, the Trustee may refrain from carrying out such
designation or other investment direction until the designation or other
investment direction has been clarified or completed to the Trustee's
satisfaction, and neither the Trustee, SSRIS, the Agent nor any Fund (nor any of
their affiliates) will have any liability for loss of interest, earnings or
investment gains or appreciation during such period.
5. The Participant by written notice to the Trustee, may designate one or more
beneficiaries to receive the balance (if any) remaining in the Participant's
account after his death and the time and manner of payment of such balance
(subject to the applicable requirements of the preceding Articles of these Terms
and Conditions). A designation may be on a form provided by the Trustee or on a
written instrument acceptable to the Trustee executed by the Participant and
filed with the Trustee. The Participant may revoke or change such designation in
like manner, at any time and from time to time. No designation will be effective
until received by the Trustee. Any designation filed with the Trustee (whether
or not such designation fully disposes of the Participant's account) will revoke
all other designations previously filed with the Trustee. If no such designation
is in effect upon the Participant's death, or if such designation is in effect
but does not fully dispose of the Participant's account, the balance in the
account shall be paid in a single sum, as soon as is practicable, to the
Participant's estate.
Subject to the applicable requirements of the preceding Articles of these
Terms and Conditions, the Participant may designate a form of payment to the
beneficiary by filing an instrument so specifying with the Trustee. In the
absence of such written instructions from the Participant, the Trustee will pay
the beneficiary in such form as the beneficiary selects.
Except as provided in the first sentence of the preceding paragraph,
following the Participant's death, each beneficiary (or the representative of
the Participant's estate) will exercise the powers and responsibilities of the
Participant hereunder with respect to the portion of the Participant's account
passing to such beneficiary (or estate).
6. The Trustee shall forward to the Participant any notices, prospectuses,
reports to shareholders, financial statements, proxies and proxy soliciting
materials, relating to the Fund shares in the Participant's account. The Trustee
shall vote any such shares held in the account in accordance with the timely
written instructions of the Participant if received. If no timely written
instructions are received from the Participant, the Trustee may vote such shares
in such manner as it deems appropriate (including "present" or in accordance
with the recommendations of SSRIS).
7. The Trustee's fee for performing its duties hereunder shall be such
reasonable amounts as shall be agreed to from time to time by the Trustee and
SSRIS. Such fee, any taxes of any kind and any liabilities with respect to the
account, and any and all expenses reasonably incurred by the Trustee shall, if
not paid by the Participant, be paid from the Participant's account.
8. The Trustee shall make distributions from the account at such times and in
such manner as the Participant directs in writing, subject (except where
otherwise specifically provided in this Article VIII) to the applicable
requirements of the preceding Articles of these Terms and Conditions.
The recalculation of life expectancy of the Participant and/or the
Participant's spouse in connection with distributions from the account before
the Participant's death will be made only at the written election of the
Participant. The recalculation of life expectancy of the surviving spouse in
connection with distributions from the account after the Participant's death
will be made only at the written election of the surviving spouse. By
establishing the account, the Participant (for himself and his surviving spouse,
if any) determines not to recalculate life expectancies unless the Participant
(or surviving spouse) specifically elects the recalculation of life expectancies
approach in accordance with the following sentence. Any such election may be
made in such form as the Participant (or surviving spouse) provides for
(including instructions to such effect to the Trustee or the calculation of
minimum distribution amounts in accordance with a method that provides for
recalculation of life expectancy and instructions to the Trustee to make
distributions in accordance with such method).
9. It shall be the sole responsibility of the Participant (or the Participant's
employer) to determine the time and amount of salary
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reduction or other contributions to the account and the time, amount and manner
of payment of distributions from the account (and to instruct the Trustee or the
Agent accordingly), and the federal and state tax treatment of any contributions
to or distributions from the account. SSRIS, the Agent, the Trustee and the
Funds shall be fully protected in following the direction of the Participant
with respect to the time, amount and manner of payment of such distributions, or
in not acting in the absence of such direction. If the Participant (or
beneficiary) does not direct the Trustee to make distributions from the account
by the time that such distributions are required to commence in accordance with
the preceding Articles of these Terms and Conditions, the Trustee (and SSRIS and
the Agent) will assume that the Participant (or beneficiary) is meeting the
minimum distribution requirements from another individual retirement arrangement
maintained by the Participant (or beneficiary) and will be fully protected in so
doing. SSRIS, the Agent, the Trustee and the Funds shall not be liable for any
taxes, penalties, liabilities or other costs to the Participant or any other
person resulting from contributions to or distributions from the Participant's
account.
10. SSRIS, the Agent, the Trustee and the Funds shall not be responsible for any
loss or diminution in the value of the Participant's account arising out of the
Participant's establishment of a State Street Research SIMPLE Individual
Retirement Account or arising out of any investment instructions of the
Participant, whether relating to the portion of contributions invested in one or
more of the Funds, the selection of a particular class of shares of a particular
Fund, or the exchange of shares of one Fund for shares of one or more other
Funds. SSRIS, the Agent, the Trustee and the Funds shall not render any
investment advice to the Participant (or beneficiary) and will have no duty of
inquiry concerning the Participant's (or beneficiary's) investment directions
(subject to the right of the Trustee, SSRIS or the Agent to obtain clarification
or completion of any investment directions under section 4 above). The
Participant (or beneficiary) will have exclusive investment control over the
account.
11. Whenever the Participant (or beneficiary) is responsible for any direction,
notice, representation or instruction under these Terms and Conditions, SSRIS,
the Agent, the Trustee and the Funds shall be entitled to assume the propriety
and truth of any statement made by the Participant (or beneficiary), and shall
be under no duty of further inquiry with respect thereto, and shall have no
liability with respect to any action taken in reliance upon such statement.
However, the Trustee (or Agent or SSRIS) shall be entitled to receive such
information or documentation (including signature guarantees, waivers or
indemnifications) as it may reasonably request before carrying out any
direction, notice or instruction from the Participant (or beneficiary).
Participant agrees to provide information to the Trustee at such times as
may be necessary to enable the Trustee to administer the account hereunder.
Except to the extent provided by applicable law, the account will not be
subject to assignment, transfer, pledge or hypothecation, nor shall it be
liable for the debts of the Participant (or beneficiary) or subject to
seizure, attachment, execution or other legal process. However, the Trustee
(or Agent or SSRIS) may carry out the requirements of any apparently valid
order of a governmental authority (including a court) relating to the
Participant's account and will have no liability for so doing.
12. These Term and Conditions shall terminate upon the complete distribution of
the account to the Participant or his beneficiaries or to a successor individual
retirement account. The Trustee shall have the right to terminate this account
upon 60 days notice to the Participant, or to his beneficiaries if he is then
dead. In such event, upon expiration of such 60 day period, the Trustee shall
transfer the amount in the account into such successor individual retirement
accounts as the Participant (or his beneficiaries) shall designate, or, in the
absence of such designation, to the Participant, or if he is then dead, to the
beneficiaries or the Participant's estate as their interests shall appear.
13. The Trustee may resign at any time upon 60 days' notice in writing to SSRIS
and may be removed by SSRIS at any time upon 60 days' notice in writing to the
Trustee. Upon such resignation or removal, SSRIS shall appoint a successor
trustee which satisfies the requirements of Section 408 of the Internal Revenue
code.
14. Upon receipt by the Trustee of written notice of appointment of a successor
trustee or custodian and of written acceptance of such appointment by the
successor, the Trustee shall transfer to such successor the assets of the
account and copies of all records pertaining thereto. The Trustee may reserve
such sum of money as it deems advisable for payment of its fees, taxes, costs,
expenses or liabilities with respect to the account, with the balance (if any)
of such reserve remaining after the payment of such items to be paid over to the
successor. The successor shall hold the assets paid over to it under terms that
satisfy the requirements of Section 408 of the Internal Revenue Code.
15. If, within 60 days after the Trustee's resignation or removal, SSRIS has not
appointed a successor trustee which has accepted such appointment, the Trustee
shall appoint such a successor unless it elects to terminate the Agreement under
section 12 of this Article VIII.
16. The Trustee may employ or designate one or more parties to serve as agents
or contractors to perform any or all of its duties hereunder.
17. Any notice sent to the Participant or to his beneficiaries or estate, if he
is then dead, shall be effective if sent by first class mail to him or them at
his or their last addresses of record as provided to the Trustee.
18. Any distributions from the account may be mailed, first-class postage
prepaid to the last known address of the person who is to receive such
distribution, as shown on the Trustee's records, and such distribution shall, to
the extent of the amount thereof, completely discharge the Trustee's liability
of such payment.
19. Any purchase or redemption of shares of any class of a Fund for or from the
Participant's account will be affected at the public offering price or net asset
value of such Fund (as described in the then effective prospectus for such Fund)
next established after the Fund's transfer agent receives the contribution or
other directions.
Any purchase, exchange, transfer or redemption of shares of any class of
a Fund for or from the Participant's account will be subject to any sales
charge, distribution fee or redemption charge, or other fee or charge
applicable to shares of such class, as described in the then effective
prospectus for such Fund. In addition, shares of any class of a Fund will be
subject to any service fee, charge or other annual maintenance or servicing
fees or charges applicable to shares of such class as described in the then
effective prospectus for such Fund (unless the imposition of such fee or
charge is prohibited under applicable regulations or rulings).
20. SSRIS may amend these Terms and Conditions from time to time, and shall give
written notice of any material amendment to the Participant within a reasonable
time after the amendment is adopted or becomes effective, whichever is later.
The Participant hereby expressly delegates authority to SSRIS to amend these
Terms and Conditions and consents to any such amendments.
21. The Terms and Conditions shall be construed, administered and enforced
according to the laws of Massachusetts. The Participant agrees that any legal
proceedings relating to the Participant's account must be brought in a court
(including a federal district court) located in Massachusetts.
22. The term "Trustee" refers to the person serving as the Trustee of the SIMPLE
Individual Retirement Account established hereby, and the term "Participant"
refers to the person for whose benefit such Account was established.
23. Articles I through VII of these Terms and Conditions are in the form
promulgated by the Internal Revenue Service. It is anticipated that if and when
the Internal Revenue Service promulgates changes to Form 5305-S, SSRIS will
adopt such changes as an amendment to these Terms and Conditions. Pending the
adoption of any amendment necessary or desirable to conform these Terms and
Conditions to the requirements of any amendments to the Internal
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<PAGE>
Revenue Code or regulations or rulings thereunder, the Trustee (and SSRIS and
the Agent) may operate the Participant's account in accordance with such
requirements to the extent deemed necessary to preserve the tax benefits of the
account.
24. The Participant acknowledges that he or she has received and read the
current prospectus for each Fund in which his or her account is invested and the
State Street Research SIMPLE Individual Retirement Account Disclosure Statement.
(References are to the Internal Revenue Code.)
(a) SSRIS, the Agent, the Trustee and the Funds will have no responsibility
for compliance with the requirements of Code Section 408(p) and any other
applicable requirements (including, if applicable, whether any transferee
individual retirement account or annuity which the participant designates
to receive a transfer from his account hereunder meets the requirements to
be a SIMPLE IRA or whether any penalty taxes may be payable in connection
therewith), which matters shall be the sole responsibility of the
Depositor.
(b) This Agreement is intended to establish a valid SIMPLE Individual
Retirement Account operating in conjunction with a SIMPLE IRA plan operated
by the Participant's employer, and to meet all applicable requirements of
Code Section 408(p) (and other applicable legal requirements for SIMPLE
IRAs). This Agreement will be interpreted and the custodial account
hereunder administered in a manner that carries out such intent. In
addition, if future regulations or rulings provide guidance concerning the
requirements for a valid SIMPLE IRA, this Agreement will be interpreted and
the custodial account hereunder will be administered in a manner that
complies with such regulations or rulings pending the adoption of any
required amendment to this Agreement.
Control Number: 3735-970215(0398)SSR-LD IR-593E-0297
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[logo] STATE STREET RESEARCH IRA
SIMPLE IRA Disclosure Statement
The following information is provided to you in accordance with the requirements
of the Internal Revenue Code (the "Code") and Treasury regulations and should be
reviewed in conjunction with the State Street Research SIMPLE IRA Terms and
Conditions (the "Terms and Conditions"), SIMPLE IRA Application (the
"Application") and the current prospectus for each fund in which your account is
invested. The provisions of the Terms and Conditions, Application and prospectus
govern in any instance where the Disclosure Statement is incomplete or appears
to conflict. This Disclosure Statement reflects the provisions of the Internal
Revenue Code in effect on January 1, 1997. This Disclosure Statement provides a
nontechnical summary of the law. Please consult with your tax advisor for more
complete information and refer to IRS Publication 590.
The information in this Disclosure Statement relates to SIMPLE Individual
Retirement Accounts. SIMPLE IRAs operate as part of an employer SIMPLE IRA plan
maintained by your employer. Other IRAs, which are not part of an employer
SIMPLE IRA plan, are available and may be established using a different
Application. This Disclosure Statement does not describe such regular IRAs. For
more information on regular IRAs, contact State Street Research at the address
below to request forms and descriptive information.
Right to Revoke
To the extent provided by IRS rules for SIMPLE IRAs, you have the right to
revoke your IRA after signing the Application if you act within the time limits
provided under the IRS rules. You may revoke your IRA by mail or by delivery of
written notice to:
State Street Research
P.O. Box 8408
Boston, MA02266
Your notice will be considered mailed on the date of postmark, or the date
of certification or registration if it is sent by certified or registered mail.
If you revoke your IRA, you are entitled to a return of the amount
contributed. If you have any questions concerning your right of revocation,
please call 800-562-0032 during regular business hours.
Statutory Requirements of an IRA
An IRA is a trust or custodial account established for the exclusive benefit of
you and your beneficiaries. Current law requires that your SIMPLE IRA agreement
be in writing and meet the following requirements:
1. Contributions to your SIMPLE IRA must be in cash, and, for any taxable year,
cannot exceed the limits described below, unless the contribution is a rollover
or transfer to the account.
2. The custodian or trustee must be a bank, savings and loan association, credit
union or other institution or person approved by the Internal Revenue Service to
administer your IRA in accordance with current tax laws.
3. None of your IRA assets may be commingled with the assets of other people
except in a common trust fund or common investment fund.
4. No portion of your IRA may be invested in life insurance contracts or in
collectibles (within the meaning of Internal Revenue Code Section 408[m]). A
collectible is defined as a work of art, rug or antique, metal or gem, stamp or
coin, alcoholic beverage, or any other tangible personal property specified by
the Internal Revenue Service. Specially minted U.S. gold and silver bullions and
certain state issued coins are permissible IRA investments.
5. You are required to take minimum distributions from your IRA at certain times
in accordance with Proposed Regulations Section 1.408-8.
A. During Your Life
You are required to begin making withdrawals from your SIMPLE IRA for the
year in which you reach age 70-1/2 and each year thereafter. Generally, you must
withdraw an amount at least equal to the minimum distribution by December 31 of
each year. However, you may delay your first required withdrawal until the April
1 following the year in which you reached age 70-1/2. (This means that if you
wait to make your withdrawal for the 70-1/2 year until April 1 of the following
year, your total withdrawal in that year must equal the minimum distributions
for two years - one representing the minimum distribution for your 70-1/2 year
and a second withdrawal by December 31 representing the minimum distribution for
that year.)
