As filed with the Securities and Exchange Commission on January 23, 1997
1933 Act Registration No. 33-74628
1940 Act File No. 811-8322
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. __ [ ]
Post-Effective Amendment No. 6 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 7 [X]
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STATE STREET RESEARCH SECURITIES TRUST
(Exact Name of Registrant as Specified in Charter)
One Financial Center, Boston, Massachusetts 02111
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (617) 357-1200
Francis J. McNamara, III
Senior Vice President, Secretary & General Counsel
State Street Research & Management Company
One Financial Center
Boston, Massachusetts 02111
(Name and Address of Agent for Service)
Copies of Communications to:
Geoffrey R.T. Kenyon, Esq.
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109
It is proposed that this filing will become effective (check appropriate box):
[ ] Immediately upon filing pursuant to paragraph (b)
[X] On January 24, 1997 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] On _____________ pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] On __________ pursuant to paragraph (a)(2)
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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The Registrant hereby declares that, pursuant to Rule 24f-2(a)(1) under the
Investment Company Act of 1940, as amended (the "1940 Act"), it has registered
an indefinite number of shares of beneficial interest, par value $.001 per
share, in the State Street Research Intermediate Bond Fund series and the State
Street Research Strategic Income Fund series of the Registrant, which shares are
designated as Class A shares, Class B shares, Class C shares and Class D shares
of such series.
A Rule 24f-2 Notice for the fiscal period ended April 30, 1996 was filed by
the Registrant on or about June 30, 1996 with respect to the State Street
Research Intermediate Bond Fund series of the Registrant. To date, no Rule 24f-2
Notice has been required to be filed by the Registrant with respect to its State
Street Research Strategic Income Fund Series.
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<PAGE>
The Prospectus and Statement of Additional Information of State Street
Research Intermediate Bond Fund are included in Post-Effective Amendment No. 5
to this Registration Statement.
The Prospectus and Statement of Additional Information of State Street
Research Strategic Income Fund are included herein.
<PAGE>
STATE STREET RESEARCH SECURITIES TRUST
CROSS REFERENCE SHEET
Pursuant to Rule 481(a)
<TABLE>
<CAPTION>
Caption or Location in Prospectus Caption or Location in Prospectus
Form N-1A Item No. for State Street Research for State Street Research
Intermediate Bond Fund Strategic Income Fund
PART A
<S> <C> <C>
1. Cover Page...................... Same Same
2. Synopsis........................ Table of Expenses Table of Expenses
3. Condensed Financial
Information .................... Financial Highlights; Calculation of Financial Highlights; Calculation of
Performance Data Performance Data
4. General Description
of Registrant .................. The Fund's Investments; Investment The Fund's Investments; Limiting
Practices; The Fund and its Shares; Investment Risk; The Fund and its Shares;
Appendix Debt/Bond Ratings Appendix Debt/Bond Ratings
5. Management of the Fund.......... Management of the Fund; Purchase of Management of the Fund; Purchase of
Shares; Shareholder Services Shares; Shareholder Services
5A. Management's Discussion of
Fund Performance ............... [To be included in Annual Report to [To be included in Annual Report to
Shareholders] Shareholders]
6. Capital Stock and
Other Securities ............... The Fund and its Shares; Management of The Fund and its Shares; Management of
the Fund; Dividends and Distributions; the Fund; Dividends and Distributions;
Taxes; Shareholder Services Taxes; Shareholder Services
7. Purchase of Securities
Being Offered ................. Purchase of Shares; Shareholder Purchase of Shares; Shareholder
Services; Management of the Fund Services; Management of the Fund
8. Redemption or Repurchase ....... Redemption of Shares; Shareholder Redemption of Shares; Shareholder
Services Services
9. Legal Proceedings............... Not Applicable Not Applicable
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Caption or Location in Statement Caption or Location in Statement
of Additional Information for of Additional Information for
State Street Research Intermediate State Street Research Strategic
Form N-1A Item No. Bond Fund Income Fund
PART B
<S> <C> <C>
10. Cover Page...................... Same Same
11. Table of Contents............... Same Same
12. General Information and
History ........................ Not Applicable Not Applicable
13. Investment Objectives
and Policies ................... Additional Investment Policies and Investment Policies and
Restrictions; Additional Information Restrictions; Additional Information
Concerning Certain Investment Concerning Certain Investment
Techniques; Debt Instruments and Techniques; Debt Instruments and
Permitted Cash Investments; Permitted Cash Investments;
Portfolio Transactions Portfolio Transactions
14. Management of the Registrant ... Trustees and Officers Trustees and Officers
15. Control Persons and Principal
Holders of Securities .......... Trustees and Officers Trustees and Officers
16. Investment Advisory and Other
Services ....................... Investment Advisory Services; Investment Advisory Services;
Custodian; Independent Accountants; Custodian; Independent Accountants;
Distribution of Shares of the Fund Distribution of Shares of the Fund
17. Brokerage Allocation............ Portfolio Transactions Portfolio Transactions
18. Capital Stock and
Other Securities ............... Not Applicable (Description in Not Applicable (Description in
Prospectus) Prospectus)
19. Purchase, Redemption and Pricing
of Securities Being Offered .... Purchase of Shares; Net Asset Value Purchase of Shares; Redemption of Shares;
Net Asset Value
20. Tax Status ..................... Certain Tax Matters Certain Tax Matters
21. Underwriters ................... Distribution of Shares of the Fund Distribution of Shares of the Fund
22. Calculation of Performance
Data ........................... Calculation of Performance Data Calculation of Performance Data
23. Financial Statements ........... Financial Statements Financial Statements
</TABLE>
ii
<PAGE>
State Street Research
Strategic Income Fund
Prospectus
August 19, 1996
(as supplemented through January 24, 1997)
The investment objective of State Street Research Strategic Income Fund
(the "Fund") is to provide high current income consistent with overall total
return. In seeking to achieve its investment objective, the Fund invests
primarily in U.S. Government securities; high yield, high risk debt securities
(commonly known as "junk bonds"), as well as investment grade debt, of U.S.
issuers; and international debt securities of governmental and private issuers.
For further information, see "The Fund's Investments."
State Street Research & Management Company (the "Investment Manager")
serves as investment adviser to the Fund. As of November 30, 1996 the Investment
Manager had assets of approximately $42.5 billion under management. State Street
Research Investment Services, Inc. serves as distributor (the "Distributor") for
the Fund.
There are risks in any investment program, including the risk of changing
economic and market conditions, and there is no assurance that the Fund will
achieve its investment objective. The net asset value of the Fund's shares
fluctuates as market conditions change.
Because of the Fund's investment policies, the Fund is subject to
above-average risks; it may invest substantial amounts in foreign securities and
high yield, high risk bonds. An investment in the Fund should be part of a
balanced investment program which includes more conservative investments. For
further information, see "The Fund's Investments."
This Prospectus sets forth concisely the information a prospective
investor ought to know about the Fund before investing. It should be retained
for future reference. A Statement of Additional Information about the Fund dated
August 19, 1996 as supplemented January 24, 1997 has been filed with the
Securities and Exchange Commission and is incorporated by reference into this
Prospectus. It is available at no charge upon request to the Fund at the address
indicated on the cover or by calling 1-800-562-0032.
The Fund is a diversified (as defined under the Investment Company Act of
1940) series of State Street Research Securities Trust (the "Trust"), an
open-end management investment company.
Shareholders may have their shares redeemed directly by the Fund at net
asset value plus the applicable contingent deferred sales charge, if any;
redemptions processed through securities dealers may be subject to processing
charges.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THE FUND CAN INVEST UP TO 60% OF ITS TOTAL ASSETS IN LOWER RATED BONDS,
COMMONLY KNOWN AS "JUNK BONDS," THAT ENTAIL GREATER RISKS, INCLUDING DEFAULT
RISKS, THAN THOSE FOUND IN HIGHER RATED SECURITIES. INVESTORS SHOULD CAREFULLY
CONSIDER THESE RISKS BEFORE INVESTING. SEE "THE FUND'S INVESTMENTS," PAGES 4 TO
10 AND "APPENDIX - DESCRIPTION OF DEBT/BOND RATINGS," PAGES 30 TO 31.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY FINANCIAL INSTITUTION, ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY, AND
INVOLVE INVESTMENT RISK, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
<PAGE>
Table of Contents Page
Table of Expenses ...................................................... 2
Financial Highlights ................................................... 4
The Fund's Investments ................................................. 4
Limiting Investment Risk ............................................... 10
Purchase of Shares ..................................................... 11
Redemption of Shares ................................................... 19
Shareholder Services ................................................... 21
The Fund and its Shares ................................................ 25
Management of the Fund ................................................. 26
Dividends and Distributions; Taxes ..................................... 27
Calculation of Performance Data ........................................ 28
Appendix-Description of Debt/Bond Ratings............................... 30
The Fund offers four classes of shares which may be purchased at the next
determined net asset value per share plus, in the case of all classes except
Class C shares, a sales charge which, at the election of the investor, may be
imposed (i) at the time of purchase (the Class A shares) or (ii) on a deferred
basis (the Class B and Class D shares).
Class A shares are subject to (i) an initial sales charge of up to 4.5%
and (ii) an annual service fee of 0.25% of the average daily net asset value of
the Class A shares.
Class B shares are subject (i) to a contingent deferred sales charge
(declining from 5% to 2%), which will be imposed on most redemptions made within
five years of purchase and (ii) annual distribution and service fees of 1% of
the average daily net asset value of such shares. Class B shares automatically
convert into Class A shares (which pay lower ongoing expenses) at the end of
eight years after purchase. No contingent deferred sales charge applies after
the fifth year following the purchase of Class B shares.
Class C shares are offered only to certain employee benefit plans and
large institutions. No sales charge is imposed at the time of purchase or
redemption of Class C shares. Class C shares do not pay any distribution or
service fees.
Class D shares are subject to (i) a contingent deferred sales charge of 1%
if redeemed within one year following purchase and (ii) annual distribution and
service fees of 1% of the average daily net asset value of such shares.
<PAGE>
Table of Expenses
<TABLE>
<CAPTION>
Class A Class B Class C Class D
<S> <C> <C> <C> <C>
Shareholder Transaction Expenses(1)
Maximum Sales Charge Imposed on Purchases (as
percentage of offering price) ......................... 4.5% None None None
Maximum Deferred Sales Charge (as a
percentage of net asset value at time of
purchase or redemption, whichever is lower)............ None(2) 5% None 1%
Maximum Sales Charge Imposed on Reinvested
Dividends (as a percentage of offering price) ......... None None None None
Redemption Fees (as a percentage of amount
redeemed, if applicable) .............................. None None None None
Exchange Fee ............................................ None None None None
</TABLE>
(1) Reduced sales charge purchase plans are available for Class A shares. The
maximum 5% contingent deferred sales charge on Class B shares applies to
redemptions during the first year after purchase; the charge declines
thereafter and no contingent deferred sales charge is imposed after the
fifth year. Class D shares are subject to a 1% contingent deferred sales
charge on any portion of the purchase redeemed within one year of the
sale. Long-term investors in Class A, Class B or Class D shares may, over
a period of years, pay more than the economic equivalent of the maximum
sales charge permissible under applicable rules. See "Purchase of Shares."
(2) Purchases of Class A shares of $1 million or more are not subject to a
sales charge. If such shares are redeemed within 12 months of purchase, a
contingent deferred sales charge of 1% will be applied to the redemption.
See "Purchase of Shares."
<PAGE>
Class A Class B Class C Class D
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees ................. 0.75% 0.75% 0.75% 0.75%
12b-1 Fees .................... 0.25% 1.00% None 1.00%
Other Expenses .................. 0.75% 0.75% 0.75% 0.75%
Less Voluntary Reduction ........ (0.40%) (0.40%) (0.40%) (0.40%)
------- ------- -------- ------
Total Fund Operating Expenses
(after voluntary reduction) 1.35% 2.10% 1.10% 2.10%
======= ====== ======= ======
Example: 1 Year 3 Years
------ -------
You would pay the following expenses on a $1,000 investment including, for
Class A shares, the maximum applicable initial sales charge and assuming
(1) 5% annual return and (2) redemption of the entire investment at the end
of each time period:
Class A shares .................................. $58 $86
Class B shares .................................. $71 $96
Class C shares .................................. $11 $35
Class D shares .................................. $31 $66
You would pay the following expenses on the same investment, assuming no
redemption:
1 Year 3 Years
------ -------
Class B shares .................................. $21 $66
Class D shares .................................. $21 $66
- --------------------
The example should not be considered as a representation of past or future
return or expenses. Actual return or expenses may be greater or less than shown.
The purpose of the table above is to assist the investor in understanding
the various costs and expenses that an investor will bear directly or
indirectly. Because the Fund is newly organized, the percentage expense levels
shown in the table as "Other Expenses" are based on estimated amounts for the
current year. Actual expense levels for the current fiscal year and future years
may vary from the amounts shown. The table does not reflect charges for optional
services elected by certain shareholders, such as the $7.50 fee for remittance
of redemption proceeds by wire. For further information on sales charges, see
"Purchase of Shares -- Alternative Purchase Program"; for further information on
<PAGE>
management fees, see "Management of the Fund"; and for further information on
12b-1 fees, see "Purchase of Shares -- Distribution Plan."
The Fund has been advised that the Distributor and its affiliates may from
time to time and in varying amounts voluntarily assume some portion of fees or
expenses relating to the Fund. The Fund presently expects such assistance to be
provided for the next 12 months or until the Fund's net assets reach $100
million, whichever first occurs. However, the Fund has not received any firm
commitment that such assistance will in fact be provided.
For the current fiscal year, Total Fund Operating Expenses as a percentage
of average net assets of Class A, Class B, Class C and Class D shares of the
Fund are estimated to be 1.75%, 2.50%, 1.50% and 2.50%, respectively, in the
absence of the voluntary assumption of fees or expenses by the Distributor and
its affiliates.
Financial Highlights
This information should be read in conjunction with financial statements
and notes thereto included in the Statement of Additional Information.
For a share outstanding from August 30, 1996 (commencement of operations)
to October 31, 1996 (Unaudited):
<TABLE>
<CAPTION>
Class A Class B Class C Class D
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $7.00 $7.00 $7.00 $7.00
Net investment income* 0.07 0.05 0.08 0.06
Net realized and unrealized gain on investments, foreign
currency and forward contracts 0.15 0.16 0.15 0.15
Dividends from net investment income (0.05) (0.05) (0.06) (0.05)
----- ----- ----- -----
Net asset value, end of period $7.17 $7.16 $7.17 $7.16
===== ===== ===== =====
Total return 3.19%+ 2.94%+ 3.22%+ 2.94%+
Net assets at end of period (000s) $28,802 $5,070 $9,298 $3,540
Ratio of operating expenses to average net assets* 1.35%++ 2.10%++ 1.10%++ 2.10%
Ratio of net investment income to average net assets* 6.89%++ 6.14%++ 7.14%++ 6.14%
Portforlio turnover rate 29.84% 29.84% 29.84% 29.84%
- ----------
*Reflects voluntary assumption of fees or expenses per
share (less than $0.01 per share, see Note 3 to
Financial Statements in the Statement of Additional
Information.) $0.00 $0.00 $0.00 $0.00
+Represents aggregate return for the period without annualization and does not
reflect any front-end or contingent deferred sales charge. Total return would
be lower if the Distributor and its affiliates had not voluntarily assumed a
portion of the Fund's expenses.
++Annualized
</TABLE>
The Fund's Investments
The Fund's investment objective is to provide high current income
consistent with overall total return. The investment objective is a fundamental
policy that may not be changed without approval of the Fund's shareholders.
In seeking to achieve its investment objective, the Fund invests, under
normal circumstances, primarily in U.S. Government securities; high yield, high
risk, as well as investment grade, debt securities of U.S. issuers; and
international debt securities of governmental and private issuers.
The Investment Manager believes that assets can be diversified and
allocated among the three sectors, U.S. Government securities, high yield, high
risk securities, and international debt securities, to take advantage of the
different ways that such sectors have performed in economic cycles. As interest
rates rise and fall in the United States, the volatility of the prices of U.S.
Government securities has historically been greater than the volatility of high
yield, high risk U.S. corporate debt. When the U.S. economy is at a particular
point in the economic growth and interest rate cycle, a given foreign economy
may be at a different point in the economic cycle; in general, the U.S. and
foreign economies do not coincide. Foreign monetary policies and movements in
the exchange rates among the world's currencies also affect investments. There
is no assurance that the asset allocation made by the Fund will be effective.
The allocation to a given sector will vary as domestic and international market
conditions warrant. Up to 100% of the Fund's assets could be allocated to any
one sector depending on circumstances, except that not more than 60% may be
invested in high yield, high risk securities.
The three sectors encompass virtually all types of traditional debt
securities as well as other securities which are treated as debt securities
including, but not limited to, bonds, notes, bills, debentures, commercial
paper, bank instruments and depository accounts, collateralized mortgage
obligations
<PAGE>
and other mortgage related or backed obligations, asset-backed securities,
variable and floating rate instruments, payment-in-kind securities,
participation interests in trusts and other entities, interest only and
principal only stripped securities, convertible debt securities, and preferred
stocks. The stated or effective maturity of the instruments can range from very
short-term to very long-term.
The Fund will seek high current income consistent with overall total
return through interest earned on debt securities and through gains from the
purchase and sale of the underlying securities at different prices. There is no
assurance that the Fund will obtain such income or gains. All bonds are subject
to relative degrees of interest rate risk and related market volatility. As
interest rates rise, the value of debt securities held by the Fund and thus,
shares of the Fund, can be expected to decline. As interest rates decline, the
value of debt securities held by the Fund and thus, shares of the Fund, can be
expected to increase. The magnitude of these fluctuations will be greater when
the average maturity of the portfolio securities is longer. In addition, the
value of portfolio securities can be affected by changes in the creditworthiness
of the issuer, especially of high yield, high risk debt, resulting from, for
example, positive or negative changes in the issuer's financial condition, its
business operations, or outside economic factors impacting the issuer. Thus, as
interest rates move up or down and the creditworthiness of issuers change, the
amount of possible interest income and the value of the underlying debt security
can both be subject to change. Under normal circumstances, the Fund expects to
be fully invested in debt securities in the three sectors as described. However
the Fund may, consistent with its investment objective, make other investments,
including common stocks and warrants up to 15% of the Fund's total assets.
Although the Fund's investments are discussed below in three broad
sectors, many instruments are available in more than one sector, such as
mortgage-related securities which can be a U.S. Government security when issued
by a U.S. agency, or a non-governmental debt security when issued by a private
trust.
Government Securities
U.S. Government securities are securities which are issued or guaranteed
as to principal or interest by the U.S. Government, a U.S. Government agency or
instrumentality, or certain mixed-ownership Government corporations or sponsored
enterprises. The U.S. Government securities in which the Fund invests include,
among others, direct obligations of the U.S. Treasury, i.e., U.S. Treasury
bills, notes, certificates and bonds; obligations of U.S. Government agencies or
instrumentalities such as the Federal Home Loan Banks, Federal Farm Credit
Banks, including mortgage-backed obligations of the Government National Mortgage
Association, Federal National Mortgage Association and Federal Home Loan
Mortgage Corporation; and obligations of mixed-ownership Government corporations
such as Resolution Funding Corporation.
<PAGE>
The Fund may invest in mortgage-related securities. Mortgage-related
securities represent interests in pools of commercial or residential mortgage
loans and provide the Fund with a flow-through of interest and principal
payments as such payments are received with respect to the mortgages in the
pool. Mortgage-related securities may be issued by U.S. Government agencies,
instrumentalities or mixed-ownership corporations or sponsored enterprises, and
the securities may or may not be supported by the credit of such entities.
Mortgage-related securities may also be issued by private entities such as
investment banking firms, insurance companies, mortgage bankers and home
builders. An issuer may offer senior or subordinated securities backed by the
same pool of mortgages. The senior securities have priority to the interest
and/or principal payments on the mortgages in the pool; the subordinate
securities have a lower priority with respect to such payments on the mortgages
in the pool. See "Risk Factors" below.
The Fund may invest in stripped securities. Stripped securities are issued
by governmental or private issuers. U.S. Government securities may be acquired
by the Fund in the form of separately traded principal and interest components
of securities issued or guaranteed by the U.S. Treasury. The principal and
interest components of selected securities are traded independently under the
Separate Trading of Registered Interest and Principal of Securities ("STRIPS")
program. Under the STRIPS program, the principal and interest components are
individually numbered and separately issued by the U.S. Treasury at the request
of depository financial institutions, which then trade the component parts
independently. Obligations of Resolution Funding Corporation are similarly
divided into principal and interest components and maintained as such on the
book entry records of the Federal Reserve Banks.
Stripped securities also include mortgage-related securities which have
been divided into separate interest and principal components. Holders of the
interest components of mortgage related securities will receive payments of the
interest only on the current face amount of the mortgages and holders of the
principal components will receive payments of the principal on the mortgages.
"Interest only" securities are known as IOs; "principal only" securities are
known as POs. See "Risk Factors" below.
Risk Factors
In the case of mortgage-related securities, the possibility of prepayment
of the underlying mortgages which might be motivated, for instance, by declining
interest rates, could lessen the potential for total return in mortgage-backed
securities. When pre-payments of mortgages occur during periods of declining
interest rates, the Fund will have to reinvest the proceeds in instruments with
lower effective interest rates.
In the case of stripped securities, in periods of low interest rates and
rapid mortgage prepayments, the value of IOs for mortgage-related securities can
decrease significantly. The market for IOs and POs is new and there is no
assurance it will operate efficiently or provide liquidity in the future.
Stripped securities are extremely volatile in certain interest rate
environments.
U.S. Corporate High Yield, High Risk, Investment Grade and Other Debt Securities
High yield, high risk debt includes corporate bonds, convertible bonds and
preferred stocks, rated at the time of purchase in categories BB through D by
Standard & Poor's Corporation ("S&P") or Ba through C by Moody's Investors
Service, Inc. ("Moody's"), commonly known as "junk bonds", or which are unrated
but believed by the Investment Manager to be of comparable quality. Where an
investment is split rated, the Fund may invest on the basis of the higher
rating. Where an investment is only rated by one rating agency, the Fund may
invest on the basis of a higher
<PAGE>
rating derived from its own analysis.
The Fund may also invest in higher rated, lower yield debt securities of
domestic issuers. Higher rated securities include those rated AAA through BBB by
S&P or Aaa through Baa by Moody's. Securities rated BBB by S&P or Baa by Moody's
can have speculative characteristics. Investment grade securities are generally
issued by larger or more established issuers, compared to lower rated
securities, and are less volatile. The Fund will invest in investment grade
securities when appropriate given the spread between higher and lower quality
debt, market expectations, and overall portfolio composition. Investment grade
debt can lessen a potential decline in the Fund's net asset value, but may also
reduce the Fund's current income and total return.
In addition to the ratings from S&P and Moody's, ratings by other
nationally recognized statistical rating organizations may be used, such as
Fitch's Investors Services and Duff & Phelps Credit Rating Company.
Risk Factors
Lower rated high yield, high risk securities generally involve more credit
risk than higher rated securities and are considered by S&P and Moody's to be
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. Such securities may
also be subject to greater market price fluctuations than lower yielding, higher
rated debt securities; credit ratings do not reflect this market risk. In
addition, these ratings may not reflect the effect of recent developments on an
issuer's ability to make interest and principal payments. Bonds rated in the
lowest category and in default may never resume interest payments or repay
principal and their market value may be difficult to determine. In the event the
rating of a security is downgraded, the Investment Manager will determine
whether the security should be retained or sold depending on an assessment of
all facts and circumstances at that time. For further information concerning the
ratings of debt securities, see the Appendix to this Prospectus.
Additional risks of such securities include (i) limited liquidity and
secondary market support, particularly in the case of securities that are not
rated or are subject to restrictions on resale, which may limit the ability of
the Fund to sell portfolio securities either to meet redemption requests or in
response to changes in the economy or the financial markets, and make selection
and valuation of portfolio securities more subjective and dependent upon the
Investment Manager's credit analysis; (ii) the potential for the insolvency of
issuers during periods of changing interest rates and economic difficulty; (iii)
subordination to the prior claims of senior lenders; and (iv) the possibility
that earnings of the issuer may be insufficient to meet its debt service. Growth
in the market for this type of security has paralleled a general expansion in
certain sectors in the U.S. economy, and the effects of adverse economic changes
(including a recession) are unclear.
Other Debt Securities
The Fund may also invest in other debt-related obligations issued by
corporations, trusts and similar entities such as beneficial interests in
asset-backed pools, zero coupon securities, pay-in-kind ("PIK") securities,
Yankee bonds and Government trust certificates. The credit quality of the issuer
of such securities can range across the entire spectrum from high quality to
highly speculative.
Asset-backed (other than mortgage-related) securities represent interests
in pools of consumer loans such as credit card receivables, automobile loans and
leases, leases on equipment such as computers, and other financial instruments.
<PAGE>
These securities provide a flow-through of interest and principal payments as
payments are received on the loans or leases and may be supported by letters of
credit or similar guarantees of payment by a financial institution.
Zero coupon securities pay no interest for all or a portion of their life
but are purchased at a discount to face value at maturity. Their return consists
of the amortization of the discount between their purchase price and their
maturity value, plus any fixed rate interest income. Zero coupon securities pay
no interest to holders prior to maturity even though interest on these
securities is reported as income to the Fund. PIK debt securities permit the
issuer to pay the interest thereon either in cash or as additional debt
obligations. The reporting of interest for zero coupon and PIK securities is
similar. The Fund will be required to distribute all or substantially all of
such amounts annually to its shareholders. These distributions may cause the
Fund to liquidate portfolio assets in order to make such distributions at a time
when the Fund may have otherwise chosen not to sell such securities. The market
for zero coupon and payment-in-kind securities is more volatile than that of
securities which pay interest at regular intervals.
Yankee bonds are bonds denominated in U.S. dollars and issued by foreign
entities for sale in the United States. Yankee bonds are affected by interest
rates in the U.S. and by the economic, political and other forces which impact
the issuer locally.
The Fund may invest from time to time in collective investment vehicles,
such as Government trusts whose assets consist principally of U.S. Government
securities, or other assets, such as U.S. Government loans to foreign countries,
substantially collateralized or supported by such securities.
International Debt Securities
The Fund may invest in debt obligations denominated in foreign currencies
issued or guaranteed by governments, governmental agencies and similar bodies,
and supranational organizations, corporations, financial institutions, trusts,
and other entities. The Fund expects to invest predominantly in investment grade
debt of issuers in Developed Nations, although no limits apply as to quality or
geography.
The Fund invests in foreign debt based on the attractiveness of the
issuer, the general economic climate, the interest rate environment, and the
relative strength of the U.S. dollar and relevant currency. The obligations of
foreign governmental entities have various kinds of government support and
include obligations issued or guaranteed by foreign governmental entities with
taxing powers. These obligations may or may not be supported by the full faith
and credit of a foreign government. The obligations of foreign corporations are
subject to many of the same business, industry and other fundamental variables
that affect the creditworthiness of domestic corporations. All foreign debt
obligation, both governmental and nongovernmental, are also affected by the
interrelationships of interest rates in the U.S. and abroad and exchange rates
among currencies.
<PAGE>
Supranational debt may be denominated in U.S. dollars, a foreign currency
or a multi-national currency unit. Examples of supranational entities include
the World Bank, the European Investment Bank, the Asian Development Bank and the
Inter-American Development Bank. The governmental members, or "stockholders",
usually make initial capital contributions to the supranational entity and in
many cases are committed to make additional capital contributions if the
supranational entity is unable to repay its borrowings.
The Fund may invest in securities denominated in a multi-national currency
unit. An illustration of a multi-national currency unit is the European Currency
Unit (the "ECU"), which is a "basket" consisting of specified amounts of the
currencies of the member states of the European Community, a Western European
economic cooperative organization that includes Germany, France, the United
Kingdom, the Netherlands, Belgium and Italy, among others. European
supranational entities, in particular, issue ECU-denominated obligations.
The Fund may invest in American Depositary Receipts ("ADRs") and European
Depositary Receipts ("EDRs"). ADRs are dollar denominated receipts, typically
issued by a U.S. bank or trust company, which evidence ownership of underlying
securities issued by a foreign corporation or other entity. EDRs are foreign
currency denominated receipts issued in Europe which evidence a similar
ownership arrangement. The Fund may also invest in bonds denominated in U.S.
dollars issued outside the United States by corporations and others, for
example, "Eurodollar" bonds.
<PAGE>
Risk Factors
The risks associated with investments in foreign securities include those
resulting from fluctuations in currency exchange rates, revaluation of
currencies, future political and economic developments, including the risks of
nationalization or expropriation, the possible imposition of currency exchange
blockages, higher operating expenses, foreign withholding and other taxes which
may reduce investment return, reduced availability of public information
concerning issuers and the fact that foreign issuers are not generally subject
to uniform accounting, auditing and financial reporting standards or to other
regulatory practices and requirements comparable to those applicable to domestic
issuers. Moreover, securities of many foreign issuers may be less liquid and
their prices more volatile than those of securities of comparable domestic
issuers.
The Fund may also invest in the securities of issuers in countries with
less developed economies as deemed appropriate by the Investment Manager,
although the Fund does not presently expect to invest more than 5% of its total
assets in issuers in such less developed countries. Such countries include
countries that have an emerging securities market that trades a small number of
securities; countries with low- to middle-income economies; and/or countries
with economies that are based on only a few industries. Eastern European
countries are considered to have less developed capital markets.
For further information regarding foreign investments, see the Statement
of Additional Information.
