SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
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STATE STREET RESEARCH PORTFOLIOS, INC.
(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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STATE STREET RESEARCH INTERNATIONAL EQUITY FUND
a series of
State Street Research Portfolios, Inc.
One Financial Center
Boston, Massachusetts 02111
Dear Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders of
State Street Research International Equity Fund, a series of State Street
Research Portfolios, Inc. (the "Fund"), to be held at the offices of the State
Street Research Portfolios, Inc. (the "Company"), at One Financial Center,
Boston, Massachusetts 02111 on [_____________], 1998 at [_____] local time.
At this important meeting, you will be asked to consider and act upon
the following proposals:
1. To approve an Agreement and Plan of Reorganization and Liquidation
between the Fund and State Street Research International Equity Fund, a
newly-created series of State Street Research Financial Trust (the
"Acquiring Fund").
2. To change the classification of the policy regarding investments in
options from fundamental to nonfundamental.
3. To amend the Fund's fundamental policy regarding investing in
commodities and commodity contracts.
4. To amend the Fund's fundamental policy relating to securities lending.
5. To amend the Fund's fundamental policy regarding industry concentration.
6. (For Class S shareholders only). To include Class S shares under the
Fund's Plan of Distribution Pursuant to Rule 12b-1.
I thank you for your participation as a shareholder and urge you to
exercise your right to vote by completing, dating and signing the enclosed proxy
card. A self-addressed, postage-paid envelope has been enclosed for your
convenience. We look forward to receiving your vote.
IT IS VERY IMPORTANT THAT YOUR VOTING INSTRUCTIONS BE RECEIVED NO LATER
THAN _____________, 1998.
Instructions for shares held of record in the name of a nominee, such as
a broker-dealer, may be subject to earlier cut-off dates established by such
intermediaries to facilitate a timely response.
Sincerely,
Ralph F. Verni
Chairman of the Board,
President and Chief Executive Officer
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STATE STREET RESEARCH INTERNATIONAL EQUITY FUND
a series of
State Street Research Portfolios, Inc.
One Financial Center
Boston, Massachusetts 02111
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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held On ____________, 1997
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A Special Meeting of Shareholders of State Street Research International
Equity Fund, a series of State Street Research Portfolios, Inc. (the "Fund"),
will be held at the offices of State Street Research Portfolios, Inc., a
Maryland corporation (the "Company"), One Financial Center, Boston,
Massachusetts 02111 on ___________, 1998 at ________ local time (the "Meeting")
for the following purposes:
1. To consider and act upon an Agreement and Plan of Reorganization and
Liquidation providing for the transfer of the assets of the Fund
(subject to certain of its liabilities) to State Street Research
International Equity Fund, a series of State Street Research Financial
Trust (the "Acquiring Fund") in exchange for Class A, Class B, Class C
and Class S shares of the Acquiring Fund, the distribution of such
shares to shareholders of the Fund and the subsequent liquidation of the
Fund;
2. To change the classification of the policy regarding investments in
options from fundamental to nonfundamental.
3. To amend the Fund's fundamental policy regarding investing in
commodities and commodity contracts.
4. To amend the Fund's fundamental policy relating to securities lending.
5. To amend the Fund's fundamental policy regarding industry concentration.
6. (For Class S shareholders only). To include Class S shares under the
Fund's Plan of Distribution Pursuant to Rule 12b-1.
7. To consider and act upon any matter incidental to the foregoing and to
transact such other business as may properly come before the Meeting and
any adjournments thereof.
The close of business on _____________, 1998 has been fixed as the
record date for the determination of shareholders entitled to notice of, and to
vote at, the Meeting and any adjournments thereof.
YOUR VOTE IS IMPORTANT REGARDLESS OF THE SIZE OF YOUR HOLDINGS IN THE
FUND. WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE COMPLETE
AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED
ENVELOPE, WHICH NEEDS NO POSTAGE IF MAILED IN THE UNITED STATES. IF YOU DESIRE
TO VOTE IN PERSON AT THE MEETING, YOU MAY REVOKE YOUR PROXY.
By Order of the Directors,
Francis J. McNamara, III
Secretary
___________, 1998
Date of Notice
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QUESTIONS AND ANSWERS
Q: Why is this material being sent to shareholders and what are they
supposed to do with it?
A: This material is being sent to shareholders of the International Equity
Fund to ask them to vote on important recommendations by the Directors
of the Fund that will affect their interest in the Fund. You should read
the material, mark your vote on the enclosed Proxy Form and send it
back. Call 1-800-562-0032 for help with your questions.
Q: What is the recommendation in Proposal 1?
A: Proposal 1 is asking shareholders of the International Equity Fund to
simply change its present form of organization from the sole portfolio
series of State Street Research Portfolios, Inc. to that of a
newly-organized portfolio series of State Street Research Financial
Trust. The reorganization will not change the investment objective or
policies of the Fund. This transaction is being proposed because it is
expected that the operation of the Fund as one of several portfolio
series of State Street Research Financial Trust will result in greater
administrative efficiency. After the change, the name of your fund will
be the same as before.
Q: Under Proposal 2, what is a fundamental policy and why is the Fund
changing the policy on options to nonfundamental?
A: Fundamental policies are ones which can only be changed by shareholder
vote. The proposal is to change the policy to nonfundamental so that the
Fund can react quickly to investment ideas or regulatory changes in the
future and avoid coming back to the shareholders in the event of a
conflict with an old fundamental policy. The Fund expects to adopt a
nonfundamental policy which provides greater flexibility to invest in
options as market developments occur.
Q: Under Proposal 3, what is the change on commodities?
A: Commodities are a special category of investments, which includes
so-called futures contracts, which sophisticated investors like the Fund
use to protect against, or make money on, expected market changes. A
revised fundamental policy would be adopted to provide the Fund with
greater flexibility to invest in commodities.
Q: Under Proposal 4, what is the change on lending?
A: Under the fund's current lending policy, the Fund is permitted to lend
its portfolio securities only up to 20% of its total assets. The
proposed change would remove this percentage limitation. As a result,
the Fund would be permitted to lend its portfolio securities up to
33-1/3% of total assets (total assets to include the value of the
collateral received from the lending of such securities).
Q: Under Proposal 5, what is the change on industry concentration?
A: Under current policy, the Fund may not make an investment which would
cause it to have more than 25% of its assets invested in companies in
any one industry. The proposed change would recognize that the way an
industry is defined can vary over time and acknowledges that the Fund
may want to redefine industries as businesses evolve.
Q: What is Proposal 6, for Class S shareholders only, relating to the
Fund's Plan of Distribution Pursuant to Rule 12b-1 (the "Distribution
Plan")?
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A: Class S shareholders of the Fund are being asked to include Class S
shares of the Fund under the Distribution Plan. Class S shareholders
would not incur any new distribution fees, but the Distribution Plan
will provide that the Fund's distributor may expend its own resources in
the distribution of Class S shares.
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Important additional information about the proposals is set forth in the
accompanying Proxy Statement. Please read it carefully.
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STATE STREET RESEARCH INTERNATIONAL EQUITY FUND
a series of
State Street Research Portfolios, Inc.
One Financial Center
Boston, Massachusetts 02111
The following table identifies each proposal set forth in the Notice of
Special Meeting of Shareholders (the "Notice") and the checkmark (T) indicates
which classes of the Fund's shareholders are being solicited to approve which
proposal.
Proposal Fund Classes
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A, B & C S
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1. Agreement and Plan of Reorganization [Check Mark] [Check Mark]
and Liquidation
2. Options [Check Mark] [Check Mark]
3. Commodities [Check Mark] [Check Mark]
4. Securities Lending [Check Mark] [Check Mark]
5. Industry Concentration [Check Mark] [Check Mark]
6. Rule 12b-1 Plan (Class S Only) [Check Mark]
This Proxy Statement is furnished to the shareholders of State Street
Research International Equity Fund, the sole portfolio series of State Street
Research Portfolios, Inc., (the "Fund"), in connection with the solicitation of
proxies by and on behalf of the Board of Directors of State Street Research
Portfolios, Inc. (the "Company") to be used at a Special Meeting of Shareholders
of the Fund to be held at the offices of the Company, One Financial Center,
Boston, Massachusetts 02111 at [_____] local time on [________], 1998 and at any
adjournment thereof (the "Meeting").
Any shareholder who has given a proxy has the right to revoke it at any
time prior to its exercise by attending the Meeting and voting his or her shares
in person or by submitting a written notice of revocation or a later-dated proxy
to the Company at the address of the Company set forth on the cover page of this
Proxy Statement prior to the date of the Meeting. Shareholders of record of the
Fund at the close of business on [____________,] 1998 (the "Record Date") will
be entitled to notice of, and to vote at, the Meeting of the Fund or to vote at
any adjournments thereof. This Proxy Statement, proxy and accompanying Notice of
Special Meeting of Shareholders (the "Notice") were first sent or given to
shareholders of the Fund on or about [____________,] 1998.
As of the Record Date, there were approximately [_______], [______],
[_______] and [_____] issued and outstanding Class A, Class B, Class C and Class
S shares, respectively, of the Fund. Each share of the Fund is entitled to one
vote, with a proportionate vote for each fractional share.
If the enclosed Proxy form is properly executed and returned in time to
be voted at the Meeting, the shares represented thereby will be voted in
accordance with the instructions on the Proxy form. The proxy grants discretion
to the persons named therein, as proxies, to take such further action as they
may determine appropriate in connection with any other matter which may properly
come before the Meeting or any adjournments thereof. The Company does not
currently know of any matter to be considered at the Meeting other than the
proposals set forth in the Notice.
The affirmative vote of the holders of a majority of the shares entitled
to vote of the Fund outstanding at the close of business on the Record Date, all
classes voting together, is required to approve Proposal 1. Approval of each of
proposals 2 through 5 requires 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,
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the vote of a majority of the outstanding voting securities (a "1940 Act
Majority Vote") means the vote of the lesser of (i) 67% or more of the voting
shares present at the Meeting if the holders of more than 50% of the outstanding
voting shares are present or represented by proxy or (ii) more than 50% of
outstanding voting shares. Approval of Proposal 6 requires a 1940 Act Majority
Vote of the Class C shares of the Fund.
The holders of a majority of the shares entitled to vote of the Fund
outstanding at the close of business on the Record Date present in person or
represented by proxy constitute a quorum for the Meeting. In the event a quorum
is not present at the Meeting or in the event a quorum is present at the Meeting
but sufficient votes to approve the proposals are not received, the persons
named as proxies may propose an adjournment to a date not more than 120 days
after the Record Date without further notice to shareholders of the Meeting to
permit further solicitation of proxies provided such persons determine, after
consideration of all relevant factors, including the nature of the proposal, the
percentage of votes then cast, the percentage of negative votes then cast, the
nature of the proposed solicitation activities and the nature of the reasons for
such further solicitation, that an adjournment and additional solicitation is
reasonable and in the interests of shareholders. A shareholder vote may be taken
on one or more of the proposals prior to such adjournment if sufficient votes
have been received and such vote is otherwise appropriate. Any such adjournment
will require the affirmative vote of a majority of those shares present at the
Meeting in person or by proxy.