The minimum distribution for any taxable year is equal to the amount
obtained by dividing the account balance at the end of the prior year (less any
required distributions taken between January 1 and April 1 of the year following
the year you attain age 70-1/2) by the joint life expectancy of you and your
designated beneficiary. If you have not designated a beneficiary for your IRA by
your required beginning date, your single life expectancy will be used. Your
single or joint life expectancy is determined by using the IRS unisex life
expectancy tables. You can find these tables in
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Treasury Regulations Section 1.72-9. See Article IV in your Terms and Conditions
for a more detailed explanation of how to calculate the minimum distribution.
If you name someone other than your spouse as your beneficiary, and your
beneficiary is more than ten years younger than you, your required minimum
distribution must satisfy the minimum incidental benefit rule (MDIB) described
in IRS regulations. The MDIB rule generally requires that your required minimum
distributions be calculated as if your beneficiary were exactly ten years
younger than you.
The minimum distribution required must be calculated separately for each
IRA you own, but the amounts so determined may be totalled and taken from any
one of your IRAs (SIMPLE IRAs and regular IRAs).
B. After Your Death
If you die on or after your required beginning date, distributions must be made
to your beneficiary or beneficiaries as least as rapidly as under the method
being used to determine minimum distributions as of the date of your death. If
your beneficiary is your spouse, your beneficiary can elect to treat your
SIMPLE IRA as his or her own IRA.
If you die before your required beginning date, the entire amount remaining
in your account must, in general, be distributed by December 31 of the year
containing the fifth anniversary of your death. If your beneficiary is a natural
person, he or she may instead choose to receive the remaining balance in your
account over his or her lifetime or over a period not exceeding his or her life
expectancy. Such payments must begin no later than the end of the year following
the year of your death. If your designated beneficiary is your spouse,
distribution need not commence until December 31 of the year you would have
attained 70-1/2, if later than the December 31st of the year following the year
of your death. See Article IV in the Terms and Conditions for a more detailed
explanation of how to calculate the minimum distributions.
Employer Information Requirements
The rules for SIMPLE IRA plans require your employer to give you a "Summary
Description" of the features of the employer's SIMPLE IRA plan. This requirement
to provide a Summary Description may be satisfied by your employer's giving you
a copy of IRS Form 5304-SIMPLE or Form 5305-SIMPLE, as filled out by the
employer to establish its SIMPLE IRA plan. As completed by the employer, this
form will include information such as eligibility requirements applicable to the
employer's SIMPLE IRA plan. Alternatively, your employer may satisfy the Summary
Description requirement by giving the same information in a different format.
In addition, your employer must give you a notice stating how much the
employer will contribute for a year to the SIMPLE IRA plan accounts of
participating employees.
Eligibility
A. Employer Eligibility
Only small employers (those with 100 or fewer employees in the previous
calendar year who received $5,000 or more in compensation from the
employer) may maintain SIMPLE IRA plans. There are other rules as well.
Your employer will determine if it is eligible to have a SIMPLE IRA plan.
B. Employee Eligibility
All employees must participate in the employer's SIMPLE IRA plan unless
specifically excluded. The employer may decide to exclude any of the
following:
-employees who did not receive $5,000 or more in compensation from the
employer in at least two prior calendar years (not necessarily
consecutive);
-employees who are not reasonably expected to receive $5,000 or more in
compensation from the employer for the current calendar year;
-employees in a collective bargaining unit, provided that there was good
faith bargaining over the issue of retirement benefits;
-employees who are non-resident aliens and receive no U.S. source income
from the employer.
The summary description of the employer's SIMPLE IRA plan should indicate
whether any of these groups of employees will be excluded from the
employer's SIMPLE IRA plan.
Contributions
Only two kinds of contributions are permitted: (i) employee contributions
elected by the employee in a salary reduction agreement with the employer and
(ii) employer contributions, which may be either matching or nonmatching
contributions.
Employee Contribution Limits
An eligible employee may elect to have a percentage of compensation contributed
by the employer to the employee's SIMPLE IRA. The maximum contribution amount is
$6,000 for a calendar year. The $6,000 limit is indexed for future
cost-of-living increases.
You elect the desired percentage of compensation to contribute by entering
into a salary reduction agreement with your employer. Your employer will have a
form for you to use. Salary reductions may be made only from compensation you
earn after signing the salary reduction agreement.
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Your employer must transfer your salary reduction contributions to your SIMPLE
IRA as soon as the employer can reasonably do so. However, this may not be later
than the 30th day of the month following the month when you would have received
the compensation except for the salary reduction.
Employer Contribution Requirements
For each calendar year that it maintains a SIMPLE IRA plan, your employer must
make contributions on behalf of participants. The employer may elect either
matching or nonmatching contributions for a particular calendar year.
If the employer elects matching contributions, you must elect salary
reduction contributions from your own compensation in order to receive a
matching contribution to your account by your employer. Your employer will match
your contributions, dollar for dollar, up to a cap of from 1% to 3% of your
compensation for the calendar year. Your employer decides the cap (subject to
certain IRS requirements--these requirements restrict how frequently an employer
may choose a matching contributions cap of less than 3%).
If your employer decides to make nonmatching contributions, it must
contribute 2% of your compensation for the calendar year (provided that you
receive $5,000 or more in compensation from the employer for the calendar year).
For this purpose only, compensation is subject to an IRS limit. The limit for
1997 is $160,000 (this amount is indexed for future cost-of-living changes).
Each calendar year, your employer must give you a notice specifying whether
it will make nonmatching or matching contributions (and specifying the matching
cap) for that calendar year. Employer nonmatching or matching contributions must
be transferred to the SIMPLE IRA accounts of eligible employees no later than
the due date (including any extension) for the employer to file its federal
income tax return for the year.
Rollovers and Transfers
Amounts in your SIMPLE IRA may be rolled over or transferred to another IRA of
yours, or your SIMPLE IRA may receive rollover or transfer contributions from
another SIMPLE IRA, provided all the applicable rollover rules are followed. A
"transfer" is a payment from one IRA trustee or custodian directly to another
IRA trustee or custodian, without passing through the hands of the participant.
A "rollover" is a distribution to the participant from one IRA trustee or
custodian, followed by the participant's depositing the amount received (all or
part of it) with another trustee or custodian within the time allowed by law.
The rollover rules are generally summarized below. If you have any questions
regarding these rules, please contact your tax advisor.
1. Rollovers from or to other IRA
You may make a transfer or rollover contribution to your State Street
Research SIMPLE IRA of amounts held in another SIMPLE IRA. Transfers or
rollovers to this SIMPLE IRA may come only from another SIMPLE IRA, not from a
regular IRA. There are no limits on the amount of the transfer or rollover
contributions made from one SIMPLE IRA to another SIMPLE IRA. A proper IRA to
IRA rollover is completed if all or part of the distribution is rolled over
within 60 days after the distribution is received. No more than one distribution
per year from an IRA may be rolled over into another IRA. The
one-rollover-per-year rule does not apply to transfers from one IRA trustee or
custodian directly to another; these may be made more often than once per year.
You may also transfer amounts held in this State Street Research SIMPLE IRA
account to another IRA with a different trustee or custodian, or you may make a
withdrawal from this IRA and within 60 days make a rollover of the amount
withdrawn to another IRA. However, during the first two years after your
participation in your employer's SIMPLE IRA plan begins, you may transfer or
roll over only to another SIMPLE IRA (not a regular IRA).
2. Transfers to Change Investments
The rules governing transfers to change investments depend on whether your
employer has established its SIMPLE IRA plan with a "designated financial
institution" or not. Normally, SIMPLE IRA plans established by employers through
State Street Research will not have a designated financial institution. However,
if your employer has established its SIMPLE IRA plan with another sponsor, the
designated financial institution rules may apply. The summary description (or
other information) about your employer's SIMPLE IRA plan should indicate whether
the plan uses a designated financial institution or not.
Under the designated financial institution rules, all employee and employer
contributions are initially paid to that institution. However, you may elect to
have contributions to your SIMPLE IRA account with the designated financial
institution transferred to another SIMPLE IRA you have established, for example
with State Street Research, where the contributions will be invested in
accordance with your directions. If you make this election during the 60-day
period when you elect your salary reduction contributions to the plan for a
calendar year, then contributions for that calendar year are required to be
transferred without a transfer fee or other cost or penalty. While held by the
designated financial institution pending transfer to your other SIMPLE IRA,
contributions, the contributions for you may be invested in a specified
investment, such as a money market fund or a deposit account, and you will have
no choice of investments. Other transfer may be made to another SIMPLE IRA or
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regular IRA, but they will be subject to normal custodian or trustee fees and
any redemption or other charges imposed by the investment fund in which
contributions are invested. More information on this subject should appear in
the summary description of your employer's SIMPLE IRA plan.
Your employer may decide to operate its SIMPLE IRA plan without a
designated financial institution. Normally, SIMPLE IRA plans established through
State Street Research will not have a designated financial institution. Each
eligible employee is required to establish a SIMPLE IRA with a financial
institution of his or her choice. Contributions on your behalf will be sent to
your SIMPLE IRA account, wherever you have set it up, and invested according to
your instructions.
Taxation of Withdrawals
Withdrawals by you (or your beneficiary) from your SIMPLE IRA will be includable
as income in the taxable year in which received.
Federal Tax Penalties
A. Early Withdrawal Penalty
If you make a withdrawal from your SIMPLE IRA prior to attaining age 59 1\2, an
additional penalty tax will be imposed on the amount of the distribution, unless
an exception to the penalty is available. The penalty tax will be 25% of the
amount withdrawn for withdrawals you make during the first two years after the
date of the first contribution to your SIMPLE IRA account. For withdrawals after
the first two years, the penalty is 10% of the amount withdrawn. Certain
exceptions to the imposition of this penalty are available. The penalty will not
be imposed if the distribution was made on account of death, disability, or was
a qualifying rollover or a direct transfer. The additional penalty tax may not
apply if the distribution is made in a series of substantially equal periodic
payments, at least annually, based on your life expectancy or the joint life
expectancy of you and your beneficiary. Finally, an exception to the penalty tax
is available if the withdrawal does not exceed either (i) the amount of your
deductible medical expenses for the year of the withdrawal (consult your tax
advisor on the deductibility or medical expenses; generally, medical expenses
paid during a year are deductible to the extent they exceed 7 1\2% of your
adjusted gross income for the year), or (ii) the amount you paid for health
insurance covering yourself, your spouse or dependents (this health insurance
exception applies only if you are unemployed and receive federal or state
unemployment benefit payments for at least 12 weeks, and is available for
withdrawals during the year in which you receive such unemployment compensation
benefits or in the following year, but not to withdrawals made after you have
been reemployed for 60 days).
B. Excess Accumulation Penalty
If you do not receive your required minimum distribution for the year you attain
age 70-1\2 and by the end of each subsequent year, you will be subject to a 50%
excise tax on the amount of the required minimum distribution which should have
been taken but was not. If the distribution you actually receive falls short of
the required minimum distribution, the 50% excise tax will be imposed on the
amount by which the distribution falls short. The IRS has authority to waive or
reduce the 50% penalty tax upon proof that the failure to receive the required
minimum distribution was due to reasonable cause and that reasonable steps are
being taken to remedy the failure.
C. Excess Distribution Penalty
There is a 15% excise tax assessed against annual distributions from tax-favored
retirement plans, including IRAs (regular and SIMPLE IRAs), which exceed
$160,000 (for 1997; this amount is indexed for future cost-of-living increases).
To determine whether you have distributions in excess of the limit, you must
aggregate the amounts of all distributions received by you during the calendar
year, including IRAs. If you had account balances or accrued benefits equal to
at least $562,500 as of August 1, 1986, you may have a portion of the excess
distributions exempted from the 15% additional tax if you made a timely
grandfather election on your tax return. If the penalty tax on both excess
distributions and premature distributions apply to the same distribution, the
penalty tax on excess distributions is reduced by the penalty tax on the
premature distributions. Under a recent amendment to the tax law, the 15% excise
tax for annual distributions above $160,000 will not apply to withdrawals during
calendar years 1997, 1998 and 1999. A related 15% excise tax on your estate for
certain excess accumulations remaining in all of your tax-favored retirement
plans at your death continues to apply during these three years. Please consult
your tax advisor for more complete information on penalty taxes, including
advice on whether you should consider making withdrawals from your SIMPLE IRA
during the three-year period when the 15% excess distribution penalty does not
apply.
D. Excess Retirement Accumulation Penalty
Your estate will have to pay additional federal estate tax if you die with an
excess retirement accumulation. The increased estate tax will be equal to 15% of
the excess retirement accumulation. An excess retirement accumulation exists if,
at the time of your death, the value of all your interests in tax-favored
retirement plans, including IRAs, exceeds the present value of an annuity with
annual payments of $160,000 (for 1997; this amount is indexed for future
cost-of-living increases) payable over your life expectancy immediately before
your death.
4
<PAGE>
Other Tax Considerations
A. Federal Tax Withholding
Federal income tax will be withheld on amounts withdrawn by you from your IRA
unless you elect not to have withholding. Generally, tax will be withheld at a
10% rate. The mandatory 20% federal income tax withholding rule that applies to
most distributions from qualified profit sharing or pension plans that are not
directly rolled over to another plan or IRA do not apply to withdrawals from
your simple IRA account. Depending on your state of residence, state income tax
withholding may also apply.
B. Special Tax Treatment
Capital gains treatment and the favorable 5- or 10-year forward averaging tax
treatment, available for certain lump sum distributions from qualified profit
sharing or pension plans, do not apply to IRA distributions.
C. Prohibited Transactions
If you or your beneficiary engage in a prohibited transaction with your IRA, as
described in IRC Section 4975, your IRA will lose its tax-exempt status and you
must include the value of your account in your gross income for that taxable
year. If you pledge any portion of your IRA as collateral for a loan, the amount
so pledged will be treated as a distribution to you and will be included in your
gross income for that year. If you are under age 59-1/2 at the time such a
transaction occurs, you may be subject to the 25% or 10% penalty tax on
premature distributions.
D. Reporting for Tax Purposes
Additional reporting is required in the event that special taxes or penalties
described herein are due. You must file Form 5329 with the IRS for each taxable
year in which a premature distribution takes place, less than the required
minimum distribution amount is distributed from your IRA, or excess
distributions are made.
IRS Approval and Information
The agreement used to establish this IRA (IRS Form 5305-S) has been approved by
the Internal Revenue Service. The Internal Revenue Service approval is a
determination only to its form. It is not an endorsement of the plan in
operation or of the investments offered. This Disclosure Statement provides only
a summary of the laws governing SIMPLE IRAs. Please note that SIMPLE IRA plans
are governed by new provisions of the tax laws and the IRS has not yet issued
regulations or other definitive rulings on SIMPLE IRA plan requirements. While
the information in this Disclosure Statement is accurate as of the date of its
publication, you should consult with your tax advisor or the IRS for latest
developments. You should consult your personal tax advisor or IRS Publication
590, Individual Retirement Arrangements, for more detailed information. This
publication is available from your local IRS office or by calling
1-800-TAX-FORMS.