Currency Transactions
In order to protect against the effect of uncertain future exchange rates
on securities denominated in foreign currencies, the Fund may engage in currency
exchange transactions either on a spot (i.e., cash) basis at the rate prevailing
in the currency exchange market or by entering into forward contracts to
purchase or sell currencies. The Fund may simultaneously engage in such
transactions in the denomination currency of the underlying investment in
another currency in respect to the denomination currency; sometimes called
"cross hedging". Although such contracts tend to minimize the risk of loss
resulting from a correctly predicted decline in value of hedged currency, they
tend to limit any potential gain that might result should the value of such
currency increase. In entering a forward currency transaction, the Fund is
dependent upon the creditworthiness and good faith of the counterparty. The Fund
attempts to reduce the risks of nonperformance by the counterparty by dealing
only with established, large institutions with which the Investment Manager has
done substantial business in the past. For further information, see the
Statement of Additional Information.
<PAGE>
Other Investment Policies
The Fund may lend portfolio securities with a value of up to 33 1/3% of
its total assets. The Fund will receive cash or cash equivalents (e.g., U.S.
Government obligations) as collateral in an amount equal to at least 100% of the
current market value of the loaned securities plus accrued interest. Collateral
received by the Fund will generally be held in the form tendered, although cash
may be invested in securities issued or guaranteed by the U.S. Government or its
agencies or instrumentalities, irrevocable stand-by letters of credit issued by
a bank, or any combination thereof. The investing of cash collateral received
from loaning portfolio securities involves leverage which magnifies the
potential for gain or loss on monies invested and, therefore, results in an
increase in the volatility of the Fund's outstanding securities. Such loans may
be terminated at any time.
The Fund will retain most rights of ownership including rights to
dividends, interest or other distributions on the loaned securities. Voting
rights pass with the lending, although the Fund may call loans to vote proxies
if desired. Should the borrower of the securities fail financially, there is a
risk of delay in recovery of the securities or loss of rights in the collateral.
Loans are made only to borrowers which are deemed by the Investment Manager to
be of good financial standing.
The Fund may buy and sell options, futures contracts and options on
futures contracts on securities, securities indices and currencies, and enter
into closing transactions with respect thereto; such instruments are commonly
known as derivatives because they derive their value from underlying assets,
such as the assets on which they are based. The Fund may not establish a
position in a commodity futures contract or purchase or sell a commodity option
contract for other than bona fide hedging purposes if immediately thereafter the
sum of the amount of initial margin deposits and premiums required to establish
such derivative positions for nonhedging purposes would exceed 5% of the market
value of the Fund's net assets; similar policies apply to options which are not
commodities. The Fund may also invest in derivatives through various forms of
swap arrangements, which have simultaneously the characteristics of a security
and a futures contract, although the Fund does not presently expect to invest
more than 5% of its total assets in such derivatives. These swap arrangements
include interest rate swaps, currency swaps and index swaps. For a more detailed
discussion of derivatives, see the Statement of Additional Information. The Fund
may also enter into repurchase agreements and reverse repurchase agreements.
The Fund may purchase "when-issued" securities, which are traded on a
price basis prior to actual issuance. Such purchases will be made only to
achieve the Fund's investment objective and not for leverage. The when-issued
trading period generally lasts from a few days to months or over a year or more.
No income accrues to the Fund prior to the time it takes delivery. When-issued
trading frequently occurs with governmental or private mortgage pools which are
traded prior to the actual finalization of pool arrangements. Such transactions
may involve a risk of loss if the value of the securities fall below the price
committed to prior to the actual issuance. The Trust's custodian will establish
a segregated account for the Fund when it purchases securities on a when-issued
basis consisting of cash or liquid securities equal to the amount of the
when-issued commitments. Securities transactions involving delayed deliveries or
forward commitments are frequently characterized as when-issued transactions and
are similarly treated by the Fund.
The Fund may invest in restricted securities in accordance with Rule 144A
under the Securities Act of 1933, which allows for the resale of such securities
among certain qualified institutional buyers. Because the market for such
securities is still developing, such securities could possibly become illiquid
<PAGE>
in particular circumstances. See the Statement of Additional Information.
The Fund anticipates that its portfolio turnover rate will generally not
exceed 200% under normal conditions. The Fund does, however, reserve full
freedom with respect to portfolio turnover. In periods when there are rapid
changes in economic conditions or security price levels or when investment
strategy changes significantly, portfolio turnover may be higher than during
times of economic and market price stability or when investment strategy remains
relatively constant. An actual portfolio turnover rate of 100% or more may
result in greater transaction costs, relative to other funds of all types in
general, and may have tax and other consequences as well. See the Statement of
Additional Information.
Limiting Investment Risk
In seeking to lessen investment risk, the Fund operates under certain
fundamental and nonfundamental investment restrictions.
Under the fundamental investment restrictions, the Fund may not (a)
purchase a security of any one issuer (other than securities issued or
guaranteed as to principal or interest by the U.S. Government or its agencies or
instrumentalities or mixed-ownership Government corporations or sponsored
enterprises) if such purchase would, with respect to 75% of the Fund's total
assets, cause more than 5% of the Fund's total assets to be invested in the
securities of such issuer or cause more than 10% of the voting securities of
such issuer to be held by the Fund; or (b) invest more than 25% of the Fund's
total assets in securities of issuers principally engaged in any one industry.
The foregoing fundamental investment restrictions do not apply in the
event the Fund invests in other mutual funds, subject to future changes in law
and regulatory requirements (see "The Fund and its Shares"); otherwise, the
foregoing restrictions may not be changed except by vote of the holders of a
majority of the outstanding voting securities of the Fund, as defined under the
Investment Company Act of 1940 (the "1940 Act").
Under the nonfundamental investment restrictions, the Fund may not invest
more than 15% of its net assets in illiquid securities including repurchase
agreements extending for more than seven days and may not invest more than 5% of
its total assets in restricted securities excluding securities eligible for
resale under Rule 144A under the Securities Act of 1933. Although many illiquid
securities may also be restricted, and vice versa, compliance with each of these
policies will be determined independently. The foregoing nonfundamental
investment restriction may be changed without a shareholder vote.
<PAGE>
For further information on the above and other fundamental and
nonfundamental investment restrictions, see the Statement of Additional
Information.
The Fund may hold up to 100% of its assets in cash or certain short-term
securities for temporary defensive purposes when, in the opinion of the
Investment Manager, such a position is more likely to provide protection against
adverse market conditions. To the extent that the Fund's assets are held in a
temporary defensive position, the Fund will not be achieving its investment
objective. The types of short-term instruments in which the Fund may invest for
such purposes are, as more fully described in the Statement of Additional
Information: U.S. Government securities, time deposits and corporate commercial
paper rated at least "A" by S&P or "Prime" by Moody's (or, if not rated, issued
by companies having an outstanding unsecured debt issue rated at least "A" by
S&P or Moody's).
- -------------------------------------------------------------------------------
Information on the Purchase of Shares, Redemption of Shares and Shareholder
Services is set forth on pages 11 to 25 below.
The Fund is available for investment by many kinds of investors including
participants investing through 401(k) or other retirement plan sponsors,
employees investing through savings plans sponsored by employers, Individual
Retirement Accounts ("IRAs"), trusts, corporations, individuals, etc. The
applicability of the general information and administrative procedures set
forth below accordingly will vary depending on the investor and the
recordkeeping system established for a shareholder's investment in the Fund.
Participants in 401(k) and other plans should first consult with the
appropriate person at their employer or refer to the plan materials before
following any of the procedures below. For more information or assistance,
anyone may call 1-800-562-0032.
- -------------------------------------------------------------------------------
Purchase of Shares
Methods of Purchase
Through Dealers and Others
Shares of the Fund are continuously offered through securities dealers,
financial institutions and others (collectively referred to herein as securities
dealers or dealers) who have entered into sales agreements with the Distributor.
Purchases through dealers are confirmed at the offering price, which is the net
asset value plus the applicable sales charge, next determined after the order is
duly received by State Street Research Shareholder Services ("Shareholder
Services"), a division of State Street Research Investment Services, Inc., from
the dealer. ("Duly received" for purposes herein means in accordance with the
conditions of the applicable method of purchase as described below.) The dealer
is responsible
<PAGE>
for transmitting the order promptly to Shareholder Services in order to permit
the investor to obtain the current price. See "Purchase of Shares -- Net Asset
Value" herein.
By Mail
Initial investments in the Fund may be made by mailing or delivering to
the investor's dealer a completed Application (accompanying this Prospectus),
together with a check for the total purchase price payable to the Fund. The
dealer must forward the Application and check in accordance with the
instructions on the Application. Additional shares may be purchased by mailing
to Shareholder Services a check payable to the Fund in the amount of the total
purchase price together with any one of the following: (i) an Application; (ii)
the stub from the shareholder's account statement; or (iii) a letter setting
forth the name of the Fund, the class of shares and the account name and number.
Shareholder Services will deliver the purchase order to the transfer agent and
dividend paying agent, State Street Bank and Trust Company (the "Transfer
Agent").
If the check is not honored for its full amount, the purchaser could be
subject to additional charges to cover collection costs and any investment loss,
and the purchase may be cancelled.
By Wire
An investor may purchase shares by wiring Federal Funds of not less than
$5,000 to State Street Bank and Trust Company, which also serves as the Trust's
custodian (the "Custodian"), as set forth below. Prior to making an investment
by wire, an investor must notify Shareholder Services at 1-800-521-6548 and
obtain a control number and instructions. Following such notification, Federal
Funds should be wired through the Federal Reserve System to:
ABA #011000028
State Street Bank and Trust Company
Boston, MA
BNF = State Street Research
Strategic Income Fund and class of shares (A, B, C or D)
AC = 99029761
OBI = Shareholder Name
Shareholder Account Number
Control #K (assigned by State Street
Research Shareholder Services)
In order for a wire investment to be processed on the same day (i) the
investor must notify Shareholder Services of his or her intention to make such
investment by 12 noon Boston time on the day of his or her investment; and (ii)
the wire must be received by 4 P.M. Boston time that same day.
<PAGE>
An investor making an initial investment by wire must promptly complete
the Application accompanying this Prospectus and deliver it to his or her
dealer, who should forward it as required. No redemptions will be effected until
the Application has been duly processed.
The Fund may in its discretion discontinue, suspend or change the practice
of accepting orders by any of the methods described above. Orders for the
purchase of shares are subject to acceptance by the Fund. The Fund reserves the
right to suspend the sale of shares, or to reject any purchase order, including
orders in connection with exchanges, for any reason.
Minimum Investment
Class of Shares
---------------------------------------------------
A B C D
------------ ------------- ---------- ----------
Minimum Initial
Investment
By Wire $5,000 $5,000 (a) $5,000
IRAs $2,000 $2,000 (a) $2,000
By Investamatic $1,000 $1,000 (a) $1,000
All other $2,500 $2,500 (a) $2,500
Minimum Subsequent
Investment $5,000 $5,000 (a) $5,000
By Wire $50 $50 (a) $50
IRAs $50 $50 (a) $50
By Investamatic $50 $50 (a) $50
All other
(a) Special conditions apply; contact the Distributor.
The Fund reserves the right to vary the minimums for initial or subsequent
investments as in the case of, for example, exchanges and investments under
various retirement and employee benefit plans, sponsored arrangements involving
group solicitations of the members of an organization, or other investment plans
for reinvestment of dividends and distributions or for periodic investments
(e.g., Investamatic Check Program).
<PAGE>
Alternative Purchase Program
General
Alternative classes of shares permit investors to select a purchase
program which they believe will be the most advantageous for them, given the
amount of their purchase, the length of time they anticipate holding Fund
shares, or the flexibility they desire in this regard, and other relevant
circumstances. Investors will be able to determine whether in their particular
circumstances it is more advantageous to incur an initial sales charge and not
be subject to certain ongoing charges or to have their entire initial purchase
price invested in the Fund with the investment being subject thereafter to
ongoing service fees and distribution fees. As described in greater detail
below, securities dealers are paid differing amounts of commissions and other
compensation depending on which class of shares they sell.
<PAGE>
The major differences among the various classes of shares are as follows:
Class A Class B Class C Class D
Sales Initial sales Contingent None Contingent
Charges charge at time deferred sales deferred sales
of investment charge of 5% charge of 1%
of up to 4.5% to 2% applies applies to any
depending on to any shares shares
amount of redeemed redeemed
investment within first within one
five years year following
following their purchase
their
purchase; no
contingent
deferred sales
charge after
five years
On investments of
$1 million or more,
no initial sales
charge; but
contingent deferred
sales charge of 1%
applies to any
shares redeemed
within one year
following their
purchase
Distribution None 0.75% for None 0.75% each
Fee first eight year
years; Class B
shares convert
automatically
to Class A
shares after
eight years
Service Fee 0.25% each year 0.25% each year None 0.25% each
year
Initial Above 4% None 1%
Commission described
Received by initial sales
Selling charge less
Dealers 0.25% to 0.50%
retained by
Distributor
On investments
of $1 million
or more, 0.25%
to 1% paid to
dealer by
Distributor
In deciding which class of shares to purchase, the investor should
consider the amount of the investment, the length of time the investment is
expected to be held, and the ongoing service fee and distribution fee, among
other factors.
<PAGE>
Class A shares are sold at net asset value plus an initial sales charge of
up to 4.5% of the public offering price. Because of the sales charge, not all of
an investor's purchase amount is invested unless the purchase equals $1,000,000
or more. Class B shareholders pay no initial sales charge, but a contingent
deferred sales charge of up to 5% generally applies to shares redeemed within
five years of purchase. Class D shareholders also pay no initial sales charge,
but a contingent deferred sales charge of 1% generally applies to redemptions
made within one year of purchase. For Class B and Class D shareholders,
therefore, the entire purchase amount is immediately invested in the Fund.
An investor who qualifies for a significantly reduced initial sales
charge, or a complete waiver of the sales charge on investments of $1,000,000 or
more, on the purchase of Class A shares might elect that option to take
advantage of the lower ongoing service and distribution fees that characterize
Class A shares compared with Class B or Class D shares.
Class A, Class B and Class D shares are assessed an annual service fee of
0.25% of average daily net assets. Class B shares are assessed an annual
distribution fee of 0.75% of daily net assets for an eight-year period following
the date of purchase and are then automatically converted to Class A shares.
Class D shares are assessed an annual distribution fee of 0.75% of daily net
assets for as long as the shares are held. The prospective investor should
consider these fees plus the initial or contingent deferred sales charges in
estimating the costs of investing in the various classes of Fund shares.
Only certain employee benefit plans and large institutions may make
investments in Class C shares.
Some of the service and distribution fees are allocated to dealers (see
"Distribution Plan" below). In addition, the Distributor will, at its expense,
provide additional cash and noncash incentives to securities dealers that sell
shares. Such incentives may be extended only to those dealers who have sold or
may sell significant amounts of shares and/or meet other conditions established
by the Distributor; for example, the Distributor may sponsor special promotions
to develop particular distribution channels or to reach certain investor groups.
The Distributor may also compensate those dealers with clients who maintain
their investments in the Fund over a period of years. The incentives may include
merchandise and trips to and attendance at sales seminars at resorts.
Class A Shares -- Initial Sales Charges
Sales Charges
The purchase price of a Class A share of the Fund is the Fund's per share
net asset value next determined after the
<PAGE>
purchase order is duly received, as defined herein, plus a sales charge which
varies depending on the dollar amount of the shares purchased as set forth in
the table below. A major portion of this sales charge is reallowed by the
Distributor to the dealer responsible for the sale.
Dollar Sales Sales Dealer
Amount of Charge Charge Concession
Purchase Paid by Paid by As % of
Transaction Investor Investor Purchase
As % of As % of Price
Purchase Net Asset
Price Value
Less than 4.50% 4.71% 4.00%
$100,000
$100,000 or 3.50% 3.63% 3.00%
above but less
than $250,000
$250,000 or 2.50% 2.56% 2.00%
above but less
than $500,000
$500,000 or 2.00% 2.04% 1.75%
above but less
than
$1 million
$1 million and 0% 0% See following discussion
above
On any sale of Class A shares to a single investor in the amount of
$1,000,000 or more, the Distributor may pay the authorized dealer a commission
based on the aggregate of such sales as follows:
Amount of Sale Commission
(a) $1 million to $3 million 1.00%
(b) Next $2 million 0.50%
(c) Amount over $5 million 0.25%
On such sales of $1,000,000 or more, unless the above commission is waived
by the dealer, the investor is subject to a 1% contingent deferred sales charge
on any portion of the purchase redeemed within one year of the sale. However,
such redeemed shares will not be subject to the contingent deferred sales charge
to the extent that their value represents (1) capital appreciation or (2)
reinvestment of dividends or capital gains distributions. In addition, the
contingent deferred sales charge will be waived for certain other redemptions as
described under "Contingent Deferred Sales Charge Waivers" below (as otherwise
applicable to Class B shares).
<PAGE>
Class A shares of the Fund that are purchased without a sales charge may
be exchanged for Class A shares of certain other Eligible Funds, as described
below, without the imposition of a contingent deferred sales charge, although
contingent deferred sales charges may apply upon a subsequent redemption within
one year of the Class A shares which are acquired through such exchange. For
federal income tax purposes, the amount of the contingent deferred sales charge
will reduce the gain or increase the loss, as the case may be, on the amount
realized on redemption. The amount of any contingent deferred sales charge will
be paid to the Distributor.
Reduced Sales Charges
The reduced sales charges set forth in the table above are applicable to
purchases made at any one time by any "person," as defined in the Statement of
Additional Information, of $100,000 or more of Class A shares of the Fund or a
combination of "Eligible Funds." "Eligible Funds" include the Fund and other
funds so designated by the Distributor from time to time. Class B, Class C and
Class D shares may also be included in the combination under certain
circumstances. Dealers should call Shareholder Services for details concerning
the other Eligible Funds and any persons who may qualify for reduced sales
charges and related information. See the Statement of Additional Information.
Letter of Intent
Any investor who provides a Letter of Intent may qualify for a reduced
sales charge on purchases of no less than an aggregate of $100,000 of Class A
shares of the Fund and any other Eligible Funds within a 13-month period. Class
B, Class C and Class D shares may also be included in the combination under
certain circumstances. Additional information on a Letter of Intent is available
from dealers, or from the Distributor, and also appears in the Statement of
Additional Information.
Right of Accumulation
Investors may purchase Class A shares of the Fund or a combination of
shares of the Fund and other Eligible Funds at reduced sales charges pursuant to
a Right of Accumulation. Under the Right of Accumulation, the sales charge is
determined by combining the current purchase with the value of the Class A
shares of other Eligible Funds held at the time of purchase. Class B, Class C
and Class D shares may also be included in the combination under certain
circumstances. See the Statement of Additional Information and call Shareholder
Services for details concerning the Right of Accumulation.
<PAGE>
Other Programs
Class A shares of the Fund may be sold at a reduced sales charge or
without a sales charge pursuant to certain sponsored arrangements, which include
programs under which a company, employee benefit plan or other organization
makes recommendations to, or permits group solicitation of, its employees,
members or participants, except any organization created primarily for the
purpose of obtaining shares of the Fund at a reduced sales charge or without a
sales charge. Sales without a sales charge, or with a reduced sales charge, may
also be made through brokers, financial planners, institutions, and others,
under managed fee-based programs (e.g., "wrap fee" or similar programs) which
meet certain requirements established from time to time by the Distributor.
Information on such arrangements and further conditions and limitations is
available from the Distributor.
In addition, no sales charge is imposed in connection with the sale of
Class A shares of the Fund to the following entities and persons: (A) the
Investment Manager, Distributor, or any affiliated entities, including any
direct or indirect parent companies and other subsidiaries of such parents
(collectively "Affiliated Companies"); (B) employees, officers, sales
representatives or current or retired directors or trustees of the Affiliated
Companies or any investment company managed by any of the Affiliated Companies,
any relatives of any such individuals whose relationship is directly verified by
such individuals to the Distributor, or any beneficial account for such
relatives or individuals; and (C) employees, officers, sales representatives or
directors of dealers and other entities with a selling agreement with the
Distributor to sell shares of any aforementioned investment company, any spouse
or child of such person, or any beneficial account for any of them. The purchase
must be made for investment and the shares purchased may not be resold except
through redemption. This purchase program is subject to such administrative
policies, regarding the qualification of purchasers and any other matters, as
may be adopted by the Distributor from time to time.
The initial sales charge will also be waived on Class A shares purchased
and paid for with the proceeds of shares redeemed in the past 90 days from a
mutual fund (other than a fund managed by the Investment Manager or any of its
subsidiaries) on which an initial sales charge or contingent deferred sales
charge was paid; this waiver must be requested when the purchase order is placed
for the Class A shares and the Distributor may require evidence of qualification
for this waiver and establish other conditions. Availability of the waiver is
subject to completion of steps necessary to implement the purchase program.
Class B Shares -- Contingent Deferred Sales Charges
Contingent Deferred Sales Charges
The public offering price of Class B shares is the net asset value per
share next determined after the purchase order is duly received, as defined
herein. No sales charge is imposed at the time of purchase; thus the full amount
of the investor's purchase payment will be invested in the Fund. However, a
contingent deferred sales charge may be imposed upon redemptions of Class B
shares as described below.
<PAGE>
The Distributor will pay dealers at the time of sale a 4% commission for
selling Class B shares. The proceeds of the contingent deferred sales charge and
the distribution fee are used to offset distribution expenses and thereby permit
the sale of Class B shares without an initial sales charge.
Class B shares that are redeemed within a five-year period after their
purchase will not be subject to a contingent deferred sales charge to the extent
that the value of such shares represents (1) capital appreciation of Fund assets
or (2) reinvestment of dividends or capital gains distributions. The amount of
any applicable contingent deferred sales charge will be calculated by
multiplying the net asset value of such shares at the time of redemption or at
the time of purchase, whichever is lower, by the applicable percentage shown in
the table below:
Contingent
Deferred
Sales Charge
As A Percentage Of
Net Asset Value
Redemption During At Redemption
1st Year Since Purchase 5%
2nd Year Since Purchase 4%
3rd Year Since Purchase 3%
4th Year Since Purchase 3%
5th Year Since Purchase 2%
6th Year Since Purchase
and Thereafter None
In determining the applicability and rate of any contingent deferred sales
charge, it will be assumed that a redemption of Class B shares is made first of
those shares having the greatest capital appreciation, next of shares
representing reinvestment of dividends and capital gains distributions and
finally of remaining shares held by the shareholder for the longest period of
time. The holding period for purposes of applying a contingent deferred sales
charge on Class B shares of the Fund acquired through an exchange from another
Eligible Fund will be measured from the date that such shares were initially
acquired in the other Eligible Funds, and Class B shares being redeemed will be
considered to represent, as applicable, capital appreciation or dividend and
capital gains distribution reinvestments in such other Eligible Fund. These
determinations will result in any contingent deferred sales charge being imposed
at the lowest possible rate. For federal income tax purposes, the amount of the
contingent deferred sales charge will reduce the gain or increase the loss, as
the case may be, on the amount realized on redemption. The amount of any
contingent deferred sales charge will be paid to the Distributor.
<PAGE>
Contingent Deferred Sales Charge Waivers
The contingent deferred sales charge does not apply to exchanges, or to
redemptions under a systematic withdrawal plan which meets certain conditions.
In addition, the contingent deferred sales charge will be waived for: (i)
redemptions made within one year of the death or total disability, as defined by
the Social Security Administration, of all shareholders of an account; (ii)
redemptions made after attainment of a specific age in an amount which
represents the minimum distribution required at such age under Section 401(a)(9)
of the Internal Revenue Code for retirement accounts or plans (e.g., age 70 1/2
for IRAs and Section 403(b) plans), calculated solely on the basis of assets
invested in the Fund or other Eligible Funds; and (iii) a redemption resulting
from a tax-free return of an excess contribution to an IRA. (The foregoing
waivers do not apply to a tax-free rollover or transfer of assets out of the
Fund.) The Fund may modify or terminate the waivers described above at any time;
for example, the Fund may limit the application of multiple waivers and
establish other conditions for employee benefit plans.
Conversion of Class B Shares to Class A Shares
A shareholder's Class B shares, including all shares received as dividends
or distributions with respect to such shares, will automatically convert to
Class A shares of the Fund at the end of eight years following the issuance of
such Class B shares; consequently, they will no longer be subject to the higher
expenses borne by Class B shares. The conversion rate will be determined on the
basis of the relative per share net asset values of the two classes and may
result in a shareholder receiving either a greater or fewer number of Class A
shares than the Class B shares so converted. As noted above, holding periods for
Class B shares received in exchange for Class B shares of other Eligible Funds
will be counted toward the eight-year period.
Class C Shares -- Institutional; No Sales Charge
The purchase price of a Class C share of the Fund is the Fund's per share
net asset value next determined after the purchase order is duly received, as
defined herein. No sales charge is imposed at the time of purchase or
redemption. The Fund will receive the full amount of the investor's purchase
payment.
In general, Class C shares are only available for new investments by
certain large institutions, and employee benefit plans which acquire shares
through programs or products sponsored by Metropolitan Life Insurance Company
("Metropolitan") and/or its affiliates, for which Class C shares have been
designated. Information on the availability of Class C shares and further
conditions and limitations is available from the Distributor.
<PAGE>
Class C shares may be issued directly or through exchanges to those
shareholders of the Fund or other Eligible Funds who previously held shares not
subject to any future sales charge or service fees or distribution fees. Class C
shares may be also issued in connection with mergers and acquisitions involving
the Fund.
Class D Shares -- Spread Sales Charges
The purchase price of a Class D share of the Fund is the Fund's per share
net asset value next determined after the purchase order is duly received, as
defined herein. No sales charge is imposed at the time of purchase; thus the
full amount of the investor's purchase payment will be invested in the Fund.
Class D shares are subject to a 1% contingent deferred sales charge on any
portion of the purchase redeemed within one year of the sale. The contingent
deferred sales charge will be 1% of the lesser of the net asset value of the
shares at the time of purchase or at the time of redemption. The Distributor
pays dealers a 1% commission for selling Class D shares at the time of purchase.
The proceeds of the contingent deferred sales charge and the distribution fee
are used to offset distribution expenses and thereby permit the sale of Class D
shares without an initial sales charge.
Class D shares that are redeemed within one year after purchase will not
be subject to the contingent deferred sales charge to the extent that the value
of such shares represents (1) capital appreciation of Fund assets or (2)
reinvestment of dividends or capital gains distributions. In addition, the
contingent deferred sales charge will be waived for certain other redemptions as
described under "Contingent Deferred Sales Charge Waivers" above (as otherwise
applicable to Class B shares). For federal income tax purposes, the amount of
the contingent deferred sales charge will reduce the gain or increase the loss,
as the case may be, on the amount realized on redemption. The amount of any
contingent deferred sales charge will be paid to the Distributor.
Net Asset Value
The Fund's per share net asset values are determined Monday through Friday
as of the close of the New York Stock Exchange (the "NYSE") exclusive of days on
which the NYSE is closed. The NYSE ordinarily closes at 4 P.M. New York City
time. Assets held by the Fund are valued at the last reported sale price as of
the close of business on the valuation date, except that securities and assets
for which market quotations are not readily available are valued as determined
in good faith by or under the authority of the Trustees of the Trust. In
determining the value of certain
<PAGE>
assets for which market quotations are not readily available, the Fund may use
one or more pricing services. The pricing services utilize information with
respect to market transactions, quotations from dealers and various
relationships among securities in determining value and may provide prices
determined as of times prior to the close of the NYSE. The Trustees have
authorized the use of the amortized cost method to value short-term debt
instruments issued with a maturity of one year or less that have a remaining
maturity of 60 days or less when the value obtained is fair value. Further
information with respect to the valuation of the Fund's assets is included in
the Statement of Additional Information.
Distribution Plan
The Fund has adopted a Plan of Distribution Pursuant to Rule 12b-1 (the
"Distribution Plan") in accordance with the regulations under the Investment
Company Act of 1940, as amended (the "1940 Act"). Under the provisions of the
Distribution Plan, the Fund makes payments to the Distributor based on an annual
percentage of the average daily value of the net assets of each class of shares
as follows:
Class Service Fee Distribution Fee
A 0.25% None
B 0.25% 0.75%
C None None
D 0.25% 0.75%
Some or all of the service fees are used to pay or reimburse dealers
(including dealers that are affiliates of the Distributor) or others for
personal services and/or the maintenance or servicing of shareholder accounts. A
portion of any initial commission paid to dealers for the sale of shares of the
Fund represents payment for personal services and/or the maintenance of
shareholder accounts by such dealers. Dealers who have sold Class A shares are
eligible for further reimbursement commencing as of the time of such sale.
Dealers who have sold Class B and Class D shares are eligible for further
reimbursement after the first year during which such shares have been held of
record by such dealer as nominee for its clients (or by such clients directly).
Any service fees received by the Distributor and not allocated to dealers may be
applied by the Distributor in reduction of expenses incurred by it directly for
personal services and the maintenance or servicing of shareholder accounts.
The distribution fees are used primarily to offset initial and ongoing
commissions paid to dealers for selling such shares. Any distribution fees
received by the Distributor and not allocated to dealers may be applied by the
Distributor in connection with sales or marketing efforts, including special
<PAGE>
promotional fees and cash and noncash incentives based upon sales by dealers.
The Distributor provides distribution services on behalf of other funds
having distribution plans and receives similar payments from, and incurs similar
expenses on behalf of, such other funds. When expenses of the Distributor cannot
be identified as relating to a specific fund, the Distributor allocates expenses
among the funds in a manner deemed fair and equitable to each fund.