For purposes of determining the presence of a quorum for transacting
business at the Meeting and for determining whether sufficient votes have been
received for approval of any proposal to be acted upon at the Meeting,
abstentions and broker "non-votes" (that is, proxies from brokers or nominees
indicating that such persons have not received instructions from the beneficial
owner or other persons entitled to vote shares on a particular matter with
respect to which the brokers or nominees do not have, or choose not to exercise,
discretionary power) may on the discretion of the Company be treated as shares
that are present at the Meeting and entitled to vote on the proposal, but which
have not been voted. For this reason, abstentions and broker non-votes could
assist the Fund in obtaining a quorum. When counted as present, abstentions and
broker non-votes have the practical effect of a Ano@ vote for purposes of
obtaining the requisite vote for approval of proposals 1 through 6. When
abstentions and broker non-votes are not counted as present, the percentage
voting in favor of a proposal will be arithmetically higher than if such
abstentions and broker non-votes were counted.
The Fund will bear the costs of preparing, printing and mailing the
enclosed proxy, accompanying Notice and Proxy Statement and all other costs in
connection with solicitation of proxies, including any additional solicitation
by letter, telephone or telegraph.
In addition to solicitation of proxies by mail, officers of the Company
and officers and regular employees of State Street Research & Management Company
("SSRM"), affiliates of SSRM, or other representatives of the Company may also
solicit proxies by telephone or telegram or in person. The Company also intends
to use Proxy Advantage, a service provided by a wholly-owned subsidiary of First
Data Investment Services Group, Inc. ("FDISG"), a proxy solicitation firm, to
assist with the mailing and tabulation effort and any special, personal
solicitation of proxies. The costs of retaining FDISG to perform such services
are estimated to be $________, which will be borne by the Fund, in addition to
out-of-pocket expenditures for postage, printing and related items. The Fund
will reimburse brokerage firms and others for their expenses in forwarding
solicitation material to the beneficial owners of shares of the Fund.
Shareholders of the Fund may be asked by FDISG representatives to cast
their votes by authorizing the execution of a proxy by telephone. Shareholders
will either be contacted by a FDISG representative using information derived
from a shareholder list provided by the Fund or shareholders may be sent a
written communication or left a telephone message asking the shareholder to
telephone FDISG at a designated toll-free number. In all such cases, the
representative of FDISG will ask for the shareholder's full name and address,
the last four digits of the shareholder's social security number or employer
identification number, the person's title (in the case of a corporate
shareholder) and confirmation that the person is authorized to direct the voting
of the shares. The shareholder will be asked to confirm that the Proxy Statement
and proxy form have been received. If answered in the affirmative, the FDISG
representative will advise the shareholder that the shareholder may authorize
the execution of a proxy over the telephone and ask the shareholder if the
shareholder desires to authorize the execution of a proxy at that time.
Telephone conversations will be recorded. If the shareholder chooses to proceed,
the FDISG representative will then ask the shareholder if the shareholder wishes
to support all of the recommendations of the Directors as stated in the Proxy
Statement. If the shareholder does not choose to support
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the recommendations of the Directors, the FDISG representative will ask the
shareholder if the shareholder would like to consider each proposal
individually. If answered in the affirmative, the FDISG representative will read
the proposals to the shareholder and ask for such shareholder's voting
instruction on each proposal.
Although the FDISG representative will assist with any questions, the
answers to which are contained in the Proxy Statement, the FDISG representative
will not make recommendations on how to vote on any proposal. Finally, the FDISG
representative will explain that FDISG will execute a written proxy as the
shareholder's agent in accordance with the shareholder's instructions and will
forward the proxy to the Fund. Within 72 hours after each telephone call, FDISG
will send to each shareholder who used the telephone proxy voting method a
written confirmation of the shareholder's instructions. The shareholder will be
asked to contact FDISG immediately if the shareholder's instructions have not
been properly recorded.
If a shareholder wishes to participate in the Meeting, but does not wish
to authorize the execution of a proxy by telephone, the shareholder may still
submit the Proxy form included with this Proxy Statement or attend the Meeting
in person. Any shareholder who has given a proxy, by telephone or in written
form, has the right to revoke it at any time prior to its exercise by submitting
a subsequent telephone vote, or a written notice of revocation or a later-dated
proxy to the Company at the above address or by attending the Meeting and voting
his or her shares in person.
Upon request by a shareholder of the Fund to State Street Research
Shareholder Services, One Financial Center, Boston, Massachusetts 02111 at
1-800-562-0032, the annual report and most recent semiannual report succeeding
the annual report, if any, for the Fund will be furnished without charge to the
requesting shareholder.
The Fund's distributor is State Street Research Investment Services,
Inc., ("SSRIS") One Financial Center, Boston, Massachusetts 02111.
As of _________, 1998, the Directors of the Company owned less than 1%
of outstanding shares of the Fund (and less than 1% of the outstanding Class S
shares of the Fund).
3
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PROPOSAL ONE
AGREEMENT AND PLAN OF REORGANIZATION AND LIQUIDATION
Proposed Reorganization
At meetings held on __________, 1998 the Board of Directors of the
Company and the Board of Trustees of State Street Research Financial Trust (the
"Trust"), respectively, approved an Agreement and Plan of Reorganization and
Liquidation (the "Plan of Reorganization") substantially in the form set forth
as Exhibit A to this Proxy Statement. The Plan of Reorganization provides for
the transfer of all of the assets of the Fund to State Street Research
International Equity Fund, a newly-organized series of the Trust (the "Acquiring
Fund"), and the assumption by the Acquiring Fund of all liabilities of the Fund
reflected on an unaudited statement of assets and liabilities in exchange for
Class A, Class B, Class C and Class S shares of beneficial interest, $.001 par
value per share, of the Acquiring Fund (the "Acquiring Fund Shares"). The number
and aggregate net asset value of the Acquiring Fund Shares of each class to be
issued will equal the number and aggregate net asset value of each corresponding
class of the Fund outstanding as of the close of business on the business day
immediately prior to the closing of the Reorganization (the "Valuation Date").
The obligations of the Company and the Trust to effectuate the Reorganization
are subject to the satisfaction of certain conditions, including approval by the
shareholders of the Fund of the Plan of Reorganization. The closing ("Closing")
of the Reorganization will take place following the satisfaction or waiver of
the conditions to the Reorganization. At or as soon as practicable after the
Closing, the Fund will liquidate and distribute to its shareholders of record as
of the close of business on the Valuation Date the full and fractional Acquiring
Fund Shares received by the Fund, each shareholder to receive a number of
Acquiring Fund Shares of each class equal to the number of shares of common
stock of the Fund of the corresponding class held by such shareholder on the
Valuation Date. The proposed transaction described above is referred to in this
Proxy Statement as the "Reorganization". The Fund and the Acquiring Fund may
hereinafter be referred to collectively as the "Funds" and individually as a
"Fund." The Board of Directors of the Company may hereinafter be referred to as
the "Board of Directors," and the Board of Trustees of the Trust may hereinafter
be referred to as the "Board of Trustees."
The Acquiring Fund will commence operations upon the Reorganization and
will have an investment objective, policies and restrictions that are identical
to those of the Fund (which will reflect any modifications of the Fund's
policies that are approved by shareholders pursuant to Proposals 2 through 5 in
this Proxy Statement).
In the Reorganization, the Acquiring Fund will assume certain
liabilities, including all expenses, costs, charges and reserves reflected on an
unaudited statement of assets and liabilities of the Fund prepared as of the
close of business on the Valuation Date in accordance with generally accepted
accounting principles consistently applied from the prior audited period. Such
statement of assets and liabilities will reflect those liabilities known to the
Fund as of the date thereof.
The Plan of Reorganization authorizes the Company, as the sole
shareholder of the Acquiring Fund prior to the distribution of the Acquiring
Fund Shares to Fund shareholders to take the following actions: (i) approve an
Investment Management Agreement (the "New Management Agreement") between the
Trust, on behalf of the Acquiring Fund, and SSRM, (ii) approve a Sub-Investment
Management Agreement (the "New Sub-Investment Management Agreement") by and
among the Trust, on behalf of the Acquiring Fund, SSRM and GFM International
Investors, Inc. ("GFM"), with respect to the Acquiring Fund, (iii) approve a
Plan of Distribution Pursuant to Rule 12b-1 (the "Acquiring Fund Distribution
Plan") with respect to the Class A, Class B and Class S shares of the Acquiring
Fund (and the Class S shares, if Proposal 6 is approved by Class S shareholders
of the Fund), and (iv) ratify the selection of Price Waterhouse LLP as the
independent accountants of the Fund.
The liquidation of the Fund and distribution of the Acquiring Fund
Shares to shareholders of the Fund will be accomplished by the establishment of
shareholder accounts on the share records of the Acquiring Fund in the name of
each such shareholder of the Fund, representing the respective number of full
and fractional Acquiring Fund Shares due such shareholder. All of the Acquiring
Fund's future distributions attributable to the shares issued in the
Reorganization will be paid to shareholders in cash or invested in additional
shares of the Acquiring Fund at the price in effect as described in the
Acquiring Fund's prospectus on the respective payment dates in accordance with
instructions previously given by the shareholder to the Fund's transfer agent.
As of the Closing, each outstanding certificate which, prior to the Closing,
represented shares of the Fund will be deemed for all
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purposes to evidence ownership of the number of Acquiring Fund Shares issuable
with respect thereto pursuant to the Reorganization. After the Closing,
certificates originally representing shares of Class A or Class S of the Fund
will be rendered nonnegotiable; upon special request and surrender of such
certificates to State Street Bank and Trust Company (State Street Bank") as
transfer agent, holders of these nonnegotiable certificates shall be entitled to
receive certificates representing the number of Acquiring Fund Shares issuable
with respect thereto. All Class B and Class C shares of the Acquiring Fund are
held of record in book entry form and no certificates for such shares will be
issued. Following the Closing, the Company will be deregistered as an investment
company under the 1940 Act and will be dissolved under Maryland law.
Notwithstanding approval by shareholders of the Fund, the Plan of
Reorganization may be terminated at any time prior to the consummation of the
Reorganization without liability on the part of either party or its respective
Directors or Trustees, officers or shareholders, by either party on written
notice to the other party if circumstances should develop that, in the opinion
of the Company or the Trust, make proceeding with the Reorganization
inadvisable. The Plan of Reorganization may be amended, waived or supplemented
in such manner as may be mutually agreed upon by the authorized officers of the
Company and the Trust; provided, however, that following the Meeting, no such
amendment, waiver or supplement may have the effect of changing the provision
for determining the number of Acquiring Fund Shares to be issued to the Fund
shareholders to the detriment of such shareholders without their further
approval. The expenses incurred in connection with entering into and carrying
out the provisions of the Plan of Reorganization, whether or not the
Reorganization is consummated, will be paid by the Fund.