5
<PAGE>
[logo] STATE STREET RESEARCH
(c) 1997 State Street Research Investment Services, Inc. Boston, MA 02111
Control Number: 3759-970220(0398)SSR-LD IR-600E-0297
METLIFE - STATE STREET FIXED INCOME TRUST
FIRST AMENDED AND RESTATED PLAN OF
DISTRIBUTION PURSUANT TO RULE 12b-1
WHEREAS, the MetLife - State Street Fixed Income Trust, an
unincorporated association of the type commonly known as a business trust
organized under the laws of the Commonwealth of Massachusetts (the "Trust"),
engages in business as an open-end management investment company and is
registered as such under the Investment Company Act of 1940, as amended (the
"Act");
WHEREAS, the Trust is authorized (i) to issue shares of beneficial
interest (the "Shares") in separate series, with the Shares of each such series
representing the interests in a separate portfolio of securities and other
assets, and (ii) to divide the Shares within each such series into two or more
classes;
WHEREAS, the Trust has established one portfolio series, the State
Street Research Government Income Fund (the State Street Research Government
Income Fund being referred to herein as the "Initial Series" - such series,
together with any previously established series made subject to this Plan and
all other series subsequently established by the Trust and made subject to this
Plan, being referred to herein individually as a "Series" and collectively as
the "Series");
WHEREAS, the Trust may be deemed a distributor of the Shares within the
meaning of Rule 12b-1 under the Act, and desires to adopt a Plan of Distribution
and has adopted a related Distribution Agreement with State Street Research
Investment Services, Inc., the Trust's principal underwriter (the "Distributor")
pursuant to such Rule (respectively, the "Plan" and the "Agreement"); and
WHEREAS, the Board of Trustees as a whole, and the Trustees who are not
interested persons of the Trust (as defined in the Act) and who have no direct
or indirect financial interest in the operation of this Plan or the Agreement
and any agreements relating to it (the "Qualified Trustees"), having determined,
in the exercise of their reasonable business judgment and in light of their
fiduciary duties under state law and under Section 36(a) and (b) of the Act,
that there is a reasonable likelihood that this Plan and the Agreement will
benefit the Initial Series and its shareholders, have accordingly approved this
Plan and the Agreement by votes cast in person at a
<PAGE>
meeting called for the purpose of voting on this Plan and the Agreement and any
agreements related thereto.
NOW, THEREFORE, the Trust hereby adopts this Plan in accordance with
Rule 12b-1 under the Act, on the following terms and conditions:
SECTION 1. DISTRIBUTION ACTIVITIES
Subject to the supervision of the Board of Trustees, the Trust may
engage, directly or indirectly, in financing any activities primarily intended
to result in the sale of Shares, including, but not limited to, the following:
(1) 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 and others (including affiliates of the Distributor) engaged in the
distribution and marketing of Shares or furnishing assistance to investors on an
ongoing basis, (2) reimbursement of direct out-of-pocket expenditures incurred
by the Distributor in connection with the distribution and marketing of Shares,
including expenses relating to the formulation and implementation of marketing
strategies and promotional activities such as direct mail promotions and
television, radio, newspaper, magazine and other mass media advertising, the
preparation, printing and distribution of sales literature, the preparation,
printing and distribution of Prospectuses of the Trust and reports for
recipients other than existing shareholders of the Trust, and obtaining such
information, analyses and reports with respect to marketing and promotional
activities and investor accounts as the Trust may, from time to time, deem
advisable, and (3) reimbursement of expenses incurred by the Distributor in
connection with the servicing of shareholder accounts, including payments to
securities dealers and others in consideration of the provision of personal
service to investors and/or the maintenance of shareholder accounts and expenses
associated with the provision of personal service by the Distributor directly to
investors. In addition, the Plan shall be deemed to authorize the Distributor
and State Street Research & Management Company (the "Adviser") to make payments
out of general profits, revenues and other sources to underwriters, securities
dealers and others in connection with sales as described in the Prospectus of
the Trust as from time to time amended and in effect (for purposes hereof,
references to the Prospectus of the Trust shall be deemed to include all
Prospectuses of the Trust), to the extent, if any, that such payments may be
deemed to be within the scope of Rule 12b-1 under the Act.
2
<PAGE>
The Trust and the Series are authorized to engage in the activities
listed above, and in other activities primarily intended to result in the sale
of Shares, either directly or through other persons with which the Trust has
entered into agreements pursuant to the Plan.
SECTION 2. MAXIMUM EXPENDITURES
The expenditures to be made by the Initial Series pursuant to this Plan
and the basis upon which payment of such expenditures will be made shall be
determined by the Initial Series, but in no event may such expenditures exceed
the following: (i) with respect to Class A Shares of each Initial Series, an
annual rate of .25% of the average daily value of net assets represented by such
Class A shares, (ii) with respect to Class B Shares and Class D Shares of each
Initial Series, an annual rate of .75% of the average daily value of the net
assets represented by such Class B or Class D shares (as the case may be) to
finance sales or promotion expenses and an annual rate of .25% of the average
daily value of the net assets represented by such Class B or Class D shares (as
the case may be) to make payments for personal service and/or the maintenance of
shareholder accounts, and (iii) with respect to any Series subsequently
established by the Trust and made subject to this Agreement, the annual rate as
agreed upon and specified in an addendum hereto; plus such amounts as the
Distributor and Adviser may expend from general revenues, profits and other
sources from time to time in accordance with the last sentence of Section 1 and
the second paragraph of Section 3. The expenditures to be made pursuant to this
Plan shall commence with respect to each class of Shares of a Series as of the
date on which this Plan becomes effective with respect to each such class.
SECTION 3. PAYMENTS
Pursuant to this Plan, the Trust shall make periodic payments to the
Distributor at the annual rate provided for in Section 2 with respect to each
Series, or class of Shares thereof. The Distributor shall in turn remit to and
allocate among selected dealers (including those that are affiliates of the
Distributor) who have entered into selected dealer agreements with the
Distributor, in consideration of and as reimbursement for expenses incurred in
the provision of distribution and marketing services and furnishing assistance
to investors on an ongoing basis, such amounts as are required pursuant to such
selected dealer agreements and as indicated in the Prospectus of the Trust. Any
amounts received by the
3
<PAGE>
Distributor and not so allocated may be applied by the Distributor as
reimbursement for expenses incurred in connection with the distribution and
marketing of Shares of each class and the servicing of investor accounts as
contemplated by Section 1(2) hereof. The distribution and servicing expenses of
a particular class will be borne solely by that class and no Series will use
fees charged to one class within a Series to support the marketing or servicing
relating to any other class of Shares within that Series or any other Series.
Any amounts received by the Distributor hereunder and not applied as provided
herein shall be returned to the applicable class or Series of the Trust.
The Distributor and the Adviser may also make payments to authorized
securities dealers as specified in the Prospectus of the Trust as from time to
time amended and in effect, from its general profits, revenues and other
sources. Amounts received by the Distributor from any Fund in respect of any
class of Shares shall not be used to pay any commission expenses related to the
sale of any other class of Shares of such Series.
Notwithstanding anything to the contrary herein, the aggregate of all
payments to the Distributor to finance sales or promotion expenses with respect
to the Class B or the Class D shares pursuant to this Section 3 together with
any contingent deferred sales charges received by the Distributor in connection
with the redemption of shares of the respective class shall not exceed the
amount expended by the Distributor to finance sales or promotion expenses of
such class.
SECTION 4. TERM AND TERMINATION
(a) Initial Series. This Plan shall become effective with respect
to each class of the Initial Series as of the later of (i) the date on which a
Registration Statement with respect to such class of Shares becomes effective
under the Securities Act of 1933, as amended, or (ii) the date on which such
class of the Initial Series commences offering its Shares to the public and
shall continue in effect with respect to each Initial Series (subject to Section
4(c) hereof) until one year from the date of such effectiveness, unless the
continuation of this Plan shall have been approved with respect to the Initial
Series in accordance with the provisions of Section 4(c) hereof.
(b) Additional Series. This Plan shall become effective with
respect to each additional Series or class thereof other than the Initial Series
established by the Trust after the date hereof and made subject to this Plan
upon
4
<PAGE>
commencement of the initial public offering thereof (provided that the Plan has
previously been approved for continuation by votes of a majority of both (i) the
Board of Trustees of the Trust and (ii) the Qualified Trustees, cast in person
at a meeting held before the initial public offering of such additional Series
or classes thereof and called for the purpose of voting on such approval), and
shall continue in effect with respect to each such additional Series or Class
(subject to Section 4(c) hereof) for one year thereafter, unless the
continuation of this Plan shall have been approved with respect to such
additional Series or Class in accordance with the provisions of Section 4(c)
hereof. The Distributor and the Trust on behalf of each such additional Series
or Class shall each sign an addendum hereto agreeing to be bound hereby and
setting forth such specific and different terms as the parties may agree upon,
including, without implied limitation, the amount and purpose of payments to be
made hereunder.
(c) Continuation. This Plan and the Agreement shall continue in
effect with respect to each Series or Class thereof subsequent to the initial
term specified in Section 4(a) and (b) for so long as such continuance is
specifically approved at least annually by votes of a majority of both (i) the
Board of Trustees of the Trust and (ii) the Qualified Trustees, cast in person
at a meeting called for the purpose of voting on this Plan, subject to any
shareholder approval requirements existing under applicable law.
(d) Termination. (i) This Plan may be terminated at any time with
respect to the Trust or any Series or Class thereof, as the case may be, by vote
of a majority of the Qualified Trustees, or by vote of a majority of the
outstanding voting securities of the Trust or that Series or Class, as the case
may be. The Plan may remain in effect with respect to a Series or Class thereof
even if it has been terminated in accordance with this Section 4(e) with respect
to such Series or one or more other Series of the Trust.
(ii) The Agreement may be terminated at any time, without
penalty, with respect to the Trust or any Series, as the case may be, by vote of
a majority of the Qualified Trustees or by vote of a majority of the outstanding
voting securities of the Trust or that Series, as the case may be, on sixty
days' written notice to the Distributor. In addition, the Agreement provides for
automatic termination in the event of its assignment.
5
<PAGE>
SECTION 5. AMENDMENTS
This Plan may not be amended to increase materially the amount of
distribution expenditures provided for in Section 2 hereof unless such amendment
is approved by a vote of a majority of the outstanding voting securities of each
Series or class thereof with respect to which a material increase in the amount
of distribution expenditures is proposed, and no material amendment to the Plan
shall be made unless approved in the manner provided for annual renewal in
Section 4(c) hereof. Otherwise, this Plan may be amended with respect to the
Trust or a Series or class thereof by vote of a majority of the Qualified
Trustees or the outstanding voting securities of the Trust or that Series, as
the case may be.
SECTION 6. INDEPENDENT TRUSTEES
While this Plan is in effect with respect to any Series, the selection
and nomination of Trustees who are not interested persons (as defined in the
Act) of the Trust shall be committed to the discretion of the Trustees who are
not interested persons.
SECTION 7. QUARTERLY REPORTS
The Treasurer of the Trust and the Treasurer of the Distributor shall
provide to the Trustees of the Trust and the Trustees shall review, at least
quarterly, a written report of the amounts expended for distribution pursuant to
this Plan and the purposes for which such expenditures were made.
SECTION 8. RECORDKEEPING
The Trust shall preserve copies of this Plan, the Agreement and any
related agreements and all reports made pursuant to Section 7 hereof, for a
period of not less than six years from the date of this Plan and the Agreement,
the agreements or such reports, as the case may be, the first two years in an
easily accessible place.
SECTION 9. LIMITATION OF LIABILITY
The term "MetLife - State Street Fixed Income Trust" means and refers
to the Trustees from time to time serving under the First Amended and Restated
Master Trust Agreement dated June 1, 1993 (the "Master Trust Agreement") as the
same may subsequently thereto have been, or subsequently hereto be, amended. It
is expressly agreed that the obligations of the
6
<PAGE>
Trust hereunder shall not be binding upon any of the Trustees, shareholders,
nominees, officers, agents or employees of the Trust, personally, but bind only
the trust property of the Trust, as provided in the Master Trust Agreement of
the Trust. The execution and delivery of this Plan and the Plan have been
authorized by the Trustees and shareholder of the Trust and signed by an
authorized officer of the Trust, acting as such, and neither such authorization
by such Trustees and shareholder nor such execution and delivery by such officer
shall be deemed to have been made by any of them individually or to impose any
liability on any of them personally, but shall bind only the trust property of
the Trust as provided in its Master Trust Agreement. The Master Trust Agreement
of the Trust further provides, and it is expressly agreed, that each Series of
the Trust shall be solely and exclusively responsible for the payment of its
debts, liabilities and obligations and that no other Series shall be responsible
or liable for the same.
IN WITNESS WHEREOF, the Trust and the Distributor have executed this
First Amended and Restated Plan of Distribution on the day and year set forth
below in Boston, Massachusetts.
ATTEST: METLIFE - STATE STREET
FIXED INCOME TRUST
/s/ Darman A. Wing By: /s/ Gerard P. Maus
STATE STREET RESEARCH
ATTEST: INVESTMENT SERVICES, INC.
/s/ Constantine Hutchins, Jr. By: /s/ Donald E. Webber
Date: June 1, 1993
METLIFE - STATE STREET FINANCIAL TRUST
One Financial Center
Boston, MA 02111
September 6, 1993
State Street Research
Investment Services, Inc.
One Financial Center
Boston, MA 02111
Gentlemen:
This letter is to confirm to you that MetLife - State Street Financial
Trust (the "Trust") has created a new series of shares to be known as MetLife -
State Street Research Balanced Fund (the "Fund"), and that the First Amended and
Restated Plan of Distribution Pursuant to Rule 12b-1 adopted by the Trust and
dated June 1, 1993 (the "Plan"), shall apply with respect to the Fund as a
"Series" thereunder and under the terms set forth in the then current prospectus
and statement of additional information of the Fund, as from time to time
amended. The maximum expenditures under the Plan for the Fund shall be the same
as stated in Section 2 of the Plan for the Initial Series.
Please indicate your acceptance of the above in accordance with the
terms of the Plan by signing this letter as indicated below.
The term "MetLife - State Street Financial Trust" means and refers to
the Trustees from time to time serving under the First Amended and Restated
Master Trust Agreement ("Master Trust Agreement") of the Trust dated June 1,
1993 as the same may subsequently thereto have been, or subsequently hereto may
be, amended. It is expressly agreed that the obligations of the Trust hereunder
shall not be binding upon any of the Trustees, shareholders, nominees, officers,
agents or employees of the Trust as individuals or personally, but shall bind
only the trust property of the Trust, as provided in the Master Trust Agreement
of the Trust. This Agreement has been authorized by the Trustees of the Trust
and signed by a duly authorized officer of the Trust, acting as such, and
neither such authorization nor such execution shall be deemed to have been made
individually or to impose any personal liability, but shall bind only the trust
property of the Trust as provided in its Master Trust Agreement. The Master
Trust Agreement of the Trust provides, and it is
<PAGE>
expressly agreed, that each Fund of the Trust shall be solely and exclusively
responsible for the payment of its debts, liabilities and obligations, and that
no other fund shall be responsible for the same.