Commissions and other cash and noncash incentives and payments to dealers,
to the extent payable out of the general profits, revenues or other sources of
the Distributor (including the advisory fees paid by the Fund), have also been
authorized pursuant to the Distribution Plan.
A rule of the National Association of Securities Dealers, Inc. ("NASD")
limits the annual expenditures which the Fund may incur under the Distribution
Plan to 1%, of which 0.75% may be used to pay distribution expenses and 0.25%
may be used to pay shareholder service fees. The NASD rule also limits the
aggregate amount which the Fund may pay for such distribution costs to 6.25% of
gross share sales of a class since the inception of any asset-based sales charge
plus interest at the prime rate plus 1% on unpaid amounts thereof (less any
contingent deferred sales charges). Such limitation does not apply to
shareholder service fees. Payments to the Distributor or to dealers funded under
the Distribution Plan may be discontinued at any time by the Trustees of the
Trust.
Redemption of Shares
Shareholders may redeem all or any portion of their accounts on any day
the NYSE is open for business. Redemptions will be effective at the applicable
net asset value per share next determined (see "Purchase of Shares -- Net Asset
Value" herein) after receipt of the redemption request, in accordance with the
requirements described below, by Shareholder Services and delivery of the
request by Shareholder Services to the Transfer Agent. To allow time for the
clearance of checks used for the purchase of any shares which are tendered for
redemption shortly after purchase, the remittance of the redemption proceeds for
such shares could be delayed for 15 days or more after the purchase.
Shareholders who anticipate a potential need for immediate access to their
investments should, therefore, purchase shares by wire. Except as noted,
redemption proceeds from the Fund are normally remitted within seven days after
receipt of the redemption request by the Fund and any necessary documents in
good order.
<PAGE>
Methods of Redemption
Request By Mail
A shareholder may request redemption of shares, with proceeds to be mailed
to the shareholder or wired to a predesignated bank account (see "Proceeds By
Wire" below), by sending to State Street Research Shareholder Services, P.O. Box
8408, Boston, Massachusetts 02266-8408: (1) a written request for redemption
signed by the registered owner(s) of the shares, exactly as the account is
registered; (2) an endorsed stock power in good order with respect to the shares
or, if issued, the share certificates for the shares endorsed for transfer or
accompanied by an endorsed stock power; (3) any required signature guarantees
(see "Redemption of Shares -- Signature Guarantees" below); and (4) any
additional documents which may be required for redemption in the case of
corporations, trustees, etc., such as certified copies of corporate resolutions,
governing instruments, powers of attorney, and the like. The Transfer Agent will
not process requests for redemption until it has received all necessary
documents in good order. A shareholder will be notified promptly if a redemption
request cannot be accepted. Shareholders having any questions about the
requirements for redemption should call Shareholder Services toll-free at
1-800-562-0032.
Request By Telephone
Shareholders may request redemption by telephone with proceeds to be
transmitted by check or by wire (see "Proceeds By Wire" below). A shareholder
can request a redemption for $50,000 or less to be transmitted by check. Such
check for the proceeds will be made payable to the shareholder of record and
will be mailed to the address of record. There is no fee for this service. It is
not available for shares held in certificate form or if the address of record
has been changed within 30 days of the redemption request. The Fund may revoke
or suspend the telephone redemption privilege at any time and without notice.
See "Shareholder Services -- Telephone Services" for a discussion of the
conditions and risks associated with Telephone Privileges.
Request by Check (Class A Shares Only)
Shareholders of Class A shares of the Fund may redeem shares by checks
drawn on State Street Bank and Trust Company. Checks may be made payable to the
order of any person or organization designated by the shareholder and must be
for amounts of at least $500 but not more than $100,000. Shareholders will
continue to earn dividends on the shares to be redeemed until the check clears.
There is no charge associated with redemption of shares by check. Checkbooks are
supplied for a $2 fee. Checks will be sent only to the registered owner at the
address of record. A $10 fee will be charged against an account in the event a
redemption
<PAGE>
check is presented for payment and not honored pursuant to the terms and
conditions established by State Street Bank and Trust Company.
Shareholders can request the checkwriting privilege by completing the
signature card which is part of the Application. In order to arrange for
redemption-by-check after an account has been opened, a revised Application with
signature card and signatures guaranteed must be sent to Shareholder Services.
Cancelled checks will be returned to shareholders at the end of each month.
The redemption-by-check service is subject to State Street Bank and Trust
Company's rules and regulations applicable to checking accounts (as amended from
time to time), and is governed by the Massachusetts Uniform Commercial Code. All
notices with respect to checks drawn on State Street Bank and Trust Company must
be given to State Street Bank and Trust Company. Stop payment instructions with
respect to checks must be given to State Street Bank and Trust Company by
calling 1-617-985-8543. Shareholders may not close out an account by check.
Proceeds By Wire
Upon a shareholder's written request or by telephone if the shareholder
has Telephone Privileges (see "Shareholder Services -- Telephone Services"
herein), the Trust's custodian will wire redemption proceeds to the
shareholder's predesignated bank account. To make the request, the shareholder
should call 1-800-521-6548 prior to 4 P.M. Boston time. A $7.50 charge against
the shareholder's account will be imposed for each wire redemption. This charge
is subject to change without notice. The shareholder's bank may also impose a
charge for receiving wires of redemption proceeds. The minimum redemption by
wire is $5,000.
Request to Dealer to Repurchase
For the convenience of shareholders, the Fund has authorized the
Distributor as its agent to accept orders from dealers by wire or telephone for
the repurchase of shares by the Distributor from the dealer. The Fund may revoke
or suspend this authorization at any time. The repurchase price is the net asset
value for the applicable shares next determined following the time at which the
shares are offered for repurchase by the dealer to the Distributor. The dealer
is responsible for promptly transmitting a shareholder's order to the
Distributor. Payment of the repurchase proceeds is made to the dealer who placed
the order promptly upon delivery of certificates for shares in proper form for
transfer or, for Open Accounts, upon the receipt of a stock power with
signatures guaranteed as described below, and, if required, any supporting
documents. Neither the Fund nor the Distributor imposes any charge upon such a
repurchase. However, a dealer may impose a charge as agent for a shareholder in
the
<PAGE>
repurchase of his or her shares. The Fund has reserved the right to change,
modify or terminate the services described above at any time.
Additional Information
Because of the relatively high cost of maintaining small shareholder
accounts, the Fund reserves the right to involuntarily redeem at its option any
shareholder account which remains below $1,500 for a period of 60 days after
notice is mailed to the applicable shareholder, or to impose a maintenance fee
on such account after 60 days' notice. Such involuntary redemptions will be
subject to applicable sales charges, if any. The Fund may increase such minimum
account value above such amount in the future after notice to affected
shareholders. Involuntarily redeemed shares will be priced at the net asset
value on the date fixed for redemption by the Fund, and the proceeds of the
redemption will be mailed promptly to the affected shareholder at the address of
record. Currently, the maintenance fee is $18 annually, which is paid to the
Transfer Agent. The fee does not apply to certain retirement accounts or if the
shareholder has more than an aggregate $50,000 invested in the Fund and other
Eligible Funds combined. Imposition of a maintenance fee on a small account
could, over time, exhaust the assets of such account.
To cover the cost of additional compliance administration, a $20 fee will
be charged against any shareholder account that has been determined to be
subject to escheat under applicable state laws.
The Fund may not suspend the right of redemption or postpone the date of
payment of redemption proceeds for more than seven days, except that (a) it may
elect to suspend the redemption of shares or postpone the date of payment of
redemption proceeds: (1) during any period that the NYSE is closed (other than
customary weekend and holiday closings) or trading on the NYSE is restricted;
(2) during any period in which an emergency exists as a result of which disposal
of portfolio securities is not reasonably practicable or it is not reasonably
practicable for the Fund fairly to determine the value of its net assets; or (3)
during such other periods as the Securities and Exchange Commission may by order
permit for the protection of investors; and (b) the payment of redemption
proceeds may be postponed as otherwise provided under "Redemption of Shares"
herein.
Signature Guarantees
To protect shareholder accounts, the Transfer Agent, the Fund, the
Investment Manager and the Distributor from possible fraud, signature guarantees
are required for certain redemptions. Signature guarantees help the Transfer
Agent determine that the person who has authorized a redemption from the account
is, in fact, the shareholder. Signature guarantees are required for,
<PAGE>
among other things: (1) written requests for redemptions for more than $50,000;
(2) written requests for redemptions for any amount if the proceeds are
transmitted to other than the current address of record (unchanged in the past
30 days); (3) written requests for redemptions for any amount submitted by
corporations and certain fiduciaries and other intermediaries; (4) requests to
transfer the registration of shares to another owner; and (5) authorizations to
establish the checkwriting privilege. Signatures must be guaranteed by a bank, a
member firm of a national stock exchange, or other eligible guarantor
institution. The Transfer Agent will not accept guarantees (or notarizations)
from notaries public. The above requirements may be waived in certain instances.
Please contact Shareholder Services at 1-800-562-0032 for specific requirements
relating to your account.
Shareholder Services
The Open Account System
Under the Open Account System full and fractional shares of the Fund owned
by shareholders are credited to their accounts by the Transfer Agent, State
Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts 02110.
Certificates representing shares will not be issued. Shareholders will receive
periodic statements of transactions in their accounts.
The Fund's Open Account System provides the following options:
1. Additional purchases of shares of the Fund may be made through
dealers, by wire or by mailing a check, payable to the Fund, to
Shareholder Services under the terms set forth above under "Purchase
of Shares."
2. The following methods of receiving dividends from investment income
and distributions from capital gains are available:
(a) All income dividends and capital gains distributions
reinvested in additional shares of the Fund.
(b) All income dividends in cash; all capital gains distributions
reinvested in additional shares of the Fund.
(c) All income dividends and capital gains distributions in
cash.
(d) All income dividends and capital gains distributions invested
in any one available Eligible Fund designated by the
shareholder as described below. See "Dividend Allocation Plan"
herein.
<PAGE>
Dividend and distribution selections should be made on the Application
accompanying the initial investment. If no selection is indicated on the
Application, the account will automatically be coded for reinvestment of all
dividends and distributions in additional shares of the same class of the Fund.
Selections may be changed at any time by telephone or written notice to
Shareholder Services. Dividends and distributions are reinvested at net asset
value without a sales charge.
Exchange Privilege
Shareholders of the Fund may exchange their shares for available shares
with corresponding characteristics of any of the other Eligible Funds at any
time on the basis of the relative net asset values of the respective shares to
be exchanged, subject to compliance with applicable securities laws.
Shareholders of any other Eligible Fund may similarly exchange their shares for
Fund shares with corresponding characteristics. Prior to making an exchange,
shareholders should obtain the Prospectus of the Eligible Fund into which they
are exchanging. Under the Direct Program, subject to certain conditions,
shareholders may make arrangements for regular exchanges from the Fund into
other Eligible Funds. To effect an exchange, Class A, Class B and Class D shares
may be redeemed without the payment of any contingent deferred sales charge that
might otherwise be due upon an ordinary redemption of such shares. The State
Street Research Money Market Fund issues Class E shares which are sold without
any sales charge. Exchanges of State Street Research Money Market Fund Class E
shares into Class A shares of the Fund or any other Eligible Fund are subject to
the initial sales charge or contingent deferred sales charge applicable to an
initial investment in such Class A shares, unless a prior Class A sales charge
has been paid directly or indirectly with respect to the shares redeemed. For
purposes of computing the contingent deferred sales charge that may be payable
upon disposition of the acquired Class A, Class B and Class D shares, the
holding period of the redeemed shares is "tacked" to the holding period of the
acquired shares. The period any Class E shares are held is not tacked to the
holding period of any acquired shares. No exchange transaction fee is currently
imposed on any exchange.
Shares of the Fund may also be acquired or redeemed in exchange for shares
of the Summit Cash Reserves Fund ("Summit Cash Reserves") by customers of
Merrill Lynch, Pierce, Fenner & Smith Incorporated (subject to completion of
steps necessary to implement the program). The Fund and Summit Cash Reserves are
related mutual funds for purposes of investment and investor services. Upon the
acquisition of shares of Summit Cash Reserves by exchange for redeemed shares of
the Fund, (a) no sales charge is imposed by Summit Cash Reserves, (b) no
contingent deferred sales charge is imposed by the Fund on the Fund shares
redeemed, and (c) any applicable holding period of the Fund shares redeemed
<PAGE>
is "tolled," that is, the holding period clock stops running pending further
transactions. Upon the acquisition of shares of the Fund by exchange for
redeemed shares of Summit Cash Reserves, (a) the acquisition of Class A shares
shall be subject to the initial sales charges or contingent deferred sales
charges applicable to an initial investment in such Class A shares, unless a
prior Class A sales charge has been paid indirectly, and (b) the acquisition of
Class B or Class D shares of the Fund shall restart any holding period
previously tolled, or shall be subject to the contingent deferred sales charge
applicable to an initial investment in such shares.
For the convenience of its shareholders who have Telephone Privileges, the
Fund permits exchanges by telephone request from either the shareholder or the
shareholder's dealer. Shares may be exchanged by telephone provided that the
registration of the two accounts is the same. The toll-free number for exchanges
is 1-800-562-0032. See "Telephone Services" herein for a discussion of
conditions and risks associated with Telephone Privileges.
The exchange privilege may be exercised only in those states where shares
of the relevant other Eligible Fund may legally be sold. For tax purposes, each
exchange actually represents the sale of shares of one fund and the purchase of
shares of another. Accordingly, exchanges may produce a capital gain or loss for
tax purposes. The exchange privilege may be terminated or suspended or its terms
changed at any time, subject, if required under applicable regulations, to 60
days' prior notice. New accounts established for investments upon exchange from
an existing account in another fund will have the same Telephone Privileges as
the existing account, unless Shareholder Services is instructed otherwise.
Related administrative policies and procedures may also be adopted with regard
to a series of exchanges, street name accounts, sponsored arrangements and other
matters.
The exchange privilege is not designed for use in connection with
short-term trading or "market timing" strategies. To protect the interests of
shareholders, the Fund reserves the right to temporarily or permanently
terminate the exchange privilege for any person who makes more than six
exchanges out of or into the Fund per calendar year. Accounts under common
ownership or control, including accounts with the same taxpayer identification
number, may be aggregated for purposes of the six exchange limit.
Notwithstanding the six exchange limit, the Fund reserves the right to refuse
exchanges by any person or group if, in the Investment Manager's judgment, the
Fund would be unable to invest effectively in accordance with its investment
objective and policies, or would otherwise potentially be adversely affected.
Exchanges may be restricted or refused if the Fund receives or anticipates
simultaneous orders affecting significant portions of the Fund's assets. In
particular, a pattern of exchanges that coincides with a market timing
strategy may be disruptive to the Fund. The Fund may impose these restrictions
at any time.
<PAGE>
The exchange limit may be modified for accounts in certain institutional
retirement plans because of plan exchange limits, Department of Labor
regulations or administrative and other considerations. Subject to the
foregoing, if an exchange request in good order is received by Shareholder
Services and delivered by Shareholder Services to the Transfer Agent by 12 noon
Boston time on any business day, the exchange usually will occur that day.
Consult Shareholder Services before requesting an exchange or for further
information.
Reinvestment Privilege
A shareholder of the Fund who has redeemed shares or had shares
repurchased at his or her request may reinvest all or any portion of the
proceeds (plus that amount necessary to acquire a fractional share to round off
his or her reinvestment to full shares) in shares, of the same class as the
shares redeemed, of the Fund or any other Eligible Fund at net asset value and
without subjecting the reinvestment to an initial sales charge, provided such
reinvestment is made within 120 calendar days after a redemption or repurchase.
Upon such reinvestment, the shareholder will be credited with any contingent
deferred sales charge previously charged with respect to the amount reinvested.
The redemption of shares is, for federal income tax purposes, a sale on which
the shareholder may realize a gain or loss. If a redemption at a loss is
followed by a reinvestment within 30 days, the transaction may be a "wash sale"
resulting in a denial of the loss for federal income tax purposes.
Any reinvestment pursuant to the reinvestment privilege will be subject to
any applicable minimum account standards imposed by the fund into which the
reinvestment is made. Shares are sold to a reinvesting shareholder at the net
asset value thereof next determined following timely receipt by Shareholder
Services of such shareholder's written purchase request and delivery of the
request by Shareholder Services to the Transfer Agent. A shareholder may
exercise this reinvestment privilege only once per 12-month period with respect
to his or her shares of the Fund. No charge is imposed by the Fund for such
reinvestments; however, dealers may charge fees in connection with the
reinvestment privilege. The reinvestment privilege may be exercised with respect
to an Eligible Fund only in those states where shares of the relevant other
Eligible Fund may legally be sold.
Investment Plans
The Investamatic Program is available to Class A, Class B and Class D
shareholders. Under this Program, shareholders may make regular investments by
authorizing withdrawals from their bank accounts each month or quarter on the
Application available from Shareholder Services.
<PAGE>
The Distributor also offers IRAs and retirement plans, including prototype
and other employee benefit plans for employees, sole proprietors, partnerships
and corporations. Details of these investment plans and their availability may
be obtained from securities dealers or from Shareholder Services.
Systematic Withdrawal Plan
A shareholder who owns noncertificated Class A or Class C shares with a
value of $5,000 or more, or Class B or Class D shares with a value of $10,000 or
more, may elect, by participating in the Fund's Systematic Withdrawal Plan, to
have periodic checks issued for specified amounts. These amounts may not be less
than certain minimums, depending on the class of shares held. The Plan provides
that all income dividends and capital gains distributions of the Fund shall be
credited to participating shareholders in additional shares of the Fund. Thus,
the withdrawal amounts paid can only be realized by redeeming shares of the Fund
under the Plan. To the extent such amounts paid exceed dividends and
distributions from the Fund, a shareholder's investment will decrease and may
eventually be exhausted.
In the case of shares otherwise subject to contingent deferred sales
charges, no such charges will be imposed on withdrawals of up to 8% annually of
either (a) the value, at the time the Plan is initiated, of the shares then in
the account or (b) the value, at the time of a withdrawal, of the same number of
shares as in the account when the Plan was initiated, whichever is higher.
Expenses of the Plan are borne by the Fund. A participating shareholder
may withdraw from the Plan and the Fund may terminate the Plan at any time on
written notice. Purchase of additional shares while a shareholder is receiving
payments under a Plan is ordinarily disadvantageous because of duplicative sales
charges. For this reason, a shareholder may not participate in the Investamatic
Check Program and the Systematic Withdrawal Plan at the same time.
Dividend Allocation Plan
The Dividend Allocation Plan allows shareholders to elect to have all of
their dividends and any other distributions from the Fund or any Eligible Fund
automatically invested at net asset value in one other such Eligible Fund
designated by the shareholder, provided the account into which the dividends and
distributions are directed is initially funded with the requisite minimum
amount. The number of shares purchased will be determined as of the dividend
payment date. The Dividend Allocation Plan is subject to state securities law
requirements, to suspension at any time, and to such policies, limitations and
restrictions, as, for instance,
<PAGE>
may be applicable to street name or master accounts, that may be adopted from
time to time.
Automatic Bank Connection
A shareholder may elect, by participating in the Fund's Automatic Bank
Connection ("ABC"), to have dividends and other distributions, including
Systematic Withdrawal Plan payments, automatically deposited in the
shareholder's bank account by electronic funds transfer. Some contingent
deferred sales charges may apply. See "Systematic Withdrawal Plan" herein.
Reports
Reports for the Fund will be sent to shareholders of record at least
semiannually. These reports will include a list of the securities owned by the
Fund as well as the Fund's financial statements.
Telephone Services
The following telephone privileges ("Telephone Privileges") can be used:
(1) the privilege allowing the shareholder to make telephone redemptions
for amounts up to $50,000 to be mailed to the shareholder's address
of record is available automatically;
(2) the privilege allowing the shareholder or his or her dealer to
make telephone exchanges is available automatically;
(3) the privilege allowing the shareholder to make telephone redemptions
for amounts over $5,000, to be remitted by wire to the shareholder's
predesignated bank account, is available by election on the
Application accompanying this Prospectus. A current shareholder who
did not previously request such telephone wire privilege on his or
her original Application may request the privilege by completing a
Telephone Redemption-by-Wire Form which may be obtained by calling
1-800-562-0032. The Telephone Redemption-by-Wire form requires a
signature guarantee; and
(4) the privilege allowing the shareholder to make telephone purchases
or redemptions, transmitted via the Automated Clearing House system,
into or from the shareholder's predesignated bank account, is
available upon completion of the requisite initial documentation.
For details and forms, call 1-800-562-0032. The documentation
requires a signature guarantee.
<PAGE>
A shareholder may decline the automatic Telephone Privileges set forth in
(1) and (2) above by so indicating on the Application accompanying this
Prospectus.
A shareholder may discontinue any Telephone Privilege at any time by
advising Shareholder Services that the shareholder wishes to discontinue the use
of such privileges in the future.
Unless such Telephone Privileges are declined, a shareholder is deemed to
authorize Shareholder Services and the Transfer Agent to: (1) act upon the
telephone instructions of any person purporting to be the shareholder to redeem,
or purporting to be the shareholder or the shareholder's dealer to exchange,
shares from any account; and (2) honor any written instructions for a change of
address regardless of whether such request is accompanied by a signature
guarantee. All telephone calls will be recorded. None of the Fund, the other
Eligible Funds, the Transfer Agent, the Investment Manager or the Distributor
will be liable for any loss, expense or cost arising out of any request,
including any fraudulent or unauthorized requests. Shareholders assume the risk
to the full extent of their accounts that telephone requests may be
unauthorized. Reasonable procedures must be followed to confirm that
instructions communicated by telephone are genuine. The shareholder will not be
liable for any losses due to unauthorized or fraudulent instructions if such
procedures are not followed.
Shareholders may redeem or exchange shares by calling toll-free
1-800-562-0032. Although it is unlikely, during periods of extraordinary market
conditions, a shareholder may have difficulty in reaching Shareholder Services
at such telephone number. In that event, the shareholder should contact
Shareholder Services at 1-800-562-0032 or otherwise at its main office at One
Financial Center, Boston, Massachusetts 02111-2690.
Shareholder Account Inquiries:
Please call 1-800-562-0032
Call this number for assistance in answering general questions on your
account, including account balance, available shareholder services, statement
information and performance of the Fund. Account inquiries may also be made in
writing to State Street Research Shareholder Services, P.O. Box 8408, Boston,
Massachusetts 02266-8408. A fee of up to $10 will be charged against an account
for providing additional account transcripts or photocopies of paid redemption
checks or for researching records in response to special requests.
Shareholder Telephone Transactions:
Please call 1-800-562-0032
<PAGE>
Call this number for assistance in purchasing shares by wire and for
telephone redemptions or telephone exchange transactions. For more information
and/or requisite authorization forms for telephone redemption and exchange
privileges call 1-800-562-0032. Shareholder Services will require some form of
personal identification prior to acting upon instructions received by telephone.
Written confirmation of each transaction will be provided.
The Fund and its Shares
The Fund was organized in August, 1996 as an additional series of State
Street Research Securities Trust (a Massachusetts business trust. The Trustees
have authorized shares of the Fund to be issued in four classes: Class A, Class
B, Class C and Class D. The Trust is registered with the Securities and Exchange
Commission under the 1940 Act, as an open-end management investment company. The
fiscal year end of the Fund is April 30.
Subject to a number of conditions, including the granting of an exemptive
order from the Securities and Exchange commission and/or possible changes in
applicable laws and regulatory policy, the Fund may choose to become a fund of
funds, that is, a mutual fund which invests in other mutual funds. For example,
the Fund could invest in an affiliated fund that invests primarily in U.S.
Government securities, a second affiliated fund that invests primarily in high
yield, high risk securities, and a third fund that invests in international
debt. Such an arrangement could offer advantages to the Fund through more
efficient operations and portfolio diversification.
Except for those differences between the classes of shares described below
and elsewhere in the Prospectus, each share of the Fund has equal dividend,
redemption and liquidation rights with other shares of the Fund and when issued
is fully paid and nonassessable. In the future, certain classes may be
redesignated, for administrative purposes only, to conform to standard class
designations and common usage of terms which may develop in the mutual fund
industry. For example, Class C shares may be redesignated as Class Y shares and
Class D shares may be redesignated as Class C shares. Any redesignation would
not affect any substantive rights respecting the shares.
Each share of each class of shares represents an identical legal interest
in the same portfolio of investments of the Fund, has the same rights and is
identical in all respects, except that Class A, Class B and Class D shares bear
the expenses of the deferred sales arrangement and any expenses (including the
higher service and distribution fees) resulting from such sales arrangement, and
certain other incremental expenses related to a class. Each class will have
exclusive voting rights with respect to provisions of the Rule 12b-1
distribution plan pursuant to
<PAGE>
which the service and distribution fees, if any, are paid. Although the legal
rights of holders of each class of shares are identical, it is likely that the
different expenses borne by each class will result in different net asset values
and dividends. The different classes of shares of the Fund also have different
exchange privileges.
The rights of holders of shares may be modified by the Trustees at any
time, so long as such modifications do not have a material adverse effect on the
rights of any shareholder. The Trustees may reorganize, merge or liquidate the
Fund without prior shareholder approval and subject to compliance with
applicable law. On any matter submitted to the shareholders, the holder of each
Fund share is entitled to one vote per share (with proportionate voting for
fractional shares) regardless of the relative net asset value thereof. Under the
Master Trust Agreement of the Trust, no annual or regular meeting of
shareholders is required. Thus, there will ordinarily be no shareholder meetings
unless required by the 1940 Act or other reasons.
Under Massachusetts law, the shareholders of the Trust could, under
certain circumstances, be held personally liable for the obligations of the
Trust. However, the Master Trust Agreement of the Trust disclaims shareholder
liability for acts or obligations of the Trust and provides for indemnification
for all losses and expenses of any shareholder of the Fund held personally
liable for the obligations of the Trust. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which the Fund would be unable to meet its obligations. The
Investment Manager believes that, in view of the above, the risk of personal
liability to shareholders is remote.
As of December 31, 1996, the Investment Manager, the Distributor and/or
Metropolitan, their indirect parent, were the beneficial owners in the aggregate
of 81.8% and 97.9% of the outstanding Class A and Class C shares of the Fund,
respectively, and may be deemed to be in control of such classes as "control" is
defined in the 1940 Act. So long as 25% of a class of shares is so owned, such
owners will be presumed to be in control of such class of shares for purposes of
voting on certain matters submitted to a vote of shareholders, such as any
Distribution Plan for a given class.
Management of the Fund
Under the provisions of the Master Trust Agreement and the laws of
Massachusetts, responsibility for the management and supervision of the Fund
rests with the Trustees. The Fund's investment manager is State Street Research
& Management Company. The Investment Manager is charged with the overall
responsibility
<PAGE>
for managing the investments and business affairs of the Fund, subject to the
authority of the Board of Trustees.
The Investment Manager was founded by Paul Cabot, Richard Saltonstall and
Richard Paine to serve as investment adviser to one of the nation's first mutual
funds, presently known as State Street Research Investment Trust, which they had
formed in 1924. Their investment management philosophy, which continues to this
day, emphasized comprehensive fundamental research and analysis, including
meetings with the management of companies under consideration for investment.
The Investment Manager's portfolio management group has extensive investment
industry experience managing equity and debt securities. In managing debt
securities for a portfolio, the Investment Manager may consider yield curve
positioning, sector rotation and duration, among other factors.
The Investment Manager and the Distributor are indirect wholly-owned
subsidiaries of Metropolitan, and both are located at One Financial Center,
Boston, Massachusetts 02111-2690.
Under its Advisory Agreement with the Trust, the Investment Manager
receives a monthly investment advisory fee equal to 0.75% (on an annual basis)
of the average daily value of the net assets of the Fund. The Fund bears all
costs of its operation other than those incurred by the Investment Manager under
the Advisory Agreement. In particular, the Fund pays, among other expenses,
investment advisory fees, certain distribution expenses under the Fund's
Distribution Plan and the compensation and expenses of the Trustees who are not
otherwise currently affiliated with the Investment Manager or any of its
affiliates. The Fund also incurs expenses payable to various states in
connection with the offer and sale of the Fund's shares, and expenses for legal,
custodian and transfer agent services, among other costs. Under the Advisory
Agreement, the Investment Manager provides the Fund with office space,
facilities and personnel. The Investment Manager compensates Trustees of the
Trust if such persons are employees or affiliates of the Investment Manager or
its affiliates.
John H. Kallis is primarily responsible for the day-to-day management of
the Fund's portfolio. He has managed the Fund since inception. Mr. Kallis has
investment discretion over the entire portfolio of the Fund, makes investment
decisions as to specific securities holdings, allocates and from time to time
adjusts such allocations of investments among different sectors, and delegates
responsibility for defined portions of the portfolio to others. Mr. Kallis
manages the U.S. government securities sector of the Fund. His principal
occupation currently is Senior Vice President of State Street Research &
Management Company. During the past five years
<PAGE>
he has also served as portfolio manager for State Street Research & Management
Company. Mr. Bartlett R. Geer has managed the high yield, high risk securities
sector of the Fund since inception. Mr. Geer's principal occupation is Senior
Vice President of State Street Research & Management Company. During the past
five years, he has also served as Vice President of State Street Research &
Management Company. Ms. Elizabeth M. Westvold has managed the international debt
sector of the Fund since inception. Ms. Westvold's principal occupation is
Senior Vice President of State Street Research & Management Company. During the
past five years, she has also served as Vice President and as a securities
analyst for State Street Research & Management Company.
Subject to the policy of seeking best overall price and execution, sales
of shares of the Fund may be considered by the Investment Manager in the
selection of broker or dealer firms for the Fund's portfolio transactions.