Full and fractional shares of the Acquiring Fund will be issued to the
Fund shareholders in accordance with the procedures under the Plan of
Reorganization as described above. Each share will be fully paid and
nonassessable by the Trust when issued and transferable without restrictions and
will have no preemptive or cumulative voting rights and have only such
conversion or exchange rights as the Board of Trustees of the Trust may grant in
its discretion.
By approving the Reorganization, shareholders will be agreeing to waive
any investment restrictions which could be deemed to prohibit the Reorganization
to the extent necessary to effect the Reorganization.
Reasons for the Reorganization
The Board of Directors has proposed the Reorganization to simplify the
administration of the Fund. Specifically, following the Reorganization the Fund
will be one among the multiple series of the Trust as opposed to the sole series
of the Company. The Company will also deregister as an investment company with
the Securities and Exchange Commission (the "Commission"). The Reorganization
will consequently eliminate the need for a separate registration statement
filing by the Company with the Commission as well as certain state filings. In
addition, the Fund will become a series of a Massachusetts business trust, the
form of organization used by all other registered investment companies currently
managed by SSRM and distributed by SSRIS. The use of a common form of
organization will facilitate administration of the Fund by eliminating the need
to monitor and comply with a separate set of legal requirements applicable to a
Maryland corporation.
Federal Income Tax Consequences
Tax counsel to the Fund, Goodwin, Procter & Hoar LLP, is to opine that,
subject to customary assumptions and representations, on the basis of the
existing provisions of the Internal Revenue Code (the "Code"), the Treasury
Regulations promulgated thereunder and current administrative and judicial
interpretations thereof, for Federal income tax purposes: (a) the transfer of
all or substantially all of the Fund's assets solely in exchange for Acquiring
Fund Shares and the assumption by the Acquiring Fund of certain assumed
liabilities of the Fund, and the distribution of such shares to shareholders of
the Fund will constitute a "reorganization" within the meaning of Section
368(a)(1)(F) of the Code; the Fund and the Acquiring Fund will each be a "party
to a reorganization" within the meaning of Section 368(b); (b) no gain or loss
will be recognized by the Fund or the Acquiring Fund on the transfer of the
Fund's assets to the Acquiring Fund in exchange for Acquiring Fund Shares and
the assumption by the Acquiring Fund of certain assumed liabilities of the
Acquired Fund or upon the distribution of the Acquiring Fund Shares to the
Fund's shareholders in exchange for their shares of the Fund; (c) the tax basis
of the Fund's assets acquired by the Acquiring Fund will be the same to the
Acquiring Fund as the tax basis of such assets to the Fund immediately prior to
the Reorganization, and the holding period of the assets of the Fund in the
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hands of the Acquiring Fund will include the period during which those assets
were held by the Fund; (d) no gain or loss will be recognized by the Acquiring
Fund upon the receipt of the assets of the Fund solely in exchange for the
Acquiring Fund Shares and the assumption by the Acquiring Fund of certain
assumed liabilities of the Fund; (e) no gain or loss will be recognized by
shareholders of the Fund upon the receipt of the Acquiring Fund Shares by such
shareholders, provided such shareholders receive solely Acquiring Fund Shares
(including fractional shares) in exchange for their Fund shares; (f) the
aggregate tax basis of the Acquiring Fund Shares, including any fractional
shares, received by each shareholder of the Fund pursuant to the Reorganization
will be the same as the aggregate tax basis of the Fund's shares held by such
shareholder immediately prior to the Reorganization, and the holding period of
the Acquiring Fund Shares, including fractional shares, to be received by each
shareholder of the Fund will include the period during which the Fund's shares
exchanged therefor were held by such shareholder (provided that the Fund's
shares were held as a capital asset on the date of the Reorganization).
The receipt of such an opinion is a condition to the consummation of the
Reorganization. If the transfer of the Assets of the Fund in exchange for
Acquiring Fund Shares and the assumption by the Acquiring Fund of certain
liabilities of the Fund do not constitute a tax-free reorganization, each Fund
shareholder will recognize gain or loss equal to the difference between the
value of Acquiring Fund Shares such shareholder acquires and the tax basis of
such shareholder's Fund shares.
Shareholders of the Fund should consult their tax advisers regarding the
effect, if any, of the proposed Reorganization in light of their individual
circumstances. Since the foregoing discussion relates only to the Federal income
tax consequences of the Reorganization, shareholders of the Fund should also
consult their tax advisers as to state and local tax consequences, if any, of
the Reorganization.
Management and Other Service Providers
Responsibility for the management and supervision of the Company and the
Fund rests with the Company's Board of Directors. The same individuals that
currently serve as Directors of the Company also serve as Trustees of the Trust.
In addition, Thomas L. Phillips and Jeptha H. Wade also serve as Trustees of the
Trust and are expected to retire in April, 1998. Mr. Phillips is 72. He is
retired and was formerly Chairman of the Board and Chief Executive Officer of
Raytheon Company, of which he remains a director. Mr. Wade 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. Each of the current officers of the
Company will also serve as officers of the Trust.
SSRM, the Fund's investment manager, is an indirect, wholly-owned
subsidiary of Metropolitan Life Insurance Company ("Metropolitan"). The Company
and SSRM are parties to an Investment Management Agreement (the "Current
Management Agreement") pursuant to which SSRM provides investment research and
management and other services for the Fund. In consideration for such services,
SSRM receives a monthly investment advisory fee from the Fund based on the
average daily value of the net assets of the Fund. In turn, SSRM has entered
into a Sub-Investment Management Agreement (the "Current Sub-Investment
Management Agreement") with the Company and GFM International Investors Limited
whereby GFM has assumed the overall responsibility for managing the investments
of the Fund, subject to the supervision of the Company's Board of Directors and
SSRM. GFM is also an indirect subsidiary of Metropolitan. GFM receives a monthly
fee from SSRM based upon the average daily value of the net assets of the Fund.
The Current Management Agreement between SSRM and the Company was transferred in
March, 1997 to SSRM from SSRIS which is also an indirect, wholly-owned
subsidiary of Metropolitan.
Responsibility for the management and supervision of the Trust,
including the Acquiring Fund, rests with the Trust's Board of Trustees. SSRM
will also act as investment manager of the Acquiring Fund and GFM will also act
as sub-investment adviser of the Acquiring Fund. The Trust will enter into the
New Management Agreement with SSRM that is substantially identical to the
Current Management Agreement. SSRM will enter into the New Sub-Investment
Management Agreement with the Trust and GFM that is substantially identical to
the Current Sub-Investment Management Agreement.
State Street Bank will act as custodian and transfer agent for the
Acquiring Fund pursuant to agreements with the Trust that are substantially
similar to the current agreements with the Company. State Street Bank is not an
affiliate of the Acquiring Fund, the Fund, Metropolitan, SSRIS, GFM or SSRM.
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Deloitte & Touche LLP serves as the independent accountants for the
Fund. Price Waterhouse LLP, the independent accounts for each of the other
series of the Trust, will serve as independent accountants for the Acquiring
Fund.
Multiple Class Structure; Distribution Arrangements
The Fund has outstanding and offers four classes of shares, which may be
purchased through securities dealers, other financial intermediaries, and
special programs at the next determined net asset value per share plus, in the
case of all classes except the Class S shares, a sales charge which, at the
election of the investor, may be imposed (a) at the time of purchase (the Class
A shares) or (b) on a deferred basis (the Class B and Class C shares). In the
proposed Reorganization, shareholders of the Fund will receive the corresponding
class of shares of the Acquiring Fund which they currently hold in the Fund.
Prior to November, 1997, the current Class S shares were designated as Class C,
and the current Class C shares were designated as Class D. The Class A, Class B,
Class C and Class S shares of the Acquiring Fund will have identical
arrangements with respect to the imposition of initial and contingent deferred
sales charges and distribution and service fees as the comparable class of
shares of the Fund. The Reorganization will be effected at net asset value
without the imposition of a sales charge, and thus, Acquiring Fund Shares
acquired by shareholders of the Fund pursuant to the proposed Reorganization
would not be subject to any initial sales charge or contingent deferred sales
charge as a result of the Reorganization. However, holders of the Acquiring Fund
Shares acquired as a result of the Reorganization would continue to be subject
to a contingent deferred sales charge upon subsequent redemption to the same
extent as if they had continued to hold their shares of the Fund. 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 of the Acquiring
Fund, the holding period of the redeemed shares will be "tacked" to the holding
period of the Fund.
SSRIS serves as distributor of shares of the Fund. The Fund adopted a
Plan of Distribution pursuant to Rule 12b-1 (the "Distribution Plan") in 1993
that is currently applicable to Class A, B and C shares of the Fund. (If
Proposal 6 is adopted, the Distribution Plan would also be applicable to Class S
shares.) Under the Distribution Plan, and a distribution agreement between the
Company and SSRIS, the Fund makes payments to SSRIS based on an annual
percentage of the average daily value of the net assets of each class of shares
as follows:
Class of Shares
of Each Fund Service Fee Distribution Fee
--------------- ----------- ----------------
A 0.25% None
B 0.25% 0.75%
C 0.25% 0.75%
S None None
The Acquiring Fund's Distribution Plan and related distribution
agreement will be substantially identical to the Fund's Distribution Plan and
distribution agreement, respectively.
Dividends and Distributions
The Acquiring Fund will have the same dividend and distribution policy
as the Fund. The Fund's policy is to declare dividends annually from net
investment income, if any. Distributions by the Fund of capital gain net income,
if any, will generally be made after the end of the fiscal year or as otherwise
required for compliance with applicable tax regulations. After the closing of
the Reorganization, Fund shareholders who currently have dividends reinvested
will continue to have dividends reinvested in the Acquiring Fund and those
shareholders who currently have capital gains reinvested will continue to have
capital gains reinvested in the Acquiring Fund. The number of shares received in
connection with any such reinvestment will be based upon the net asset value per
share of the applicable class of shares of the Acquiring Fund in effect on the
record date.
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Shareholder Services
The Acquiring Fund will offer the same shareholder services, including
the Open Account System, reinvestment privileges, a systematic withdrawal plan,
a dividend allocation plan, telephone transactions and access to the
Investamatic Check Program, an automatic investment program.
The Acquiring Fund will have the same exchange privileges as the Fund.
Shareholders of the Fund may exchange their shares for shares of a corresponding
class of shares, when available, of certain funds as determined by SSRIS, 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 such fund may similarly exchange their shares for
shares of an available corresponding class of the Acquiring Fund.
The Acquiring Fund will offer the same redemption features as the Fund,
including the acceptance of redemption requests by mail, telephone and wire,
provided that applicable conditions are met. Any request to redeem shares of the
Fund received and processed prior to the Reorganization will be treated as a
redemption of shares of the Fund. Any request to redeem shares received or
processed after the Reorganization will be treated as a request to redeem shares
of the Acquiring Fund.