METLIFE - STATE STREET
FINANCIAL TRUST
By: /s/ Gerard P. Maus
ACCEPTED AND AGREED TO:
STATE STREET RESEARCH
INVESTMENT SERVICES, INC.
By: /s/ Donald E. Webber
METLIFE - STATE STREET FINANCIAL TRUST
One Financial Center
Boston, MA 02111
May 16, 1994
State Street Research
Investment Services, Inc.
One Financial Center
Boston, MA 02111
Gentlemen:
This letter is to confirm to you that MetLife - State Street Financial
Trust (the "Trust") has created two (2) new series of shares to be known as
State Street Research Strategic Portfolios: Conservative and State Street
Research Strategic Portfolios: Aggressive (the "Funds"), and that the First
Amended and Restated Plan of Distribution Pursuant to Rule 12b-1 adopted by the
Trust and dated June 1, 1993 (the "Plan"), shall apply with respect to each of
the Funds as a "Series" thereunder and under the terms set forth in the then
current prospectus and statement of additional information of the Funds, as from
time to time amended. The maximum expenditures under the Plan for the Funds
shall be the same as stated in Section 2 of the Plan for the Initial Series.
Please indicate your acceptance of the above in accordance with the
terms of the Plan by signing this letter as indicated below.
The term "MetLife - State Street Financial Trust" means and refers to
the Trustees from time to time serving under the First Amended and Restated
Master Trust Agreement ("Master Trust Agreement") of the Trust dated June 1,
1993 as the same may subsequently thereto have been, or subsequently hereto may
be, amended. It is expressly agreed that the obligations of the Trust hereunder
shall not be binding upon any of the Trustees, shareholders, nominees, officers,
agents or employees of the Trust as individuals or personally, but shall bind
only the trust property of the Trust, as provided in the Master Trust Agreement
of the Trust. This Agreement has been authorized by the Trustees of the Trust
and signed by a duly authorized officer of the Trust, acting as such, and
neither such authorization nor such execution shall be deemed to have been made
individually or to impose any personal liability, but shall bind only the trust
property of the Trust as provided in its Master Trust Agreement. The Master
Trust Agreement of the Trust provides, and it is expressly agreed, that each
Fund of the Trust shall be solely and exclusively responsible for the payment of
its debts, liabilities and obligations, and that no other fund shall be
responsible for the same.
METLIFE - STATE STREET FINANCIAL TRUST
By: /s/ Ralph F. Verni
ACCEPTED AND AGREED TO:
STATE STREET RESEARCH
INVESTMENT SERVICES, INC.
By: /s/ Gerard P. Maus
Calculation of Yield
Government Income Fund
The annualized yield based on the month of January 1989 was calculated
according to the following formula:
a-b 6
YIELD = 2[( ----- +1) -1]
cd
Where: a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends
d = the maximum offering price per share on the last day of
the month
Therefore: YIELD = 2[(10,802,873 - 1,208,173 6
------------------------- +1) -1]
124,173,599 x 11.35
= 8.31%
See "Calculation of Performance Data" in the Statement of Additional
Information for a description of how interest earned ("a" above) is calculated.
Average daily number of shares outstanding ("c" above) is calculated by
summing the shares entitled to receive dividends on each day of the month and
dividing the total by the number of days in the month.
<PAGE>
GOVERNMENT INCOME FUND
Standard Total Return Computations -- Since Inception
Original Amt. Invested $l,000.00
Commission at 4.5% $0.00
Net Amount to Fund $l,000.00
Purchase price $12.50
Shares acquired 80.000
<TABLE>
<CAPTION>
Beginning Monthly Reinvest Shares New Month-end Monthly ITD
Month Shares Income Dividend Price Purchased Shares NAV ERV Performance Performance
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
04/30/87 80.000 0.1070 8.56 $11.99 0.714 80.714 $12.06 $973.41 -2.66 -2.66
05/31/87 80.714 0.0859 6.93 $11.90 0.583 81.297 $11.92 $969.06 -0.45 -3.09
06/30/87 81.297 0.0881 7.16 $11.99 0.597 81.894 $11.95 $978.63 -0.99 -2.14
07/31/87 81.894 0.0885 7.25 $11.84 0.612 82.506 $11.87 $979.35 0.07 -2.07
08/31/87 82.506 0.0894 7.38 $11.53 0.640 83.146 $11.72 $974.47 -0.50 -2.55
09/30/87 83.146 0.0912 7.58 $11.41 0.665 83.810 $11.43 $957.95 -1.69 -4.20
10/31/87 83.810 0.0953 7.99 $11.72 0.681 84.492 $11.66 $985.17 2.84 -1.48
11/30/87 84.492 0.0953 8.05 $11.61 0.694 85.185 $11.64 $991.56 0.65 -0.84
12/31/87 85.195 0.0953 8.12 $11.62 0.699 85.884 $11.67 $1,002.27 1.08 0.23
01/31/88 85.884 0.0953 8.18 $12.06 0.679 86.563 $11.99 $1,037.89 3.55 3.79
02/29/88 86.563 0.0953 8.25 $11.96 0.690 87.252 $12.03 $1,049.65 1.13 4.96
03/31/88 87.252 0.0953 8.32 $11.80 0.705 87.957 $11.81 $1,038.77 -1.04 3.88
04/30/88 87.957 0.0900 7.92 $11.64 0.680 88.637 $11.69 $1,036.17 -0.25 3.62
05/31/88 88.637 0.0900 7.98 $11.60 0.688 89.325 $11.52 $1,029.02 -0.69 2.90
06/30/88 89.325 0.0900 8.04 $11.55 0.696 90.021 $11.64 $1,047.84 1.83 4.78
07/31/88 90.021 0.0900 8.10 $11.51 0.704 90.725 $11.51 $1,044.24 -0.34 4.42
08/31/88 90.725 0.0900 8.16 $11.51 0.709 91.434 $11.41 $1,043.26 -0.09 4.33
09/30/88 91.434 0.0927 8.48 $11.60 0.731 92.165 $11.54 $1,063.58 1.95 6.36
10/31/88 92.165 0.0927 8.54 $11.64 0.734 92.899 $11.64 $1,081.34 1.67 8.13
</TABLE>
For the nineteen month period from commencement of operations on
March 23, 1987 through October 31, 1988:
n
P(1 + T) = ERV
19/l2
1000(1 + T) = 1,081.34
T = 5.06%
<PAGE>
GOVERNMENT INCOME FUND
Standard Total Return Computations - One Year
Original Amt. Invested $l,000.00
Commission at 4.5% $0.00
Net Amount to Fund $1,000.00
Purchase price $11.66
Shares acquired 85.763
<TABLE>
<CAPTION>
Beginning Monthly Reinvest Shares New Month-end Monthly ITD
Month Shares Income Dividend Price Purchased Shares NAV ERV Performance Performance
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
11/30/87 85.763 0.0953 8.17 $11.61 0.704 86.467 $11.64 $1,006.48 0.65 0.65
12/31/87 86.467 0.0953 8.24 $11.62 0.709 87.176 $11.67 $1,017.35 1.08 1.73
01/31/88 87.176 0.0953 8.31 $12.06 0.689 87.865 $11.99 $1,053.51 3.55 5.35
02/29/88 87.865 0.0953 8.37 $11.90 0.700 88.565 $12.03 $1,065.44 1.13 6.54
03/31/88 88.565 0.0953 8.44 $11.80 0.715 89.281 $11.81 $1,054.41 -1.04 5.44
04/30/88 89.281 0.0900 8.04 $11.64 0.690 89.971 $11.69 $1,051.76 -0.25 5.18
05/31/88 89.971 0.0900 8.10 $11.60 0.698 90.669 $11.52 $1,044.51 -0.69 4.45
06/30/88 90.669 0.O900 8.16 $11.55 0.707 91.376 $11.64 $1,063.61 1.83 6.36
07/31/88 91.376 0.0900 8.22 $11.51 0.714 92.090 $11.51 $1,059.96 -0.34 6.00
08/31/88 92.090 0.0900 8.29 $11.51 0.720 92.810 $11.41 $1,058.96 -0.09 5.90
09/30/88 92.810 0.0927 8.60 $11.60 0.742 93.552 $11.54 $1,079.59 1.95 7.96
10/31/88 93.552 0.0927 8.67 $11.64 0.745 94.297 $11.64 $1,097.61 1.67 9.76
</TABLE>
For the twelve months ended October 31, 1988:
n
P(1 + T) = ERV
1
1000(1 + T) = 1,097.61
T = 9.76%
<PAGE>
GOVERNMENT INCOME FUND
Nonstandardized Total Return Computation
Original Amt. Invested $1,000.00
Commission at 0.0% $0.00
Net Amount to Fund $1,000.00
Purchase price $11.51
Shares acquired 86.881
<TABLE>
<CAPTION>
Beginning Monthly Reinvest Shares New Month-end Monthly ITD
Month Shares Income Dividend Price Purchased Shares NAV ERV Performance Performance
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
08/31/88 86.881 0.0900 7.82 $11.51 0.679 87.560 $11.41 $999.06 -0.09 -0.09
09/30/88 87.560 0.0927 8.12 $11.60 0.700 88.260 $11.54 $1,018.52 1.95 1.85
10/31/88 88.260 0.0927 8.18 $11.53 0.710 88.970 $11.64 $1,035.61 1.68 3.56
11/30/88 88.970 0.0927 8.25 $11.42 0.722 89.692 $11.42 $1,024.28 -1.09 2.43
12/30/88 89.692 0.0927 8.31 $11.27 0.738 90.429 $11.31 $1,022.76 -0.15 2.28
01/31/89 90.429 0.0927 8.38 $11.35 0.739 91.168 $11.35 $1,034.76 1.17 3.48
</TABLE>
No annualization is made and dividends are reinvested at month-end net asset
value. Computation for the six months ended January 31, 1989.
Calculation of Distribution Rate
MetLife-State Street Government Income Fund
The distribution rate is calculated by annualizing the latest per-share
distribution from ordinary income and dividing the result by the maximum
offering price per share as of the end of the period to which the distribution
relates.
The computation for the month ended October 31, 1989 is as follows:
.0800(a) x 12 = .960/11.63(b) = 8.25%
(a) distribution rate for the month ended October 31, 1989
(b) net asset value and maximum offering price at October 31, 1989 ($11.63)
Calculation of Yield
State Street Research Strategic Portfolios: Moderate
The annualized yield for Class C shares based on the month of October
1994 was calculated according to the following formula:
a-b
--- 6
YIELD = 2[( + 1 ) -1]
cd
Where: a= dividends and interest earned during the period
b= expenses accrued for the period (net of voluntary expense
reductions by the Investment Manager)
c= the average daily number of shares outstanding during the period
that were entitled to receive dividends
d= the maximum offering price per share on the last day of the month
Therefore:
111,197.59 - 23,795.09 6
YIELD = 2[(---------------------- + 1) -1]
3,106,784.928 x 9.18
= 3.71%
See "Calculation of Performance Data" in the Statement of Additional Information
for a description of how interest earned ("a" above) is calculated.
Expenses accrued ("b" above) do not include the Investment Manager's voluntary
reduction of management fees or assumption of any portion of expenses relating
to the Fund during the subject period.
Average daily number of shares outstanding ("c" above) is calculated by summing
the shares entitled to receive dividends on each day of the month and dividing
the total by the number of days in the month.
<PAGE>
Calculation of Yield
State Street Research Strategic Portfolios: Conservative
The annualized yield for Class C shares based on the month of October
1994 was calculated according to the following formula:
a-b
--- 6
YIELD = 2[( + 1 ) -1]
cd
Where: a= dividends and interest earned during the period
b= expenses accrued for the period (net of voluntary expense
reductions by the Investment Manager)
c= the average daily number of shares outstanding during the period
that were entitled to receive dividends
d= the maximum offering price per share on the last day of the month
Therefore:
495.18 - 62.73 6
YIELD = 2[(----------------- + 1) -1]
10,471.204 x 9.56
= 5.24%
See "Calculation of Performance Data" in the Statement of Additional Information
for a description of how interest earned ("a" above) is calculated.
Expenses accrued ("b" above) do not include the Investment Manager's voluntary
reduction of management fees or assumption of any portion of expenses relating
to the Fund during the subject period.
Average daily number of shares outstanding ("c" above) is calculated by summing
the shares entitled to receive dividends on each day of the month and dividing
the total by the number of days in the month.
<PAGE>
Calculation of Yield
State Street Research Strategic Portfolios: Aggressive
The annualized yield for Class C shares based on the month of October
1994 was calculated according to the following formula:
a-b
--- 6
YIELD = 2[( + 1 ) -1]
cd
Where: a= dividends and interest earned during the period
b= expenses accrued for the period (net of voluntary expense
reductions by the Investment Manager)
c= the average daily number of shares outstanding during the period
that were entitled to receive dividends
d= the maximum offering price per share on the last day of the month
Therefore:
280.63 - 91.59 6
YIELD = 2[(----------------- + 1) -1]
10,471.204 x 9.74
= 2.23%
See "Calculation of Performance Data" in the Statement of Additional Information
for a description of how interest earned ("a" above) is calculated.
Expenses accrued ("b" above) do not include the Investment Manager's voluntary
reduction of management fees or assumption of any portion of expenses relating
to the Fund during the subject period.
Average daily number of shares outstanding ("c" above) is calculated by summing
the shares entitled to receive dividends on each day of the month and dividing
the total by the number of days in the month.
<PAGE>
Calculation of Distribution Rate
State Street Research Strategic Portfolios: Moderate
The distribution rate for Class C shares is calculated by annualizing
the latest per-share distribution from ordinary income and dividing the result
by the maximum offering price per share as of the end of the period.
The computation as of October 31, 1994 is as follows:
.0500(a) x 4 = .20/9.18(b) = 2.18%
(a) latest per-share distribution from ordinary income
(b) maximum offering price at October 31, 1994 ($9.18)
<PAGE>
Calculation of Distribution Rate
State Street Research Strategic Portfolios: Conservative
The distribution rate for Class C shares is calculated by annualizing
the latest per-share distribution from ordinary income and dividing the result
by the maximum offering price per share as of the end of the period.
The computation as of October 31, 1994 is as follows:
.1090(a) x 4 = .436/9.56(b) = 4.56%
(a) latest per-share distribution from ordinary income
(b) maximum offering price at October 31, 1994 ($9.56)
<PAGE>
Calculation of Distribution Rate
State Street Research Strategic Portfolios: Aggressive
The distribution rate for Class C shares is calculated by annualizing
the latest per-share distribution from ordinary income and dividing the result
by the maximum offering price per share as of the end of the period.