The Investment Manager has a Code of Ethics governing personal securities
transactions of certain of its employees; see the Statement of Additional
Information.
Dividends and Distributions; Taxes
The Fund intends to qualify and elect to be treated as a regulated
investment company under Subchapter M of the Internal Revenue Code, although it
cannot give complete assurance that it will do so. As long as it so qualifies
and satisfies certain distribution requirements, it will not be subject to
federal income taxes on its income (including capital gains, if any) distributed
to its shareholders. Consequently, the Fund intends to distribute annually to
its shareholders substantially all of its net investment income and any capital
gain net income (capital gains net of capital losses).
Dividends from net investment income will be declared daily during each
calendar month and paid monthly; distributions of long-term and short-term
capital gain net income will generally be made on an annual basis (or as
otherwise required for compliance with applicable tax regulations), except to
the extent that net short-term gains, if any, are included in the monthly income
dividends for the purpose of stabilizing, to the extent possible, the amount of
net monthly distributions as described below. Both dividends from net investment
income and distributions of capital gain net income will be paid to shareholders
in additional shares of the Fund at net asset value, except in the case of
shareholders who elect a different available distribution method.
The Fund will provide its shareholders of record with annual information
on a timely basis concerning the federal tax status of dividends and
distributions during the preceding calendar year.
The Fund has adopted distribution procedures which differ from those which
have been customary for investment companies in general The Fund will declare a
dividend each day in an amount based on monthly projections of its future net
investment income and will pay such dividends monthly as described above.
Consequently, the amount of each daily dividend may differ from actual net
investment income as determined under generally accepted accounting principles.
The purpose of these distribution procedures is to attempt to eliminate, to the
extent
<PAGE>
possible, fluctuations in the level of monthly dividend payments that might
result if the Fund declared dividends in the exact amount of its daily net
investment income.
Each daily dividend is payable to shareholders of record at the time of
its declaration (for this purpose, including only holders of shares purchased
for which payment has been received by the Transfer Agent and excluding holders
of shares redeemed on that day).
Although not contemplated, it is possible that total distributions in a
year could exceed the total of the Fund's current and accumulated earnings and
profits as calculated for federal income tax purposes, because of technical tax
and accounting considerations and the distribution procedures described above,
among other reasons. This excess would first be treated as a "return of capital"
for federal income tax purposes and would reduce by its amount the shareholder's
cost or other basis in his or her shares. After the shareholder's cost or other
basis is reduced to zero, which is highly unlikely, the distribution will be
treated as gain from the sale of Fund shares.
Dividends paid by the Fund from taxable net investment income and
distributions of net short-term capital gains, whether they are paid in cash or
reinvested in additional shares, will be taxable for federal income tax purposes
to shareholders as ordinary income. Distributions of net capital gains (the
excess of net long-term capital gains over net short-term capital losses) which
are designated as capital gains distributions, whether paid in cash or
reinvested in additional shares, will be taxable for federal income tax purposes
to shareholders as long-term capital gains, regardless of how long shareholders
have held their shares. If shares of the Fund which are sold at a loss have been
held six months or less, the loss will be considered as a long-term capital loss
to the extent of any capital gains distributions received.
Dividends and other distributions and proceeds of redemptions of Fund
shares paid to individuals and other nonexempt payees will be subject to a 31%
federal backup withholding tax if the Transfer Agent is not provided with the
shareholder's correct taxpayer identification number and certification that the
shareholder is not subject to such backup withholding.
The foregoing discussion relates only to generally applicable federal
income tax provisions in effect as of the date of this Prospectus. Therefore,
prospective shareholders are urged to consult their own tax advisers regarding
tax matters, including state and local tax consequences.
<PAGE>
Calculation of Performance Data
From time to time, in advertisements or in communications to shareholders
or prospective investors, the Fund may compare the performance of its Class A,
Class B, Class C and Class D shares to that of other mutual funds with similar
investment objectives, to certificates of deposit and/or to other financial
alternatives. In addition, the Fund may state its weighted average portfolio
quality. The Fund may also compare its performance to appropriate indices such
as Lehman Brothers Non-U.S. Dollar Aggregate Bond Index, First Boston High Yield
Bond Index, Salomon Brothers World Government Bond Index, Merrill Lynch Domestic
Master Bond Index, Merrill Lynch Global Bond Index, Merrill Lynch High Yield
Master Index, Standard & Poor's 500 Stock Index (the "S&P 500"), Consumer Price
Index and Dow Jones Industrial Average and/or to appropriate rankings and
averages, such as the Lipper Multisector Income Funds average, compiled by
Lipper Analytical Services, Inc., or to those compiled by Morningstar, Inc.,
Money Magazine, Business Week, Forbes Magazine, the Wall Street Journal and
Investor's Daily.
Total return is computed separately for each class of shares of the Fund.
The average annual total return ("standard total return") for shares of the Fund
is computed by determining the average annual compounded rate of return for a
designated historical period as applied to a hypothetical $1,000 initial
investment, which is redeemed in total at the end of such period. In making the
calculation, all dividends and distributions are assumed to be reinvested, and
all recurring expenses, including management and distribution fees, are
recognized. The calculation also reflects the maximum initial or contingent
deferred sales charge, determined as of the assumed date of initial investment
or the assumed date of redemption, as the case may be. Standard total return
will be calculated for the periods specified in applicable regulations and may
be accompanied by nonstandard total return information for differing periods
computed in the same manner with or without annualizing the total return or
taking sales charges into account. During the first year of operations, the Fund
may also advertise its aggregate total return without annualization.
The Fund's yield is computed separately for each class of shares by
dividing the net investment income, after recognition of all recurring charges,
per share earned during the most recent month or other specified 30-day period
by the applicable maximum offering price per share on the last day of such
period an annualizing the result. For purposes of the yield calculation,
interest income is computed based on the yield to maturity of each debt
obligation in the Fund's portfolio, and all recurring charges are recognized.
The standard total returns and yield results take sales charges into
account, if applicable, but do not take into account recurring and nonrecurring
charges for optional services which only certain shareholders elect and which
involve nominal fees, such as the $7.50 fee for remittance of redemption
proceeds by wire. Where sales charges are not taken into account in the
calculation of nonstandard total return, the results will be increased. Any
voluntary waiver of management fees or assumption
<PAGE>
of expenses by the Fund's affiliates will also increase performance results.
The Fund's distribution rate is calculated separately for each class of
shares by annualizing the latest distribution and dividing the result by the
maximum offering price per share as of the end of the period to which the
distribution relates. The distribution rate is not computed in the same manner
as the above described yield, and therefore can be significantly different from
it. In its supplemental sales literature, the Fund may quote its distribution
rate together with the above described standard total return and yield
information. The use of such distribution rates would be subject to an
appropriate explanation of how the components of the distribution rate differ
from the above described yield.
Performance information may be useful in evaluating the Fund and for
providing a basis for comparison with other financial alternatives. Since the
performance of the Fund varies in response to fluctuations in economic and
market conditions, interest rates and Fund expenses, among other things, no
performance quotation should be considered a representation as to the Fund's
performance for any future period. In addition, the net asset value of shares of
the Fund will fluctuate, with the result that shares of the Fund, when redeemed,
may be worth more or less than their original cost. Neither an investment in the
Fund nor the Fund's performance is insured or guaranteed; such lack of insurance
or guarantees should accordingly be given appropriate consideration when
comparing the Fund to financial alternatives which have such features.
Performance data or rankings for a given class of shares should be interpreted
carefully by investors who hold or may invest in a different class of shares.
APPENDIX
Description of Debt/Bond Ratings
Standard & Poor's Corporation
AAA: Debt rated AAA has the highest rating assigned by S&P. Capacity
to pay interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
A: Debt rated A has a strong capacity to pay interest and repay principal,
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
<PAGE>
BBB: Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
Debt rated BB, B, CCC, CC and C is regarded as having speculative
characteristics with respect to capacity to pay interest and repay principal. BB
indicates the least degree of speculation and C the highest. While such debt
will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major exposures to adverse conditions.
BB: Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB rating.
B: Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
BB or BB- rating.
CCC: Debt rated CCC has a currently identifiable vulnerability to default,
and is dependent upon favorable business, financial and economic conditions to
meet timely payment of interest and repayment of principal. In the event of
adverse business, financial or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
B or B- rating.
CC: The rating CC is typically applied to debt subordinated to senior
debt which is assigned an actual or implied CCC debt rating.
C: The rating C is typically applied to debt subordinated to senior debt
which is assigned an actual or implied CCC- debt rating. The C rating may be
used to cover a situation where a bankruptcy petition has been filed, but debt
service payments are continued.
CI: The rating CI is reserved for income bonds on which no interest is
being paid.
D: Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments are
<PAGE>
not made on the date due even if the applicable grace period has not expired,
unless S&P believes that such payments will be made during such grace period.
The D rating also will be used upon the filing of a bankruptcy petition if debt
service payments are jeopardized.
Plus (+) or Minus (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
S&P may attach the "r" symbol to derivative, hybrid, and certain other
obligations that S&P believes may experience high volatility or high variability
in expected returns due to noncredit risks created by the terms of the
obligation, such as securities whose principal or interest return is indexed to
equities, commodities, or currencies; certain swaps and options; and interest
only (IO) and principal only (PO) mortgage securities.
Moody's Investors Service, Inc.
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt-edge." Interest payments are protected by a large or by an exceptionally
stable margin, and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment
<PAGE>
characteristics and in fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during other good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with respect to
principal or interest.
Ca: Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
1, 2 or 3: The ratings from Aa through B may be modified by the addition
of a numeral indicating a bond's rank within its rating category.
<PAGE>
State Street Research
Strategic Income Fund
August 19, 1996
(as supplemented through
January 24, 1997)
P R O S P E C T U S
STATE STREET RESEARCH
STRATEGIC INCOME FUND
One Financial Center
Boston, MA 02111
INVESTMENT ADVISER
State Street Research &
Management Company
One Financial Center
Boston, MA 02111
DISTRIBUTOR
State Street Research
Investment Services, Inc.
One Financial Center
Boston, MA 02111
SHAREHOLDER SERVICES
State Street Research
Shareholder Services
P.O. Box 8408
Boston, MA 02266
1-800-562-0032
CUSTODIAN
State Street Bank and
Trust Company
225 Franklin Street
Boston, MA 02110
LEGAL COUNSEL
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, MA 02109
SI-470E-1971BS
CONTROL NUMBER: 3605-970122(1097)SSR-LD
<PAGE>
STATE STREET RESEARCH STRATEGIC INCOME FUND
a series of
STATE STREET RESEARCH SECURITIES TRUST
STATEMENT OF ADDITIONAL INFORMATION
August 19, 1996
(as supplemented January 24, 1997)
TABLE OF CONTENTS
Page
INVESTMENT POLICIES AND RESTRICTIONS .............................. 2
ADDITIONAL INFORMATION CONCERNING
CERTAIN INVESTMENT TECHNIQUES ............................... 5
DEBT INSTRUMENTS AND PERMITTED CASH INVESTMENTS ................... 12
TRUSTEES AND OFFICERS ............................................. 15
INVESTMENT ADVISORY SERVICES ...................................... 20
PURCHASE AND REDEMPTION OF SHARES ................................. 21
NET ASSET VALUE ................................................... 23
PORTFOLIO TRANSACTIONS ............................................ 24
CERTAIN TAX MATTERS ............................................... 26
DISTRIBUTION OF SHARES OF THE FUND ................................ 28
CALCULATION OF PERFORMANCE DATA ................................... 30
CUSTODIAN ......................................................... 33
INDEPENDENT ACCOUNTANTS ........................................... 33
FINANCIAL STATEMENTS .............................................. 33
The following Statement of Additional Information is not a Prospectus. It
should be read in conjunction with the Prospectus of State Street Research
Strategic Income Fund, dated August 19, 1996, as supplemented through January
24, 1997, which may be obtained without charge from the offices of State Street
Research Securities Trust (the "Trust") or State Street Research Investment
Services, Inc. (the "Distributor"), One Financial Center, Boston, Massachusetts
02111-2690.
CONTROL NUMBER:
<PAGE>
INVESTMENT POLICIES AND RESTRICTIONS
As set forth in part under "The Fund's Investments" and "Limiting
Investment Risk" in the Fund's Prospectus, the Fund has adopted certain
investment restrictions.
The fundamental and nonfundamental policies of the Fund do not apply to
------
any matters involving the issuance of multiple classes of shares of the Fund or
the creation or use of structures (e.g., fund of funds, master-feeder structure)
allowing the Fund to invest substantially all its assets in collective
investment vehicles or allowing the Fund to serve as such a collective
investment vehicle for other funds, to the extent permitted by law and
regulatory authorities.
All of the Fund's fundamental investment restrictions are set forth below.
These fundamental investment restrictions may not be changed except by the
affirmative vote of a majority of the Fund's outstanding voting securities as
defined in the Investment Company Act of 1940, as amended (the "1940 Act").
(Under the 1940 Act, a "vote of the majority of the outstanding voting
securities" means the vote, at a meeting of security holders duly called, (i) of
67% or more of the voting securities present at a meeting if the holders of more
than 50% of the outstanding voting securities are present or represented by
proxy or (ii) of more than 50% of the outstanding voting securities, whichever
is less.) Under these restrictions, it is the Fund's policy:
(1) not to purchase a security of any one issuer (other than securities
issued or guaranteed as to principal or interest by the U.S.
Government or its agencies or instrumentalities or mixed-ownership
Government corporations or sponsored enterprises) if such purchase
would, with respect to 75% of the Fund's total assets, cause more
than 5% of the Fund's total assets to be invested in the securities
of such issuer or cause more than 10% of the voting securities of
such issuer to be held by the Fund;
(2) not to issue senior securities as defined in the 1940 Act, except as
permitted by that Act and the rules thereunder or as permitted by
the Securities and Exchange Commission (the creation of general
liens or security interests under industry practices for
transactions in portfolio assets are not deemed to involve the
issuance of senior securities);
(3) not to underwrite or participate in the marketing of securities
of other issuers, except (a) the Fund may, acting alone or in
syndicates or groups, purchase or otherwise acquire securities of
other issuers for investment, either from the issuers or from
persons in a control relationship with the issuers or from
underwriters of such securities; and (b) to the extent that, in
connection with the disposition of the Fund's securities, the
Fund may be a selling shareholder in an offering or deemed to be
an underwriter under certain federal securities laws;
(4) not to purchase fee simple interests in real estate unless acquired
as a result of ownership of securities or other instruments,
although the Fund may purchase and sell other interests in real
estate including securities which are secured by real estate, or
securities of companies which make real estate loans or own, or
invest or deal in, real estate;
2
<PAGE>
(5) not to invest in physical commodities or physical commodity
contracts or options in excess of 10% of the Fund's total assets,
except that investments in essentially financial items or
arrangements such as, but not limited to, swap arrangements,
hybrids, currencies, currency and other forward contracts,
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;
(6) not to lend money; however, the Fund may lend portfolio securities
and purchase bonds, debentures, notes, bills and any other debt
related instruments or interests (and enter into repurchase
agreements with respect thereto);
(7) not to make any investment which would cause more than 25% of the
value of the Fund's total assets to be invested in securities of
nongovernment-related issuers principally engaged in any one
industry, as described in the Fund's Prospectus or Statement of
Additional Information as amended from time to time; and
(8) not to borrow money, including reverse repurchase agreements in so
far as such agreements may be regarded as borrowings, except for
borrowings not in an amount in excess of 33 1/3% of the value of its
total assets.
The following nonfundamental investment restrictions may be changed
without shareholder approval. Under these restrictions, it is the Fund's policy:
(1) not to purchase any security or enter into a repurchase agreement if
as a result more than 15% of its net assets would be invested in
securities that are illiquid (including repurchase agreements not
entitling the holder to payment of principal and interest within
seven days);
(2) not to invest more than 15% of its net assets in restricted
securities of all types (including not more than 5% of its net
assets in restricted securities which are not eligible for resale
pursuant to Rule 144A, Regulation S or other exemptive provisions
under the Securities Act of 1933);
(3) not to invest more than 5% of its total assets in securities of
private companies including predecessors with less than three
years' continuous operations except (a) securities guaranteed or
backed by an affiliate of the issuer with three years of
continuous operations, (b) securities issued or guaranteed as to
principal or interest by the U.S. Government, or its agencies or
instrumentalities, or a mixed-ownership Government corporation,
(c) securities of issuers with debt securities rated at least
"BBB" by Standard & Poor's Corporation or "Baa" by Moody's
Investor's Service, Inc. (or their equivalent by any other
nationally recognized statistical rating organization), or
securities of issuers considered by the Investment Manager to be
3
<PAGE>
equivalent, (d) securities issued by a holding company with at
least 50% of its assets invested in companies with three years of
continuous operations including predecessors, and (e) securities
which generate income which is exempt from local, state or
federal taxes; provided that the Fund may invest up to 15% in
such issuers so long as such investments plus investments in
restricted securities (other than those which are eligible for
resale under Rule 144A, Regulation S or other exemptive
provisions as noted above) do not exceed 15% of the Fund's total
assets;
(4) 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;
(5) not to purchase securities on margin or make short sales of
securities or maintain a short position except for short sales
"against the box" (as a matter of current operating policy, the
Fund will not make short sales or maintain a short position
unless not more than 5% of the Fund's net assets (taken at
current value) are held as collateral for such sales at any time;
and for the purpose of this restriction, escrow or custodian
receipts or letters, margin or safekeeping accounts, or similar
arrangements used in the industry in connection with the trading
of futures, options and forward commitments are not deemed to
involve the use of margin);
(6) not to purchase a security issued by another investment company,
except to the extent permitted under the 1940 Act or except by
purchases in the open market involving only customary brokers'
commissions, or securities acquired as dividends or distributions or
in connection with a merger, consolidation or similar transaction or
other exchange;
(7) not to purchase or retain any security of an issuer if those of its
officers and Trustees and officers and directors of its investment
adviser who individually own more than 1/2 of 1% of the securities
of such issuer, when combined, own more than 5% of the securities of
such issuer taken at market;
(8) not to invest directly as a joint venturer or general partner in
oil, gas or other mineral exploration or development joint ventures
or general partnerships (provided that the Fund may invest in
securities issued by companies which invest in or sponsor such
programs and in securities indexed to the price of oil, gas or other
minerals);
(9) not to make an investment in warrants, valued at the lower of
cost or market, which causes the Fund to own, at the time of such
investment, warrants in excess of 5% of its net assets, provided
that warrants not listed on the New York or American Stock
Exchange shall be further limited to 2% of the Fund's net assets
(warrants initially attached to securities and acquired by the
Fund upon original issuance thereof shall be deemed to be without
value); and
Compliance with the above nonfundamental investment restrictions (1) and
(2) will be determined independently.
4
<PAGE>
ADDITIONAL INFORMATION CONCERNING
CERTAIN INVESTMENT TECHNIQUES
Among other investments described below, the Fund may buy and sell
domestic and foreign options, futures contracts, and options on futures
contracts, with respect to securities, securities indices, currencies and
interest rates, and may enter into closing transactions with respect to each of
the foregoing under circumstances in which the use of such instruments and
techniques are expected by State Street Research & Management Company (the
"Investment Manager") to aid in achieving the investment objective of the Fund.
The Fund on occasion may also purchase instruments with characteristics of both
futures and securities (e.g., debt instruments with interest and principal
payments determined by reference to the value of a commodity or a currency at a
future time) and which, therefore, possess the risks of both futures and
securities investments.
Futures Contracts
Futures contracts are publicly traded contracts to buy or sell underlying
assets, such as certain securities, currencies or an index of securities, at a
future time at a specified price. A contract to buy establishes a "long"
position while a contract to sell establishes a "short" position.
The purchase of a futures contract on securities or an index of securities
normally enables a buyer to participate in the market movement of the underlying
asset or index after paying a transaction charge and posting margin in an amount
equal to a small percentage of the value of the underlying asset or index. The
Fund will initially be required to deposit with the Trust's custodian or the
broker effecting the futures transaction an amount of "initial margin" in cash
or U.S. Treasury obligations.
Initial margin in futures transactions is different from margin in
securities transactions in that the former does not involve the borrowing of
funds by the customer to finance the transaction. Rather, the initial margin is
like a performance bond or good faith deposit on the contract. Subsequent
payments (called "maintenance margin") to and from the broker will be made on a
daily basis as the price of the underlying asset fluctuates. This process is
known as "marking to market." For example, when the Fund has taken a long
position in a futures contract and the value of the underlying asset has risen,
that position will have increased in value and the Fund will receive from the
broker a maintenance margin payment equal to the increase in value of the
underlying asset. Conversely, when the Fund has taken a long position in a
futures contract and the value of the underlying instrument has declined, the
position would be less valuable, and the Fund would be required to make a
maintenance margin payment to the broker.
At any time prior to expiration of the futures contract, the Fund may
elect to close the position by taking an opposite position which will terminate
the Fund's position in the futures contract. A final determination of
maintenance margin is then made, additional cash is required to be paid by or
released to the Fund, and the Fund realizes a loss or a gain. While futures
contracts with respect to securities do provide for the delivery and acceptance
of such securities, such delivery and acceptance are seldom made.
Futures contracts will be executed primarily (a) to establish a short
position, and thus protect the Fund from experiencing the full impact of an
expected decline in market value of portfolio holdings without requiring the
sale of holdings, or (b) to establish a long position, and thus to participate
in an expected rise in market value of securities or currencies which the Fund
intends to purchase. Subject to the limitations described below, the Fund may
also enter into futures contracts for purposes of
5
<PAGE>
enhancing return. In transactions establishing a long position in a futures
contract, money market instruments equal to the face value of the futures
contract will be identified by the Fund to the Trust's custodian for maintenance
in a separate account to insure that the use of such futures contracts is
unleveraged. Similarly, a representative portfolio of securities having a value
equal to the aggregate face value of the futures contract will be identified
with respect to each short position. The Fund will employ any other appropriate
method of cover which is consistent with applicable regulatory and exchange
requirements.
Options on Securities
The Fund may use options on securities to implement its investment
strategy. A call option on a security, for example, gives the purchaser of the
option the right to buy, and the writer the obligation to sell, the underlying
asset at the exercise price during the option period. Conversely, a put option
on a security gives the purchaser the right to sell, and the writer the
obligation to buy, the underlying asset at the exercise price during the option
period.
Purchased options have defined risk, i.e., the premium paid for the
option, no matter how adversely the price of the underlying asset moves, while
affording an opportunity for gain corresponding to the increase or decrease in
the value of the optioned asset.
Written options have varying degrees of risk. An uncovered written call
option theoretically carries unlimited risk, as the market price of the
underlying asset could rise far above the exercise price before its expiration.
This risk is tempered when the call option is covered, i.e., when the option
writer owns the underlying asset. In this case, the writer runs the risk of the
lost opportunity to participate in the appreciation in value of the asset rather
than the risk of an out-of-pocket loss. A written put option has defined risk,
i.e., the difference between the agreed-upon price that the Fund must pay to the
buyer upon exercise of the put and the value, which could be zero, of the asset
at the time of exercise.
The obligation of the writer of an option continues until the writer
effects a closing purchase transaction or until the option expires. To secure
his obligation to deliver the underlying asset in the case of a call option, or
to pay for the underlying asset in the case of a put option, a covered writer is
required to deposit in escrow the underlying security or other assets in
accordance with the rules of the applicable clearing corporation and exchanges.
Options on Securities Indices
The Fund may engage in transactions in call and put options on securities
indices. For example, the Fund may purchase put options on indices of securities
in anticipation of or during a market decline to attempt to offset the decrease
in market value of its securities that might otherwise result.
Put options on indices of securities are similar to put options on the
securities themselves except that the delivery requirements are different.
Instead of giving the right to make delivery of a security at a specified price,
a put option on an index of securities gives the holder the right to receive an
amount of cash upon exercise of the option if the value of the underlying index
has fallen below the exercise price. The amount of cash received will be equal
to the difference between the closing price of the index and the exercise price
of the option expressed in dollars times a specified multiple. As with options
on securities or futures contracts, the Fund may offset its position in index
options prior
6
<PAGE>
to expiration by entering into a closing transaction on an exchange or it may
let the option expire unexercised.
A securities index assigns relative values to the securities included in
the index and the index options are based on a broad market index. Although
there are at present few available options on indices of fixed income
securities, other than tax-exempt securities, or futures and related options
based on such indices, such instruments may become available in the future. In
connection with the use of such options, the Fund may cover its position by
identifying a representative portfolio of securities having a value equal to the
aggregate face value of the option position taken. However, the Fund may employ
any appropriate method to cover its positions that is consistent with applicable
regulatory and exchange requirements.
Options on Futures Contracts
An option on a futures contract gives the purchaser the right, in return
for the premium paid, to assume a position in a futures contract (a long
position if the option is a call and a short position if the option is a put) at
a specified exercise price at any time during the period of the option.
Options Strategy
A basic option strategy for protecting the Fund against a decline in
securities prices could involve (a) the purchase of a put -- thus "locking in"
the selling price of the underlying securities or securities indices -- or (b)
the writing of a call on securities or securities indices held by the Fund --
thereby generating income (the premium paid by the buyer) by giving the holder
of such call the option to buy the underlying asset at a fixed price. The
premium will offset, in whole or in part, a decline in portfolio value; however,
if prices of the relevant securities or securities indices rose instead of
falling, the call might be exercised, thereby resulting in a potential loss of
appreciation in the underlying securities or securities indices.
A basic option strategy when a rise in securities prices is anticipated is
the purchase of a call -- thus "locking in" the purchase price of the underlying
security or other asset. In transactions involving the purchase of call options
by the Fund, money market instruments equal to the aggregate exercise price of
the options will be identified by the Fund to the Trust's custodian to insure
that the use of such investments is unleveraged.
The Fund may write options in connection with buy-and-write transactions;
that is, the Fund may purchase a security and concurrently write a call option
against that security. If the call option is exercised in such a transaction,
the Fund's maximum gain will be the premium received by it for writing the
option, adjusted upward or downward by the difference between the Fund's
purchase price of the security and the exercise price of the option. If the
option is not exercised and the price of the underlying security declines, the
amount of such decline will be offset in part, or entirely, by the premium
received.
The writing of covered put options is similar in terms of risk/return
characteristics to buy-and-write transactions. If the market price of the
underlying security rises or otherwise is above the exercise price, the put
option will expire worthless and the Fund's gain will be limited to the premium
received. If the market price of the underlying security declines or otherwise
is below the exercise price, the Fund's return will be the premium received from
writing the put option minus the amount by which the market price of the
security is below the exercise price.
7
<PAGE>
Limitations and Risks of Options and Futures Activity
The Fund will engage in transactions in futures contracts or options as a
hedge against changes resulting from market conditions which produce changes in
the values of their securities or the securities which it intends to purchase
(e.g., to replace portfolio securities which will mature in the near future)
and, subject to the limitations described below, to enhance return. The Fund
will not purchase any futures contract or purchase any call option if,
immediately thereafter, more than one third of the Fund's net assets would be
represented by long futures contracts or call options. The Fund will not write a
covered call or put option if, immediately thereafter, the aggregate value of
the assets (securities in the case of written calls and cash or cash equivalents
in the case of written puts) underlying all such options, determined as of the
dates such options were written, would exceed 25% of that Fund's net assets. The
Fund may not establish a position in a commodity futures contract or purchase or
sell a commodity option contract for other than bona fide hedging purposes if
immediately thereafter the sum of the amount of initial margin deposits and
premiums required to establish such positions for such nonhedging purposes would
exceed 5% of the market value of the Fund's net assets.
Although effective hedging can generally capture the bulk of a desired
risk adjustment, no hedge is completely effective. The Fund's ability to hedge
effectively through transactions in futures and options depends on the degree to
which price movements in its holdings correlate with price movements of the
futures and options.
Some positions in futures and options may be closed out only on an
exchange which provides a secondary market therefor. There can be no assurance
that a liquid secondary market will exist for any particular futures contract or
option at any specific time. Thus, it may not be possible to close such an
option or futures position prior to maturity. The inability to close options and
futures positions also could have an adverse impact on the Fund's ability to
effectively hedge its securities and might, in some cases, require the Fund to
deposit cash to meet applicable margin requirements. The Fund will enter into an
option or futures position only if it appears to be a liquid investment.
Foreign Investments
Generally, ADRs in registered form are designed for use in U.S. securities
markets and EDRs are designed for use in European securities markets. ADRs are
available through facilities which may be either "sponsored" or "unsponsored."
In a sponsored arrangement, the foreign issuer establishes the facility, pays
some or all of the depository's fees, and usually agrees to provide shareholder
communications. In an unsponsored arrangement, the foreign issuer is not
involved, and the ADR holders pay the fees of the depository. Sponsored ADRs are
generally more advantageous to the ADR holders and the issuer than are
unsponsored ADRs. More and higher fees are generally charged in an unsponsored
program. Only sponsored ADRs may be listed on the New York or American Stock
Exchanges. Unsponsored ADRs may prove to be more risky due to (a) the additional
costs to the Fund; (b) the relative illiquidity of the issue in U.S. markets;
and (c) the possibility of higher trading costs in the over-the-counter market
as opposed to exchange-based trading. The Fund will take these and other risk
considerations into account before making an investment in an unsponsored ADR.
To the extent the Fund invests in securities of issuers in less developed
countries or emerging foreign markets, it will be subject to a variety of
additional risks, including risks associated with political instability,
economies based on relatively few industries, lesser market liquidity, high
rates of inflation, significant price volatility of portfolio holdings and high
levels of external debt in the relevant country.