Minimum Account Size
The Acquiring Fund will be subject to the same procedures with respect
to minimum account size as the Fund. The Fund reserves the right to redeem an
account if the aggregate value of the shares in such account is less than $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. Currently,
the maintenance fee is $18 annually. The Acquiring Fund shareholder accounts
established pursuant to the Reorganization with a value of less than $1,500 will
therefore be subject to redemption upon 60 days= prior notice or the annual
maintenance fee. During such 60-day period, a shareholder will have the option
of avoiding such redemption or maintenance fee by increasing the value of the
account to $1,500 or more.
Fiscal Year
The Acquiring Fund will operate on a fiscal year ending October 31.
Comparative Information on Shareholder Rights.
The following is a summary of certain of the provisions of the Company's
Restated Articles of Incorporation and By-laws and the Trust's First Amended and
Restated Master Trust Agreement and By-laws. Shareholders should refer directly
to the provisions of the Company's Restated Articles of Incorporation and
By-laws and the Trust's Master Trust Agreement and By-laws for their full text.
General. The Fund is a series of the Company, which was organized as a
Maryland corporation in April, 1991 under the name MetLife Portfolios, Inc. and
is registered with the Commission as an open-end management company. The Company
subsequently changed its name to State Street Research Portfolios, Inc. and is
currently governed by Restated Articles of Incorporation, dated February, 1995,
as amended. The above-referenced Restated Articles of Incorporation may
hereinafter be referred to as the "Restated Articles of Incorporation." As a
Maryland corporation, the Company's operations are governed by its Restated
Articles of Incorporation and applicable Federal and Maryland law.
The Acquiring Fund is a series of the Trust, a business trust which was
established in 1986 under the laws of the Commonwealth of Massachusetts and is
registered with the Commission as an open-end management company. The Trust and
the Acquiring Fund are governed by a First Amended and Restated Master Trust
Agreement dated June 1, 1993, as further amended thereafter. The
above-referenced Master Trust Agreement may hereinafter be referred to as the
"Master Trust Agreement." As a Massachusetts business trust, the Trust's
operations are governed by its Master Trust Agreement and applicable Federal and
Massachusetts laws.
Shares of the Fund and the Acquiring Fund. Interests in the Fund are
represented by shares of common stock, $.01 par value per share. The Company's
Restated Articles of Incorporation have authorized 2 billion shares
8
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of common stock, 100 million shares of which are authorized to be issued as
shares of the Fund. As of the date hereof, the Fund is the sole operating series
of the Company. Each share of any Company series represents an equal
proportionate interest in the assets and liabilities, excluding differences in
class expenses, belonging to that series. As such, each share is entitled to
dividends and distributions out of the surplus or other lawfully available
assets belonging to that series as declared by the Board of Directors.
Beneficial interests of the Acquiring Fund will be represented by
transferable shares, par value $.001 per share. The Master Trust Agreement
permits the Trustees to issue an unlimited number of shares and to divide such
shares into an unlimited number of series. As of the date hereof, the Trust has
four operating 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. Each share of any Trust series represents an equal proportionate
interest in the assets and liabilities, excluding differences in class expenses,
belonging to that series. As such, each share is entitled to dividends and
distributions out of the income (after expenses) belonging to that series as
declared by the Board of Trustees.
Voting Requirements. The Company's Restated Articles of Incorporation
may be amended at any time in the manner prescribed by Maryland law. On any
matter which affects only the interests of a certain series or class of shares
of the Funds and with respect to which a separate series or class vote is
required by the 1940 Act or Maryland law, only the holders of shares of that
series or class, as the case may be, are entitled to vote.
Generally, the provisions of the Master Trust Agreement of the Trust may
be amended at any time, so long as such amendment does not adversely affect the
rights of any shareholder with respect to which such amendment is or purports to
be applicable and so long as such amendment is not in contravention of
applicable law, by an instrument in writing signed by a majority of the then
Trustees (or by an officer of such Trust pursuant to the vote of a majority of
such Trustees). Generally, any amendment to the Trust's Master Trust Agreement
that adversely affects the rights of shareholders of one or more series may be
adopted by a majority of the then Trustees of the Trust when authorized by
shareholders holding a majority of the shares entitled to vote.
Voting Rights. Neither the Company nor the Fund holds an annual meeting
of shareholders, and there normally is no meeting of shareholders for the
purpose of electing Directors unless and until such time as less than a majority
of the Directors holding office have been elected by shareholders. On each
matter submitted to a vote of the shareholders of the Company, each shareholder
is entitled to one vote for each whole share owned and a proportionate,
fractional vote for each fractional share outstanding in the shareholder's name
on the Company's books. On any matter which affects only the interests of a
certain series of shares of the Company, such as the Fund, or any class of such
series and with respect to which a separate series or class vote is required by
the 1940 Act or Maryland law, only the holders of shares of that series or
class, as the case may be, are entitled to vote. Directors hold office until a
successor is elected and qualified, and vacancies in the Board of Directors may
be filed by the Board of Directors.
The Master Trust Agreement provides that special meetings of
shareholders for any purpose requiring action by shareholders under such Master
Trust Agreement or the Trust's By-laws shall be called upon the written request
of holders of at least 10% of the outstanding shares of the Trust or, as the
context may require, a series thereof. The Master Trust Agreement provides in
general that shareholders have the power to vote only on certain matters,
including, among others, (a) the election or removal of Trustees as provided in
the Master Trust Agreement; (b) with respect to certain contracts, such as
contracts for investment advisory or management services, to the extent required
as provided in the Master Trust Agreement as a whole; (c) with respect to any
termination of the Trust as provided in the Master Trust Agreement; (d) an
amendment of the Master Trust Agreement as provided in the Master Trust
Agreement; and (e) with respect to such additional matters relating to the Trust
as may be required by the 1940 Act, the Master Trust Agreement, the By-laws or
any registration of the Trust with the Commission or as the Trustees may
consider necessary or desirable. Certain of the foregoing matters will involve
separate votes of one or more series (or classes thereof) of the Trust, while
others will require a vote of the Trust's shareholders as a whole.
Under the Master Trust Agreement, the Trustees of the Trust may
reorganize, merge or liquidate the Acquiring Fund without shareholder approval.
On the other hand, a shareholder vote is generally required for such actions
under Maryland law. The Board of Trustees of the Trust believe that, in most
circumstances, it is not in the best interests of shareholders to require a
meeting of shareholders to reorganize, merge or liquidate the
9
<PAGE>
Acquiring Fund. For example, the Acquiring Fund may have insufficient assets to
invest effectively or high expense levels because of operational needs. In such
a case, the Trustees may determine that it would be in the best interests of
shareholders to merge the Acquiring Fund with another mutual fund that has
similar investment objectives or policies, which could have the effect of
reducing the per share expenses of each fund or otherwise benefit shareholders.
The process of obtaining shareholder approval for such a transaction, however,
may make it difficult to complete the transaction and, in general, will
substantially increase the costs of the transaction for shareholders. The
Trustees of the Trust believe that it would be in the best interests of
shareholders to permit consummation of such a transaction without incurring the
expenses associated with holding a meeting of shareholders.
The Trustees of the Trust would exercise the authority in a reasonable
manner. Any action by the Trustees of the Trust would be subject to compliance
with any laws that may be applicable. While the 1940 Act does not require
shareholder approval for these actions, the Acquiring Fund would comply with any
other indirect requirements of the 1940 Act that would become applicable. If
circumstances warranted, the Trustees of the Trust could determine to elicit
viewpoints from shareholders prior to any action or conduct a formal proxy
solicitation even though not required. In all cases, shareholders would receive
notice prior to completion of any transaction. The Trustees of the Trust do not
have any present plans to use this authority.
Shareholder Liability. Under Maryland law, the Fund's shareholders have
no personal liability for the Fund's corporate acts and obligations. The
Maryland General Corporation Law does not have any provision pertaining to
shareholder responsibility for unpaid corporate liabilities in the event of
dissolution.
Under Massachusetts law, shareholders of a Massachusetts business trust
could, under certain circumstances, be held personally liable for the
obligations of the Trust. However, the Master Trust Agreement disclaims
shareholder liability for acts or obligations of the Trust. The Master Trust
Agreement provides for indemnification, under certain circumstances, out of
Trust property for all losses and expenses of any shareholder held personally
liable by virtue of his status as such, and not because of such shareholder's
acts or omissions or for some other reason, for the obligations of the Trust.
Thus, the risk of a shareholder incurring financial loss on account of
shareholder liability is considered by the Trust to be remote since it is
limited to circumstances in which a disclaimer is inoperative and the Trust
itself would be unable to meet its obligations.
Shares of the Acquiring Fund issued to the shareholders of the Fund in
the Reorganization will be fully paid and nonassessable by the Trust when issued
and transferable without restrictions and will have no preemptive or conversion
rights.
Liability of Directors, Trustees and Officers. The By-Laws of the
Company provide that the Company will indemnify Directors of the Company against
liabilities and expenses incurred in connection with litigation in which they
may be involved because of their positions with the Company to the extent
permitted by Maryland law. The Company only is required under the Bylaws to
indemnify in advance expenses to any person other than a Director to the extent
specifically approved by resolution adopted by the Board of Directors. Nothing
in the Restated Articles of Incorporation or the By-laws of the Company,
however, protects or indemnifies a Director or officer against any liability to
which such person would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of such person's office, as determined by (a) a final decision on the
merits by a court or other body before whom the proceeding was brought that the
person to be indemnified was not liable by reason of disabling conduct, or (b)
in the absence of such a decision, a reasonable determination, based upon a
review of the facts, that the person to be indemnified was not liable by reason
of disabling conduct, by (i) the vote of a majority of a quorum of Directors who
are neither "interested persons" of the Company, as defined in the 1940 Act, nor
parties to the proceeding, or (ii) an independent legal counsel in a written
opinion. The Company may not advance legal expenses for the defense of a
proceeding brought by the Company or its shareholders against a Director or
officer unless, among other things, he or she furnishes an undertaking to repay
the advance unless it is ultimately determined that he or she is entitled to
indemnification.
Under the Master Trust Agreement, Trustees and officers will be
indemnified, under certain circumstances, for all liabilities, including the
expenses of litigation, against them unless their conduct is determined to
constitute willful misfeasance, bad faith, gross negligence or reckless
disregard of their duties ("disabling conduct"). A determination that a Trustee
or officer is entitled to indemnification may be based upon the outcome of a
court
10
<PAGE>
action or administrative proceeding or a reasonable determination, following a
review of the facts, by (a) a vote of a majority of a quorum of the Trustees who
are neither "interested persons" of the Trust as defined in the 1940 Act nor
parties to the proceeding or (b) an independent legal counsel in a written
opinion that such Trustee or officer was not liable by reason of disabling
conduct. The Trust may also advance money for these expenses provided that the
Trustee or officer undertakes to repay the Trust if his or her conduct is later
determined to preclude indemnification and certain other conditions are met.