The computation as of October 31, 1994 is as follows:
.0490(a) x 4 = .196/9.74(b) = 2.01%
(a) latest per-share distribution from ordinary income
(b) maximum offering price at October 31, 1994 ($9.74)
<PAGE>
State Street Research Strategic Portfolios: Moderate - Class C
Nonstandardized Total Return Computation
Original Amt. Invested $1,000.00
Commission at 0.0% $0.00
Net Amount to Fund $1,000.00
Purchase price $9.15
Shares acquired 109.290
<TABLE>
<CAPTION>
Beginning Dividend Monthly Reinvest Shares New Month-end Monthly ITD
Month Shares Rate Income Price Purchased Shares NAV ERV Performance Performance
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
8/31/94 109.290 0.0000 0.00 $9.21 0.000 109.290 $9.21 $1,006.56 0.66 0.66
9/30/94 109.290 0.0500 5.46 $8.95 0.611 109.900 $8.95 $983.61 -2.28 -1.64
10/31/94 109.900 0.0000 0.00 $9.14 0.000 109.900 $9.14 $1,004.49 2.12 0.45
10/31/94 109.900 0.0000 0.00 $9.33 0.000 109.900 $9.33 $1,025.37 2.08 2.54
10/31/94 109.900 0.0500 5.50 $9.14 0.601 110.501 $9.14 $1,009.98 -1.50 1.00
10/31/94 110.501 0.0000 0.00 $9.18 0.000 110.501 $9.18 $1,014.40 0.44 1.44
</TABLE>
No annualization is made. Computation for the six months ended October 31, 1994.
<PAGE>
State Street Research Strategic Portfolios: Conservative - Class C
Nonstandardized Total Return Computation
Original Amt. Invested $1,000.00
Commission at 0.0% $0.00
Net Amount to Fund $1,000.00
Purchase price $9.70
Shares acquired 103.093
<TABLE>
<CAPTION>
Beginning Dividend Monthly Reinvest Shares New Month-end Monthly ITD
Month Shares Rate Income Price Purchased Shares NAV ERV Performance Performance
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
8/31/94 103.093 0.0000 0.00 $9.80 0.000 103.093 $9.80 $1,010.31 1.03 1.03
9/30/94 103.093 0.1090 11.24 $9.55 1.177 104.269 $9.55 $995.77 -1.44 -0.42
10/31/94 104.269 0.0000 0.00 $9.56 0.000 104.269 $9.56 $996.82 0.10 -0.32
</TABLE>
No annualization is made. Computation for the three months ended October 31,
1994.
<PAGE>
State Street Research Strategic Portfolios: Aggressive - Class C
Nonstandardized Total Return Computation
Original Amt. Invested $1,000.00
Commission at 0.0% $0.00
Net Amount to Fund $1,000.00
Purchase price $9.56
Shares acquired 104.603
<TABLE>
<CAPTION>
Beginning Dividend Monthly Reinvest Shares New Month-end Monthly ITD
Month Shares Rate Income Price Purchased Shares NAV ERV Performance Performance
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
8/31/94 104.603 0.0000 0.00 $9.87 0.000 104.603 $9.87 $1,032.43 3.24 3.24
9/30/94 104.603 0.0490 5.13 $9.72 0.527 105.130 $9.72 $1,021.86 -1.02 2.19
10/31/94 105.130 0.0000 0.00 $9.74 0.000 105.130 $9.74 $1,023.96 0.21 2.40
</TABLE>
No annualization is made. Computation for the three months ended October 31,
1994.
<PAGE>
State Street Research Strategic Portfolios: Moderate - Class C
Standard Total Retum Computations- Since Inception
Original Amt. Invested $1,000.00
Commission at 0.0% $0.00
Net Amount to Fund $1,000.00
Purchase price $9.55
Shares acquired 104.712
<TABLE>
<CAPTION>
Beginning Dividend Monthly Reinvest Shares New Month-end Monthly Aggregate
Month Shares Rate Income Price Purchased Shares NAV ERV Performance Performance
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
9/30/93 104.712 0.0000 0.00 $9.52 0.000 104.712 $9.52 $996.86 -0.31 -0.31
10/31/93 104.712 0.0000 0.00 $9.57 0.000 104.712 $9.57 $1,002.09 0.53 0.21
11/30/93 104.712 0.0000 0.00 $9.40 0.000 104.712 $9.40 $984.29 -1.78 -1.57
12/31/93 104.712 0.0650 6.81 $9.41 0.723 105.435 $9.41 $992.15 0.80 -0.79
1/31/94 105.435 0.0000 0.00 $9.77 0.000 105.435 $9.77 $1,030.10 3.83 3.01
2/28/94 105.435 0.0000 0.00 $9.60 0.000 105.435 $9.60 $1,012.18 -1.74 1.22
3/31/94 105.435 0.0500 5.27 $9.13 0.577 106.013 $9.13 $967.90 -4.38 -3.21
4/30/94 106.013 0.0000 0.00 $9.15 0.000 106.013 $9.15 $970.02 0.22 -3.00
5/31/94 106.013 0.0000 0.00 $9.21 0.000 106.013 $9.21 $976.38 0.66 -2.36
6/30/94 106.013 0.0500 5.30 $8.95 0.592 106.605 $8.95 $954.11 -2.28 -4.59
7/31/94 106.605 0.0000 0.00 $9.14 0.000 106.605 $9.14 $974.37 2.12 -2.56
8/31/94 106.605 0.0000 0.00 $9.33 0.000 106.605 $9.33 $994.62 2.08 -0.54
9/30/94 106.605 0.0500 5.33 $9.14 0.583 107.188 $9.14 $979.70 -1.50 -2.03
10/31/94 107.188 0.0000 0.00 $9.18 0.000 107.188 $9.18 $983.99 0.44 -1.60
</TABLE>
(1) Calculate average annual retum of the Fund for the period September 28, 1993
through October 31, 1994:
399/365
1,000 (1 + T) = 983.99
T=-1.47%
<PAGE>
State Street Research Strategic Portfolios: Conservative - Class C .
Standard Total Return Computations- Since Inception
Original Amt. Invested $1,000.00
Commission at 0.0% $0.00
Net Amount to Fund $1,000.00
Purchase price $9.55
Shares acquired 104.712
<TABLE>
<CAPTION>
Beginning Dividend Monthly Reinvest Shares New Month-end Monthly Aggregate
Month Shares Rate Income Price Purchased Shares NAV ERV Performance Performance
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5/31/94 104.712 0.0000 0.00 $9.59 0.000 104.712 $9.59 $1,004.19 0.42 0.42
6/30/94 104.712 0.0000 0.00 $9.49 0.000 104.712 $9.49 $993.72 -1.04 -0.63
7/31/94 104.712 0.0000 0.00 $9.70 0.000 104.712 $9.70 $1,015.71 2.21 1.57
8/31/94 104.712 0.0000 0.00 $9.80 0.000 104.712 $9.80 $1,026.18 1.03 2.62
9/30/94 104.712 0.1090 11.41 $9.55 1.195 105.907 $9.55 $1,011.41 -1.44 1.14
10/31/94 105.907 0.0000 0.00 $9.56 0.000 105.907 $9.56 $1,012.47 0.10 1.25
</TABLE>
(1) Calculate average annual return of the Fund for the period May 16, 1994
through October 31, 1994:
169/365
1,000 (1 + T) = 1012.47
T = 2.71%
<PAGE>
State Street Research Strategic Portfolios: Aggressive - Class C
Standard Total Return Computations- Since Inception
Original Amt. Invested $1,000.00
Commission at 0.0% $0.00
Net Amount to Fund $1,000.00
Purchase price $9.55
Shares acquired 104.712
<TABLE>
<CAPTION>
Beginning Dividend Monthly Reinvest Shares New Month-end Monthly Aggregate
Month Shares Rate Income Price Purchased Shares NAV ERV Performance Performance
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
5/31/94 104.712 0.0000 0.00 $9.64 0.000 104.712 $9.64 $1,009.42 0.94 0.94
6/30/94 104.712 0.0000 0.00 $9.37 0.000 104.712 $9.37 $981.15 -2.80 -1.88
7/31/94 104.712 0.0000 0.00 $9.56 0.000 104.712 $9.56 $1,001.05 2.03 0.10
8/31/94 104.712 0.0000 0.00 $9.87 0.000 104.712 $9.87 $1,033.51 3.24 3.35
9/30/94 104.712 0.0490 5.13 $9.72 0.528 105.240 $9.72 $1,022.93 -1.02 2.29
10/31/94 105.240 0.0000 0.00 $9.74 0.000 105.240 $9.74 $1,025.04 0.21 2.50
</TABLE>
(1) Calculate average annual return of the Fund for the period May 16, 1994
through October 31, 1994:
169/365
1,000 (1 + T) = 1025.04
T = 5.49%
POWER OF ATTORNEY
We, the undersigned State Street Research Financial Trust ("Trust"), a
Massachusetts business trust, its trustees, its principal executive officer and
its principal financial and accounting officer, hereby severally constitute and
appoint Francis J. McNamara, III and Darman A. Wing, as our true and lawful
attorneys, with full power to each of them alone to sign for us, in our names
and in the capacities indicated below, any Registration Statements and any and
all amendments thereto of the Trust filed with the Securities and Exchange
Commission and generally to do all such things in our names and in the indicated
capacities as are required to enable the Trust to comply with provisions of the
Securities Act of 1933, as amended, and/or the Investment Company Act of 1940,
as amended, and all requirements and regulations of the Securities and Exchange
Commission, hereby ratifying and confirming our signatures as they have been and
may be signed by our said attorneys to said Registration Statements, and any and
all amendments thereto.
IN WITNESS WHEREOF, we have hereunto set our hands, on this 29th day of
December, 1997.
SIGNATURES
STATE STREET RESEARCH FINANCIAL TRUST
By: /s/ Ralph F. Verni
-----------------------------------
Ralph F. Verni, Chief Executive
Officer and President
/s/ Ralph F. Verni /s/ Dean O. Morton
-------------------------------- ---------------------------------
Ralph F. Verni, Trustee and Dean O. Morton, Trustee
principal executive officer
/s/ Gerard P. Maus /s/ Thomas L. Phillips
-------------------------------- ---------------------------------
Gerard P. Maus, Principal Thomas L. Phillips, Trustee
Financial and accounting officer
/s/ Steve A. Garban /s/ Toby Rosenblatt
-------------------------------- ---------------------------------
Steve A. Garban, Trustee Toby Rosenblatt, Trustee
/s/ Malcolm T. Hopkins /s/ Michael S. Scott Morton
-------------------------------- ---------------------------------
Malcolm T. Hopkins, Trustee Michael S. Scott Morton, Trustee
<PAGE>
/s/ Edward M. Lamont /s/ Jeptha H. Wade
-------------------------------- ---------------------------------
Edward M. Lamont, Trustee Jeptha H. Wade, Trustee
/s/ Robert A. Lawrence
--------------------------------
Robert A. Lawrence, Trustee
Certificate of Resolution
I, the undersigned Darman A. Wing, hereby certify that I am Assistant
Secretary of State Street Research Financial Trust (the "Trust"), a
Massachusetts business trust duly authorized and validly existing under
Massachusetts law, and that the following is a true, correct and complete
statement of a vote duly adopted by the Trustees of said Trust on May 5, 1995:
"VOTED: That Francis J. McNamara, III and Darman A. Wing be, and each
hereby is, authorized and empowered, for and on behalf of the
Trust, its principal financial and accounting officer, and in their
name, to execute, and file a Power of Attorney relating to, the
Trust's Registration Statements under the Investment Company Act of
1940 and/or the Securities Act of 1933, and amendments thereto, the
execution and delivery of such Power of Attorney, Registration
Statements and amendments thereto, to constitute conclusive proof
of such authorization."
I further certify that said vote has not been amended or revoked and that
the same is now in full force and effect.
IN WITNESS WHEREOF, I have hereunto set my hand on this 29th day of
December, 1997.
/s/ Darman A. Wing
-----------------------
Assistant Secretary
STATE STREET RESEARCH FUNDS NEW ACCOUNT APPLICATION
* Use a pen.
* Please print in CAPITAL LETTERS.
Use the Additional Services
Application to take advantage of a
range of services, including
checkwriting and Systematic
Withdrawal Plan.
1 Your Account
- --------------------------------------------------------------------------------
(graphic of a telephone)
* Fill in one type only.
Individual Retirement Accounts require a different application. To obtain an
IRA application, call 1-800-562-0032. (graphic of a telephone)
Individual / Joint Account
_____________________________________________________________
- -------------------------------------------------------------
Name [first, middle initial, last]
[ ][ ][ ]-[ ][ ]-[ ][ ][ ][ ]
Social Security number
[ ][ ]/[ ][ ]/[ ][ ]
Date of birth [month / day / year]
- -------------------------------------------------------------
Name of joint owner, if any [first, middle initial, last]
[ ][ ][ ]-[ ][ ]-[ ][ ][ ][ ]
Joint owner's Social Security number
[ ][ ]/[ ][ ]/[ ][ ]
Joint owner's date of birth [month / day / year]
Joint owners will be joint tenants with rights of survivorship unless you
check a different option:
O Tenants in common O Tenants by entirety O Community property
Gift / Transfer to a Minor [UGMA/UTMA]
_____________________________________________________________
- -------------------------------------------------------------
Name of one custodian [first, middle initial, last]
- -------------------------------------------------------------
As custodian for [name of minor; first, middle initial, last]
Under the [ ][ ] Uniform Gifts / Transfers to Minors Act
[minor's state of residence]
[ ][ ][ ]-[ ][ ]-[ ][ ][ ][ ]
Minor's Social Security number
[ ][ ]/[ ][ ]/[ ][ ]
Minor's date of birth [month / day / year]
Trust Account
________________________________________________________________
- -------------------------------------------------------------
Name of trustee [first, middle initial, last]
- -------------------------------------------------------------
Name of co-trustee, if any [first, middle initial, last]
- -------------------------------------------------------------
As trustees of [name of trust]
- -------------------------------------------------------------
For the benefit of [trust beneficiary]
[ ][ ]-[ ][ ][ ][ ][ ][ ][ ]
Trust's federal tax identification number
[ ][ ]/[ ][ ]/[ ][ ]
Date of trust agreement [month / day / year]
Business / Other Account
______________________________________________________________
- -------------------------------------------------------------
Name of entity
[ ][ ][ ][ ][ ][ ][ ][ ][ ]
Federal tax identification number or Social Security number
O I / We have included a corporate resolution, as is required to open this
account.
Type of entity: O Corporation
O Partnership
O Estate
O Unincorporated association
O Guardian
For all other types of accounts, please call 1-800-562-0032 for a different
application.
2 Your Address
- --------------------------------------------------------------------------------
- ---------------------------------------------------------------
Street address / P.O. Box
- ---------------------------------------------------------------
City
[ ][ ] [ ][ ][ ][ ][ ]-[ ][ ][ ][ ]
State Zip
[ ][ ][ ]-[ ][ ][ ]-[ ][ ][ ][ ]
Daytime phone number
[ ][ ][ ]-[ ][ ][ ]-[ ][ ][ ][ ]
Evening phone number
Check one:
[ ] U.S. citizen [ ] Non-U.S. citizen
[ ] U.S. resident [ ] Resident of:
[ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ]
<PAGE>
3 Your Investment
- --------------------------------------------------------------------------------
* Choose one share class and distribution option for each fund.