Although the Fund may invest in securities denominated in foreign
currencies, the Fund values its securities and other assets in U.S. dollars. As
a result, the net asset value of the Fund's shares may fluctuate with U.S.
dollar exchange rates as well as with price changes of the Fund's securities in
the various local markets and currencies. Thus, an increase in the value of the
U.S. dollar compared to the currencies in which the Fund makes its investments
could reduce the effect of increases and magnify the effect of decreases in the
prices of the Fund's securities in their local markets. Conversely, a decrease
in the value of the U.S. dollar will have the opposite effect of magnifying the
effect of increases and reducing the effect of decreases in the prices of the
Fund's securities in the local markets.
8
<PAGE>
Currency Transactions
The Fund's dealings in forward currency exchange contracts will be limited
primarily to hedging involving either specific transactions or aggregate
portfolio positions, although the Fund reserves the right to seek return through
currency investments. A forward currency contract involves an obligation to
purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract agreed upon by the parties, at a
price set at the time of the contract. These contracts are not commodities and
are entered into in the interbank market conducted directly between currency
traders (usually large commercial banks) and their customers. Although spot and
forward contracts will be used primarily to protect the Fund from adverse
currency movements, they also involve the risk that anticipated currency
movements will not be accurately predicted, which may result in losses to the
Fund. This method of protecting the value of the Fund's portfolio securities
against a decline in the value of a currency does not eliminate fluctuations in
the underlying prices of the securities. It simply establishes a rate of
exchange that can be achieved at some future point in time. Although such
contracts tend to minimize the risk of loss due to a decline in the value of
hedged currency, they tend to limit any potential gain that might result should
the value of such currency increase.
Repurchase Agreements
The Fund may enter into repurchase agreements. Repurchase agreements occur
when the Fund acquires a security and the seller, which may be either (i) a
primary dealer in U.S. Government securities or (ii) an FDIC-insured bank having
gross assets in excess of $500 million, simultaneously commits to repurchase it
at an agreed-upon price on an agreed-upon date within a specified number of days
(usually not more than seven) from the date of purchase. The repurchase price
reflects the purchase price plus an agreed-upon market rate of interest which is
unrelated to the coupon rate or maturity of the acquired security. The Fund will
only enter into repurchase agreements involving U.S. Government securities.
Repurchase agreements could involve certain risks in the event of default or
insolvency of the other party, including possible delays or restrictions upon
the Fund's ability to dispose of the underlying securities. Repurchase
agreements will be limited to 30% of the Fund's total assets, except that
repurchase agreements extending for more than seven days when combined with
other illiquid securities will be limited to 15% of the Fund's net assets.
Currently, the Fund does not expect to invest more than 5% of its net assets in
repurchase agreements.
Reverse Repurchase Agreements
The Fund may enter into reverse repurchase agreements. However, the Fund
has no present intention of engaging in reverse repurchase agreements in excess
of 5% of the Fund's total assets. In a reverse repurchase agreement the Fund
transfers a portfolio instrument to another person, such as a financial
institution, broker or dealer, in return for a percentage of the instrument's
market value in cash, and agrees that on a stipulated date in the future the
Fund will repurchase the portfolio instrument by remitting the original
consideration plus interest at an agreed-upon rate. The ability to use reverse
repurchase agreements may enable, but does not ensure the ability of, the Fund
to avoid selling portfolio instruments at a time when a sale may be deemed to be
disadvantageous.
When effecting reverse repurchase agreements, assets of the Fund in a
dollar amount sufficient to make payment of the obligations to be purchased are
segregated on the Fund's records at the trade date and maintained until the
transaction is settled.
9
<PAGE>
Rule 144A Securities
The Fund may buy or sell restricted securities in accordance with Rule
144A under the Securities Act of 1933 ("Rule 144A Securities"). Securities may
be resold pursuant to Rule 144A under certain circumstances only to qualified
institutional buyers as defined in the rule, and the markets and trading
practices for such securities are relatively new and still developing; depending
on the development of such markets, such Rule 144A Securities may be deemed to
be liquid as determined by or in accordance with methods adopted by the
Trustees. Under such methods the following factors are considered, among others:
the frequency of trades and quotes for the security, the number of dealers and
potential purchasers in the market, marketmaking activity, and the nature of the
security and marketplace trades. Investments in Rule 144A Securities could have
the effect of increasing the level of the Fund's illiquidity to the extent that
qualified institutional buyers become, for a time, uninterested in purchasing
such securities. Also, the Fund may be adversely impacted by the possible
illiquidity and subjective valuation of such securities in the absence of a
market for them.
Indexed Securities
The Fund may purchase securities the value of which is indexed to interest
rates, foreign currencies and various indices and financial indicators. These
securities are generally short- to intermediate-term debt securities. The
interest rates or values at maturity fluctuate with the index to which they are
connected and may be more volatile than such index.
Swap Arrangements
The Fund may enter into various forms of swap arrangements with
counterparties with respect to interest rates, currency rates or indices,
including purchase of caps, floors and collars as described below. In an
interest rate swap the Fund could agree for a specified period to pay a bank or
investment banker the floating rate of interest on a so-called notional
principal amount (i.e., an assumed figure selected by the parties for this
purpose) in exchange for agreement by the bank or investment banker to pay the
Fund a fixed rate of interest on the notional principal amount. In a currency
swap the Fund would agree with the other party to exchange cash flows based on
the relative differences in values of a notional amount of two (or more)
currencies; in an index swap, the Fund would agree to exchange cash flows on a
notional amount based on changes in the values of the
10
<PAGE>
selected indices. Purchase of a cap entitles the purchaser to receive payments
from the seller on a notional amount to the extent that the selected index
exceeds an agreed upon interest rate or amount whereas purchase of a floor
entitles the purchaser to receive such payments to the extent the selected index
falls below an agreed upon interest rate or amount. A collar combines a cap and
a floor.
Most swaps entered into by the Fund will be on a net basis; for example,
in an interest rate swap, amounts generated by application of the fixed rate and
the floating rate to the notional principal amount would first offset one
another, with the Fund either receiving or paying the difference between such
amounts. In order to be in a position to meet any obligations resulting from
swaps, the Fund will set up a segregated custodial account to hold appropriate
liquid assets, including cash; for swaps entered into on a net basis, assets
will be segregated having a daily net asset value equal to any excess of the
Fund's accrued obligations over the accrued obligations of the other party,
while for swaps on other than a net basis assets will be segregated having a
value equal to the total amount of the Fund's obligations.
These arrangements will be made primarily for hedging purposes, to
preserve the return on an investment or on a part of the Fund's portfolio.
However, the Fund may enter into such arrangements for income purposes to the
extent permitted by the CFTC for entities which are not commodity pool
operators, such as the Fund. In entering a swap arrangement, the Fund is
dependent upon the creditworthiness and good faith of the counterparty. The Fund
attempts to reduce the risks of nonperformance by the counterparty by dealing
only with established, reputable institutions. The swap market is still
relatively new and emerging; positions in swap arrangements may become illiquid
to the extent that nonstandard arrangements with one counterparty are not
readily transferable to another counterparty or if a market for the transfer of
swap positions does not develop. The use of interest rate swaps is a highly
specialized activity which involves investment techniques and risks different
from those associated with ordinary portfolio securities transactions. If the
Investment Manager is incorrect in its forecasts of market values, interest
rates and other applicable factors, the investment performance of the Fund would
diminish compared with what it would have been if these investment techniques
were not used. Moreover, even if the Investment Manager is correct in its
forecasts, there is a risk that the swap position may correlate imperfectly with
the price of the asset or liability being hedged.
Industry Classifications
In determining how much of the Fund's portfolio is invested in a given
industry, the following industry classifications are currently used. Securities
issued or guaranteed as to principal or interest by the U.S. Government or its
agencies or instrumentalities or mixed-ownership Government corporations
(including repurchase agreements involving U.S. Government securities to the
extent excludable under relevant regulatory interpretations) are excluded.
Securities issued by foreign governments are also excluded. Companies engaged in
the business of financing will be classified according to the industries of
their parent companies or industries that otherwise most affect such financing
companies. Issuers of asset-backed pools will be classified as separate
industries based on the nature of the underlying assets, such as mortgages,
credit card receivables, etc. "Asset-backed -- Mortgages" includes private pools
of nongovernment backed mortgages.
<TABLE>
<S> <C> <C>
Aerospace Electronic Components Oil Service
Airline Electronic Equipment Paper Products
Asset-backed--Mortgages Entertainment Personal Care
Asset-backed--Credit Card Financial Service Photography
Receivables Food & Beverage Plastics
Automotive Forest Products Printing & Publishing
Automotive Parts Gaming & Lodging Railroad
Bank Gas Real Estate & Building
Building Gas Transmission Recreation
Business Service Grocery Retail Trade
Cable Healthcare & Hospital Savings & Loan
Capital Goods & Equipment Management Shipping & Transportation
Chemical Hospital Supply Technology & Communications
Computer Software & Service Hotel & Restaurant Telephone
Conglomerate Insurance Textile & Apparel
Consumer Goods & Services Machinery Tobacco
Container Media Truckers
Cosmetics Metal & Mining Trust Certificates--
Diversified Office Equipment Government Related Lending
Drug Oil Production
Electric Oil Refining & Marketing
Electric Equipment
</TABLE>
11
<PAGE>
DEBT INSTRUMENTS AND PERMITTED CASH INVESTMENTS
As indicated in the Fund's Prospectus, the Fund may invest in long-term
and short-term debt securities. The Fund may invest in cash and short-term
securities for temporary defensive purposes when, in the opinion of the
Investment Manager, such a position is more likely to provide protection against
unfavorable market conditions than adherence to other investment policies.
Certain debt securities and money market instruments in which the Fund may
invest are described below.
U.S. Government and Related Securities
U.S. Government securities are securities which are issued or
guaranteed as to principal or interest by the U.S. Government, a U.S.
Government agency or instrumentality, or certain mixed-ownership Government
corporations as described herein. The U.S. Government securities in which
the Fund invests include, among others:
o direct obligations of the U.S. Treasury, i.e., U.S. Treasury
bills, notes, certificates and bonds;
o obligations of U.S. Government agencies or instrumentalities such
as the Federal Home Loan Banks, the Farmers Home Administration, the
Federal Farm Credit Banks, the Federal National Mortgage Association,
the Government National Mortgage Association and the Federal Home Loan
Mortgage Corporation; and
12
<PAGE>
o obligations of mixed-ownership Government corporations such as
Resolution Funding Corporation.
U.S. Government securities which the Fund may buy are backed in a variety
of ways by the U.S. Government, its agencies or instrumentalities. Some of these
obligations, such as Government National Mortgage Association mortgage-backed
securities, are backed by the full faith and credit of the U.S. Treasury. Other
obligations, such as those of the Federal National Mortgage Association, are
backed by the discretionary authority of the U.S. Government to purchase certain
obligations of agencies or instrumentalities, although the U.S. Government has
no legal obligation to do so. Obligations such as those of the Federal Home Loan
Banks, the Federal Farm Credit Banks, the Federal National Mortgage Association
and the Federal Home Loan Mortgage Corporation are backed by the credit of the
agency or instrumentality issuing the obligations. Certain obligations of
Resolution Funding Corporation, a mixed-ownership Government corporation, are
backed with respect to interest payments by the U.S. Treasury, and with respect
to principal payments by U.S. Treasury obligations held in a segregated account
with a Federal Reserve Bank. Except for certain mortgage-related securities, the
Fund will only invest in obligations issued by mixed-ownership Government
corporations where such securities are guaranteed as to payment of principal or
interest by the U.S. Government or a U.S. Government agency or instrumentality,
and any unguaranteed principal or interest is otherwise supported by U.S.
Government obligations held in a segregated account.
U.S. Government securities may be acquired by the Fund in the form of
separately traded principal and interest components of securities issued or
guaranteed by the U.S. Treasury. The principal and interest components of
selected securities are traded independently under the Separate Trading of
Registered Interest and Principal of Securities ("STRIPS") program. Under the
STRIPS program, the principal and interest components are individually numbered
and separately issued by the U.S. Treasury at the request of depository
financial institutions, which then trade the component parts independently.
Obligations of Resolution Funding Corporation are similarly divided into
principal and interest components and maintained as such on the book entry
records of the Federal Reserve Banks.
In addition, the Fund may invest in custodial receipts that evidence
ownership of future interest payments, principal payments or both on certain
U.S. Treasury notes or bonds in connection with programs sponsored by banks and
brokerage firms. Such notes and bonds are held in custody by a bank on behalf of
the owners of the receipts. These custodial receipts are known by various names,
including "Treasury Receipts" ("TRs"), "Treasury Investment Growth Receipts"
("TIGRs") and "Certificates of Accrual on Treasury Securities" ("CATS"), and may
not be deemed U.S. Government securities.
The Fund may also invest from time to time in collective investment
vehicles, the assets of which consist principally of U.S. Government securities
or other assets substantially collateralized or supported by such securities,
such as Government trust certificates.
Bank Money Investments
Bank money investments include but are not limited to certificates of
deposit, bankers' acceptances and time deposits. Certificates of deposit are
generally short-term (i.e., less than one year), interest-bearing negotiable
certificates issued by commercial banks or savings and loan associations against
funds deposited in the issuing institution. A banker's acceptance is a time
draft drawn on a commercial bank by a borrower, usually in connection with an
international commercial
13
<PAGE>
transaction (to finance the import, export, transfer or storage of goods). A
banker's acceptance may be obtained from a domestic or foreign bank, including a
U.S. branch or agency of a foreign bank. The borrower is liable for payment as
well as the bank, which unconditionally guarantees to pay the draft at its face
amount on the maturity date. Most acceptances have maturities of six months or
less and are traded in secondary markets prior to maturity. Time deposits are
nonnegotiable deposits for a fixed period of time at a stated interest rate. The
Fund will not invest in any such bank money investment unless the investment is
issued by a U.S. bank that is a member of the Federal Deposit Insurance
Corporation ("FDIC"), including any foreign branch thereof, a U.S. branch or
agency of a foreign bank, a foreign branch of a foreign bank, or a savings bank
or savings and loan association that is a member of the FDIC and which at the
date of investment has capital, surplus and undivided profits (as of the date of
its most recently published financial statements) in excess of $50 million. The
Fund will not invest in time deposits maturing in more than seven days and will
not invest more than 10% of its total assets in time deposits maturing in two to
seven days.
U.S. branches and agencies of foreign banks are offices of foreign
banks and are not separately incorporated entities. They are chartered and
regulated either federally or under state law. U.S. federal branches or
agencies of foreign banks are chartered and regulated by the Comptroller of
the Currency, while state branches and agencies are chartered and regulated
by authorities of the respective states or the District of Columbia. U.S.
branches of foreign banks may accept deposits and thus are eligible for FDIC
insurance; however, not all such branches elect FDIC insurance. Unlike U.S.
branches of foreign banks, U.S. agencies of foreign banks may not accept
deposits and thus are not eligible for FDIC insurance. Both branches and
agencies can maintain credit balances, which are funds received by the office
incidental to or arising out of the exercise of their banking powers and can
exercise other commercial functions, such as lending activities.
Short-Term Corporate Debt Instruments
Short-term corporate debt instruments include commercial paper to finance
short-term credit needs (i.e., short-term, unsecured promissory notes) issued by
corporations including but not limited to (a) domestic or foreign bank holding
companies or (b) their subsidiaries or affiliates where the debt instrument is
guaranteed by the bank holding company or an affiliated bank or where the bank
holding company or the affiliated bank is unconditionally liable for the debt
instrument. Commercial paper is usually sold on a discounted basis and has a
maturity at the time of issuance not exceeding nine months.
Commercial Paper Ratings
Commercial paper investments at the time of purchase will be rated A by
S&P or Prime by Moody's, or, if not rated, issued by companies having an
outstanding long-term unsecured debt issue rated at least A by S&P or by
Moody's. The money market investments in corporate bonds and debentures (which
must have maturities at the date of settlement of one year or less) must be
rated at the time of purchase at least A by S&P or by Moody's.
Commercial paper rated A (highest quality) by S&P is issued by entities
which have liquidity ratios which are adequate to meet cash requirements.
Long-term senior debt is rated A or better, although in some cases BBB credits
may be allowed. The issuer has access to at least two additional channels of
borrowing. Basic earnings and cash flow have an upward trend with allowance made
for unusual circumstances. Typically, the issuer's industry is well established
and the issuer has a strong position within the industry. The reliability and
quality of management are unquestioned. The relative
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<PAGE>
strength or weakness of the above factors determines whether the issuer's
commercial paper is rated A-1, A-2 or A-3. (Those A-1 issues determined to
possess overwhelming safety characteristics are denoted with a plus (+) sign:
A-1+.)
The rating Prime is the highest commercial paper rating assigned by
Moody's. Among the factors considered by Moody's in assigning ratings are the
following: evaluation of the management of the issuer; economic evaluation of
the issuer's industry or industries and an appraisal of speculative-type risks
which may be inherent in certain areas; evaluation of the issuer's products in
relation to competition and customer acceptance; liquidity; amount and quality
of long-term debt; trend of earnings over a period of 10 years; financial
management of obligations which may be present or may arise as a result of
public interest questions and preparations to meet such obligations. These
factors are all considered in determining whether the commercial paper is rated
Prime-1, Prime-2 or Prime-3.
In the event the lowering of ratings of debt instruments held by the Fund
by applicable rating agencies results in a material decline in the overall
quality of the Fund's portfolio, the Trustees of the Trust will review the
situation and take such action as they deem in the best interests of the Fund's
shareholders, including, if necessary, changing the composition of the
portfolio.
15
<PAGE>
TRUSTEES AND OFFICERS
The Trustees and principal officers of the Trust, their addresses, and
their principal occupations and positions with certain affiliates of the
Investment Manager are set forth below.
*+Bartlett R. Geer, One Financial Center, Boston, MA 02111 serves as Vice
President of the Trust. He is 41. His principal occupation is Senior Vice
President of State Street Research & Management Company. During the past five
years he has also served as Vice President of State Street Research & Management
Company.
*+John H. Kallis, One Financial Center, Boston, MA 02111, serves as Vice
President of the Trust. He is 55. His principal occupation is Senior Vice
President of State Street Research & Management Company. During the past five
years he has also served as Portfolio Manager for State Street Research &
Management Company.
+Edward M. Lamont, Box 1234, Moores Hill Road, Syosset, NY 11791,
serves as Trustee of the Trust. He is 70. He is engaged principally in
private investments and civic affairs, and is an author of business history.
Previously, he was with Morgan Guaranty Trust Company of New York.
+Robert A. Lawrence, Saltonstall & Co., 50 Congress Street, Boston, MA
02109, serves as Trustee of the Trust. He is 70. His principal occupation during
the past five years has been Partner, Saltonstall & Co., a private investment
firm.
*+Gerard P. Maus, One Financial Center, Boston, MA 02111, serves as
Treasurer of the Trust. He is 45. His principal occupation is Executive Vice
President, Treasurer, Chief Financial Officer and Director of State Street
Research & Management Company. During the past five years he has also served as
Executive Vice President and Chief Financial Officer of New England Investment
Companies and as Senior Vice President and Vice President of New England Mutual
Life Insurance Company. Mr. Maus's other principal business affiliations include
Executive Vice President, Treasurer, Chief Financial Officer and Director of
State Street Research Investment Services, Inc.
*+Francis J. McNamara, III, One Financial Center, Boston, MA 02111, serves
as Secretary and General Counsel of the Trust. He is 41. His principal
occupation is Executive Vice President, General Counsel and Secretary of State
Street Research & Management Company. During the past five years he has also
served as Senior Vice President of State Street Research & Management Company
and as Senior Vice President, General Counsel and Assistant Secretary of The
Boston Company, Inc., Boston Safe Deposit and Trust Company and The Boston
Company Advisors, Inc. Mr. McNamara's other principal business affiliations
include Senior Vice President, General Counsel and Clerk of State Street
Research Investment Services, Inc.
+Dean O. Morton, 3200 Hillview Avenue, Palo Alto, CA 94304, serves as
Trustee of the Trust. He is 64. He is retired, having served during the past
five years, until October 1992, as Executive Vice President, Chief Operating
Officer and Director of Hewlett-Packard Company.
*+Kim M. Peters, One Financial Center, Boston, MA 02111, serves as Vice
President of the Trust. He is 44. His principal occupation is Senior Vice
President of State Street Research & Management Company. During the past five
years, he has also served as Vice President of State Street Research &
Management Company.
- -----------------------------
* or + See footnotes on page 17.
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<PAGE>
+Thomas L. Phillips, 141 Spring Street, Lexington, MA 02173, serves as
Trustee of the Trust. He 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.
+Toby Rosenblatt, 3409 Pacific Avenue, San Francisco, CA 94118, serves as
Trustee of the Trust. He is 58. His principal occupations during the past five
years have been President of The Glen Ellen company, a private investment
company, and Vice President of Founders Investments Ltd.
+Michael S. Scott Morton, Massachusetts Institute of Technology,
77 Massachusetts Avenue, Cambridge, MA 02139, serves as Trustee of the
Trust. He is 59. His principal occupation during the past five
years has been Jay W. Forrester Professor of Management at Sloan School of
Management, Massachusetts Institute of Technology.
*+Thomas A. Shively, One Financial Center, Boston, MA 02111, serves as
Vice President of the Trust. He is 42. His principal occupation is Executive
Vice President and Director of State Street Research & Management Company.
During the past five years he has also served as Senior Vice President of State
Street Research & Management Company. Mr. Shively's other business affiliations
include Director of State Street Research Investment Services, Inc.
*+Ralph F. Verni, One Financial Center, Boston, MA 02111, serves as
Chairman of the Board, President, Chief Executive Officer and Trustee of the
Trust. He is 53. His principal occupation is Chairman of the Board, President,
Chief Executive Officer and Director of State Street Research & Management
Company. During the past five years he has also served as President and Chief
Executive Officer of New England Investment Companies and as Chief Investment
Officer and Director of New England Mutual Life Insurance Company. Mr. Verni's
other principal business affiliations include Chairman of the Board and Director
of State Street Research Investment Services, Inc., and, until February 1996,
prior positions as President and Chief Executive Officer.
+Jeptha H. Wade, 251 Old Billerica Road, Bedford, MA 01730, serves as
Trustee of the Trust. He is 72. He is retired and was formerly Of Counsel for
the law firm Choate, Hall & Stewart. He was a partner of that firm from 1960 to
1987.
*Elizabeth M. Westvold, One Financial Center, Boston, MA 02111, serves as
Vice President of the Trust. She is 36. Her principal occupation is Senior Vice
President of State Street Research & Management Company. During the past five
years she has also served as Vice President and as an analyst for State Street
Research & Management Company.
- -----------------------------
* These Trustees and/or officers are or may be deemed to be interested persons
of the Trust under the 1940 Act because of their affiliations with the Fund's
investment adviser.
+ Serves as a Trustee and/or officer of one or more of the following
investment companies, each of which has an advisory relationship with the
Investment Manager or its affiliates: State Street Research Equity Trust,
State Street Research Financial Trust, State Street Research Income Trust,
State Street Research Money Market Trust, State Street Research Tax-Exempt
Trust, State Street Research Capital Trust, State Street Research Exchange
Trust, State Street Research Growth Trust, State Street Research Master
Investment Trust, State Street Research Securities Trust, State Street
Research Portfolios, Inc. and Metropolitan Series Fund, Inc.
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<PAGE>
As of December 31, 1996, the Trustees and principal officers of the Trust
owned less than 1% of the Fund's outstanding Class A shares, and none of the
Fund's Class B, Class C or Class D shares.
As of December 31, 1996, the following persons or entities were the record
and/or beneficial owners of the approximate amounts of each class of shares of
the Fund as set forth beside their names:
Shareholder %
----------- -
Class A Metropolitan 81.8
Class B Merrill Lynch 43.3
Class C Metropolitan 97.9
Class D Merrill Lynch 79.2
The full name and address of each of the above persons or entities are as
follows:
Metropolitan Life Insurance Company (a)
One Madison Avenue
New York, NY 10010
Merrill Lynch, Pierce, Fenner & Smith, Inc. (b)
One Liberty Plaza
165 Broadway
New York, NY 10080
(a) Metropolitan Life Insurance Company ("Metropolitan"), a New York
corporation, was the record and/or beneficial owner, directly or indirectly
through its subsidiaries or affiliates, of such shares.
(b) The Fund believes that such entity does not have beneficial ownership of
such shares.
Ownership of 25% or more of a voting security is deemed "control" as
defined in the 1940 Act. So long as 25% of a class of shares is so owned, such
owner will be presumed to be in control of such class of shares for purposes of
voting on certain matters submitted to a vote of shareholders, such as any
Distribution Plan for a given class.
The Trustees have been compensated as follows:
Total
Compensation
Aggregate From Trust and
Compensation Complex Paid
Name of Trustee From Trust (a)(c) to Trustees (b)
--------------- ------------- --------------
Edward M. Lamont $3,800 $ 59,375
Robert A. Lawrence $3,800 $ 92,125
Dean O. Morton $4,300 $ 96,125
Thomas L. Phillips $3,800 $ 59,375
Toby Rosenblatt $3,800 $ 59,375
Michael S. Scott Morton $4,900 $100,325
Ralph F. Verni $ 0 $ 0
Jeptha H. Wade $4,200 $ 63,375
- ---------------------------
(a)For the fiscal year ended April 30, 1996. Includes compensation from multiple
series of the Trust. See "Distribution of Shares" for a listing of series.
(b)Includes compensation on behalf of 31 funds representing all series of
investment companies for which the Investment Manager serves as the primary
investment adviser, series of Metropolitan Series Fund, Inc., for which the
Investment Manager serves as sub-investment adviser, and series of State
Street Research Portfolios, Inc., for which State Street Research Investment
Services, Inc. serves as distributor. "Total Compensation from Trust and
Complex Paid to Trustees" is for the 12 months ended December 31, 1996. The
Trust does not provide any pension or retirement benefits for the Trustees.
(c)This information includes another series of the Trust through its fiscal year
ended April 30, 1996, and includes estimates of compensation from the Fund
for the current fiscal year ending April 30, 1997. The Fund was organized in
August, 1996.
Except as otherwise provided under said Act, the Board of Trustees will be
a self-perpetuating body until fewer than two thirds of the Trustees serving as
such are Trustees who were elected by shareholders of the Trust. In the event
less than a majority of the Trustees serving as such were elected by
shareholders of the Trust, a meeting of shareholders will be called to elect
Trustees. Under the Master Trust Agreement, any Trustee may be removed by vote
of two thirds of the outstanding Trust shares; holders of 10% or more of the
outstanding Trust shares can require that the Trustees call a meeting of
shareholders for purposes of voting on the removal of one or more Trustees. In
connection with such meetings called by shareholders, shareholders will be
assisted to the extent required by applicable law.
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<PAGE>
INVESTMENT ADVISORY SERVICES
State Street Research & Management Company, the Investment Manager, a
Delaware corporation, with offices at One Financial Center, Boston,
Massachusetts 02111-2690, acts as investment adviser to the Fund. The Advisory
Agreement provides that the Investment Manager shall furnish the Fund with an
investment program, suitable office space and facilities and such investment
advisory, research and administrative services as may be required from time to
time. The Investment Manager compensates all executive and clerical personnel
and Trustees of the Trust if such persons are employees of the Investment
Manager or its affiliates. The Investment Manager is an indirect wholly owned
subsidiary of Metropolitan.
The advisory fee payable monthly by the Fund to the Investment Manager is
computed as a percentage of the average of the value of the net assets of the
Fund, as determined at the close of the New York Stock Exchange (the "NYSE") on
each day the NYSE is open for trading, at the annual rate of 0.75% of the net
assets of the Fund. The Distributor and its affiliates may from time to time and
in varying amounts voluntarily assume some portion of fees or expenses relating
to the Fund.
The Advisory Agreement provides that it shall continue in effect with respect
to the Fund for a period of two years after its initial effectiveness and will
continue from year to year thereafter as long as it is approved at least
annually both (i) by a vote of a majority of the outstanding voting securities
of the Fund (as defined in the 1940 Act) or by the Trustees of the Trust, and
(ii) in either event by a vote of a majority of the Trustees who are not parties
to the Advisory Agreement or "interested persons" of any party thereto, cast in
person at a meeting called for the purpose of voting on such approval. The
Advisory Agreement may be terminated on 60 days' written notice by either party
and will terminate automatically in the event of its assignment, as defined
under the 1940 Act and regulations thereunder. Such regulations provide that a
transaction which does not result in a change of actual control or management of
an adviser is not deemed an assignment.
Under a Funds Administration Agreement between the Investment Manager and the
Distributor, the Distributor provides assistance to the Investment Manager in
performing certain fund administration services for the Trust, such as
assistance in determining the daily net asset value of shares of series of the
Trust and in preparing various reports required by regulations.
Under a Shareholders' Administrative Services Agreement between the Trust and
the Distributor, the Distributor provides shareholders' administrative services,
such as responding to inquiries and
19
<PAGE>
instructions from investors respecting the purchase and redemption of shares of
the Fund, and is entitled to reimbursements of its costs for providing such
services. Under certain arrangements for Metropolitan to provide
subadministration services, Metropolitan may receive a fee for the maintenance
of certain share ownership records for participants in sponsored arrangements,
such as employee benefit plans, through or under which the Fund's shares may be
purchased.
Under the Code of Ethics of the Investment Manager, its employees in Boston,
where investment management operations are conducted, are only permitted to
engage in personal securities transactions in accordance with certain conditions
relating to an employee's position, the identity of the security, the timing of
the transactions, and similar factors. Such employees must report their personal
securities transactions quarterly and supply broker confirmations to the
Investment Manager.