It should be noted that it is the view of the staff of the Commission
that to the extent that any provisions such as those described above are
inconsistent with the 1940 Act, including Section 17 thereof, the provisions of
the 1940 Act preempt such inconsistent provisions.
Appraisal Rights.
Under Maryland General Corporation Law, shareholders of the Fund do not
have appraisal rights in connection with a combination or acquisition of the
assets of the Fund by another entity. Shareholders of the Fund may, however,
redeem their shares at net asset value prior to the date of the Reorganization.
Neither the Master Trust Agreement of the Trust nor Massachusetts law
grants the shareholders of the Acquiring Fund any rights in the nature of
dissenters= rights of appraisal with respect to any action upon which such
shareholders may be entitled to vote.
The Directors of the Company, including the Directors who are not
interested persons ("interested persons") of the Company within the meaning of
the 1940 Act, recommend that the shareholders of the Fund approve Proposal 1. If
Proposal 1 is not approved, the Directors of the Company will continue the
management of the Fund and may consider other alternatives in the best interest
of the shareholders of the Fund.
PROPOSAL 2
TO CHANGE THE CLASSIFICATION
OF THE POLICY REGARDING INVESTMENTS
IN OPTIONS FROM FUNDAMENTAL TO NONFUNDAMENTAL
The Fund is currently subject to the investment policy set forth below
which, among others, the Fund originally designated as a "fundamental" policy,
i.e., a policy only changeable by shareholder vote. The Directors of the Company
after careful consideration and analysis have concluded that it is not in the
best interest of the Fund to continue this designation for this investment
policy. A fundamental policy which may only be altered by shareholder vote by
its nature inhibits the ability of a fund's management to respond quickly to
changing market conditions or revised regulations or policies affecting the
industry. The Directors recognize that certain policies should be changeable
only by the investors themselves. On the other hand, the Directors believe that
other policies do not fit within this category in today's rapidly changing
investment environment. The Directors believe that the investment policy
regarding options should be characterized as nonfundamental for the reasons set
forth herein and recommend that the shareholders approve the elimination of the
fundamental characteristics of such policy.
Under the current fundamental policy, the Fund:
"may not (1) write call options which are not covered options;
[or] (2) writeput options, except covered put options or put options to
close out option positions previously entered into . . ."
The proposal is to change the character of this policy from fundamental
to nonfundamental. If the change is approved, the Fund expects to adopt a
nonfundamental policy:
"not to engage in transactions in options except in connection
with options on securities, securities indices, currencies and interest
rates, and options on futures on securities, securities indices,
currencies and interest rates."
The Directors have concluded that it is in the best interest of the Fund
to change the character of the policy on options from fundamental to
nonfundamental. The Directors believe that the change to a nonfundamental policy
and the revisions to the policy will provide the Fund with additional
flexibility to address market, regulatory
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<PAGE>
or other developments regarding options as they occur in the future. No imminent
change in current practices is anticipated. The Fund intends to implement and
monitor the operation of the new policy and to change it, as developments
warrant. Assuming the proposal is approved, such change could then be
accomplished without the delay and expense of soliciting shareholder approval.
The Directors, including the Directors who are not interested persons,
recommend a vote FOR approval of this proposal. If the proposal is not approved
by the shareholders, the Fund's present investment policy will remain in effect.
PROPOSAL 3
TO AMEND THE FUND's FUNDAMENTAL
POLICY REGARDING INVESTMENTS IN
COMMODITIES AND COMMODITY CONTRACTS
The fundamental policy regarding commodities and commodity contracts
currently reads as follows for the Fund. Under the policy, the Fund may not:
"invest in commodities or commodity contracts, except that the
Fund may purchase stock index, interest rate, and currency futures
contracts, may write covered stock index, interest rate and currency
futures contracts, may write covered put and call options on such
futures contracts, and may enter into closing transactions with respect
to options on such futures contracts."
In order to clarify this policy as well as provide greater flexibility
as regards investments in commodities and commodity contracts, the Directors
propose that the shareholders adopt the following revised fundamental policy,
under which it would be the Fund's policy:
"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, delayed delivery and when issued 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."
The proposed policy would clarify that certain arrangements and newer
kinds of mixed instruments which involve futures and other commodities are
permissible. With the growth of the investment industry, more complex
arrangements are being presented for investment consideration. For example, an
issuer may find it advantageous to lock-in current interest rates by agreeing to
make delayed delivery of securities months or years from now, and the Fund may
find the terms of such arrangements favorable as an investment. The Fund could
decide that such an investment is attractive because of its view of future
interest rates, the interim earnings to be made on the funds until the future
delivery is made, the actual stated interest rate on the bonds, and similar
analytical considerations. The proposed policy would make clear that such
delayed delivery contracts are permissible investments. Among other
clarifications, the proposed policy would also make clear that currencies are
not regarded as commodities and that limited investments in physical commodities
are allowed, although the Fund has no present intention to make such
investments.
The Directors and SSRM are familiar with the risks inherent in certain
of the investments covered by the proposed policy and, if the proposed policy is
adopted by the shareholders, they intend to act accordingly in the
implementation thereof. No imminent change in current practices is anticipated.
The Directors, including the Directors who are not interested persons,
recommend a vote FOR approval of this proposal. If the proposal is not approved
by the shareholders, the Fund's present investment policy will remain in effect.
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<PAGE>
PROPOSAL 4
TO AMEND THE FUND's FUNDAMENTAL POLICY
RELATING TO SECURITIES LENDING
Under its current fundamental policy, the Fund
"may not make loans, provided, however, that this restriction
shall not prohibit the Fund from (a) entering into repurchase
agreements. . ., (b) purchasing bonds, notes, debentures or other
obligations of a character customarily purchased by institutional or
individual investors (whether or not publicly distributed) and (c)
making loans of its portfolio securities which do not thereupon cause in
excess of 20% of the value of the Fund's total assets to consist of
loaned securities. . .")
The Directors propose that the policy be revised so that it will be the
policy of the Fund:
"not to lend money directly to natural persons; however, the Fund
may lend portfolio securities and purchase bonds, debentures, notes,
bills and any other debt-related instruments or interests directly from
the issuer thereof or in the open market and may enter into repurchase
transactions collateralized by obligations of the U.S. Government and
its agencies and instrumentalities or other high quality securities."
If the proposed revised policy is adopted by the shareholders, the Fund
would be able, under current regulatory positions, to lend portfolio securities
up to a maximum in value of 33 1/3 % of its total assets (including in total
assets the value of the collateral received from the lending of such
securities). The Fund's current policy limits such lending to 20% of the Fund's
total assets. The revised policy would therefore provide the Fund with
additional flexibility to engage in securities lending. While any such loan is
outstanding, it will be continuously secured by collateral in the form of cash
or cash equivalents (e.g., U.S. Government obligations) equal at all times to at
least 100% of the current market value of the loaned securities plus accrued
interest. Collateral received by the Fund will generally be invested in quality
short-term unaffiliated mutual funds, securities issued or guaranteed by the
U.S. Government or its agencies or instrumentalities, irrevocable stand-by
letters of credit issued by a bank or repurchase agreements, among similar
investments. The investing of cash collateral received from loaning portfolio
securities involves leverage which magnifies the potential for gain or loss on
monies invested and, therefore, results in an increase in the volatility of the
Fund's outstanding securities. Such loans may be terminated at any time. The
transactions are generally structured so that 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 would be made only to borrowers which are deemed by SSRM to be of good
financial standing. The Fund has no intention of making loans of portfolio
securities to individuals.
The Directors, including the Directors who are not interested persons,
recommend a vote FOR approval of this proposal. If the proposal is not approved
by the shareholders, the Fund's present investment policy will remain in effect.
PROPOSAL 5
TO AMEND THE FUND's FUNDAMENTAL POLICY REGARDING INDUSTRY CONCENTRATION
The fundamental policy of the fund regarding industry concentration
reads as follows:
The Fund may not make any investment which would thereupon cause
more than 25% of the value of the total assets of the Fund to be
invested in securities issued by companies principally engaged in any
one industry, provided, however, that (a) utilities will be divided
according to their services so that, for example, gas, gas transmission,
electric and telephone will each be deemed a separate industry, (b) oil
and oil related companies will be divided by type so that, for example,
domestic crude oil and gas producers, domestic integrated oil companies,
international oil companies and oil service companies will each be
deemed a separate industry, and (c) savings and loan associations and
finance companies will each be deemed a separate industry. To the extent
that 25% of the total assets of the Fund may become invested
13
<PAGE>
in the four oil related industries listed above in the aggregate, such
fact will be disclosed. For purposes of this limitation, all debt
securities issued by foreign governments, their agencies or
instrumentalities willbe treated as foreign government debt and all debt
securities issued bysupranational organizations will be treated as
supranational debt.
For reasons set forth below, the Fund proposes to amend the policy for
the Fund to read as follows: The policy of the Fund would be:
"not to make any investment which would cause more than 25% of
the value of the Fund's total assets to be invested in the securities of
issuers principally engaged in any one industry, as based on industry
classifications as may be described in the Fund's Prospectus or
Statement of Additional Information, as amended from time to time."
Because the current policy contains specific examples of how a few
industries would be defined, it could be misconstrued as inferring that no other
kinds of distinctions would be made for other industries. The Fund in fact has
always reserved the right to define industries as appropriate over time on the
basis of evolutionary changes in businesses. For example, the burgeoning growth
of asset-backed securities has resulted in new industry classifications for
these securities based on the nature of the underlying assets, such as equipment
and automobile financing obligations, automobile leases, and credit card
receivables. Finance companies may be classified according to the industries of
their parent companies or industries that otherwise most affect such financing
companies. The change in the policy would make clear that the Fund will define
and redefine industries over time as business directions dictate.
The Directors, including the Directors who are not interested persons,
recommend a vote FOR approval of this proposal. If the proposal is not approved
by the shareholders of the Fund, the Fund's present investment policy will
remain in effect.
PROPOSAL 6
(FOR CLASS S SHAREHOLDERS OF THE FUND ONLY) TO INCLUDE
CLASS S SHARES UNDER THE FUND's PLAN OF
DISTRIBUTION PURSUANT TO RULE 12b-1
The Board of Directors proposes to include Class S shares of the Fund
under the Fund's Plan of Distribution Pursuant to Rule 12b-1 ("Distribution
Plan"). However, Class S shareholders will not incur any direct expense under
the Distribution Plan.
The Fund has adopted multiple classes of shares (Classes A, B, C, and S)
and a related Distribution Plan applicable, currently, to Classes A, B and C.