* Generally, the minimum investment is $2,500 per account ($1,000 using
Investamatic). Some funds have higher minimums. Please refer to
prospectus.
<TABLE>
<CAPTION>
Fund Name Amount You are Investing Share Class All Distributions
- -----------------------------------------------------------------------------------------------------------------------------------
A B C Reinvested In Cash
<S> <C> <C> <C> <C> <C> <C>
O Aurora $ [ ],[ ][ ][ ],[ ][ ][ ].[ ][ ] O O O O O
O Capital $ [ ],[ ][ ][ ],[ ][ ][ ].[ ][ ] O O O O O
O Emerging Growth $ [ ],[ ][ ][ ],[ ][ ][ ].[ ][ ] O O O O O
O Equity Income $ [ ],[ ][ ][ ],[ ][ ][ ].[ ][ ] O O O O O
O Equity Investment $ [ ],[ ][ ][ ],[ ][ ][ ].[ ][ ] O O O O O
O Global Resources $ [ ],[ ][ ][ ],[ ][ ][ ].[ ][ ] O O O O O
O Government Income $ [ ],[ ][ ][ ],[ ][ ][ ].[ ][ ] O O O O O
O Growth $ [ ],[ ][ ][ ],[ ][ ][ ].[ ][ ] O O O O O
O High Income $ [ ],[ ][ ][ ],[ ][ ][ ].[ ][ ] O O O O O
O International Equity $ [ ],[ ][ ][ ],[ ][ ][ ].[ ][ ] O O O O O
O Investment Trust $ [ ],[ ][ ][ ],[ ][ ][ ].[ ][ ] O O O O O
O Managed Assets $ [ ],[ ][ ][ ],[ ][ ][ ].[ ][ ] O O O O O
O Money Market $ [ ],[ ][ ][ ],[ ][ ][ ].[ ][ ] Class E only O O
O New York Tax-Free $ [ ],[ ][ ][ ],[ ][ ][ ].[ ][ ] O O O O O
O Strategic Income $ [ ],[ ][ ][ ],[ ][ ][ ].[ ][ ] O O O O O
O Tax-Exempt $ [ ],[ ][ ][ ],[ ][ ][ ].[ ][ ] O O O O O
O Other: $ [ ],[ ][ ][ ],[ ][ ][ ].[ ][ ] O O O O O
</TABLE>
This investment is being made:
O by mail - make check payable to State Street Research Funds
O by Federal Funds Wire; the control number is:
[ ][ ][ ][ ][ ][ ][ ][ ][ ][ ]
O through a dealer; the wire order confirmation number is:
[ ][ ][ ][ ][ ][ ][ ][ ][ ][ ]
4 Options for Reducing Sales Charges
- --------------------------------------------------------------------------------
I wish to apply for reduced Class A sales charges through:
O Right of Accumulation
________________________________________________
When calculating my sales charges for this investment, please include the
assets in the following accounts owned by me, my family members or other
designated persons:
[ ][ ][ ][ ][ ][ ][ ][ ][ ][ ] [ ][ ][ ][ ][ ][ ][ ][ ][ ][ ]
Account number Account number
[ ][ ][ ][ ][ ][ ][ ][ ][ ][ ] [ ][ ][ ][ ][ ][ ][ ][ ][ ][ ]
Account number Account number
[ ][ ][ ][ ][ ][ ][ ][ ][ ][ ] [ ][ ][ ][ ][ ][ ][ ][ ][ ][ ]
Account number Account number
[ ][ ][ ][ ][ ][ ][ ][ ][ ][ ] [ ][ ][ ][ ][ ][ ][ ][ ][ ][ ]
Account number Account number
O Letter of Intent
________________________________________________
I plan to invest, without obligation, a total of at least the following
amount in eligible funds over the next 13 months:
O $100,000 O $250,000 O $500,000 O $1 Million
O Please include investments made within the past 90 days in these accounts:
[ ][ ][ ][ ][ ][ ][ ][ ][ ][ ] [ ][ ][ ][ ][ ][ ][ ][ ][ ][ ]
Account number Account number
[ ][ ][ ][ ][ ][ ][ ][ ][ ][ ] [ ][ ][ ][ ][ ][ ][ ][ ][ ][ ]
Account number Account number
[ ][ ][ ][ ][ ][ ][ ][ ][ ][ ] [ ][ ][ ][ ][ ][ ][ ][ ][ ][ ]
Account number Account number
[ ][ ][ ][ ][ ][ ][ ][ ][ ][ ] [ ][ ][ ][ ][ ][ ][ ][ ][ ][ ]
Account number Account number
<PAGE>
5 Telephone Exchanges / Redemptions
- --------------------------------------------------------------------------------
* NOTE: You automatically receive these privileges unless you
decline them.
* See terms and conditions for telephone requests in current prospectus(es).
* Not available for certificate shares.
Telephone Exchange Privilege
____________________________________________________
Allows you or your dealer to request exchanges into other State Street
Research funds (and assumes you have read the relevant prospectuses).
O I DO NOT want this privilege on my account.
Initial here
Telephone Redemption Privilege
_____________________________________________________
Allows you (but not your dealer) to phone requests to sell shares, with the
proceeds sent to the address of record.
O I DO NOT want this privilege on my account.
Initial here
6 Transfers To / From Your Bank
- --------------------------------------------------------------------------------
* Convenient services to help you buy or sell fund shares.
* Be sure to attach a deposit slip or voided, unsigned check
depending on the service(s) you are requesting.
I would like to request one or more of the following service(s):
O Investamatic
________________________________________________________
Makes periodic investments in the State Street Research fund of your
choice. I authorize automatic withdrawals from the bank account
specified at the bottom of the page. I request these withdrawals to
occur: O 5th or O 20th or O 5th and 20th of a month. O every month on
the __________________ O every quarter,
$[ ][ ][ ],[ ][ ][ ].[ ][ ]
Investment amount ($50 minimum) Fund
[ ][ ][ ][ ][ ][ ][ ][ ][ ][ ]
Account number (if existing account)
$[ ][ ][ ],[ ][ ][ ].[ ][ ]
Investment amount ($50 minimum) Fund
[ ][ ][ ][ ][ ][ ][ ][ ][ ][ ]
Account number (if existing account)
O EZ Trader
_________________________________________________________
Allows you to move money between your fund account and bank account by
calling State Street Research. NOTE: Your bank must be a member of the
Automated Clearing House (ACH) system.
O Wire Redemption Capability
__________________________________________________________
Lets you designate a bank account to receive proceeds by wire when you
sell State Street Research shares.
Bank Account Information
- ------------------------------------------------------------------------------
Please establish the service(s) between my fund account and my:
O Checking account [voided, unsigned check attached]
O NOW / money market / savings account [deposit slip attached]
- ---------------------------------------------------
Bank name
- ---------------------------------------------------
Bank address
- ---------------------------------------------------
City
[ ][ ] [ ][ ][ ][ ][ ]-[ ][ ][ ][ ]
State Zip
[ ][ ][ ][ ][ ][ ][ ][ ][ ]
Bank routing number
[ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ]
Bank account number
- ---------------------------------------------------------------
Name of one bank account holder, exactly as on bank statements
- ---------------------------------------------------------------
Name of second bank account holder, if any
- ---------------------------------------------------------------
Signature of one bank account holder, exactly as on bank statements
- ---------------------------------------------------------------
Signature of of second bank account holder, if any
7 Your Signature
- --------------------------------------------------------------------------------
[graphic of a pen]
* All owners listed in Section 1 need to sign this application.
* Please note that the certification below and the provision of your
federal tax identification number are the only portions of this
application for which the IRS requires your consent.
I acknowledge that I:
* have received current prospectus(es) for all funds in which I am
investing.
* accept the terms of investment described in the prospectus(es) and
this application.
* understand that these same terms will also apply to all shares obtained
by exchange.
* accept responsibility for unauthorized telephone instructions unless the
fund's agents are negligent or unless I declined the privileges in Section
5.
I certify, under penalties of perjury, that:
* (1) the number shown on this form is my correct taxpayer identification
number (or I am waiting for a number to be issued to me), and (2) I am not
subject to backup withholding because (a) I am exempt from backup
withholding, or (b) I have not been notified by the Internal Revenue Service
that I am subject to backup withholding as a result of a failure to report
all interest or dividends, or (c) the IRS has notified me that I am no
longer subject to backup withholding.
- ---------------------------------------------------------------
Your signature exactly as your name appears in Section 1
- ---------------------------------------------------------------
Signature of joint owner (if any) exactly as name appears in Section 1
Date: [ ][ ]/[ ][ ]/[ ][ ]
[month / day / year]
Date: [ ][ ]/[ ][ ]/[ ][ ]
[month / day / year]
<PAGE>
8 Signature Guarantee
- --------------------------------------------------------------------------------
* If you are investing directly, have Part I completed; if not,
have your dealer fill out Part II.
A - For Direct Investments
_________________________________________________
- -----------------------------------------------------
Name of bank or other guarantor
- -----------------------------------------------------
Street address
- -----------------------------------------------------
City
[ ][ ] [ ][ ][ ][ ][ ]-[ ][ ][ ][ ]
State Zip
* The bank or guarantor guarantees the owner's legal capacity and all
signatures on this application and on related investment checks and
instructions, including the Additional Services Application.
- --------------------------------------------------------------
Signature of bank's or guarantor's authorized representative
Date: [ ][ ]/[ ][ ]/[ ][ ]
[month / day / year]
B - For Investments Through a Dealer
_______________________________________________________
- -----------------------------------------------------
Dealer name
- -----------------------------------------------------
Home office address
- -----------------------------------------------------
City
[ ][ ] [ ][ ][ ][ ][ ]-[ ][ ][ ][ ]
State Zip
- -----------------------------------------------------
Branch office address
- -----------------------------------------------------
City
[ ][ ] [ ][ ][ ][ ][ ]-[ ][ ][ ][ ]
State Zip
[ ][ ][ ]-[ ][ ][ ]-[ ][ ][ ][ ]
Branch office telephone number
The dealer:
* agrees to the terms of the current prospectus(es), application and
current dealer agreement, which is included by reference.
* represents that it has given the owner(s) all relevant prospectus(es).
* represents that it has completed this application according to instructions
from the owner(s).
* will indemnify the fund, its advisor, distributor or other agents from
any losses resulting from these instructions.
* guarantees the owner's legal capacity and all signatures on this
application and on related investment checks and instructions including the
Additional Services Application.
[ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ][ ]
Registered Representative
[ ][ ][ ][ ][ ][ ][ ][ ]
Registered Representative number
- -----------------------------------------------------
Signature of authorized officer of dealer
[STATE STREET RESEARCH LOGO] [METLIFE SECURITIES LOGO]
MUTUAL FUND ACCOUNT APPLICATION
Mail this application to MetLife Securities, Inc., P.O. Box 30421, Tampa, FL
33630
[ ] New Application [ ] Change-Account #____________________________
Type of Account (PLEASE PRINT FULL NAME(S) CONSISTENT WITH YOUR SIGNATURE(S) IN
SECTION 6.)
<TABLE>
<S> <C> <C>
[ ] Individual-complete (a) only [ ] Joint Tenant-complete (a & b) only [ ] Gift to a Minor-complete (c) only
[ ] Trust(1)-complete (d) only [ ] Corporation(1)-complete (e) only [ ] Partnership/Other Entity-complete (e) only
</TABLE>
Note: If the investment is to be used for an Individual Retirement Account
(IRA), a separate IRA application must be used.
(1)Call 1-800-638-8378 for additional forms.
Do you have any other mutual fund accounts with State Street Research?
[ ] Yes [ ] No
Individual or Joint Tenant
a _____________________________________________________________-______-_________
Name of Investor Social Security Number
b ______________________________________________________________________________
Name(s) of Joint Tenant(s)
Gift to a Minor
c _____________________________________ as custodian for _____________ under the
Name of Custodian (one only) Name of Minor (one only)
___________________________ "Uniform Gifts to Minors Act" _____-______-_________
Minor's State of Residence Minor's Social Security Number
Trust Account
d ______________________________________________________________________________
Trustee(s) Name(s)
_______________________________________________________________-______-_________
Name and Date of Trust Agreement Tax Identification
Number
Corporation, Partnership or Other Entity (Please include corporate resolution.)
e ______________________________________________________________________________
Name of Corporation or Other Entity
________________________________________________________________________________
Type of Business (specify corporation, Tax Identification Number
partnership, estate, guardian, etc.)
2 Your Mailing Address (PLEASE PRINT.)
( )
________________________________________________________________________________
Street Address Home Telephone Number
( )
________________________________________________________________________________
City State ZIP Business Telephone
Number
Residency [ ] U.S. (State _______________) [ ] Other(2) __________________
Specify Country
(2)Call 1-800-638-8378 for additional forms.
3 Fund Selection(s) and Distribution Option(s) (Choose only one distribution
option per Fund; see Fund prospectus for minimum initial investment
requirements.)
[ ] By Mail-Make check payable to "State Street Research"
[ ] By Federal Funds Wire
<TABLE>
<CAPTION>
Fund Name Class Designation(3) Amount Distribution Option
- ---------------------------------------------------------------------------------------------------------------------
Dividends & Dividends in Dividends & Dividend
Capital Gains Cash; Capital Capital Gains Allocation
A B(4) Reinvested Gains Reinvested(5) in Cash Plan (DAP)(6)
<S> <C> <C> <C> <C> <C> <C>
_________________ [ ] [ ] $_____ [ ] [ ] [ ] [ ]
_________________ [ ] [ ] $_____ [ ] [ ] [ ] [ ]
_________________ [ ] [ ] $_____ [ ] [ ] [ ] [ ]
_________________ [ ] [ ] $_____ [ ] [ ] [ ] [ ]
</TABLE>
(3)All Money Market Fund investments will purchase Class E shares. Be sure to
designate Class A or B shares for Money Market Fund DAP allocations.
(4)For purchase of Class B shares of more than $250,000, I hereby acknowledge
that I am aware of the reduced front-end sales charges available to me for the
purchase of Class A shares, and have chosen to purchase Class B shares. I am
aware that Class B shares have higher asset-based charges than Class A shares
for the first eight years.
(5)Does not apply to Money Market Fund.
(6)Dividend Allocation Plan: The Transfer Agent is authorized to invest all
dividends and distributions from________________________________________________
Fund Name
in the following Eligible Fund:_________________________________________________
Fund Name (Fund must meet Account
minimum investment requirements) Number (if
existing
account)
Authorization of Dividend Allocation Plan constitutes an acknowledgment that the
shareholder has received the current prospectus of the Fund to be acquired.
Except for Money Market Fund Class E, DAP must be allocated to same class
designation.