PURCHASE AND REDEMPTION OF SHARES
Shares of the Fund are distributed by the Distributor. The Fund offers four
classes of shares which may be purchased at the next determined net asset value
per share plus, in the case of all classes except Class C shares, a sales charge
which, at the election of the investor, may be imposed (i) at the time of
purchase (the Class A shares) or (ii) on a deferred basis (the Class B and Class
D shares). General information on how to buy shares of the Fund, as well as
sales charges involved, are set forth under "Purchase of Shares" in the
Prospectus. The following supplements that information.
Public Offering Price
The public offering price for each class of shares of the Fund is based on
their net asset value determined as of the close of the NYSE on the day the
purchase order is received by State Street Research Shareholder Services
provided that the order is received prior to the close of the NYSE on that day;
otherwise the net asset value used is that determined as of the close of the
NYSE on the next day it is open for unrestricted trading. When a purchase order
is placed through a dealer, that dealer is responsible for transmitting the
order promptly to State Street Research Shareholder Services in order to permit
the investor to obtain the current price. Any loss suffered by an investor which
results from a dealer's failure to transmit an order promptly is a matter for
settlement between the investor and the dealer.
Reduced Sales Charges
For purposes of determining whether a purchase of Class A shares qualifies
for reduced sales charges, the term "person" includes: (i) an individual, or an
individual combining with his or her spouse and their children and purchasing
for his, her or their own account; (ii) a "company" as defined in Section
2(a)(8) of the 1940 Act; (iii) a trustee or other fiduciary purchasing for a
single trust estate or single fiduciary account (including a pension, profit
sharing or other employee benefit trust created pursuant to a plan qualified
under Section 401 of the Internal Revenue Code); (iv) a tax-exempt organization
under Section 501(c)(3) or (13) of the Internal Revenue Code; and (v) an
employee benefit plan of a single employer or of affiliated employers.
Investors may purchase Class A shares of the Fund at reduced sales charges by
executing a Letter of Intent to purchase no less than an aggregate of $100,000
of the Fund or any combination of Class A shares of "Eligible Funds" as
designated by the Distributor within a 13-month period. The sales charge
applicable to each purchase made pursuant to a Letter of Intent will be that
which would apply
20
<PAGE>
if the total dollar amount set forth in the Letter of Intent were being bought
in a single transaction. Purchases made within a 90-day period prior to the
execution of a Letter of Intent may be included therein; in such case the date
of the earliest of such purchases marks the commencement of the 13-month period.
An investor may include toward completion of a Letter of Intent the value (at
the current public offering price) of all of his or her Class A shares of the
Funds and of any of the other Class A shares of Eligible Funds held of record as
of the date of his or her Letter of Intent, plus the value (at the current
offering price) as of such date of all of such shares held by any "person"
described herein as eligible to join with the investor in a single purchase.
Class B, Class C and Class D shares may also be included in the combination
under certain circumstances.
A Letter of Intent does not bind the investor to purchase the specified
amount. Shares equivalent to 5% of the specified amount will, however, be taken
from the initial purchase (or, if necessary, subsequent purchases) and held in
escrow in the investor's account as collateral against the higher sales charge
which would apply if the total purchase is not completed within the allotted
time. The escrowed shares will be released when the Letter of Intent is
completed or, if it is not completed, when the balance of the higher sales
charge is, upon notice, remitted by the investor. All dividends and capital
gains distributions with respect to the escrowed shares will be credited to the
investor's account.
Investors may purchase Class A shares of the Fund or a combination of
Eligible Funds at reduced sales charges pursuant to a Right of Accumulation. The
applicable sales charge under the right is determined on the amount arrived at
by combining the dollar amount of the purchase with the value (at the current
public offering price) of all Class A shares of the other Eligible Funds owned
as of the purchase date by the investor plus the value (at the current public
offering price) of all such shares owned as of such date by any "person"
described herein as eligible to join with the investor in a single purchase.
Class B, Class C and Class D shares may also be included in the combination
under certain circumstances. Investors must submit to the Distributor sufficient
information to show that they qualify for this Right of Accumulation.
Class C Shares
Class C shares are currently available to certain employee benefit plans such
as qualified retirement plans which meet criteria relating to number of
participants (currently a minimum of 100 eligible employees), service
arrangements or similar factors; insurance companies; investment companies;
endowment funds of nonprofit organizations with substantial minimum assets
(currently a minimum of $10,000,000); and other similar institutional investors.
Reorganizations
In the event of mergers or reorganizations with other public or private
collective investment entities, including investment companies as defined in the
1940 Act, as amended, the Fund may issue its shares at net asset value (or more)
to such entities or to their security holders.
Redemptions
The Fund reserves the right to pay redemptions in kind with portfolio
securities in lieu of cash. In accordance with its election pursuant to Rule
18f-1 under the 1940 Act, the Fund may limit the amount
21
<PAGE>
of redemption proceeds paid in cash. Although it has no present intention to do
so, the Fund may, under unusual circumstances, limit redemptions in cash with
respect to each shareholder during any ninety-day period to the lesser of (i)
$250,000 or (ii) 1% of the net asset value of the Fund at the beginning of such
period. In connection with any redemptions paid in kind with portfolio
securities, brokerage and other costs may be incurred by the redeeming
shareholder in the sale of the securities received.
NET ASSET VALUE
The net asset values of the shares of the Fund are determined once daily as
of the close of the NYSE, ordinarily 4 P.M. New York City time, Monday through
Friday, on each day during which the NYSE is open for unrestricted trading. The
NYSE is currently closed on New Year's Day, Presidents Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
The net asset value per share of the Fund is computed by dividing the sum of
the value of the securities held by the Fund plus any cash or other assets minus
all liabilities by the total number of outstanding shares of the Fund at such
time. Any expenses, except for extraordinary or nonrecurring expenses, borne by
the Fund, including the investment management fee payable to the Investment
Manager, are accrued daily.
In determining the values of portfolio assets as provided below, the Trustees
utilize one or more pricing services to value debt securities for which market
quotations are not readily available on a daily basis. Most debt securities are
valued on the basis of data provided by such pricing services. Since the Fund is
comprised substantially of debt securities under normal circumstances, most of
the Fund's assets are therefore valued on the basis of such data from the
pricing services. The pricing services may provide prices determined as of times
prior to the close of the NYSE.
In general, securities are valued as follows. Securities which are listed or
traded on the New York or American Stock Exchange are valued at the price of the
last quoted sale on the respective exchange for that day. Securities which are
listed or traded on a national securities exchange or exchanges, but not on the
New York or American Stock Exchange, are valued at the price of the last quoted
sale on the exchange for that day prior to the close of the NYSE. Securities not
listed on any national securities exchange which are traded "over the counter"
and for which quotations are available on the National Association of Securities
Dealers' NASDAQ System, or other system, are valued at the closing price
supplied through such system for that day at the close of the NYSE. Other
securities are, in general, valued at the mean of the bid and asked quotations
last quoted prior to the close of the NYSE if there are market quotations
readily available, or in the absence of such market quotations, then at the fair
value thereof as determined by or under authority of the Trustees of the Trust
with the use of such pricing services as may be deemed appropriate or
methodologies approved by the Trustees. Securities deemed restricted as to
resale are valued at the fair value thereof as determined by or in accordance
with methods adopted by the Trustees of the Trust.
Short-term debt instruments issued with a maturity of one year or less which
have a remaining maturity of 60 days or less are valued using the amortized cost
method, provided that during any period in which more than 25% of the Fund's
total assets is invested in short-term debt securities the current market value
of such securities will be used in calculating net asset value per share in lieu
of the amortized cost method. The amortized cost method is used when the value
obtained is fair value. Under the amortized cost method of valuation, the
security is initially valued at cost on the date of
22
<PAGE>
purchase (or in the case of short-term debt instruments purchased with more than
60 days remaining to maturity, the market value on the 61st day prior to
maturity), and thereafter a constant amortization to maturity of any discount or
premium is assumed regardless of the impact of fluctuating interest rates on the
market value of the security.
PORTFOLIO TRANSACTIONS
Portfolio Turnover
The Fund's portfolio turnover rate is determined by dividing the lesser of
securities purchases or sales for a year by the monthly average value of
securities held by the Fund (excluding, for purposes of this determination,
securities the maturities of which as of the time of their acquisition were one
year or less). The Fund reserves full freedom with respect to portfolio
turnover, as described in the Prospectus.
Brokerage Allocation
The Investment Manager's policy is to seek for its clients, including the
Fund, what in the Investment Manager's judgment will be the best overall
execution of purchase or sale orders and the most favorable net prices in
securities transactions consistent with its judgment as to the business
qualifications of the various broker or dealer firms with whom the Investment
Manager may do business, and the Investment Manager may not necessarily choose
the broker offering the lowest available commission rate. Decisions with respect
to the market where the transaction is to be completed, to the form of
transaction (whether principal or agency), and to the allocation of orders among
brokers or dealers are made in accordance with this policy. In selecting brokers
or dealers to effect portfolio transactions, consideration is given to their
proven integrity and financial responsibility, their demonstrated execution
experience and capabilities both generally and with respect to particular
markets or securities, the competitiveness of their commission rates in agency
transactions (and their net prices in principal transactions), their willingness
to commit capital, and their clearance and settlement capability. The Investment
Manager makes every effort to keep informed of commission rate structures and
prevalent bid/ask spread characteristics of the markets and securities in which
transactions for the Fund occur. Against this background, the Investment Manager
evaluates the reasonableness of a commission or a net price with respect to a
particular transaction by considering such factors as difficulty of execution or
security positioning by the executing firm. The Investment Manager may or may
not solicit competitive bids based on its judgment of the expected benefit or
harm to the execution process for that transaction.
When it appears that a number of firms could satisfy the required
standards in respect of a particular transaction, consideration may also be
given to services other than execution services which certain of such firms have
provided in the past or may provide in the future. Negotiated commission rates
and prices, however, are based upon the Investment Manager's judgment of the
rate which reflects the execution requirements of the transaction without regard
to whether the broker provides services in addition to execution. Among such
other services are the supplying of supplemental investment research; general
economic, political and business information; analytical and statistical data;
relevant market information, quotation equipment and services; reports and
information about specific companies, industries and securities; purchase and
sale recommendations for stocks and bonds; portfolio strategy services;
historical statistical information; market data services providing information
on specific issues and prices; financial publications; proxy voting data and
analysis services; technical
23
<PAGE>
analysis of various aspects of the securities markets, including technical
charts; computer hardware used for brokerage and research purposes; computer
software and databases, including those used for portfolio analysis and
modelling; and portfolio evaluation services and relative performance of
accounts.
Certain nonexecution services provided by broker-dealers may in turn be
obtained by the broker-dealers from third parties who are paid for such services
by the broker-dealers. The Investment Manager has an investment of less than ten
percent of the outstanding equity of one such third party which provides
portfolio analysis and modelling and other research and investment
decision-making services integrated into a trading system developed and licensed
by the third party to others. The Investment Manager could be said to benefit
indirectly if in the future it allocates brokerage to a broker-dealer who in
turn pays this third party for services to be provided to the Investment
Manager.
The Investment Manager regularly reviews and evaluates the services
furnished by broker-dealers. Some services may be used for research and
investment decision-making purposes, and also for marketing or administrative
purposes. Under these circumstances, the Investment Manager allocates the cost
of such services to determine the appropriate proportion of the cost which is
allocable to purposes other than research or investment decision-making and is
therefore paid directly by the Investment Manager. Some research and execution
services may benefit the Investment Manager's clients as a whole, while others
may benefit a specific segment of clients. Not all such services will
necessarily be used exclusively in connection with the accounts which pay the
commissions to the broker-dealer producing the services.
The Investment Manager has no fixed agreements or understandings with any
broker-dealer as to the amount of brokerage business which that firm may expect
to receive for services supplied to the Investment Manager or otherwise. There
may be, however, understandings with certain firms that in order for such firms
to be able to continuously supply certain services, they need to receive
allocation of a specified amount of brokerage business. These understandings are
honored to the extent possible in accordance with the policies set forth above.
It is not the Investment Manager's policy to intentionally pay a firm a
brokerage commission higher than that which another firm would charge for
handling the same transaction in recognition of services (other than execution
services) provided. However, the Investment Manager is aware that this is an
area where differences of opinion as to fact and circumstances may exist, and in
such circumstances, if any, the Investment Manager relies on the provisions of
Section 28(e) of the Securities Exchange Act of 1934, to the extent applicable.
In the case of the purchase of fixed income securities in underwriting
transactions, the Investment Manager follows any instructions received from its
clients as to the allocation of new issue discounts, selling concessions and
designations to brokers or dealers which provide the client with research,
performance evaluation, master trustee and other services. In the absence of
instructions from the client, the Investment Manager may make such allocations
to broker-dealers which have provided the Investment Manager with research and
brokerage services.
When more than one client of the Investment Manager is seeking to buy or
sell the same security, the sale or purchase is carried out in a manner which is
considered fair and equitable to all accounts. In allocating investments among
various clients (including in what sequence orders for trades are placed), the
Investment Manager will use its best business judgment and will take into
account such factors as the investment objectives of the clients, the amount of
investment funds
24
<PAGE>
available to each, the amount already committed for each client to a specific
investment and the relative risks of the investments, all in order to provide on
balance a fair and equitable result to each client over time. Although sharing
in large transactions may sometimes affect price or volume of shares acquired or
sold, overall it is believed there may be an advantage in execution. The
Investment Manager may follow the practice of grouping orders of various clients
for execution to get the benefit of lower prices or commission rates. In certain
cases where the aggregate order may be executed in a series of transactions at
various prices, the transactions are allocated as to amount and price in a
manner considered equitable to each so that each receives, to the extent
practicable, the average price of such transactions. Exceptions may be made
based on such factors as the size of the account and the size of the trade. For
example, the Investment Manager may not aggregate trades where it believes that
it is in the best interests of clients not to do so, including situations where
aggregation might result in a large number of small transactions with consequent
increased custodial and other transactional costs which may disproportionately
impact smaller accounts. Such disaggregation, depending on the circumstances,
may or may not result in such accounts receiving more or less favorable
execution relative to other clients.
CERTAIN TAX MATTERS
Federal Income Taxation of the Fund -- In General
The Fund intends to qualify and elect to be treated each taxable year as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"), although it cannot give complete assurance
that it will do so. Accordingly, the Fund must, among other things, (a) derive
at least 90% of its gross income in each taxable year from dividends, interest,
payments with respect to securities loans, gains from the sale or other
disposition of stock, securities or foreign currencies, or other income
(including, but not limited to, gains from options, futures or forward
contracts) derived with respect to its business of investing in such stock,
securities or currencies (the "90% test"); (b) derive less than 30% of its gross
income in each taxable year from the sale or other disposition of any of the
following held for less than three months (the "30% test"): (i) stock or
securities, (ii) options, futures, or forward contracts (other than options,
futures or forward contracts on foreign currencies), or (iii) foreign currencies
(or options, futures, or forward contracts on foreign currencies) but only if
such currencies (or options, futures, or forward contracts) are not directly
related to the Fund's principal business of investing in stocks or securities
(or options and futures with respect to stocks or securities); (c) satisfy
certain diversification requirements; and (d) in order to be entitled to utilize
the dividends paid deduction, distribute annually at least 90% of its investment
company taxable income (determined without regard to the deduction for dividends
paid).
The 30% test will limit the extent to which the Fund may sell securities held
for less than three months, write options which expire in less than three
months, and effect closing transactions with respect to call or put options that
have been written or purchased within the preceding three months. (If the Fund
purchases a put option for the purpose of hedging an underlying portfolio
security, the acquisition of the option is treated as a short sale of the
underlying security unless, for purposes only of the 30% test, the option and
the security are acquired on the same date.) Finally, as discussed below, this
requirement may also limit investments by the Fund in options on stock indices,
listed options on nonconvertible debt securities, futures contracts, options on
interest rate futures contracts and certain foreign currency contracts.
If the Fund should fail to qualify as a regulated investment company in any
year, it would lose the beneficial tax treatment accorded regulated investment
companies under Subchapter M of the Code
25
<PAGE>
and all of its taxable income would be subject to tax at regular corporate rates
without any deduction for distributions to shareholders, and such distributions
will be taxable to shareholders as ordinary income to the extent of such Fund's
current or accumulated earnings and profits. Also, the shareholders, if they
received a distribution in excess of current or accumulated earnings and
profits, would receive a return of capital that would reduce the basis of their
shares of the Fund to the extent thereof. Any distribution in excess of a
shareholder's basis in the shareholder's shares would be taxable as gain
realized from the sale of such shares.
The Fund will be liable for a nondeductible 4% excise tax on amounts not
distributed on a timely basis in accordance with a calendar year distribution
requirement. To avoid the tax, during each calendar year the Fund must
distribute an amount equal to at least 98% of the sum of its ordinary income
(not taking into account any capital gains or losses) for the calendar year, and
its capital gain net income for the 12-month period ending on October 31, in
addition to any undistributed portion of the respective balances from the prior
year. The Fund intends to make sufficient distributions to avoid this 4% excise
tax.
Federal Income Taxation of the Fund's Investments
Original Issue Discount. For federal income tax purposes, debt securities
purchased by the Fund may be treated as having original issue discount. Original
issue discount represents interest for federal income tax purposes and can
generally be defined as the excess of the stated redemption price at maturity of
a debt obligation over the issue price. Original issue discount is treated for
federal income tax purposes as income earned by the Fund, whether or not any
income is actually received, and therefore is subject to the distribution
requirements of the Code. Generally, the amount of original issue discount is
determined on the basis of a constant yield to maturity which takes into account
the compounding of accrued interest. Under section 1286 of the Code, an
investment in a stripped bond or stripped coupon may result in original issue
discount.
Debt securities may be purchased by the Fund at a discount that exceeds the
original issue discount plus previously accrued original issue discount
remaining on the securities, if any, at the time the Fund purchases the
securities. This additional discount represents market discount for income tax
purposes. In the case of any debt security issued after July 18, 1984, having a
fixed maturity date of more than one year from the date of issue and having
market discount, the gain realized on disposition will be treated as interest to
the extent it does not exceed the accrued market discount on the security
(unless the Fund elects to include such accrued market discount in income in the
tax year to which it is attributable). Generally, market discount is accrued on
a daily basis. The Fund may be required to capitalize, rather than deduct
currently, part or all of any direct interest expense incurred to purchase or
carry any debt security having market discount, unless the Fund makes the
election to include market discount currently. Because the Fund must include
original issue discount in income, it will be more difficult for the Fund to
make the distributions required for the Fund to maintain its status as a
regulated investment company under Subchapter M of the Code or to avoid the 4%
excise tax described above.
Options and Futures Transactions. Certain of the Fund's investments may be
subject to provisions of the Code that (i) require inclusion of unrealized gains
or losses in the Fund's income for purposes of the 90% test, the 30% test, the
excise tax and the distribution requirements applicable to regulated investment
companies; (ii) defer recognition of realized losses; and (iii) characterize
both realized and unrealized gain or loss as short-term or long-term gain or
loss. Such provisions generally apply to, among other investments, options on
debt securities, indices on securities and futures contracts.
26
<PAGE>
Federal Income Taxation of Shareholders
Distributions by the Fund can result in a reduction in the fair market value
of such Fund's shares. Should a distribution reduce the fair market value below
a shareholder's cost basis, such distribution nevertheless may be taxable to the
shareholder as ordinary income or long-term capital gain, even though, from an
investment standpoint, it may constitute a partial return of capital. In
particular, investors should be careful to consider the tax implications of
buying shares just prior to a taxable distribution. The price of shares
purchased at that time includes the amount of any forthcoming distribution.
Those investors purchasing shares just prior to a taxable distribution will then
receive a return of investment upon distribution which will nevertheless be
taxable to them.
DISTRIBUTION OF SHARES OF THE FUND
State Street Research Securities Trust is currently comprised of the
following series: State Street Research Intermediate Bond Fund and State Street
Research Strategic Income Fund. The Trustees have authorized shares of the Fund
to be issued in four classes: Class A, Class B, Class C and Class D shares. The
Trustees of the Trust have authority to issue an unlimited number of shares of
beneficial interest of separate series, $.001 par value per share. A "series" is
a separate pool of assets of the Trust which is separately managed and has a
different investment objective and different investment policies from those of
another series. The Trustees have authority, without the necessity of a
shareholder vote, to create any number of new series or classes or to commence
the public offering of shares of any previously established series or class.
The Trust has entered into a Distribution Agreement with State Street
Research Investment Services, Inc., as Distributor, whereby the Distributor acts
as agent to sell and distribute shares of the Fund. Shares of the Fund are sold
through dealers who have entered into sales agreements with the Distributor. The
Distributor distributes shares of the Fund on a continuous basis at an offering
price which is based on the net asset value per share of the Fund plus (subject
to certain exceptions) a sales charge which, at the election of the investor,
may be imposed (i) at the time of purchase (the Class A shares) or (ii) on a
deferred basis (the Class B and Class D shares). The Distributor may reallow all
or portions of such sales charges as concessions to dealers.
The differences in the price at which the Fund's Class A shares are offered
due to scheduled variations in sales charges, as described in the Fund's
Prospectus, result from cost savings inherent in economies of scale. Management
believes that the cost of sales efforts of the Distributor and broker-dealers
tends to decrease as the size of purchases increases, or does not involve any
incremental sales expenses as in the case of, for example, exchanges,
reinvestments or dividend investments at net asset value. Similarly, no
significant sales effort is necessary for sales of shares at net asset value to
certain Directors, Trustees, officers, employees, their relatives and other
persons directly or indirectly related to the Fund or associated entities. Where
shares of the Fund are offered at a reduced sales charge or without a sales
charge pursuant to sponsored arrangements, the amount of the sales charge
reduction will similarly reflect the anticipated reduction in sales expenses
associated with such sponsored arrangements. The reductions in sales expenses,
and therefore the reduction in sales charge, will vary depending on factors such
as the size and stability of the organization, the term of the organization's
existence and certain characteristics of its members. The Fund reserves the
right to make variations in, or eliminate, sales charges at any time or to
revise the terms of or to suspend or discontinue sales pursuant to sponsored
arrangements at any time.
27
<PAGE>
On any sale of Class A shares to a single investor in the amount of
$1,000,000 or more, the Distributor will pay the authorized securities dealer
making such sale a commission based on the aggregate of such sales. Such
commission also is payable to authorized securities dealers upon sales of Class
A shares made pursuant to a Letter of Intent to purchase shares having a net
asset value of $1,000,000 or more. Shares sold with such commissions payable are
subject to a one-year contingent deferred sales charge of 1.00% on any portion
of such shares redeemed within one year following their sale. After a particular
purchase of Class A shares is made under the Letter of Intent, the commission
will be paid only in respect of that particular purchase of shares. If the
Letter of Intent is not completed, the commission paid will be deducted from any
discounts or commissions otherwise payable to such dealer in respect of shares
actually sold. If an investor is eligible to purchase shares at net asset value
on account of the Right of Accumulation, the commission will be paid only in
respect of the incremental purchase at net asset value.
The Fund has adopted a "Plan of Distribution Pursuant to Rule 12b-1" (the
"Distribution Plan") under which the Fund may engage, directly or indirectly, in
financing any activities primarily intended to result in the sale of Class A,
Class B and Class D shares, including, but not limited to, (1) the payment of
commissions and/or reimbursement to underwriters, securities dealers and others
engaged in the sale of shares, including payments to the Distributor to be used
to pay commissions and/or reimbursement to securities dealers (which securities
dealers may be affiliates of the Distributor) engaged in the distribution and
marketing of shares and furnishing ongoing assistance to investors, (2)
reimbursement of direct out-of-pocket expenditures incurred by the Distributor
in connection with the distribution and marketing of shares and the servicing of
investor accounts including expenses relating to the formulation and
implementation of marketing strategies and promotional activities such as direct
mail promotions and television, radio, newspaper, magazine and other mass media
advertising, the preparation, printing and distribution of Prospectuses of the
Fund and reports for recipients other than existing shareholders of the Fund,
and obtaining such information, analyses and reports with respect to marketing
and promotional activities and investor accounts as the Fund may, from time to
time, deem advisable, and (3) reimbursement of expenses incurred by the
Distributor in connection with the servicing of shareholder accounts including
payments to securities dealers and others in consideration of the provision of
personal services to investors and/or the maintenance or servicing of
shareholder accounts and expenses associated with the provision of personal
services by the Distributor directly to investors. In addition, the Distribution
Plan is deemed to authorize the Distributor to make payments out of general
profits, revenues or other sources to underwriters, securities dealers and
others in connection with sales of shares, to the extent, if any, that such
payments may be deemed to be within the scope of Rule 12b-1 under the 1940 Act.
The expenditures to be made pursuant to the Distribution Plan may not exceed
(i) with respect to Class A shares, an annual rate of 0.25% of the average daily
value of net assets represented by such Class A shares, and (ii) with respect to
Class B and Class D shares, an annual rate of 0.75% of the average daily value
of the net assets represented by such Class B or Class D shares (as the case may
be) to finance sales or promotion expenses and an annual rate of 0.25% of the
average daily value of the net assets represented by such Class B or Class D
shares (as the case may be) to make payments for personal services and/or the
maintenance or servicing of shareholder accounts. Proceeds from the service fee
will be used by the Distributor to compensate securities dealers and others
selling shares of the Fund for rendering service to shareholders on an ongoing
basis. Such amounts are based on the net asset value of shares of the Fund held
by such dealers as nominee for their customers or which are owned directly by
such customers for so long as such shares are outstanding and the Distribution
Plan remains in effect with respect to the Fund. Any amounts received by the
Distributor and not so allocated may be
28
<PAGE>
applied by the Distributor as reimbursement for expenses incurred in connection
with the servicing of investor accounts. The distribution and servicing expenses
of a particular class will be borne solely by that class.
The Distributor may also use additional resources of its own for further
expenses on behalf of the Fund.
No interested Trustee of the Trust has any direct or indirect financial
interest in the operation of the Distribution Plan or any related agreements
thereunder. The Distributor's interest in the Distribution Plan is described
above.
To the extent that the Glass-Steagall Act may be interpreted as prohibiting
banks and other depository institutions from being paid for performing services
under the Distribution Plan, the Fund will make alternative arrangements for
such services for shareholders who acquired shares through such institutions.
CALCULATION OF PERFORMANCE DATA
The average annual total return ("standard total return") of the Class A,
Class B, Class C and Class D shares of the Fund will be calculated as set forth
below. Total return is computed separately for each class of shares of the Fund.
All calculations of performance data in this section would reflect the
voluntary measures, if any, by the Fund's affiliates to reduce fees or expenses
relating to the Fund; see "Accrued Expenses" later in this section.
Total Return
Standard total return is computed separately for each class of shares by
determining the average annual compounded rates of return over the designated
periods that, if applied to the initial amount invested, would produce the
ending redeemable value in accordance with the following formula:
P(1+T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value at the end of the designated
period assuming a hypothetical $1,000 payment made at
the beginning of the designated period
The calculation is based on the further assumptions that the maximum initial
or contingent deferred sales charge applicable to the investment is deducted,
and that all dividends and distributions by the
29
<PAGE>
Fund are reinvested at net asset value on the reinvestment dates during the
periods. All accrued expenses are also taken into account as described later
herein.
Yield
Yield for each of the Fund's Class A, Class B, Class C and Class D shares is
computed by dividing the net investment income per share earned during a recent
month or other specified 30-day period by the maximum offering price per share
on the last day of the period and annualizing the result, in accordance with the
following formula:
YIELD = 2[(a-b + 1)6 -1]
---
cd
Where: a = dividends and interest earned during
the period
b = expenses accrued for the period
c = the average daily number of shares
outstanding during the period that
were entitled to receive dividends
d = the maximum offering price per share
on the last day of the period
To calculate interest earned (for purposes of "a" above) on debt
obligations, the Fund computes the yield to maturity of each obligation held by
the Fund based on the market value of the obligation (including actual accrued
interest) at the close of the last business day of the preceding period, or,
with respect to obligations purchased during the period, the purchase price
(plus actual accrued interest). The yield to maturity is then divided by 360 and
the quotient is multiplied by the market value of the obligation (including
actual accrued interest) to determine the interest income on the obligation for
each day of the period that the obligation is in the portfolio. Dividend income
is recognized daily based on published rates.
With respect to the treatment of discount and premium on mortgage or other
receivables-backed obligations which are expected to be subject to monthly
payments of principal and interest ("paydowns"), the Fund accounts for gain or
loss attributable to actual monthly paydowns as a realized capital gain or loss
during the period. The Fund has elected not to amortize discount or premium on
such securities.
Undeclared earned income, computed in accordance with generally accepted
accounting principles, may be subtracted from the maximum offering price.
Undeclared earned income is the net investment income which, at the end of the
base period, has not been declared as a dividend, but is reasonably expected to
be declared as a dividend shortly thereafter. The maximum offering price
includes a maximum sales charge of 4.5% with respect to Class A shares.
All accrued expenses are taken into account as described later herein.
30
<PAGE>
Yield information is useful in reviewing the Fund's performance, but
because yields fluctuate, such information cannot necessarily be used to compare
an investment in the Fund's shares with bank deposits, savings accounts and
similar investment alternatives which often provide an agreed or guaranteed
fixed yield for a stated period of time. Shareholders should remember that yield
is a function of the kind and quality of the instruments in the Fund's
portfolio, portfolio maturity and operating expenses and market conditions.
Accrued Expenses
Accrued expenses include all recurring expenses that are charged to all
shareholder accounts in proportion to the length of the base period. The
standard total return results take sales charges, if applicable, into account,
although the results do not take into account recurring and nonrecurring charges
for optional services which only certain shareholders elect and which involve
nominal fees, such as the $7.50 fee for wire orders.