(Prior to November, 1997, current Class S shares were designated as Class C, and
current Class C shares were designated Class D.) Under the Distribution Plan,
shareholders of Classes A, B, and C pay a distribution fee of 0.25%, 1.00% and
1.00%, respectively, which is used by SSRIS to pay distribution expenditures,
including compensation to brokers and other financial intermediaries who have
sold the shares and/or who provide continuing personal services, to shareholders
of Class A, B and C shares. Under the Distribution Plan, SSRIS is also
authorized to make payments for distribution purposes out of its own profits or
funds from any other source. With approval of the inclusion of Class S shares
under the Distribution Plan, Class S shareholders would not pay any direct fees;
however, SSRIS will be authorized to use its own assets for the distribution of
Class S shares as described below.
Description of the Distribution Plan
Rule 12b-1 under the 1940 Act provides that an investment company may
not finance, directly or indirectly, any activity which is primarily intended to
result in the sale of shares issued by such company, unless it has adopted a
distribution plan pursuant to such Rule. The Distribution Plan authorizes the
Distributor to make payments out of its general profits, revenues and other
sources to underwriters, securities dealers and others in connection with sales
of shares, to the extent, if any, that such payments may be construed in the
future to constitute the indirect use of Fund assets to finance the sale of Fund
shares and deemed to be within the scope of Rule 12b-1 under the Act. The
Distribution Plan does not authorize any direct fees to be charged against Class
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S shares and may not be amended to provide for such charge without approval by a
1940 Act Majority Vote of the Class S shares of the Fund.
The Distribution Plan may be terminated at any time with respect to
Class S shares either by vote of a majority of the Directors who are not
"interested persons" (as defined in the 1940 Act) of the Company and who have no
direct or indirect financial interest in the Distribution Plan's operation or in
any related agreements ("Qualified Directors") or by a 1940 Act Majority Vote of
the Class S shares of the Fund. It may remain in effect with respect to Class S
shares of the Fund even if it has been terminated with respect to the other
classes of shares of the Fund.
Continuance, amendment or termination of the Distribution Plan is also
subject to the approval of the Qualified Directors. The Distribution Plan with
respect to the Fund was last approved by the Board of Directors of the Company
as a whole including the Qualified Directors in November, 1997. A copy of the
Distribution Plan is set forth as Exhibit B to this Proxy Statement.
If approved at the Meeting, the Distribution Plan and any related
agreements will apply with respect to the Class S shareholders of the Fund and
will continue to be in effect from year to year for so long as such continuance
is specifically approved at least annually by votes of a majority of the full
Board of Directors and of the Qualified Directors, cast in person at a meeting
called for that purpose. If Proposal 1 is adopted, the Plan of Reorganization
authorizes the Company as the sole shareholder of the Acquiring Fund to approve
a Plan of Distribution Pursuant to Rule 12b-1 that is substantially identical to
the Distribution Plan.
During the fiscal year ended October 31, 1997, Classes A, B, and C of
the Fund paid in the aggregate $_________ in distribution fees, all to SSRIS.
Consideration by Directors
The Directors do not believe that payments by the Fund under any
existing agreement constitute the direct or indirect financing of any activity
primarily intended to result in the sale of the Fund's Class C shares; however,
because of uncertainty concerning the interpretation and application of Rule
12b-1, the Directors have determined that the Distribution Plan should authorize
such payments as a protective measure in the event any such payment is construed
to constitute such financing through the indirect use of Class S assets. The
Board of Directors of the Company, as a whole and the Qualified Directors, have
concluded, in the exercise of their reasonable business judgment and in light of
their fiduciary duties under Maryland law and under the 1940 Act, that there is
a reasonable likelihood that the Distribution Plan will benefit the Fund and its
shareholders.
The Directors, including the Qualified Directors, recommend a vote FOR
approval of the Distribution Plan.
NO ANNUAL MEETINGS OF SHAREHOLDERS
There will be no annual or further special meetings of shareholders of
the Company unless required by applicable law or called by the Directors in
their discretion. In accordance with the Restated Articles of Incorporation, any
Director may be removed by a vote of shareholders holding a majority of the
shares of the Trust entitled to be cast for the election of Directors. In
addition, if ten or more shareholders who have been such for at least six months
and who hold in the aggregate shares with a net asset value of at least $25,000
or at least 1% of the outstanding shares of the Company, inform the Directors
that they wish to communicate with other shareholders, the Directors will either
give such shareholders access to the shareholder list or inform them of the cost
involved if the Company forwards material to shareholders on their behalf. If
the Directors object to mailing such materials, they must inform the Commission
and thereafter comply with the requirements of the 1940 Act.
Shareholders wishing to submit proposals for inclusion in a proxy
statement for a subsequent shareholder meeting should send their written
proposals to the Secretary of the Company, One Financial Center, Boston,
Massachusetts 02111. Shareholder proposals should be received in a reasonable
time before the solicitation is made.
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WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE FILL IN, DATE AND
SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. NO
POSTAGE IS NECESSARY.
___________, 1998
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EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
AND LIQUIDATION
AGREEMENT AND PLAN OF REORGANIZATION AND LIQUIDATION dated as of
______________ ,1998 by and between State Street Research Portfolios, Inc., a
Maryland corporation (the "Company"), on behalf of the State Street Research
International Equity Fund, a series of the Company (the "Acquired Fund"), and
State Street Research Financial Trust, a Massachusetts business trust (the
"Trust"), on behalf of State Street Research International Equity Fund, a series
of the Trust (the "Acquiring Fund").
W I T N E S S E T H:
WHEREAS, each of the Company and the Trust is an open-end management
investment company registered under the Investment Company Act of 1940, as
amended (the "1940 Act");
WHEREAS, this Agreement is intended to be, and is adopted as, a plan of
reorganization and liquidation within the meaning of Section 368(a)(1)(F) of the
Internal Revenue Code of 1986, as amended, such reorganization to consist of the
transfer of all of the assets of the Acquired Fund in exchange solely for Class
A, Class B, Class C and Class S shares of beneficial interest, $.001 par value
per share, of the Acquiring Fund ("Acquiring Fund Shares") and the assumption by
the Acquiring Fund of certain liabilities of the Acquired Fund and the
distribution, after the Closing hereinafter referred to, of Acquiring Fund
Shares to the shareholders of the Acquired Fund in liquidation of the Acquired
Fund, all upon the terms and conditions hereinafter set forth in this Agreement
(collectively, the "Reorganization").
NOW, THEREFORE, in consideration of the mutual promises herein
contained, the parties hereto agree as follows:
1. Transfer of Assets. Subject to the terms and conditions set forth
herein, at the closing provided for in Section 5 (the "Closing") the Company on
behalf of the Acquired Fund shall transfer all of the assets of the Acquired
Fund, and assign all Assumed Liabilities (as hereinafter defined) to the
Acquiring Fund, and the Trust on behalf of the Acquiring Fund shall acquire all
such assets, and shall assume all such Assumed Liabilities, upon delivery to the
Company on behalf of the Acquired Fund of Acquiring Fund Shares (both full and
fractional) of each class (the "New Shares") having a net asset value equal to
the value of the net assets of the corresponding class of shares of the Acquired
Fund transferred. The aggregate number of New Shares of each class delivered to
the Company shall equal the number of shares of the corresponding class of the
Acquired Fund outstanding as of the close of business on the Valuation Date.
"Assumed Liabilities" shall mean those liabilities, including all expenses,
costs, charges and reserves, reflected in an unaudited statement of assets and
liabilities of the Acquired Fund as of the close of business on the Valuation
Date (as hereinafter defined), determined in accordance with generally accepted
accounting principles consistently applied from the prior audited period. The
net asset value of each class of the New Shares and the value of the net assets
of each class of shares of the Acquired Fund to be transferred shall be
determined as of the close of regular trading on the New York Stock Exchange on
the business day next preceding the Closing (the "Valuation Date") using the
valuation procedures set forth in the then current prospectus and statement of
additional information of the Acquired Fund. All Assumed Liabilities of the
Acquired Fund, to the extent that they exist at or after the Closing, shall
after the Closing attach to the Acquiring Fund and may be enforced against the
Acquiring Fund to the same extent as if the same had been incurred by the
Acquiring Fund.
2. Shareholder Actions. Immediately upon delivery to the Acquired Fund
of the New Shares, the Acquired Fund, as the then sole shareholder of the
Acquiring Fund, shall (i) approve an Investment Management Agreement between the
Trust, on behalf of the Acquiring Fund and State Street Research & Management
Company (the "Investment Manager"), (ii) approve a Sub-Investment Management
Agreement by and among the Trust, on behalf of the Acquiring Fund, the
Investment Manager, and GFM International Investors, Inc., with respect to the
Acquiring Fund, (iii) approve a Plan of Distribution Pursuant to Rule 12b-1 with
respect to the Class A, Class B and Class C shares of the Acquiring Fund (and
the Class S shares if Class S shareholders vote at the Special
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Meeting (as hereinafter defined) to approve such plan, and (iv) ratify the
selection of Price Waterhouse LLP as the independent accountants of the Fund.
3. Distribution of New Shares; Liquidation of the Acquired Fund. At or
as soon as practicable after the Closing, the Acquired Fund will be liquidated
and the New Shares that have been delivered to the Company on behalf of the
Acquired Fund will be distributed to the shareholders of record of the Acquired
Fund as of the close of business on the Valuation Date, each shareholder to
receive a number of New Shares of each class equal to the number of shares of
the corresponding class of the Acquired Fund held by such shareholder as of the
close of business on the Valuation Date. Such liquidation and distribution will
be accompanied by the establishment of an open account on the share records of
the Acquiring Fund in the name of each shareholder of the Acquired Fund and
representing the respective number of New Shares due such shareholder. The
shareholders of record of the Acquired Fund as of the close of business on the
Valuation Date shall be certified by the Company's transfer agent. As soon as
practicable after the Closing, the Company shall take all steps necessary to
effect a complete liquidation of the Acquired Fund and shall file such
instruments, if any, as are necessary to effect the dissolution of the Company
and its deregistration under the Investment Company Act of 1940, as amended and
shall take all other steps necessary to effect such dissolution and
deregistration. As of the Closing, each outstanding certificate which, prior to
the Closing, represented shares of the Acquired Fund will be deemed for all
purposes to evidence ownership of the number of Acquiring Fund Shares issuable
with respect thereto pursuant to the Reorganization. After the Closing,
certificates originally representing shares of Class A or Class S of the
Acquired Fund will be rendered nonnegotiable; upon special request and surrender
of such certificates to State Street Bank and Trust Company as transfer agent,
holders of these nonnegotiable certificates shall be entitled to receive
certificates representing the number of Acquiring Fund Shares issuable with
respect thereto. All Class B and Class C shares of the Acquiring Fund are held
of record in book entry form and no certificates for such shares will be issued.