<PAGE>
4 Reduced Sales Charges (Applies to Class A shares only)
[ ] Right of Accumulation (ROA): I apply for Right of Accumulation reduced sales
charges subject to the Transfer Agent's confirmation of the following holdings
of certain designated persons, e.g. family members, in the Eligible Funds:
________________________________________________________________________________
Name on Account Account Number
________________________________________________________________________________
Name on Account Account Number
[ ] Letter of Intent (LOI): Although I am not obligated to purchase and the
Funds are not obligated to sell, I intend to invest over a 13-month period
beginning _______________, 19__ (purchase date not more than 90 days prior to
this letter) at least an aggregate of
[ ] $100,000 [ ] $250,000 [ ] $500,000 [ ] $1,000,000 of Eligible Funds.
5 Optional Shareholder Services
Your Bank Account (You must complete this section if you request Section A, B, C
or D below.)
Type of Bank Account: [ ] Checking [ ] NOW or Money Market
________________________________________________________________________________
Account Title (print exactly as it Bank Routing Number
appears on bank records)
________________________________________________________________________________
Bank Account Number Bank Name
________________________________________________________________________________
Bank Address City State ZIP
________________________________________________________________________________
Depositor's Signature(s) (exactly as it Date
appears on bank records)
________________________________________________________________________________
Depositor's Address City State ZIP
YOU MUST ATTACH A BLANK CHECK MARKED "VOID."
A Telephone Redemption and Exchange Privileges (Service available only for
shares held on deposit with Transfer Agent)
None of the Transfer Agent, the Fund, any other Eligible Funds, State Street
Research Shareholder Services, the Investment Manager or the Distributor will be
liable for any loss, injury, damage or expense as a result of acting upon, and
will not be responsible for the authenticity of, any telephone instructions. I
understand that all telephone calls are tape recorded. My liability shall be
subject to the use of reasonable procedures to confirm that instructions
communicated by telephone are genuine.
Telephone Exchange By Shareholder OR DEALER
The Transfer Agent may effect exchanges for my account according to telephone
instructions FROM ME OR MY DEALER as set forth in the Prospectus, and may
register the shares of the fund to be acquired exactly the same as my existing
account. Authorizing an exchange constitutes an acknowledgment that the
shareholder has received the current prospectus of the fund to be acquired. The
account will automatically have this privilege unless it is expressly declined
by providing your initials in the space below.
I DO NOT WANT THE TELEPHONE EXCHANGE PRIVILEGE. _____ (Initial here.)
Telephone Redemption By Shareholder Only
1. Proceeds to Shareholder's Address of Record. The Transfer Agent may effect
redemptions of shares from my account according to telephone instructions from
me, as set forth in the Prospectus, and send the proceeds to my address of
record. The account will automatically have this privilege unless it is
expressly declined by providing your initials in the space below.
I DO NOT WANT THE TELEPHONE REDEMPTION PRIVILEGE (to address of record).
_____ (Initial here.)
2. Proceeds to Bank Designated by Shareholder. The Telephone Redemption
Privilege (to bank designated by shareholder) is not provided automatically;
please check the box below if you want this Privilege for the account. ATTACH A
BLANK CHECK MARKED "VOID" AND FILL OUT "YOUR BANK ACCOUNT" SECTION.
The Transfer Agent may effect redemptions of shares from my account according to
telephone instructions from me, as set forth in the Prospectus, and send the
proceeds to the bank named in "Your Bank Account." [ ] (Check here.)
<PAGE>
B Investamatic Check Program (YOU MUST ATTACH A BLANK CHECK MARKED "VOID.")
I hereby request and authorize the bank named in "Your Bank Account" section to
pay and charge checks drawn on, or debits against, my account initiated by and
payable to the order of the mutual fund transfer agent designated by the
Distributor. I agree that the named Bank's rights in respect to each such check
or debit shall be the same as if it were a check drawn on or debit against my
account authorized personally by me. This authority is to remain in effect until
revoked by me in writing, and until the named Bank actually receives such
notice, I agree that the named Bank shall be fully protected in honoring any
such check or debit authorization. I further agree that if any check or debit
authorization be dishonored, whether with or without cause and whether
intentionally or inadvertently, the named Bank shall be under no liability
whatsoever, unless the nonpayment is because of insufficient funds. I understand
that this Program may be revoked by the Transfer Agent or the Distributor
without prior notice if any check is not paid upon presentation, and that this
Program may be discontinued by the Distributor, the Transfer Agent or me upon
thirty (30) business days' notice prior to the due date of any deposit.
$
________________________________________________________________________________
Fund Name Class Designation Amount ($50 minimum) Account Number
$
________________________________________________________________________________
Fund Name Class Designation Amount ($50 minimum) Account Number
_____________________________________
Total Amount of Investment: $______ Account Registration (exactly as it
appears on Fund records)
[ ] Monthly Investment Date: [ ] 5th or [ ] 20th If you do not choose a date,
[ ] Quarterly Investment Date: [ ] 5th or [ ] 20th the 5th will be chosen
automatically.
C Automatic Bank Connection (ABC) Not available for retirement plan accounts.
YOU MUST ATTACH A BLANK CHECK MARKED "VOID."
[ ] I authorize the Transfer Agent to liquidate $______________ (minimum-$50)
from my fund account beginning the month of to provide [ ] monthly,
[ ] quarterly, [ ] semiannual or [ ] annual payments. I would like the following
payment to be deposited directly into the bank account named in "Your Bank
Account" section. (Choose only one.)
[ ] Income dividends only [ ] Income dividends and capital gains
[ ] Systematic Withdrawal Plan payments (see below)
________________________________________________________________________________
Fund Name Class Designation
________________________________________________________________________________
Fund Name Class Designation
I hereby authorize the Fund and the Transfer Agent to effect the deposit of the
above indicated items by initiating credit entries to my account at the bank
named in "Your Bank Account" section. The named Bank shall not be responsible
for the correctness of the items, and the Transfer Agent is authorized to
correct and adjust any incorrect items to my bank account. This authorization
may be terminated at any time by written notification to the Fund, the Transfer
Agent and the Bank.
D Systematic Withdrawal Plan (SWP) Not available for retirement plan accounts.
See the prospectus for minimum account size and maximum withdrawal amounts.
YOU MUST ATTACH A BLANK CHECK MARKED "VOID."
[ ] I authorize the Transfer Agent to liquidate shares in and withdraw cash
(minimum-$50) from my fund account beginning the month of ____________________
to provide [ ] monthly, [ ] quarterly, [ ] semiannual or [ ] annual Systematic
Withdrawal Plan (SWP) payments in the amount of $_________________ to [ ] me
[ ] the bank named in "Your Bank Account" section, or [ ] the following payee.
(Note: If you authorize a SWP, you may not receive dividend or capital gain
distributions in cash.)
________________________________________________________________________________
Name of Payee
________________________________________________________________________________
Street Address City State ZIP
________________________________________________________________________________
Fund Name Class Designation
________________________________________________________________________________
Fund Name Class Designation
E Checkwriting Privilege
(Available for Class A shares and Money Market
Fund Class E shares only)
[ ] I request the checkwriting feature and have
completed the signature card below.
_______________________________________________
Account Number (if existing account)
_______________________________________________
Account Number (if existing account)
Signature Card Complete and sign this card and return it with your application
and investment. Do not detach.
Check applicable Fund(s) TO: State Street Bank and Trust Company ("Bank")
[ ] Money Market, Class E ________________________________________________
[ ] High Income Name (please print)
[ ] Tax-Exempt ________________________________________________
[ ] Government Income Name (please print)
[ ] NY Tax-Free ________________________________________________
[ ] Strategic Income Address City State ZIP
________________________________________________
Signature (exactly as it appears in the
Application, including any capacity)
________________________________________________
Signature (exactly as it appears in the
Application, including any capacity)
________________________________________________
Indicate the number of signatures required
______-_________________________________________
Tax Identification Number
Corporate and other accounts must include appropriate resolution forms. In
signing this signature card, the signator(s) signifies his/her or their
agreement to be subject to the rules and regulations of State Street Bank and
Trust Company pertaining thereto, as amended from time to time, and subject to
the conditions printed on the reverse side.
<PAGE>
MetLife Securities, Inc. Customer Profile
1
________________________________________________________________________________
Client's Name (or minor if U.G.M.A.) Age Social Security Number
________________________________________________________________________________
Joint Tenant Name (if any, or Age Social Security Number
custodian if U.G.M.A.)
Occupation ______________________ State of Residence ______________________
Name/Address of Employer _______________________________________________________
Is client an associated person of a broker/dealer? [ ] Yes [ ] No
If yes, furnish name and address _______________________________________________
2 Client's Estimated Annual Income (Not including income from this investment)
(N/A for UGMA, Trust, Partnership or Corp.)
[ ] $0-9,999 [ ] $20-39,999 [ ] $60-79,999 [ ] $100,000-199,999
[ ] $10-19,999 [ ] $40-59,999 [ ] $80-99,999 [ ] $200,000+
3 Savings and Investments (Exclusive of personal residence, home furnishings,
personal automobiles, and the amount of this investment) (N/A for UGMA, Trust,
Partnership or Corp.)
[ ] $0-9,999 [ ] $20-39,999 [ ] $60-79,999 [ ] $100,000-199,999 [ ] $400,000+
[ ] $10-19,999 [ ] $40-59,999 [ ] $80-99,999 [ ] $200,000-399,999
4 Net Worth (Assets minus liabilities exclusive of assets and liabilities
relating to personal residence, home furnishings and automobiles) (N/A for
UGMA, Trust, Partnership or Corp.)
[ ] $0-9,999 [ ] $20-39,999 [ ] $60-79,999 [ ] $100,000-199,999 [ ] $400,000+
[ ] $10-19,999 [ ] $40-59,999 [ ] $80-99,999 [ ] $200,000-399,999
<TABLE>
<CAPTION>
5 Main Investment Objective (select one) Secondary Investment Objective (optional)
<S> <C> <C> <C> <C> <C>
[ ] Aggressive Growth [ ] Growth & Income [ ] Tax Advantages [ ] Aggressive Growth [ ] Growth & Income [ ] Tax Advantages
[ ] Growth [ ] Current Income [ ] Growth [ ] Current Income
</TABLE>
<TABLE>
<CAPTION>
6 Source of Funds for This Investment
<S> <C> <C>
[ ] CD (Certificate of Deposit) [ ] Savings [ ] Money Market Fund
[ ] Surrender Life/Annuity Contract [ ] Rollover/Transfer of Pension Assets [ ] Another MetLife Policy, Account or Contract
[ ] Discretionary Income [ ] Loan [ ] Other ___________________________________
</TABLE>
7 This account was: [ ] Solicited [ ] Unsolicited
8 Tax Status of These Funds: [ ] Qualified [ ] Non-Qualified
9 Prior Investment Experience: Stocks ___ yrs. Bonds ___ yrs.
(complete all that apply) Mutual Funds ___ yrs. Margin ___ yrs.
Limited Partnerships ___ yrs. Options ___ yrs.
Other __________________ None ___
Investor Receipt and Arbitration Agreement
1. Arbitration
(i) Arbitration is final and binding on the parties.
(ii) The parties are waiving their right to seek remedies in court, including
the right to jury trial.
(iii) Pre-arbitration discovery is generally more limited than and different
from court proceedings.
(iv) The arbitrators' award is not required to include factual findings or
legal reasoning and any party's right to appeal or to seek modification of
rulings by the arbitrators is strictly limited.
(v) The panel of arbitrators will typically include a minority of arbitrators
who were or are affiliated with the securities industry.
(vi) No person shall bring a putative or certified class action to
arbitration, nor seek to enforce any pre-dispute arbitration agreement
against any person who has initiated in court a putative class action; or who
is a member of a putative class who has not opted out of the class with
respect to any claims encompassed by the putative class action until: (i) the
class certification is denied; or (ii) the class is decertified; or (iii) the
customer is excluded from the class by the court. Such forbearance to enforce
an agreement to arbitrate shall not constitute a waiver of any rights under
this agreement except to the extent stated herein.
2. MetLife Securities, Inc. (hereinafter "MSI") and the purchaser of the
shares, who is the signatory below (hereinafter the "Customer"), agree that
any controversy between MSI, its employees, directors, agents, officers or
affiliates and the Customer arising out of or relating to any transactions
between such parties shall be determined by arbitration. Any arbitration
pursuant to this agreement shall be conducted before, and under the rules of,
the National Association of Securities Dealers, Inc. Judgment upon the award
of the arbitrators may be entered in any federal or state court having
jurisdiction.
3. This agreement and any arbitration hereunder shall be governed and
construed in accordance with the laws of the State of New York, United States
of America, including New York procedural and substantive arbitration laws
and rules, without giving effect to conflicts of law principles.
The predispute arbitration agreement located immediately above is accepted and
agreed to. I have also received the current prospectus of the fund and have
given a check in the amount of $___________________ on this, the ____________
day of ________________ 19__
_______________________________________ ________________________________________
Customer Signature (exactly as your Registered Representative's Signature
name appears in Section 1)
/s/ Elaine S. Stevenson
_______________________________________ ________________________________________
Customer Signature MetLife Securities, Inc.; by:
Elaine S. Stevenson, President
_______________________________________ ________________________________________
Capacity
<PAGE>
6 Your Signature (All registered shareholders must sign.)
The undersigned confirms that all the information, instructions and agreements
set forth hereon shall apply to the account, and if applicable, shall also apply
to any other fund account with shares acquired upon exchange of shares of the
Fund.
Under penalties of perjury, I certify that (1) the number shown on this form is
my correct taxpayer identification number (or I am waiting for a number to be
issued to me), and (2) I am not subject to backup withholding because (a) I am
exempt from backup withholding, or (b) I have not been notified by the Internal
Revenue Service that I am subject to backup withholding as a result of a failure
to report all interest or dividends, or (c) the IRS has notified me that I am no
longer subject to backup withholding.
Certification instructions: You must cross out item (2) above if you have been
notified by the IRS that you are currently subject to backup withholding because
of underreporting interest or dividends on your tax return.
1. Arbitration
(i) Arbitration is final and binding on the parties.
(ii) The parties are waiving their right to seek remedies in court, including
the right to jury trial.
(iii) Pre-arbitration discovery is generally more limited than and different
from court proceedings.
(iv) The arbitrators' award is not required to include factual findings or
legal reasoning and any party's right to appeal or to seek modification of
rulings by the arbitrators is strictly limited.
(v) The panel of arbitrators will typically include a minority of arbitrators
who were or are affiliated with the securities industry.
(vi) No person shall bring a putative or certified class action to
arbitration, nor seek to enforce any pre-dispute arbitration agreement
against any person who has initiated in court a putative class action; or who
is a member of a putative class who has not opted out of the class with
respect to any claims encompassed by the putative class action until (i) the
class certification is denied; or (ii) the class is decertified; or (iii) the
customer is excluded from the class by the court. Such forbearance to enforce
an agreement to arbitrate shall not constitute a waiver of any rights under
this agreement except to the extent stated herein.