Accrued expenses do not include the subsidization, if any, by affiliates of
fees or expenses relating to the Fund, during the subject period. In the absence
of such subsidization, the performance of the Fund will be lower.
Nonstandardized Total Return
The Fund may provide the above described standard total return results for
Class A, Class B, Class C and Class D shares for periods which end no earlier
than the most recent calendar quarter end and which begin twelve months before
and at the time of commencement of such Fund's operations. In addition, the Fund
may provide nonstandardized total return results for differing periods, such as
for the most recent six months, and/or without taking sales charges into
account. Such nonstandardized total return is computed as otherwise described
under "Total Return" except the result may or may not be annualized, and as
noted any applicable sales charge may not be taken into account and therefore
not deducted from the hypothetical initial payment of $1,000 or ending value.
Distribution Rates
The Fund may also quote its distribution rate for each class of shares. The
distribution rate is calculated by annualizing the latest per-shares
distribution from ordinary income and dividing the result by the maximum
offering price per share as of the end of the period to which the distribution
relates. A distribution can include gross investment income from debt
obligations purchased at a premium and in effect include a portion of the
premium paid. A distribution can also include nonrecurring, gross short-term
capital gains without recognition of any unrealized capital losses. Further, a
distribution can include income from the sale of options by the Fund even though
such option income is not considered investment income under generally accepted
accounting principles.
Because a distribution can include such premiums, capital gains and option
income, the amount of the distribution may be susceptible to control by the
Investment Manager through transactions designed to increase the amount of such
items. Also, because the distribution rate is calculated in part by dividing the
latest distribution by the offering price, which is based on net asset value
plus any applicable sales charge, the distribution rate will increase as the net
asset value declines. A distribution rate can be greater than the yield rate
calculated as described above.
31
<PAGE>
CUSTODIAN
State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110, is the Trust's custodian. As custodian, State Street Bank
and Trust Company is responsible for, among other things, safeguarding and
controlling the Fund's cash and securities, handling the receipt and delivery of
securities and collecting interest and dividends on the Fund's investments.
State Street Bank and Trust Company is not an affiliate of the Investment
Manager or its affiliates.
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., One Post Office Square, Boston, Massachusetts
02109, serves as the Trust's independent accountants, providing professional
services including (1) audits of the Fund's annual financial statements, (2)
assistance and consultation in connection with Securities and Exchange
Commission filings and (3) review of the annual income tax returns filed on
behalf of the Fund.
FINANCIAL STATEMENTS
In addition to the reports provided to holders of record on a semiannual
basis, other supplementary financial reports may be made available from time to
time and holders of record may request a copy of a current supplementary report,
if any, by calling State Street Research Shareholder Services.
The following (unaudited) financial statements are for the period August 30,
1996 (commencement of operations) to October 31, 1996:
32
<PAGE>
STATE STREET RESEARCH STRATEGIC INCOME FUND
INVESTMENT PORTFOLIO
October 31, 1996 (Unaudited)
<TABLE>
<CAPTION>
Principal Maturity Value
Amount Date (Note 1)
------------------------------ ---------------------------------- --------------
<S> <C> <C> <C>
FIXED INCOME SECURITIES 91.3%
U.S. Treasury 15.8%
U.S. Treasury Bond, 8.125% $ 1,875,000 8/15/2021 $2,181,150
U.S. Treasury Note, 8.50% 2,075,000 5/15/1997 2,108,387
U.S. Treasury Note, 6.125% 525,000 5/15/1998 528,486
U.S. Treasury Note, 6.25% 475,000 8/31/2000 478,638
U.S. Treasury Note, 6.625% 1,800,000 7/31/2001 1,837,962
U.S. Treasury Note, 7.50% 250,000 11/15/2001 264,765
--------------
7,399,388
--------------
U.S. Agency Mortgage 14.4%
Federal Home Loan Mortgage
Corp., 7.00% 899,748 9/01/2025 884,560
Federal Home Loan Mortgage
Corp., 7.50% 882,813 7/01/2026 885,841
Federal National Mortgage
Association, 9.00% 1,006,859 5/01/2009 1,066,637
Federal National Mortgage
Association, 8.00% 500,008 5/01/2016 518,203
Federal National Mortgage
Association REMIC, 6.50% 500,000 10/25/2018 487,500
Government National Mortgage
Association, 6.50% 409,964 5/15/2009 406,184
Government National Mortgage
Association, 6.50% 543,876 1/15/2024 519,908
Government National Mortgage
Association, 7.00% 671,040 4/15/2026 658,035
Government National Mortgage
Association, 7.50% 568,904 5/15/2026 570,678
Government National Mortgage
Association, 8.00% 722,841 9/15/2026 739,105
--------------
6,736,651
--------------
Foreign Government 15.4%
Australian Dollar
Commonwealth of Australia,
7.50% 1,700,000 7/15/2005 1,363,126
Canadian Dollar
Government of Canada,
7.50% 1,100,000 12/01/2003 886,000
Danish Krone
Kingdom of Denmark,
8.00% 7,600,000 3/15/2006 1,407,209
European Currency
Unit
Government of France,
8.00% 475,000 4/25/2003 669,708
Italian Lira
Republic of Italy,
8.50% 1,835,000,000 4/01/1999 1,248,453
Spanish Peseta
Government of Spain,
7.40% 100,000,000 7/30/1999 797,602
Government of Spain,
8.40% 40,000,000 4/30/2001 329,856
Swedish Krona
Kingdom of Sweden,
13.00% 2,500,000 6/15/2001 $ 477,535
--------------
7,179,489
--------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
Corporate 45.7%
Bayou Steel Corp. First Mortgage
Note, 10.25% $ 200,000 3/01/2001 192,000
Benedek Communications Co. Sr. Sub.
Disc. Note, 0.00% to 5/14/2001,
13.25% from 5/15/2001 to maturity+ 1,500,000 5/15/2006 825,000
Casino Magic Corp. Sr. Sec. Note,
13.00%+ 1,000,000 8/15/2003 1,015,000
CHC Helicopter Corp. Sr. Sub. Note,
11.50% 1,000,000 7/15/2002 997,500
Empire Gas Corp. Sr. Sec. Note, to
7/14/99, 12.875% from 7/15/99 to
maturity 750,000 7/15/2004 658,125
Envirosource Inc. Note, 9.75% 1,000,000 6/15/2003 935,000
Euramax International PLC Sr. Sub.
Note, 11.25%+ 250,000 10/01/2006 255,000
Geotek Communications Inc. Sr. Disc.
Note, 0.00% to 7/14/2000, 15.00%
from 7/15/2000 to maturity 250,000 7/15/2005 160,000
Grand Union Co. Sr. Sub. Note,
12.00% 1,000,000 9/01/2004 1,010,000
Haynes International Inc. Sr. Note,
11.625% 1,000,000 9/01/2004 1,040,000
Insight Communications Co. L.P. Sr.
Sub. Disc. Note, 11.25% 1,000,000 3/01/2000 1,010,000
Intertek Financial Corp. Sr. Sub.
Note, 10.25%+ 500,000 11/01/2006 500,000
Ionica PLC Units, 13.50%+ 1,000,000 8/15/2006 1,010,625
La Petite Holdings Corp. Sr. Sec.
Notes, 9.625% 750,000 8/01/2001 697,500
Muzak L.P. Sr. Note, 10.00% 250,000 10/01/2003 251,250
NL Industries, Inc. Sr. Sec. Note,
11.75% 500,000 10/15/2003 515,625
Outdoor Systems Inc. Sr. Sub. Note,
9.375% 750,000 10/15/2006 744,375
Pagemart Inc. Sr. Disc. Exch. Note,
0.00% to 10/31/98, 12.25% from
11/1/98 to maturity 750,000 11/01/2003 588,750
Park Newspapers Inc. Sr. Note,
11.875%+ 750,000 5/15/2004 864,375
</TABLE>
The accompanying notes are an integral part of the financial statements.
33
<PAGE>
STATE STREET RESEARCH STRATEGIC INCOME FUND
INVESTMENT PORTFOLIO (cont'd)
Principal Maturity Value
Amount Date (Note 1)
--------------------------------- ------------ ------------- --------------
Plastic Specialties & Technology,
Inc. Sr. Note, 11.25% $ 500,000 12/01/2003 $ 510,000
PriCellular Wireless Corp. Sr.
Note, 10.75%+ 500,000 11/01/2004 503,750
Sheffield Steel Corp. First
Mortgage Note, 12.00% 1,000,000 11/01/2001 925,000
Spanish Broadcasting Systems Inc.
Sr. Note, 7.50% 1,000,000 6/15/2002 1,045,000
Spinnaker Industries, Inc. Sr.
Sec. Note, 10.75%+ 250,000 10/15/2006 253,750
Star Markets Co. Sr. Sub. Note,
13.00% 500,000 11/01/2004 545,000
Talley Manufacturing & Technology
Inc. Sr. Note, 10.75% 250,000 10/15/2003 258,750
Tokheim Corp. Sr. Sub. Note,
11.50%+ 1,000,000 8/01/2006 1,057,500
TransTexas Gas Corp. Sr. Sec.
Note, 11.50% 1,000,000 6/15/2002 1,060,000
Universal Outdoor Inc. Sr. Sub.
Note, 9.75% 500,000 10/15/2006 495,000
Wireless One Inc. Unit, 0.00% to
7/31/2001, 13.50% from 8/1/2001
to maturity 750,000 8/01/2006 388,125
Wireless One Inc. Sr. Disc. Note,
13.00% 1,000,000 10/15/2003 1,015,000
--------------
21,327,000
--------------
Total Fixed Income Securities (Cost $42,017,487) 42,642,528
--------------
- ----------------------------------------------------------------------------
Shares
--------------------------------- ------------ ------------- --------------
PREFERRED STOCKS 2.1%
Hollinger International, Inc. Cv.
Pfd. 80,000 980,000
--------------
Total Preferred Stocks (Cost $911,398) 980,000
--------------
SHORT-TERM OBLIGATIONS 7.6%
American Express Credit Corp.,
5.30% $ 112,000 11/04/1996 $ 112,000
American Express Credit Corp.,
5.25% 1,806,000 11/04/1996 1,806,000
Ford Motor Credit Co., 5.20% 1,620,000 11/01/1996 1,620,000
--------------
Total Short-Term Obligations (Cost $3,538,000) 3,538,000
--------------
Total Investments (Cost $46,466,885)--101.0% 47,160,528
Cash and Other Assets, Less Liabilities--(1.0)% (450,666)
--------------
Net Assets--100.0% $46,709,862
==============
Federal Income Tax Information:
At October 31, 1996, the net unrealized appreciation of
investments based on cost for Federal income tax purposes
of $46,466,885 was as follows:
Aggregate gross unrealized appreciation for all investments
in which there is an excess of value over tax cost $ 813,580
Aggregate gross unrealized depreciation for all investments
in which there is an excess of tax cost over value (119,937)
--------------
$ 693,643
==============
+ Security restricted in accordance with Rule 144A under the Securities Act
of 1933, which allows for the resale of such securities among certain
qualified buyers. The cost and market value of the Rule 144A security owned
at October 31, 1996 was $6,245,673 and $6,285,000 (13.46% of net assets),
respectively.
The accompanying notes are an integral part of the financial statements.
34
<PAGE>
STATE STREET RESEARCH STRATEGIC INCOME FUND
Forward currency exchange contracts outstanding at October 31, 1996 are as
follows:
<TABLE>
<CAPTION>
Unrealized
Appreciation Delivery
Total Value Contract Price (Depreciation) Date
- --------------------------------------------- ------------------ --------------- ------------------------
<S> <C> <C> <C> <C> <C> <C>
Buy Australian dollars, Sell U.S. dollars 370,000 AUD .79172 AUD $ 176 11/14/96
Sell Australian dollars, Buy U.S. dollars 1,840,000 AUD .79979 AUD 13,964 11/14/96
Sell Canadian dollars, Buy U.S. dollars 1,020,000 CAD .74683 CAD (3,337) 1/24/97
Sell Danish krone, Buy U.S. dollars 6,140,000 DKK .17441 DKK 13,810 11/14/96
Sell Danish krone, Buy U.S. dollars 1,379,000 DKK .17111 DKK (1,454) 11/14/96
Sell European currency units, Buy U.S.
dollars 325,000 ECU 1.26900 ECU 592 11/14/96
Sell European currency units, Buy U.S.
dollars 163,000 ECU 1.24706 ECU (3,280) 11/14/96
Sell Italian lira, Buy U.S. dollars 560,000,000 ITL .00066 ITL 623 11/14/96
Sell Italian lira, Buy U.S. dollars 350,000,000 ITL .00065 ITL (2,528) 11/14/96
Sell Italian lira, Buy U.S. dollars 350,000,000 ITL .00066 ITL (1,108) 11/14/96
Sell Italian lira, Buy U.S. dollars 465,000,000 ITL .00065 ITL (2,755) 11/14/96
Sell Spanish peseta, Buy U.S. dollars 39,300,000 ESP .00774 ESP (3,453) 11/14/96
Sell Spanish peseta, Buy U.S. dollars 29,200,000 ESP .00778 ESP (1,602) 11/14/96
Sell Spanish peseta, Buy U.S. dollars 63,400,000 ESP .00772 ESP (5,550) 1/24/97
Sell Swedish krona, Buy U.S. dollars 3,000,000 SEK .15172 SEK (1,190) 11/14/96
-------------
$ 2,908
=============
</TABLE>
The accompanying notes are an integral part of the financial statements.
35
<PAGE>
STATE STREET RESEARCH STRATEGIC INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1996 (Unaudited)
Assets
Investments, at value (Cost $46,466,885) (Note 1) $47,160,528
Cash 956
Receivable for fund shares sold 1,053,533
Interest and dividends receivable 924,788
Receivable for open forward contracts 29,165
Receivable from Distributor (Note 3) 5,000
Deferred organization costs and other assets (Note 1) 78,980
--------------
49,252,950
--------------
Liabilities
Payable for securities purchased 2,201,518
Dividends payable 236,216
Accrued management fee (Note 2) 27,598
Payable for open forward contracts 26,257
Accrued distribution and service fees (Note 5) 11,223
Payable for fund shares redeemed 4,296
Accrued trustees' fees (Note 2) 2,520
Accrued transfer agent and shareholder services (Note 2) 189
Other accrued expenses 33,326
--------------
2,543,143
--------------
Net Assets $46,709,807
==============
Net Assets consist of:
Undistributed net investment income $ 127,644
Unrealized appreciation of investments 693,643
Unrealized appreciation of forward contracts and foreign
currency 3,416
Accumulated net realized gain 105,954
Shares of beneficial interest 45,779,150
--------------
$46,709,807
==============
Net Asset Value and redemption price per share of Class A
shares ($28,801,924 / 4,016,213 shares of beneficial
interest) $7.17
==============
Maximum Offering Price per share of Class A shares ($7.17 /
.955) $7.51
==============
Net Asset Value, offering price and redemption price per
share of Class B shares ($5,070,278 / 707,958 shares of
beneficial interest)* $7.16
==============
Net Asset Value, offering price and redemption price per
share of Class C shares ($9,298,007 / 1,296,418 shares of
beneficial interest) $7.17
==============
Net Asset Value and offering price and redemption price per
share of Class D shares ($3,539,598 /
494,261 shares of beneficial interest)* $7.16
==============
*Redemption price per share for Class B and Class D is equal to net asset
value less any applicable contingent deferred sales charge.
STATEMENT OF OPERATIONS
For the period August 30, 1996 (commencement of operations) to October 31,
1996 (Unaudited)
Investment Income
Interest, net of foreign taxes of $10,858 $ 511,595
Dividends 11,900
-------------
523,495
Expenses
Management fee (Note 2) 47,349
Custodian fee 12,411
Service fee--Class A (Note 5) 10,424
Distribution and service fees--Class B (Note 5) 3,719
Distribution and service fees--Class D (Note 5) 3,382
Registration fees 6,486
Audit fee 3,906
Amortization of organization costs (Note 1) 2,754
Trustees' fees (Note 2) 2,520
Legal fees 1,575
Reports to shareholders 1,449
Transfer agent and shareholder services (Note 2) 189
Miscellaneous 252
-------------
96,416
Expenses borne by the Distributor (Note 3) (9,444)
-------------
86,972
-------------
Net investment income 436,523
-------------
Realized and Unrealized Gain (Loss) on Investments,
Foreign Currency and Forward Contracts
Net realized gain on investments (Notes 1 and 4) 124,764
Net realized loss on forward contracts and foreign
currency (Note 1) (18,810)
-------------
Total net realized gain 105,954
-------------
Net unrealized appreciation of investments 693,643
Net unrealized appreciation of forward contracts and
foreign currency 3,416
-------------
Total net unrealized appreciation 697,059
-------------
Net gain on investments, foreign currency and forward
contracts 803,013
-------------
Net increase in net assets resulting from operations $1,239,536
=============
The accompanying notes are an integral part of the financial statements.
36
<PAGE>
STATE STREET RESEARCH STRATEGIC INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
For the period August 30, 1996 (commencement of operations) to October 31,
1996 (Unaudited)
Increase (Decrease) in Net Assets
Operations:
Net investment income $ 436,523
Net realized gain on investments, foreign currency and
forward contracts 105,954
Net unrealized appreciation of investments, foreign
currency and forward contracts 697,059
---------------
Net increase resulting from operations 1,239,536
---------------
Dividends from net investment income:
Class A (202,980)
Class B (18,748)
Class C (71,776)
Class D (15,375)
---------------
(308,879)
---------------
Net increase from fund share transactions (Note 6) 45,779,150
---------------
Total increase in net assets 46,709,807
Net Assets
Beginning of period --
---------------
End of period (including undistributed net investment
income of $127,644) $ 46,709,807
===============
*Net realized gain for Federal income tax purposes (Note
1) $ 124,764
===============
The accompanying notes are an integral part of the financial statements.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
October 31, 1996
Note 1
State Street Research Strategic Income Fund (the "Fund"), is a series of
State Street Research Securities Trust (the "Trust"), which was organized as
a Massachusetts business trust in January, 1994 and is registered under the
Investment Company Act of 1940, as amended, as an open-end management
investment company. The Fund commenced operations in August, 1996. The Trust
consists presently of two separate funds: State Street Research Strategic
Income Fund and State Street Research Intermediate Bond Fund.
The investment objective of the Fund is to provide high current income
consistent with overall total return. In seeking to achieve its investment
objective, the Fund invests primarily in U.S. Government securites; high
yield, high risk debt securities (commonly known as "junk bonds"), as well as
investment grade debt, of U.S. issuers; and international debt securities of
governmental and private issuers.
The Fund offers four classes of shares. Class A shares are subject to an
initial sales charge of up to 4.50% and an annual service fee of 0.25% of
average daily net assets. Class B shares are subject to a contingent deferred
sales charge on certain redemptions made within five years of purchase and
pay annual distribution and service fees of 1.00%. Class B shares automatically
convert into Class A shares (which pay lower ongoing expenses) at the end of
eight years after the issuance of the Class B shares. Class C shares are only
offered to certain employee benefit plans and large institutions. No sales
charge is imposed at the time of purchase or redemption of Class C shares.
Class C shares do not pay any distribution or service fees. Class D shares are
subject to a contingent deferred sales charge of 1.00% on any shares redeemed
within one year of their purchase. Class D shares also pay annual distribution
and service fees of 1.00%. The Fund's expenses are borne pro-rata by each
class, except that each class bears expenses, and has exclusive voting rights
with respect to provisions of the Plan of Distribution, related specifically to
that class. The Trustees declare separate dividends on each class of shares.
The following significant accounting policies are consistently followed by
the Fund in preparing its financial statements, and such policies are in
conformity with generally accepted accounting principles for investment
companies.
A. Investment Valuation
Securities are valued by a pricing service, which utilizes market
transactions, quotations from dealers, and various relationships among
securities in determining value. Short-term securities maturing within sixty
days are valued at amortized cost. Securities quoted in foreign currencies
are translated into U.S. dollars at the current exchange rate.
B. Security Transactions
Security transactions are accounted for on the trade date (date the order to
buy or sell is executed). Realized gains or losses are reported on the basis
of identified cost of securities delivered. Gains and losses that arise from
changes in exchange rates are not segregated from gains and losses that arise
from changes in market prices of investments.
37
<PAGE>
STATE STREET RESEARCH STRATEGIC INCOME FUND
NOTES (cont'd)
C. Net Investment Income
Net investment income is determined daily and consists of interest and
dividends accrued and discount earned, less the estimated daily expenses of
the Fund. Interest income is accrued daily as earned. Dividend income is
accrued on the ex-dividend date. Discount on debt obligations is amortized
under the effective yield method. The Fund is charged for expenses directly
attributable to it, while indirect expenses are allocated between both funds
in the Trust.
D. Dividends
Dividends from net investment income are declared and paid or reinvested
quarterly. Net realized capital gains, if any, are distributed annually,
unless additional distributions are required for compliance with applicable
tax regulations.
Income dividends and capital gain distributions are determined in accordance
with Federal income tax regulations which may differ from generally accepted
accounting principles. The difference is primarily due to differing
treatments for foreign currency transactions.
E. Federal Income Taxes
No provision for Federal income taxes is necessary because the Fund intends
to qualify under Subchapter M of the Internal Revenue Code and its policy is
to distribute all of its taxable income, including net realized capital
gains, within the prescribed time periods.
F. Deferred Organization Costs
Certain costs incurred in the organization and registration of the Fund were
capitalized and are being amortized under the straight-line method over a
period of five years.
G. Forward Contracts and Foreign Currencies
The Fund enters into forward foreign currency exchange contracts in order to
hedge its exposure to changes in foreign currency exchange rates on its
foreign portfolio holdings and to hedge certain purchase and sale commitments
denominated in foreign currencies. A forward foreign currency exchange
contract is an obligation by the Fund to purchase or sell a specific currency
at a future date, which may be any fixed number of days from the origination
date of the contract. Forward foreign currency exchange contracts establish
an exchange rate at a future date. These contracts are transferable in the
interbank market conducted directly between currency traders (usually large
commercial banks) and their customers. Risks may arise from the potential
inability of a counterparty to meet the terms of a contract and from
unanticipated movements in the value of foreign currencies relative to the
U.S. dollar. The aggregate principal amount of forward currency exchange
contracts is recorded in the Fund's accounts. All commitments are
marked-to-market at the applicable transaction rates resulting in unrealized
gains or losses. The Fund records realized gains or losses at the time the
forward contracts are extinguished by entry into a closing contract or by
delivery of the currency. Neither spot transactions nor forward currency
exchange contracts eliminate fluctuations in the prices of the Fund's
portfolio securities or in foreign exchange rates, or prevent loss if the
price of these securities should decline.
H. Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period.
Actual results could differ from those estimates.
Note 2
The Trust and State Street Research & Management Company (the "Adviser"), an
indirect wholly owned subsidiary of Metropolitan Life Insurance Company
("Metropolitan"), have entered into an agreement under which the Adviser
earns monthly fees at an annual rate of 0.75% of the Fund's average daily net
assets. In consideration of these fees, the Adviser furnishes the Fund with
management, investment advisory, statistical and research facilities and
services. The Adviser also pays all salaries, rent and certain other expenses
of management. During the period August 30, 1996 (commencement of operations)
to October 31, 1996, the fees pursuant to such agreement amounted to $47,349.
State Street Research Shareholder Services, a division of State Street
Research Investment Services, Inc., the Trust's principal underwriter (the
"Distributor"), an indirect wholly owned subsidiary of Metropolitan, provides
certain shareholder services to the Fund such as responding to inquiries and
instructions from investors with respect to the purchase and redemption of
shares of the Fund. During the period August 30, 1996 (commencement of
operations) to October 31, 1996, the amount of such expenses was $99.
The fees of the Trustees not currently affiliated with the Adviser amounted
to $2,520 during the period August 30, 1996 (commencement of operations) to
October 31, 1996.
Note 3
The Distributor and its affiliates may from time to time and in varying
amounts voluntarily assume some portion of fees or expenses relating to the
Fund. During the period August 30, 1996 (commencement of operations) to
October 31, 1996, the amount of such expenses assumed by the Distributor and
its affiliates was $9,444.
Note 4
For the period August 30, 1996 (commencement of operations) to October 31,
1996, purchases and sales of securities, exclusive of short-term obligations,
aggregated $50,781,281 and $8,001,326 (including $17,726,933 and $3,888,826
of U.S. Government securities), respectively.
38
<PAGE>
STATE STREET RESEARCH SECURITIES TRUST
PART C
OTHER INFORMATION
Item 24: Financial Statements and Exhibits
(a) Financial Statements
(1) Financial Statements included in PART A (Prospectus) of this
Registration Statement:
Financial Highlights for the State Street Research
Strategic Income Fund for the period August 30, 1996
(commencement of operations) through October 31, 1996.
Financial Highlights for the State Street Research
Intermediate Bond Fund for the period May 16, 1994
(commencement of operations) through April 30, 1996
incorporated by reference from Post-Effective Amendment
No. 5.
(2) Financial Statements included in PART B (Statement of
Additional Information) of this Registration Statement:
Financial Statements for the State Street Research
Strategic Income Fund for the period August 30, 1996
(commencement of operations) through October 31, 1996.
Investment Portfolio
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Notes to Financial Statements
(including financial highlights)
Report of Independent Accountants
Management's Discussion of Fund Performance
Financial Statements for the State Street Research
Intermediate Bond Fund for the fiscal year ended April
30, 1996 incorporated by reference from Post-Effective
Amendment No. 5.
Investment Portfolio
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
(for the fiscal year ended April 30, 1996 and
for the period May 16, 1994 (commencement of
operations) through April 30, 1995)
Notes to Unaudited Financial Statements
(including financial highlights)
(b) Exhibits
(1)(a) Master Trust Agreement and Amendment No. 1 to Master Trust
Agreement (5)
(1)(b) Amendment No. 2 to the Master Trust Agreement (7)
(2) By-Laws of the Registrant (1)
(3) Not applicable
(4) Not applicable
(5)(a) Advisory Agreement with State Street Research & Management
Company (5)
(5)(b) Letter Agreement with respect to the Advisory Agreement
relating to State Street Research Strategic Income Fund
C-1
<PAGE>
(6)(a) Distribution Agreement with State Street Research Investment
Services, Inc. (5)
(6)(b) Form of Selected Dealer Agreement (4)
(6)(c) Form of Bank and Bank-Affiliated Broker-Dealer Agreement (3)
(6)(d) Form of revised Supplement No. 1 to Selected Dealer
Agreement (5)
(6)(e) Letter Agreement with respect to the Distribution Agreement
relating to State Street Research Strategic Income Fund
(7) Not applicable
(8)(a) Custodian Contract with State Street Bank and Trust
Company (5)
(8)(b) Letter Agreement with respect to the Custodian Contract
relating to State Street Research Strategic Income Fund
(9) Not applicable
(10)(a) Opinion and Consent of Goodwin, Procter & Hoar LLP with
respect to State Street Research Intermediate Bond Fund (2)
(10)(b) Opinion and Consent of Goodwin, Proctor and Hoar LLP with
respect to State Street Research Strategic Income Fund (6)
(11) Consent of Independent Accountants (7)
(12) Not applicable
(13)(a) Purchase Agreement and Investment Letter with respect to State
Street Research Intermediate Bond Fund
(13)(b) Purchase Agreement and Investment Letter with respect to
State Street Research Strategic Income Fund
(14)(a) State Street Research IRA: Disclosure Statement; Forms
Booklet; Transfer of Assets/Direct Rollover Form (4)
(14)(b) State Street Research 403(b): Brochure, Maximum Salary
Reduction Worksheet, Account Application, Salary Reduction
Agreement and Transfer of 403(b) Assets Form
(15)(a) Plan of Distribution Pursuant to Rule 12b-1 (4)
(15)(b) Letter Agreement with respect to the Plan of Distribution
Pursuant to Rule 12b-1 relating to State Street Research
Strategic Income Fund
(16) Calculation of Performance Data with respect to State Street
Research Intermediate Bond Fund (4)
(17)(a) Powers of Attorney (4)
(18) Certificate of Board Resolution Respecting Powers of
Attorney (4)
(19) Application Forms
(20) First Amended and Restated Multiple Class Expense Allocation
Plan (5)
(27) Financial Data Schedules
- -------------------------------
Filed as part of the Registration Statement as noted below and incorporated
herein by reference:
Footnote Securities Act of 1933
Reference Registration/Amendment Dated Filed
- --------- ---------------------- -----------
1 Initial Registration January 31, 1994
2 Pre-Effective Amendment No. 1 March 14, 1994
3 Post-Effective Amendment No. 1 November 19, 1994
4 Post-Effective Amendment No. 2 August 25, 1995
5 Post-Effective Amendment No. 3 June 4, 1996
6 Post-Effective Amendment No. 4 August 16, 1996
7 Post-Effective Amendment No. 5 August 29, 1996
C-2
<PAGE>
Item 25. Persons Controlled by or Under Common Control with Registrant
ORGANIZATIONAL STRUCTURE OF METROPOLITAN AND SUBSIDIARIES
AS OF DECEMBER 31, 1995
The following is a list of subsidiaries of Metropolitan Life Insurance Company
("Metropolitan") as of December 31, 1995. Those entities which are listed at the
left margin (labelled with capital letters) are direct subsidiaries of
Metropolitan. Unless otherwise indicated, each entity which is indented under
another entity is a subsidiary of such indented entity and, therefore, an
indirect subsidiary of Metropolitan. Certain inactive subsidiaries have been
omitted from the Metropolitan organizational listing. The voting securities
(excluding directors' qualifying shares, if any) of the subsidiaries listed are
100% owned by their respective parent corporations, unless otherwise indicated.