4. Representations and Warranties.
(a) The Company, on behalf of the Acquired Fund, hereby
represents and warrants to the Acquiring Fund as follows:
(i) the Company is duly organized, validly existing
and in good standing under the laws of the State of Maryland and has
full power and authority to conduct its business as presently
conducted;
(ii) the Company has full power and authority to
execute, deliver and carry out theterms of this Agreement on behalf
of the Acquired Fund;
(iii) the execution and delivery of this Agreement on
behalf of the Acquired Fund and the consummation of the transactions
contemplated hereby are duly authorized and no other proceedings on the
part of the Company or the shareholders of the Acquired Fund (other
than as contemplated in Section 5(i)) are necessary to authorize this
Agreement and the transactions contemplated hereby;
(iv) this Agreement has been duly executed by the
Company on behalf of the Acquired Fund and constitutes its valid and
binding obligation, enforceable in accordance with its terms, subject
to applicable bankruptcy, reorganization, insolvency, moratorium and
other rights affecting creditors' rights generally, and general
equitable principles;
(v) neither the execution and delivery of this
Agreement by the Company on behalf of the Acquired Fund, nor the
consummation by the Company on behalf of the Acquired Fund of the
transactions contemplated hereby will conflict with, result in a breach
or violation of or constitute (or with notice, lapse of time or both) a
breach of or default under, the Restated Articles of Incorporation or
By-Laws of the Company, as each may be amended, or any statute,
regulation, order, judgment or decree, or any instrument, contract or
other agreement to which the Company is a party or by which the Company
or any of its assets is subject or bound; and
(vi) no authorization, consent or approval of any
governmental or other public body or authority or any other party is
necessary for the execution and delivery of this Agreement by the
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Company on behalf of the Acquired Fund or the consummation of any
transactions contemplated hereby by the Company, other than as shall be
obtained at or prior to the Closing.
(b) The Trust, on behalf of the Acquiring Fund, hereby
represents and warrants to the Acquired Fund as follows:
(i) The Trust is duly organized, validly existing and
in good standing under the laws of The Commonwealth of Massachusetts
and has full power and authority to conduct its business as presently
conducted;
(ii) The Trust has full power and authority to
execute, deliver and carry out the terms of this Agreement on behalf of
the Acquiring Fund;
(iii) the execution and delivery of this Agreement on
behalf of the Acquiring Fund and the consummation of the transactions
contemplated hereby are duly authorized and no other proceedings on the
part of the Trust or the shareholders of the Acquiring Fund are
necessary to authorize this Agreement and the transactions contemplated
hereby;
(iv) this Agreement has been duly executed by the
Trust on behalf of the Acquiring Fund and constitutes its valid and
binding obligation, enforceable in accordance with its terms, subject
to applicable bankruptcy, reorganization, insolvency, moratorium and
other rights affecting creditors' rights generally, and general
equitable principles;
(v) neither the execution and delivery of this
Agreement by the Trust on behalf of the Acquiring Fund, nor the
consummation by the Trust on behalf of the Acquiring Fund of the
transaction contemplated hereby will conflict with, result in a breach
or violation of or constitute (or with notice, lapse of time or both
constitute) a breach of or default under, the First Amended and
Restated Master Trust Agreement (the "Master Trust Agreement") or
By-Laws of the Trust, as each may be amended, or any statute,
regulation, order, judgment or decree, or any instrument, contract or
other agreement to which the Trust is a party or by which the Trust or
any of its assets is subject or bound; and
(vi) no authorization, consent or approval of any
governmental or other public body or authority or any other party is
necessary for the execution and delivery of this Agreement by the Trust
on behalf of the Acquiring Fund or the consummation of any transactions
contemplated hereby by the Trust, other than as shall be obtained at or
prior to the Closing.
5. Conditions Precedent. The obligations of the Company on behalf of the
Acquired Fund and the Trust on behalf of the Acquiring Fund to effectuate the
Reorganization shall be subject to the satisfaction of the following conditions:
(a) A post-effective amendment to the registration statement
of the Acquiring Fund on Form N-1A under the Securities Act of 1933, as amended
(the "Securities Act"), registering the New Shares under the Securities Act, and
such amendment or amendments thereto as are determined by the Board of Trustees
of the Trust to be necessary and appropriate to effect such registration of the
New Shares (the "Post-Effective Amendment"), shall have been filed with the
Securities and Exchange Commission (the "Commission") and the Post-Effective
Amendment shall have become effective, and no stop-order suspending the
effectiveness of the Post-Effective Amendment shall have been issued, and no
proceeding for that purpose shall have been initiated or threatened by the
Commission (and not withdrawn or terminated);
(b) The New Shares shall have been duly qualified for offering
to the public in all states in which such qualification is required for
consummation of the transactions contemplated hereunder;
(c) All representations and warranties of the Company on
behalf of the Acquired Fund contained in this Agreement shall be true and
correct in all material respects as of the date hereof and as of the Closing,
with the same force and effect as if then made, and the Trust on behalf of the
Acquiring Fund shall have received a certificate of an officer of the Company
acting on behalf of the Acquired Fund to that effect in form and substance
reasonably satisfactory to the Trust on behalf of the Acquiring Fund;
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(d) All representations and warranties of the Trust on behalf
of the Acquiring Fund contained in this Agreement shall be true and correct in
all material respects as of the date hereof and as of the Closing, with the same
force and effect as if then made, and the Company on behalf of the Acquired Fund
shall have received a certificate of an officer of the Trust acting on behalf of
the Acquiring Fund to that effect in form and substance reasonably satisfactory
to the Company on behalf of the Acquired Fund;
(e) The Company on behalf of the Acquired Fund and the Trust
on behalf of the Acquiring Fund shall have received an opinion from Goodwin,
Procter & Hoar LLP regarding certain tax matters in connection with the
Reorganization; and
(f) A vote approving this Agreement shall have been adopted by
at least a majority of the outstanding Class A, Class B, Class C and Class S
shares of common stock of the Acquired Fund, all classes voting together,
entitled to vote at a special meeting of shareholders of the Acquired Fund duly
called for such purpose (the "Special Meeting").
6. Closing. The Closing shall be held at the offices of the Trust and
shall occur (a) immediately prior to the opening of business on the first Monday
following the satisfaction or waiver of all conditions to the Reorganization or
(b) at such later time as the parties may agree. All acts taking place at the
Closing shall be deemed to take place simultaneously unless otherwise provided
in this Agreement.
7. Expenses. The expenses incurred in connection with the transactions
contemplated by this Agreement, whether or not the transactions contemplated
hereby are consummated, will be borne by the Acquired Fund.
8. Termination. This Agreement and the transactions contemplated hereby
may be terminated and abandoned by resolution of the Board of Trustees of the
Trust or by resolution of the Board of Directors of the Company, at any time
prior to the Closing, if circumstances should develop that, in the opinion of
the Board of Trustees or the Board of Directors, in the sole discretion of
either, make proceeding with this Agreement inadvisable. In the event of any
such termination, there shall be no liability for damages on the part of either
the Acquired Fund or the Acquiring Fund, or their respective directors, trustees
or officers, to the other party or its directors, trustees or officers.
9. Amendments. This Agreement may be amended, waived or supplemented in
such manner as may be mutually agreed upon in writing by the authorized officers
of the Company acting on behalf of the Acquired Fund and by the authorized
officers of the Trust acting on behalf of the Acquiring Fund; provided, however,
that following the Special Meeting, no such amendment, waiver or supplement may
have the effect of changing the provisions for determining the number of
Acquiring Fund Shares to be issued to the Acquired Fund shareholders under this
Agreement to the detriment of such shareholders without their further approval.
10. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of The Commonwealth of Massachusetts, except as to
matters of conflicts of laws.
11. Further Assurances. Each of the Company and the Trust shall take
such further action, prior to, at, and after the Closing, as may be necessary or
desirable and proper to consummate the transactions contemplated hereby.
12. Limitations of Liability. The term "Trust" means and refers to the
trustees from time to time serving under the Master Trust Agreement of the
Trust, as the same may subsequently thereto have been, or subsequently hereto
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, personally, but bind only the assets and
property of the Acquiring Fund series 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 an 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 Sub-Trust of the Trust shall be
charged with the liabilities in respect of that Sub-Trust and all expenses,
costs, charges or reserves belonging to that Sub-Trust.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first set forth above by their duly authorized
representatives.
STATE STREET RESEARCH
FINANCIAL TRUST, on behalf
of State Street Research
International Equity Fund
By: ____________________________________________
Ralph F. Verni
Chairman of the Board, President and
Chief Executive Officer
STATE STREET RESEARCH
PORTFOLIOS, INC., on behalf
of State Street Research
International Equity Fund
By: ____________________________________________
Peter C. Bennett
Vice President
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EXHIBIT B
STATE STREET RESEARCH PORTFOLIOS, INC.
FIRST AMENDED AND RESTATED PLAN OF
DISTRIBUTION PURSUANT TO RULE 12b-1
WHEREAS, State Street Research Portfolios, Inc. (the "Corporation"), a
Maryland corporation, 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 Corporation is authorized 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; and
WHEREAS, the Corporation currently consist of one portfolio series, the
State Street International Equity Fund, (being referred to herein as the
"Initial Fund" B such series, together with any other series subsequently
established by the Corporation and made subject to this Plan, being referred to
herein individually as a "Fund" and collectively as the "Funds"); and
WHEREAS, the Company has established four classes of Shares, such
classes being referred to as "Class A", "Class B", "Class C" and "Class S"; and
WHEREAS, the Corporation may be deemed a distributor of the Shares
within the meaning of Rule 12b-1 under the Act, and has adopted a Plan of
Distribution dated November 18, 1993 (the "Original Plan") and a related
Distribution Agreement with State Street Research Investment Services, Inc., the
Corporation's principal underwriter (the "Distributor") pursuant to such Rule
(respectively, the "Plan" and the "Agreement"); and
WHEREAS, the Corporation desires to adopt a First Amended and Restated
Plan of Distribution pursuant to Rule 12b-1 (the "Plan") to reflect (i) changes
in the designation of the classes of the Fund, (ii) the inclusion of the Class S
shares in the Plan and (iii) certain other changes to the Plan; and
WHEREAS, the Board of Directors as a whole, and the Directors who are
not interested persons of the Funds of the Corporation (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
Directors"), 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 Fund and its shareholders,
have accordingly approved this Plan and the Agreement by votes cast in person at
a meeting called for the purpose of voting on this Plan and the Agreement and
any agreements related thereto.
NOW, THEREFORE, the Corporation 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 Directors, the Corporation
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 Funds of the
Corporation and reports for recipients other than existing shareholders of the
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Corporation, and obtaining such information, analyses and reports with respect
to marketing and promotional activities and investor accounts as the Corporation
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 Corporation as from time to time amended
and in effect (for purposes hereof, references to the Prospectus of the
Corporation shall be deemed to include all Prospectuses of the Corporation), to
the extent, if any, that such payments may be deemed to be within the scope of
Rule 12b-1 under the Act.
The Corporation and its Funds 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
Corporation has entered into agreements pursuant to the Plan.