2. MetLife Securities, Inc. (hereinafter "MSI") and the purchaser of the shares,
who is the signatory below (hereinafter the "Customer"), agree that any
controversy between MSI, its employees, directors, agents, officers or
affiliates and the Customer arising out of or relating to any transactions
between such parties shall be determined by arbitration. Any arbitration
pursuant to this agreement shall be conducted before, and under the rules of,
the National Association of Securities Dealers, Inc. Judgment upon the award of
the arbitrators may be entered in any federal or state court having
jurisdiction.
3. This agreement and any arbitration hereunder shall be governed and construed
in accordance with the laws of the State of New York, United States of America,
including New York procedural and substantive arbitration laws and rules,
without giving effect to conflicts of law principles.
The predispute arbitration agreement located immediately above is accepted and
agreed to. I have also received the current prospectus of the fund and have
given a check in the amount of $_________________ on this, the ______________
day of ___________________________ 19__
The Internal Revenue Service does not require your consent to any provision of
this document other than the certification required to avoid backup withholding.
_______________________________________ ________________________________________
Customer Signature (exactly as your Registered Representative's Signature
name appears in Section 1)
/s/ Elaine S. Stevenson
_______________________________________ ________________________________________
Customer Signature MetLife Securities, Inc.;
by: Elaine S. Stevenson, President
_______________________________________
Capacity
7 Dealer Information and Signature Guarantee (For Dealer use only)
The Dealer agrees to all applicable provisions in this application and in the
Prospectus, guarantees the signature and legal capacity of the shareholder, and
represents that it has provided a current Prospectus to the Applicant and that
the application is properly executed by a person authorized by the Dealer to
guarantee signatures. The Dealer warrants that this application is completed in
accordance with the shareholder's instructions and information and agrees to
indemnify the Fund, any other Eligible Funds, the Investment Manager, the
Distributor, State Street Research Shareholder Services and the Transfer Agent
for any loss or liability from acting or relying upon such instructions and
information. Signature(s) Guaranteed By
MetLife Securities, Inc.
_______________________________________ ________________________________________
Dealer Name Branch Office Number
P.O. Box 30421
_______________________________________ ________________________________________
Address of Home Office Address of Branch Office
Servicing Account
Tampa, FL 33630
_______________________________________ ________________________________________
City State ZIP City State ZIP
_______________________________________ ________________________________________
Authorized Signature of Dealer Registered Representative's
- Tampa, FL Name and Number
_______________________________________
Signature Guarantee
The payment of monies is authorized by the signature(s) on the reverse side.
If the shareholder's account with the Fund is joint, all checks drawn upon this
account must include the signatures of all persons named in the account, unless
the persons signing this card have indicated on the reverse side of this card
that the Bank is authorized to accept any one signature. Each person guarantees
the genuineness of the other's signature. Checks may not be for less than $500
or such other minimum or maximum amounts as may from time to time be established
by the Fund.
The Bank is hereby appointed agent by the person(s) signing this card (the
"Depositor(s)") and, as agent, is authorized and directed to present checks
drawn on this checking account to the Fund or its redemption agent as requests
to redeem shares of the Fund registered in the name of the Depositor(s) in the
amounts of such checks and to deposit the proceeds of such redemptions in this
checking account. The Bank shall be liable only for its own negligence.
Depositor(s) hereby authorize(s) the Fund or its redemption agent to honor
redemption requests presented in the above manner by the Bank. The Fund and its
redemption agent will not be liable for any loss, expense or cost arising out of
check redemptions. If shares of the Fund are purchased by check, redemption
proceeds will ordinarily be withheld until the Fund is reasonably assured that
payment has been collected on the check. The Bank has the right not to honor
checks in amounts exceeding the value of the depositor(s) shareholder account at
the time the check is presented for payment.
The Bank reserves the right to change, modify or terminate this checking account
at any time upon notification mailed to the address of record of the
Depositor(s).
The terms and conditions of the Distributor's currently effective Selected
Dealer Agreement are included by reference in this section. The Dealer
represents that it has a currently effective Selected Dealer Agreement with the
Distributor authorizing the Dealer to sell shares of the Fund and the Eligible
Funds, and that it may lawfully sell shares of the designated Fund(s) in the
state designated as the Applicant's address of record.
- -------------------------------
DO NOT COMPLETE
MSI - Tampa
Dealer #__________ ST _____
Rep #______________________
Rep Name __________________
- -------------------------------
CONTROL NUMBER: 3672-970214(0398)SSR-LD
ML-598E-297
[FRONT SIDE OF CARD]
STATE STREET RESEARCH FUNDS
- --------------------------------------------------------------------------------
Additional Services Application
[bullet] Use a pen. Please print in CAPITAL LETTERS.
[bullet] Use this application to add any of the features below to a new or
existing State Street Research account.
[bullet] When providing bank information, be sure to attach a deposit slip or
voided, unsigned check.
[bullet] Be sure to sign this application.
[bullet] If you are submitting this application with a New Account Application,
you don't need to duplicate any bank information or signature
guarantees that are included with that application.
A Name
- -------------------------------------------------------------
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Name (as it appears on the account)
|_|_|_|_|_|_|_|_|_| |_|_|_|-|_|_|_|-|_|_|_|_|
Federal tax identification or Daytime phone number
Social Security number
B Regular Transfers and Redemptions
- --------------------------------------------------------------------------------
[bullet] Not available on retirement plan accounts.
[bullet] Choose one option only. To add different options to different accounts,
please fill out a separate application.
[bullet] Be sure to attach a deposit slip or voided, unsigned check depending
on the service you are requesting.
[solid box] I request the following automatic redemptions or transfers:
Please deposit my income dividends directly into my bank account.
Please deposit my income dividends and capital gains distributions directly
into my bank account.
Systematic Withdrawal Plan: Please redeem $|_|_|,|_|_|_|.00 ($50 minimum)
from my fund account: [ ] every month [ ] every 3 months
[ ] every 6 months [ ] every 12 months
I would like these redemptions to begin in month number |_|_|.
I would like the money [ ] deposited directly into my bank account
[ ] sent to me by check
[ ] sent by check to the following payee:
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Payee's name
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Payee's street address/P.O. Box
|_|_|_|_|_|_|_|_|_|_|_|_|_|_| |_|_| |_|_|_|_|_|-|_|_|_|_|
City State Zip
[solid box] Please make these redemptions or transfers from my accounts in each
of the following State Street Research funds:
|_|_|_|_|_|_|_|_|_|_|_|_|_|_| |_|_|_|_|_|_|_|_|_|_|_|_|_|
Fund name Account number
(if existing account)
|_|_|_|_|_|_|_|_|_|_|_|_|_|_| |_|_|_|_|_|_|_|_|_|_|_|_|_|
Fund name Account number
(if existing account)
[solid box] Please direct any bank deposits to my:
[ ] Checking account (voided, unsigned check attached)
[ ] NOW / money market / savings account (deposit slip attached)
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Bank name
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Bank address
|_|_|_|_|_|_|_|_|_|_|_|_|_|_| |_|_| |_|_|_|_|_|-|_|_|_|_|
City State Zip
|_|_|_|_|_|_|_|_|_|_|_|_|_|_| |_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Bank routing number Bank account number
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| ____________________________________
Name of one bank account holder, Signature
exactly as on bank statements
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_| ____________________________________
Name of second bank account holder, Signature
if any
C Checkwriting
- --------------------------------------------------------------------------------
[bullet] Available on some funds' Class A shares and on Money Market Fund
Class E shares.
[bullet] For corporate and other accounts, include the appropriate resolution
forms.
[bullet] Please do not detach the perforated card.
[solid box] I request State Street Bank and Trust Company to provide me with
checkwriting on these funds:
|_|_|_|_|_|_|_|_|_|_|
Account number (if existing account)
|_|_|_|_|_|_|_|_|_|_|
Account number (if existing account)
[ ] Government Income
[ ] High Income
[ ] Money Market
[ ] New York Tax-Free
[ ] Strategic Income
[ ] Tax-Exempt
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Your name
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Address
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
City
|_|_| |_|_|_|_|_|_|_|_|_|_|
State Zip
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Federal tax identification or Social Security number
_______________________________________________________
Your signature exactly as your name appears on your new
account application or your fund statements
(including any capacity)
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Name of joint owner, if any
_______________________________________________________
Signature of joint owner exactly as name appears on
fund statements (including any capacity)
Number of signatures you with to be required on a check:
See reverse side of card for additional terms and conditions.
[REVERSE SIDE OF CARD]
D Dividend Allocation Plan (DAP)
[solid box] Please collect my dividends and distributions from this
fund/account...
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Fund name
|_|_|_|_|_|_|_|_|_|_|_|_|
Account number (if existing account)
[solid box] ...and invest them in this fund/account (new accounts must meet
initial investment minimums):
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Fund name
|_|_|_|_|_|_|_|_|_|_|_|_|
Account number (if existing account)
E Signature Guarantee
- --------------------------------------------------------------------------------
[bullet] If you are investing directly, have Part I completed; if not, have your
dealer fill out Part II.
[bullet] If you are submitting this application with a New Account Application,
you don't need to duplicate the signature guarantee if it is included
with that application.
[solid box] I - For Direct Investments
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Name of bank or other guarantor
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Street address
|_|_|_|_|_|_|_|_|_|_|_|_|_|_| |_|_| |_|_|_|_|_|-|_|_|_|_|
City State Zip
The bank or guarantor guarantees the owner's legal capacity and all signatures
on this application and on related investment checks and instructions.
_______________________________________ |_|_| / |_|_| / |_|_|
Signature of bank's or guarantor's Date [month/day/year]
authorized representative
[solid box] II - For Investments Through a Dealer
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Dealer Name
|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Home office address
|_|_|_|_|_|_|_|_|_|_|_|_|_|_| |_|_| |_|_|_|_|_|-|_|_|_|_|
City State Zip
|_|_|_|_|_|_|_|_|_|_|_|_|_|_| |_|_|_|_|_|_|_|_|_|_|_|_|_|_|
Branch office address City
|_|_| |_|_|_|_|_|-|_|_|_|_| |_|_|_|-|_|_|_|-|_|_|_|_|
State Zip Branch office telephone number
The dealer:
[bullet] agrees to the terms of the current prospectus(es), application and
current dealer agreement, which is included by reference.
[bullet] represents that it has given the owner(s) the relevant prospectus(es).
[bullet] represents that it has completed this application according to
instructions from the owner(s).
[bullet] will indemnify the fund, its adviser, distributor or other agents from
any losses resulting from these instructions.
[bullet] guarantees the owner's legal capacity and all signatures on this
application and on related investment checks and instructions.
|_|_|_|_|_|_|_|_|_|_|_|_|_|_| |_|_|_|_|_|_|_|_|_|
Registered Representative Registered Representative number
_________________________________________ |_|_| / |_|_| / |_|_|
Signature of authorized officer or dealer Date [month/day/year]
F Your Signature
- --------------------------------------------------------------------------------
[bullet] All owners whose names are on the account need to sign this
application.
I acknowledge that I:
[bullet] am authorizing the additional services described above.
[bullet] have received current prospectus(es) for all funds in which I am
investing.
[bullet] have the right to cancel any service at any time by writing to
State Street Research.
___________________________________________
Your signature exactly as your name appears
on your New Account Application or your
fund statements
___________________________________________
Signature of joint owner (if any) exactly
as name appears on fund application or
statements
|_|_| / |_|_| / |_|_|
Date [month/day/year]
By signing this form, I agree to all of the provisions and applicable rules
under the Massachusetts Uniform Commercial Code and to any conditions on
redeeming shares from the State Street Research funds.
I also agree that:
[bullet] this form applies to any other identically registered State Street
Research fund account with the checkwriting privilege I establish
later.
[bullet] if I am subject to IRS backup withholding, I may write checks only on
money fund accounts.
[bullet] State Street Bank and Trust Company and the fund reserve the right to
terminate my checkwriting privilege.
I represent that the signatures are authentic, and, for organizations, I have
submitted a certified resolution authorizing the individuals with legal capacity
to sign and act on behalf of the organization.
I understand that I am authorizing the bank to instruct State Street Research
to sell sufficient shares in my mutual fund account to honor the check.
[Logo: State Street Research]
Mail this application, along with any other required documents to:
State Street Research Funds
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000806390
<NAME> STATE STREET RESEARCH FINANCIAL TRUST
<SERIES>
<NUMBER> 011
<NAME> STATE STREET RESEARCH GOVERNMENT INCOME FUND CLASS A
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<EXPENSES-NET> 8,039,481
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<REALIZED-GAINS-CURRENT> 8,763,745
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<NET-CHANGE-FROM-OPS> 53,746,643
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (35,201,643)
<DISTRIBUTIONS-OF-GAINS> 0
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<NUMBER-OF-SHARES-REDEEMED> (8,994,512)
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<ACCUMULATED-NII-PRIOR> 100,856
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000806390
<NAME> STATE STREET RESEARCH FINANCIAL TRUST
<SERIES>
<NUMBER> 012
<NAME> STATE STREET RESEARCH GOVERNMENT INCOME FUND CLASS B
<S> <C>
<PERIOD-TYPE> YEAR
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<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 647,562,954
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<PAID-IN-CAPITAL-COMMON> 688,551,717
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<DISTRIBUTIONS-OF-INCOME> (5,410,928)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,428,886
<NUMBER-OF-SHARES-REDEEMED> (1,914,285)
<SHARES-REINVESTED> 515,830
<NET-CHANGE-IN-ASSETS> (31,539,207)
<ACCUMULATED-NII-PRIOR> 3,771,439
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<GROSS-ADVISORY-FEES> 4,364,193
<INTEREST-EXPENSE> 0
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<PER-SHARE-NAV-BEGIN> 12.40
<PER-SHARE-NII> 0.70
<PER-SHARE-GAIN-APPREC> 0.22
<PER-SHARE-DIVIDEND> (0.71)
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<RETURNS-OF-CAPITAL> 0
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<EXPENSE-RATIO> 1.83
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000806390
<NAME> STATE STREET RESEARCH FINANCIAL TRUST
<SERIES>
<NUMBER> 014
<NAME> STATE STREET RESEARCH GOVERNMENT INCOME FUND CLASS C
<S> <C>
<PERIOD-TYPE> YEAR
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<PERIOD-END> OCT-31-1997
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<OVERDISTRIBUTION-GAINS> (39,689,487)
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000806390
<NAME> STATE STREET RESEARCH FINANCIAL TRUST
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<NUMBER> 013
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<S> <C>
<PERIOD-TYPE> YEAR
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<SHARES-COMMON-PRIOR> 625,275
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<OVERDISTRIBUTION-GAINS> (39,689,487)
<ACCUM-APPREC-OR-DEPREC> 19,031,463
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<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
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<SHARES-REINVESTED> 1,888,424
<NET-CHANGE-IN-ASSETS> (31,539,207)
<ACCUMULATED-NII-PRIOR> 3,771,439
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (86,648,683)
<GROSS-ADVISORY-FEES> 4,364,193
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 8,039,481
<AVERAGE-NET-ASSETS> 671,414,308
<PER-SHARE-NAV-BEGIN> 12.42
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<PER-SHARE-DIVIDEND> (0.83)
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<EXPENSE-RATIO> 0.82
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