SECTION 2. MAXIMUM EXPENDITURES
The expenditures to be made by the Initial Fund pursuant to this Plan
and the basis upon which payment of such expenditures will be made shall be
determined by the Initial Fund, but in no event may such expenditures exceed the
following: (i) with respect to Class A Shares of the Initial Fund, 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 C Shares of each Initial
Fund, an annual rate of .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 .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 service and/or the maintenance of
shareholder accounts, and (iii) with respect to any Fund subsequently
established by the Corporation 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 Fund as of the
date on which this Plan becomes effective with respect to each such class.
SECTION 3. PAYMENTS
Pursuant to this Plan, the Corporation shall make periodic payments to
the Distributor at the annual rate provided for in Section 2 with respect to
each Fund, 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
Corporation. Any amounts received by the Distributor and not so allocated may be
applied by the Distributor as reimbursement for expenses incurred in connection
with the 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 Fund will use fees charged to one class within a Fund to support the
marketing or servicing relating to any other class of Shares within the Fund or
any other Fund. Any amounts received by the Distributor hereunder and not
applied as provided herein shall be returned to the applicable class or Fund of
the Corporation.
The Distributor and the Adviser may also make payments to authorized
securities dealers as specified in the Prospectus of the Corporation 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 Fund.
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 C shares pursuant to this Section 3 together with
any contingent deferred sales charges received by the Distributor in connection
with the redemption of shares
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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 Fund. This Plan shall become effective with respect to each
class of the Initial Fund as of the date hereof and shall continue in effect
with respect to each Initial Fund (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 Funds in accordance with
the provisions of Section 4(c) hereof.
B. Additional Funds. This Plan shall become effective with respect to
each additional Fund or class thereof other than the Initial Funds established
by the Corporation after the date hereof and made subject to this Plan upon
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 Directors of the Corporation and (ii) the Qualified Directors, cast in
person at a meeting held before the initial public offering of such additional
Fund or classes thereof and called for the purpose of voting on such approval),
and shall continue in effect with respect to each such additional Fund 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 Fund or Class in accordance with the provisions of Section 4(c)
hereof. The Distributor and the Corporation on behalf of each such additional
Fund 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 Fund or Class thereof subsequent to the initial term
specified in Section 4(a) and (b) for so long as such continuation is
specifically approved at least annually by votes of a majority of both (i) the
Board of Directors of the Corporation and (ii) the Qualified Directors, 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.
1. This Plan may be terminated at any time with respect to the
Corporation or any Fund or Class thereof, as the case may be, by vote of a
majority of the Qualified Directors, or by vote of a majority of the outstanding
voting securities of the Corporation or that Fund or Class, as the case may be.
The Plan may remain in effect with respect to a Fund or Class thereof even if it
has been terminated in accordance with this Section 4(d) with respect to such
Fund or one or more other Funds of the Corporation.
2. The Agreement may be terminated at any time, without
penalty, with respect to the Corporation or any Fund, as the case may be, by
vote of a majority of the Qualified Directors or by vote of a majority of the
outstanding voting securities of the Corporation or that Fund, 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.
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
Fund 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
Corporation or a Fund or Class thereof by vote of a majority of the Qualified
Directors or the outstanding voting securities of the Corporation or that Fund,
as the case may be.
24
<PAGE>
SECTION 6. INDEPENDENT DIRECTORS
While this Plan is in effect with respect to any Fund, the selection
and nomination of Directors who are not interested persons (as defined in the
Act) of the Corporation shall be committed to the discretion of the Directors
not interested persons.
SECTION 7. QUARTERLY REPORTS
The Treasurer of the Corporation and the Treasurer of the Distributor
shall provide to the Directors of the Corporation, and the Directors 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 Corporation 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.
25
<PAGE>
IN WITNESS WHEREOF, the Corporation and the Distributor have executed
this Plan of Distribution on the day and year set forth below.
STATE STREET RESEARCH PORTFOLIOS, INC.
By:______________________________________
STATE STREET RESEARCH INVESTMENT SERVICES,
INC.
By:______________________________________
Date: ________________ __, 1998
26
<PAGE>
STATE STREET RESEARCH INTERNATIONAL EQUITY FUND
a series of
State Street Research Portfolios, Inc.
PROXY
Special Meeting of Shareholders - _______________, 1998
The undersigned hereby appoints Ralph F. Verni, Francis J. McNamara,
III and Darman A. Wing, and each of them, as proxies with full power of
substitution to act for and vote on behalf of the undersigned all shares of
State Street Research International Equity Fund, a series of State Street
Research Portfolios, Inc. (the "Fund"), which the undersigned would be entitled
to vote if personally present at the Special Meeting of Shareholders to be held
at the principal offices of State Street Research Portfolios, Inc., a Maryland
corporation (the "Company"), One Financial Center, 31st Floor, Boston,
Massachusetts 02111, at [___] on __________, 1998, or at any adjournments
thereof, on the following items as set forth in the Notice of Special Meeting of
Shareholders and the accompanying Proxy Statement.
If a choice is specified for a proposal, this proxy will be voted as
indicated. IF NO CHOICE IS SPECIFIED, THIS PROXY WILL BE VOTED FOR THE PROPOSAL.
IF NO CHOICES ARE SPECIFIED FOR ANY PROPOSALS, THIS PROXY WILL BE VOTED FOR ALL
PROPOSALS. In their discretion the proxies are authorized to vote upon such
other business as may properly come before the Meeting. The Board of Directors
recommends a vote FOR all proposals.
The undersigned acknowledges receipt of the Notice of Special Meeting
and the accompanying Proxy Statement dated ________, 1998. PLEASE INDICATE ANY
CHANGE OF ADDRESS ON THE REVERSE SIDE. This proxy may be revoked at any time
prior to the exercise of the powers conferred thereby.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
SEE REVERSE SIDE
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<PAGE>
1. To consider and act upon an Agreement and Plan of Reorganization and
Liquidation providing for the transfer of the assets of the Fund
(subject to certain of its liabilities) to State Street Research
International Equity Fund, a series of State Street Research Financial
Trust (the "Acquiring Fund") in exchange for Class A, Class B, Class C
and Class S shares of the Acquiring Fund, the distribution of such
shares to shareholders of the Fund and the subsequent liquidation of
the Fund.
[ ] For [ ] Against [ ] Abstain
2. To change the classification of the policy regarding investments in
options from fundamental to nonfundamental.
[ ] For [ ] Against [ ] Abstain
3. To amend the Fund's fundamental policy regarding investing in
commodities and commodity contracts.
[ ] For [ ] Against [ ] Abstain
4. To amend the Fund's fundamental policy relating to securities lending.
[ ] For [ ] Against [ ] Abstain
5. To amend the Fund's fundamental policy regarding industry
concentration.
[ ] For [ ] Against [ ] Abstain
6. (For Class S shareholders only). To include Class S shares under the
Fund's Plan of Distribution Pursuant to Rule 12b-1.
[ ] For [ ] Against [ ] Abstain
MARK HERE FOR ADDRESS MARK HERE IF YOU PLAN TO
CHANGE AND NOTE AT LEFT [ ] ATTEND MEETING [ ]
IT IS IMPORTANT THAT THIS PROXY BE SIGNED AND RETURNED IN THE ENCLOSED
ENVELOPE.
NOTE: Please date and sign exactly as name or names appear hereon and
return in the enclosed envelope which requires no postage. When signing as
attorney, executor, trustee, guardian or officer of a corporation, please give
title as such.
Signature:______________________ Date:________________________
Signature:______________________ Date:________________________
2
<PAGE>
REQUEST TO RECONSIDER
PRIOR [ABSTENTION] ["AGAINST" VOTE]
(date)
To Shareholders of the
State Street International Equity Fund
Recently we solicited your proxy vote on a number of important
proposals. Because you returned a proxy form which indicated that you [abstained
from voting on] [voted "against"] one or more proposals that are still open, we
are contacting you again to ask that you reconsider your [abstention] [vote
Aagainst] and vote in favor of the proposals. The Fund is very close to the
requisite vote to approve the proposals and your vote may make a difference. The
meeting has been adjourned to allow more time to obtain votes.
The open proposals are proposal(s) [proposal number(s)]. [If the open
proposal is 1. approval of proposal 1 will simply change the Fund's form of
organization to that of a newly organized series of State Street Research
Financial Trust, which is expected to result in greater administrative
efficiency.] [If the open proposal(s) is 2-6: Approval of the proposal(s) would
give the Fund more flexibility in making investments.] The proposals are
described in more detail in the Proxy Statement. Please call 1-800-562-0032 if
you need another copy of the Proxy Statement.
Please indicate your vote, sign and return promptly the enclosed
Supplemental Proxy form in the special accompanying envelope which will expedite
processing and does not require any postage from you. (If your return envelope
is for Federal Express, call for free pick-up at 1-800-238-5355.)
You may receive a telephone call urging you to return your Supplemental
Proxy form or vote by telephone. If you have any questions, please contact State
Street Research Shareholder Services toll-free nationwide at 1-800-562-0032
between 8 a.m. and 6 p.m. Eastern Standard Time.
Thank you.
State Street Research
Shareholder Services
- ---------------------
Note: In some cases, persons with the same tax identification number and
mailing address may have received proxy solicitation materials for
different accounts in one package.
<PAGE>
State Street Research International Equity Fund
a series of
State Street Research Portfolios, Inc.
SUPPLEMENTAL PROXY
Special Meeting of Shareholders
The undersigned hereby submits this Supplemental Proxy to make the below
indicated changes to the [vote(s)] [abstention(s)] previously submitted by the
undersigned in connection with a Special Meeting of Shareholders as described
in a related Proxy Statement dated
______________________________.
If a choice is specified for a proposal, this proxy will be voted as
indicated. IF NO CHOICE IS SPECIFIED, THIS PROXY WILL BE VOTED FOR THE
PROPOSAL. IF NO CHOICES ARE SPECIFIED FOR ANY PROPOSALS, THIS PROXY WILL BE
VOTED FOR ALL PROPOSALS. The Board of Trustees recommends a vote FOR all
proposals.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES.
________________________________________________________________________________
PLEASE DETACH AND RETURN BOTTOM PORTION IN THE ENCLOSED ENVELOPE
________________________________________________________________________________
FOR AGAINST ABSTAIN
[recite proposal(s) from original ----- ----- -----
proxy card] ( ) ( ) ( )
----- ----- -----
----- ----- -----
( ) ( ) ( )
----- ----- -----
----- ----- -----
( ) ( ) ( )
----- ----- -----
IT IS IMPORTANT THAT THIS PROXY BE SIGNED
AND RETURNED IN THE ENCLOSED ENVELOPE.
DATE: ____________________, 1998.
NOTE: Please date and sign exactly as
name or names appear hereon and return in
the enclosed envelope, which requires no
postage. When signing as attorney,
executor, trustee, guardian or officer of
a corporation, please give title as such.
________________________________________
________________________________________
Signature(s) if held jointly
(Title(s), if required)