The jurisdiction of domicile of each subsidiary listed is set forth in the
parenthetical following such subsidiary.
A. Metropolitan Tower Corp. (Delaware)
1. Metropolitan Property and Casualty Insurance Company (Delaware)
a. Metropolitan Group Property and Casualty Insurance Company
(Delaware)
i. Metropolitan Reinsurance Company (U.K.) Limited (Great
Britain)
b. Metropolitan Casualty Insurance Company (Delaware)
c. Metropolitan General Insurance Company (Delaware)
d. First General Insurance Company (Georgia)
e. Metropolitan P&C Insurance Services, Inc. (California)
f. Metropolitan Lloyds, Inc. (Texas)
2. Metropolitan Insurance and Annuity Company (Delaware)
a. MetLife Europe I, Inc. (Delaware)
b. MetLife Europe II, Inc. (Delaware)
c. MetLife Europe III, Inc. (Delaware)
d. MetLife Europe IV, Inc. (Delaware)
e. MetLife Europe V, Inc. (Delaware)
3. MetLife General Insurance Agency, Inc. (Delaware)
a. MetLife General Insurance Agency of Alabama, Inc. (Alabama)
b. MetLife General Insurance Agency of Kentucky, Inc. (Kentucky)
c. MetLife General Insurance Agency of Mississippi, Inc.
(Mississippi)
d. MetLife General Insurance Agency of Texas, Inc. (Texas)
e. MetLife General Insurance Agency of North Carolina, Inc. (North
Carolina)
C-3
<PAGE>
4. Metropolitan Asset Management Corporation (Delaware)
a. MetLife Capital Holdings, Inc. (Delaware)
i. MetLife Capital Corporation (Delaware)
(1) Searles Cogeneration, Inc. (Delaware)
(2) MLYC Cogen, Inc. (Delaware)
(3) MCC Yerkes Inc. (Washington)
(4) MetLife Capital, Limited Partnership (Delaware).
Partnership interests in MetLife Capital, Limited
Partnership are held by Metropolitan (90%) and MetLife
Capital Corporation (10%).
(5) CLJ Finco, Inc. (Delaware)
(a) MetLife Capital Credit L.P. (Delaware).
Partnership interests in MetLife Capital Credit
L.P. are held by Metropolitan (90%) and
CLJ Finco, Inc. (10%).
(6) MetLife Capital Portfolio Investments, Inc. (Nevada)
(a) MetLife Capital Funding Corp. (Delaware)
ii. MetLife Capital Financial Corporation (Delaware)
C-4
<PAGE>
iii. MetLife Financial Acceptance Corporation (Delaware).
MetLife Capital Holdings, Inc. holds 100% of the voting
preferred stock of MetLife Financial Acceptance Corporation.
Metropolitan Property and Casualty Insurance Company holds
100% of the common stock of MetLife Financial Acceptance
Corporation.
b. MetLife Investment Management Corporation (Delaware)
i. MetLife Investments Limited (United Kingdom). 23rd Street
Investments, Inc. holds one share of MetLife Investments
Limited.
c. MetLife Realty Group, Inc. (Delaware)
d. GFM International Investors Limited (United Kingdom). The common
stock of GFM International Investors Limited ("GFM") is held by
Metropolitan (99.5%) and by an employee of GFM (.5%). GFM is a
sub-investment manager for the International Stock Portfolio of
Metropolitan Series Fund, Inc.
i. GFM Investments Limited (United Kingdom)
5. SSRM Holdings, Inc. (Delaware)
a. State Street Research & Management Company (Delaware). Is a sub-
investment manager for the Growth, Income, Diversified and
Aggressive Growth Portfolios of Metropolitan Series Fund, Inc.
i. State Street Research Energy, Inc. (Massachusetts)
ii. State Street Research Investment Services, Inc.
(Massachusetts)
b. Metric Holdings, Inc. (Delaware)
i. Metric Management Inc. (Delaware)
ii. Metric Realty Corp. (Delaware)
iii. Metric Realty (Illinois). Metric Realty Corp. and Metric
Holdings, Inc. each holds 50% of the common stock of Metric
Realty.
(1) Metric Capital Corporation (California)
(2) Metric Assignor, Inc. (California)
(3) Metric Institutional Realty Advisors, Inc. (California)
(4) Metric Institutional Realty Advisors, L.P.
(California).
Metric Realty holds a 99% limited partnership interest
and Metric Institutional Realty Advisors, Inc. holds a
1%
C-5
<PAGE>
interest as general partner in Metric Institutional
Realty Advisors, L.P.
(5) Metric Realty Services, Inc. (Delaware) Metric Holdings
Inc. and Metric Realty Corp. each holds 50% of the
common stock of Metric Realty Services, Inc.
(6) Metric Institutional Apartment Fund II, L.P.
(California). Metric Realty holds a 1% interest as
general partner and Metropolitan holds an approximately
14.6% limited partnership interest in Metric
Institutional Apartment Fund II, L.P.
6. MetLife Holdings, Inc. (Delaware)
a. MetLife Funding, Inc. (Delaware)
b. MetLife Credit Corp. (Delaware)
7. Metropolitan Tower Realty Company, Inc. (Delaware)
8. MetLife Real Estate Advisors, Inc. (California)
9. MetLife HealthCare Holdings, Inc.
B. Metropolitan Tower Life Insurance Company (Delaware)
C. MetLife Security Insurance Company of Louisiana (Louisiana)
D. MetLife Texas Holdings, Inc. (Delaware)
1. Texas Life Insurance Company (Texas)
a. Texas Life Agency Services, Inc. (Texas)
b. Texas Life Agency Services of Kansas, Inc. (Kansas)
E. MetLife Securities, Inc. (Delaware)
F. 23rd Street Investments, Inc. (Delaware)
G. Metropolitan Life Holdings Limited (Ontario, Canada)
1. Metropolitan Life Financial Services Limited (Ontario, Canada)
2. Metropolitan Life Financial Management Limited (Ontario, Canada)
a. Metropolitan Life Insurance Company of Canada (Canada)
b. Metropolitan Life Operations Limited (Canada)
C-6
<PAGE>
3. Morguard Investments Limited (Ontario, Canada)
Shares of Morguard Investments Limited ("Morguard") are held by
Metropolitan Life Holdings Limited (82%) and by employees of Morguard
(18%).
4. Services La Metropolitaine Quebec, Inc. (Quebec, Canada)
5. 167080 Canada, Inc. (Canada)
a. 446068 B.C. Ltd. (British Columbia, Canada)
H. MetLife (UK) Limited (Great Britain)
1. Albany Life Assurance Company Limited (Great Britain)
a. Albany Pension Managers and Trustees Limited (Great Britain)
2. Albany Home Loans Limited (Great Britain)
3. ACFC Corporate Finance Limited (Great Britain)
4. Metropolitan Unit Trust Managers Limited (Great Britain)
5. Albany International Assurance Limited (Isle of Man)
6. MetLife Group Services Limited (Great Britain)
I. Santander Met, S.A. (Spain). Shares of Santander Met, S.A. are held by
Metropolitan (50%) and by an entity (50%) unaffiliated with Metropolitan.
1. Seguros Genesis, S.A. (Spain)
2. Genesis Seguros Generales, Sociedad Anomina de Seguros y Reaseguros
(Spain)
J. Kolon-Met Life Insurance Company (Korea). Shares of Kolon-MetLife Insurance
Company are held by Metropolitan (51%) and by an entity (49%) unaffiliated
with Metropolitan.
C-7
<PAGE>
K. Genesis Seguros de Vida S.A. (Argentina)
L. Genesis Seguros de Retiro S.A. (Argentina). Shares of Genesis Seguros de
Retiro S.A. are held by Metropolitan (39%) and by an entity (61%)
unaffiliated with Metropolitan.
M. 2945835 Canada Inc. (Canada)
N. Metropolitan Marine Way Investments Limited (British Columbia, Canada)
O. Met Life Holdings Luxembourg (Luxembourg)
P. Metropolitan Life Holdings, Netherlands BV (Netherlands)
Q. MetLife International Holdings, Inc. (Delaware)
R. Metropolitan Life Insurance Company of Hong Kong Limited (Hong Kong)
C-8
<PAGE>
S. Metropolitan Realty Management, Inc. (Delaware)
1. Edison Supply and Distribution, Inc. (Delaware)
2. Cross & Brown Company (New York)
a. Cross & Brown Residentials, Inc. (New York)
b. Cross & Brown Company of Florida, Inc. (Florida)
c. Cross & Brown Associates of New York, Inc. (New York)
d. Cross & Brown Associates of New Jersey, Inc. (New Jersey)
e. Subrown Corp. (New York)
f. Cross & Brown Construction Corp. (New York)
g. CBNJ, Inc. (New Jersey)
h. Cross & Brown of Connecticut, Inc. (Connecticut)
T. MetPark Funding, Inc. (Delaware)
U. 2154 Trading Corporation (New York)
V. Transmountain Land & Livestock Company (Montana)
W. Met West Agribusiness, Inc. (Delaware)
Y. Farmers National Company (Nebraska)
1. Farmers National Commodities, Inc. (Nebraska)
C-9
<PAGE>
Z. Nebraska Farms, Inc. (Nebraska)
AA. MetFarm and Ranch Properties, Inc. (Delaware)
AB. City Trust Services, National Association (United States)
In addition to the entities listed above, Metropolitan (or where indicated an
affiliate) also owns an interest in the following entities, among others:
1) CP&S Communications, Inc., a New York corporation, holds federal radio
communications licenses for equipment used in Metropolitan owned facilities and
airplanes. It is not engaged in any business.
2) Quadreal Corp., a New York corporation, is the fee holder of a parcel of real
property subject to a 999 year prepaid lease. It is wholly-owned by
Metropolitan, having been acquired by a wholly-owned subsidiary of Metropolitan
in 1973 for $10 in connection with a real estate investment and transferred to
Metropolitan in 1988.
3) Met Life International Real Estate Equity Shares, Inc., a Delaware
corporation, is a real estate investment trust. Metropolitan owns approximately
18.4% of the outstanding common stock of this company and has the right to
designate 2 of the 5 members of its Board of Directors.
4) Metropolitan Structures is a general partnership in which Metropolitan owns
a 50% interest. Metropolitan Structures owns 100% of the common stock of
Cicero/Cermak Corporation, an Illinois corporation, which owns and manages a
shopping center in Illinois. Metropolitan Structures, Inc., an Illinois
corporation, is a property manager. Metropolitan Structures, Inc. is wholly
owned by Metropolitan Structures. Metropolitan Structures, Inc. is the sole
general partner of MS Management Services, L.P., an Illinois limited partnership
in which Metropolitan has a 49.5% interest as a limited partner.
5) Metropolitan Structures West, Inc. (doing business as MS Management
Services), a California corporation, is a property manager in California.
Metropolitan owns 50% of the capital stock of Metropolitan Structures West, Inc.
6) Seguros Genesis, S.A. (Mexico), is a Mexican insurer in which Metropolitan
and two of its subsidiaries collectively own a 24.5% interest and have the right
to designate 2 of the 9 members of the Board of Directors.
7) Interbroker, Correduria de Reaseguros, S.A., is a Spanish insurance brokerage
company in which Santander Met, S.A., a subsidiary of Metropolitan in which
Metropolitan owns a 50% interest, owns a 50% interest and has the right to
designate 2 of the 4 members of the Board of Directors.
8) Metropolitan owns varying interests in certain mutual funds distributed by
its affiliates. These ownership interests are generally expected to decrease as
shares of the funds are purchased by unaffiliated investors.
9) Metropolitan Lloyds Insurance Company of Texas, an affiliated association,
provides homeowner and related insurance for the Texas market. It is an
association of individuals designated as underwriters. Metropolitan Lloyds,
Inc., a subsidiary of Metropolitan Property and Casualty Insurance Company,
serves as the attorney-in-fact and manages the association.
10) Mezzanine Investment Limited Partnerships ("MILPs"), Delaware limited
partnerships, are investment vehicles through which investments in certain
entities are held. A wholly-owned subsidiary of Metropolitan serves as the
general partner of the limited partnerships and Metropolitan directly owns a 99%
limited partnership interest therein. The MILPs have various ownership interests
in certain companies. The various MILPs own, directly or indirectly, more than
50% of the common stock of the following companies: Coating Technologies
International, Inc., Dan River, Inc.; Igloo Holdings, Inc. and its subsidiary,
Igloo Products Corporation; Blodgett Holdings, Inc., and its subsidiaries, GS
Blodgett Corporation, GS Blodgett International Ltd., GS Blodgett Inc., Pitco
Frialator, Inc., Frialator International Limited, Magikitch'n, Inc., and
Cloverleaf Properties, Inc.; and Briggs Holdings, Inc., and its subsidiary,
Briggs Plumbing Products, Inc.
C-10
<PAGE>
Item 26: Number of Holders of Securities
- -----------------------------------------
As of December 31, 1996, the number of record holders of the Registrant's
Fund were as follows:
(1) (2)
Number of
Title of Class Record Holders
Shares of Beneficial Interest
State Street Research Intermediate Bond Fund
Class A 7
Class B 0
Class C 6
Class D 0
State Street Research Strategic Income Fund
Class A 280
Class B 294
Class C 21
Class D 54
- ----------
C-11
<PAGE>
Item 27: Indemnification
Under Article VI of the Registrant's Master Trust Agreement each of its
Trustees and officers or persons serving in such capacity with another entity at
the request of the Registrant ("Covered Person") shall be indemnified against
all liabilities, including, but not limited to, amounts paid in satisfaction of
judgments, in compromises or as fines and penalties, and expenses, including
reasonable accountants' and counsel fees, incurred by any Covered Person in
connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court or administrative or
legislative body, in which such Covered Person may be or may have been involved
as a party or otherwise or with which such Covered Person may be or may have
been threatened, while in office or thereafter, by reason of being or having
been such a Covered Person, except with respect to any matter as to which it has
been determined that such Covered Person had acted with willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of such Covered Person's office (such conduct being referred to
hereafter as "Disabling Conduct"). A determination that the Covered Person is
entitled to indemnification may be made by (i) a final decision on the merits by
a court or other body before which the proceeding was brought that the person to
be indemnified was not liable by reason of Disabling Conduct, (ii) dismissal of
a court action or an administrative proceeding against a Covered Person for
insufficiency of evidence of Disabling Conduct, or (iii) a reasonable
determination, based upon a review of the facts, that the indemnitee was not
liable by reason of Disabling Conduct by (a) a vote of a majority of a quorum of
Trustees who are neither "interested persons" of the Registrant as defined in
section 2(a)(19) of the 1940 Act nor parties to the proceeding, or (b) an
independent legal counsel in a written opinion.
Under the Distribution Agreement between the Registrant and State Street
Research Investment Services, Inc., the Registrant's distributor, the Registrant
has agreed to indemnify and hold harmless State Street Research Investment
Services, Inc. and each person who has been, is, or may hereafter be an officer,
director, employee or agent of State Street Research Investment Services, Inc.
against any loss, damage or expense reasonably incurred by any of them in
connection with any claim or in connection with any action, suit or proceeding
to which any of them may be a party, which arises out of or is alleged to arise
out of or is based upon a violation of any of its covenants herein contained or
any untrue or alleged untrue statement of material fact, or the omission or
alleged omission to state a material fact necessary to make the statements made
not misleading, in a Registration Statement or Prospectus of the Registrant, or
any amendment or supplement thereto, unless such statement or omission was made
in reliance upon written
C-12
<PAGE>
information furnished by State Street Research Investment Services, Inc.
Insofar as indemnification by the Registrant for liabilities arising under
the Securities Act of 1933 may be permitted to trustees, officers, underwriters
and controlling persons of the Registrant, pursuant to Article VI of the
Registrant's Master Trust Agreement, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a trustee, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted against the
Registrant by such trustee, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question of whether such indemnification by it
is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
C-13
<PAGE>
Item 28. Business and Other Connections of Investment Adviser
Describe any other business, profession, vocation or employment of a
substantial nature in which each investment adviser of the Registrant, and each
director, officer or partner of any such investment adviser, is or has been, at
any time during the past two fiscal years, engaged for his own account or in the
capacity of director, officer, employee, partner or trustee.
<TABLE>
<CAPTION>
Principal business
Name Connection Organization address of organization
- ---- ---------- ------------ -----------------------
<S> <C> <C> <C>
State Street Research & Investment Adviser Various investment advisory Boston, MA
Management Company clients
Arpiarian, Tanya None
Vice President
Bangs, Linda L. None
Vice President
Barton, Michael E. None
Vice President
Bennett, Peter C. Vice President State Street Research Capital Trust Boston, MA
Director and Vice President State Street Research Exchange Trust Boston, MA
Executive Vice Vice President State Street Research Financial Trust Boston, MA
President Vice President State Street Research Growth Trust Boston, MA
Vice President State Street Research Master Investment Trust Boston, MA
Vice President State Street Research Equity Trust Boston, MA
Director State Street Research Investment Services, Inc Boston, MA
Director Boston Private Bank & Trust Co. Boston, MA
President and Director Christian Camps & Conferences, Inc. Boston, MA
Chairman and Trustee Gordon College Wenham, MA
Bochman, Kathleen None
Vice President
Bray, Michael J. Employee Merrill Lynch & Co. Boston, MA
Vice President
Brown, Susan H. None
Vice President
Buffman, Andrea Project Manager BankBoston Boston, MA
(until 12/96)
Managing Director State Street Global Advisors Boston, MA
(until 12/95)
Burbank, John F. None
Senior Vice President
(Vice President
until 7/96)
Cabrera, Jesus A. Vice President First Chicago Investment Management Co. Chicago, IL
Vice President (until 5/96)
Vice President State Street Research Capital Trust Boston, MA
Canavan, Joseph W. Assistant Treasurer State Street Research Equity Trust Boston, MA
Vice President Assistant Treasurer State Street Research Financial Trust Boston, MA
Assistant Treasurer State Street Research Income Trust Boston, MA
Assistant Treasurer State Street Research Money Market Trust Boston, MA
Assistant Treasurer State Street Research Tax-Exempt Trust Boston, MA
Assistant Treasurer State Street Research Capital Trust Boston, MA
Assistant Treasurer State Street Research Exchange Trust Boston, MA
Assistant Treasurer State Street Research Growth Trust Boston, MA
Assistant Treasurer State Street Research Master Investment Trust Boston, MA
Assistant Treasurer State Street Research Securities Trust Boston, MA
Assistant Controller State Street Research Portfolios, Inc. New York, NY
C-14
<PAGE>
Principal business
Name Connection Organization address of organization
- ---- ---------- ------------ -----------------------
Carmen, Michael Portfolio Manager Montgomery Asset Management San Francisco, CA
Vice President (until 11/96)
Vice President State Street Research & Boston, MA
(until 4/96) Management Company
Vice President State Street Research Capital Trust Boston, MA
Carstens, Linda C. None
Vice President
Clifford, Jr., Paul J. Vice President State Street Research Tax-Exempt Trust Boston, MA
Vice President
D'Vari, Ronald None
Vice President
DeVeuve, Donald None
Vice President
DiFazio, Susan M.W. Senior Vice President State Street Research Investment Services, Inc. Boston, MA
Vice President
Dillman, Thomas J. Director of Research Bank of New York New York, NY
Senior Vice President (until 6/95)
Drake, Susan W. Vice President State Street Research Tax-Exempt Trust Boston, MA
Vice President (until 2/96)
Duggan, Peter J. None
Senior Vice President
Evans, Gordon Senior Vice President State Street Research Investment Services, Inc. Boston, MA
Vice President (Vice President until 3/96)
Even, Karen K. None
Vice President
Federoff, Alex G. None
Vice President
Feliciano, Rosalina None
Vice President
Gardner, Michael D. Partner Prism Group Seattle, WA
Senior Vice President
(Vice President until
6/95)
Geer, Bartlett R. Vice President State Street Research Equity Trust Boston, MA
Senior Vice President Vice President State Street Research Income Trust Boston, MA
Vice President State Street Research Securities Trust Boston, MA
Govoni, Electra None
Vice President
C-15
<PAGE>
Principal business
Name Connection Organization address of organization
- ---- ---------- ------------ -----------------------
Granger, Allison None
Vice President
Hamilton, Jr., William A. Treasurer and Director Ellis Memorial and Eldredge House Boston, MA
Senior Vice President Treasurer and Director Nautical and Aviation Publishing Company, Inc. Baltimore, MD
Treasurer and Director North Conway Institute Boston, MA
Hanson, Phyllis None
Vice President
Haverty, Jr., Lawrence J. None
Senior Vice President
Heineke, George R. None
Vice President
Jackson, Jr., Certain trusts of related and
F. Gardner non-related individuals
Senior Vice President Trustee and Chairman of the Board Vincent Memorial Hospital Boston, MA
Jamieson, Frederick H. Vice President and Asst. Treasurer State Street Research Investment Services, Inc. Boston, MA
Senior Vice President Vice President and Asst. Treasurer SSRM Holdings, Inc. Boston, MA
(Vice President Vice President and Controller MetLife Securities, Inc. New York, NY
until 6/95) Assistant Treasurer State Street Research Energy, Inc. Boston, MA
Kallis, John H. Vice President State Street Research Financial Trust Boston, MA
Senior Vice President Vice President State Street Research Income Trust Boston, MA
Vice President State Street Research Tax-Exempt Trust Boston, MA
Vice President State Street Research Securities Trust Boston, MA
Trustee 705 Realty Trust Washington, D.C.
Director and President K&G Enterprises Washington, D.C.
Kasper, M. Katherine None
Vice President
C-16
<PAGE>
Principal business
Name Connection Organization address of organization
- ---- ---------- ------------ -----------------------
Kluiber, Rudolph K. Vice President State Street Research Capital Trust Boston, MA
Vice President
Kobrick, Frederick R. Vice President State Street Research Equity Trust Boston, MA
Senior Vice Vice President State Street Research Capital Trust Boston, MA
President Vice President State Street Research Growth Trust Boston, MA
Member Harvard Business School Association Cambridge, MA
Member National Alumni Council, Boston University Boston, MA
Langholm, Knut None
Vice President
Leary, Eileen M. None
Vice President
McNamara, III, Francis J. Senior Vice President, Clerk State Street Research Investment Services, Inc. Boston, MA
Executive Vice and General Counsel
President, Secretary Secretary and General Counsel State Street Research Master Investment Trust Boston, MA
and General Counsel Secretary and General Counsel State Street Research Capital Trust Boston, MA
(Senior Vice President Secretary and General Counsel State Street Research Exchange Trust Boston, MA
until 7/96) Secretary and General Counsel State Street Research Growth Trust Boston, MA
Secretary and General Counsel State Street Research Securities Trust Boston, MA
Secretary and General Counsel State Street Research Equity Trust Boston, MA
Secretary and General Counsel State Street Research Financial Trust Boston, MA
Secretary and General Counsel State Street Research Income Trust Boston, MA
Secretary and General Counsel State Street Research Money Market Trust Boston, MA
Secretary and General Counsel State Street Research Tax-Exempt Trust Boston, MA
Secretary and General Counsel SSRM Holdings, Inc. Boston, MA
Clerk and Director State Street Research Energy, Inc. Boston, MA
Senior Vice President, General The Boston Company, Inc. Boston, MA
Counsel and Assistant Secretary
(until 5/95)
Senior Vice President, General Boston Safe Deposit and Trust Company Boston, MA
Counsel and Asistant Secretary
(until 5/95)
Senior Vice President, General The Boston Company Advisors, Inc. Boston, MA
Counsel and Assistant Secretary
(until 5/95)
C-17
<PAGE>
Principal business
Name Connection Organization address of organization
- ---- ---------- ------------ -----------------------
Maus, Gerard P. Treasurer State Street Research Equity Trust Boston, MA
Director, Executive Treasurer State Street Research Financial Trust Boston, MA
Vice President Treasurer State Street Research Income Trust Boston, MA
and Treasurer Treasurer State Street Research Money Market Trust Boston, MA
Treasurer State Street Research Tax-Exempt Trust Boston, MA
Treasurer State Street Research Capital Trust Boston, MA
Treasurer State Street Research Exchange Trust Boston, MA
Treasurer State Street Research Growth Trust Boston, MA
Treasurer State Street Research Master Investment Trust Boston, MA
Treasurer State Street Research Securities Trust Boston, MA
Director, Executive Vice President, State Street Research Investment Services, Inc. Boston, MA
Treasurer and Chief Financial Officer
Director and Treasurer State Street Research Energy, Inc. Boston, MA
Director Metric Holdings, Inc. San Francisco, CA
Director Certain wholly-owned subsidiaries
of Metric Holdings, Inc.
Director (until 11/94) GFM International Investors, Ltd. London, England
Treasurer and Chief Financial SSRM Holdings, Inc. Boston, MA
Officer
Treasurer MetLife Securities, Inc. New York, NY
Milder, Judith J. None
Senior Vice President
(Vice President until 6/95)
Miller, Joan D. Senior Vice President State Street Research Investment Services, Inc. Boston, MA
Senior Vice President
(Vice President until 7/96)
Moore, Jr., Thomas P.
Senior Vice Vice President State Street Research Capital Trust Boston, MA
President (until 11/96)
Vice President State Street Research Exchange Trust Boston, MA
Vice President State Street Research Growth Trust Boston, MA
Vice President State Street Research Master Investment Trust Boston, MA
Vice President State Street Research Equity Trust Boston, MA
Vice President State Street Research Energy, Inc. Boston, MA
Director Hibernia Savings Bank Quincy, MA
Governor on the Board of Govenors Association for Investment Management Charlottesville,
and Research VA
Mulligan, JoAnne C. Vice President State Street Research Money Market Trust Boston, MA
Senior Vice President
(Vice President until 7/96)
Orr, Stephen C. Member Technology Analysts of Boston Boston, MA
Vice President Member Electro-Science Analysts (of NYC) New York, NY
C-18
<PAGE>
Principal business
Name Connection Organization address of organization
- ---- ---------- ------------ -----------------------
Paddon, Steven W. Employee Metropolitan Life Insurance Company New York, NY
Vice President (until 10/96)
Pannell, James C. None
Vice President
Peters, Kim M. Vice President State Street Research Securities Trust Boston, MA
Senior Vice President
Ragsdale, Easton Senior Vice President Kidder, Peabody, & Co. Incorporated New York, NY
Senior Vice President (until 12/94)
(Vice President
until 7/96)
Rawlins, Jeffrey A. None
Senior Vice President
(Vice President
until 7/96)
Rice III, Daniel Joseph Vice President State Street Research Equity Trust Boston, MA
Senior Vice President
Richards, Scott None
Vice President
Romich, Douglas A. Assistant Treasurer State Street Research Equity Trust Boston, MA
Vice President Assistant Treasurer State Street Research Financial Trust Boston, MA
Assistant Treasurer State Street Research Income Trust Boston, MA
Assistant Treasurer State Street Research Money Market Trust Boston, MA
Assistant Treasurer State Street Research Tax-Exempt Trust Boston, MA
Assistant Treasurer State Street Research Capital Trust Boston, MA
Assistant Treasurer State Street Research Exchange Trust
Assistant Treasurer State Street Research Growth Trust Boston, MA
Assistant Treasurer State Street Research Master Investment Trust Boston, MA
Assistant Treasurer State Street Research Securities Trust Boston, MA
Assistant Controller State Street Research Portfolios, Inc. New York, NY
Saperstone, Paul None
Vice President
C-19
<PAGE>
Principal business
Name Connection Organization address of organization
- ---- ---------- ------------ -----------------------
Schrage, Michael None
Vice President
Schultz, David C. Director and Treasurer Mafraq Hospital Association Mafraq, Jordan
Executive Vice President Member Association of Investment
Management Sales Executives Atlanta, GA
Member, Investment Committee Lexington Christian Academy Lexington, MA
Shaver, Jr. C. Troy President and Chief State Street Research Investment Services, Inc. Boston, MA
Executive Vice Executive Officer
President President and Chief John Hancock Funds, Inc. Boston, MA
Executive Officer
(until 1/96)
Shean, William G. None
Vice President
Shively, Thomas A. Vice President State Street Research Financial Trust Boston, MA
Director and Vice President State Street Research Money Market Trust Boston, MA
Executive Vice Vice President State Street Research Tax-Exempt Trust Boston, MA
President Director State Street Research Investment Services, Inc Boston, MA
Vice President State Street Research Securities Trust Boston, MA
Shoemaker, Richard D. None
Senior Vice President
Strelow, Dan R. None
Senior Vice President
Stuka, Paul U.S. Portfolio Consultant Teton Partners Boston, MA
Senior Vice President (until 4/95)
C-20
<PAGE>
Principal business
Name Connection Organization address of organization
- ---- ---------- ------------ -----------------------
Swanson, Amy McDermott None
Senior Vice President
Trebino, Anne M. Vice President SSRM Holdings, Inc. Boston, MA
Senior Vice President
(Vice President until 6/95)
Verni, Ralph F. Chairman, President, Chief State Street Research Capital Trust Boston, MA
Chairman, President, Executive Officer and Trustee
Chief Executive Chairman, President, Chief State Street Research Exchange Trust Boston, MA
Officer and Executive Officer and Trustee
Director Chairman, President, Chief State Street Research Growth Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief State Street Research Master Investment Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief State Street Research Securities Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief State Street Research Equity Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief State Street Research Financial Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief State Street Research Income Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief State Street Research Money Market Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief State Street Research Tax-Exempt Trust Boston, MA
Executive Officer and Trustee
Chairman and Director State Street Research Investment Services, Inc. Boston, MA
(President and Chief Executive
Officer until 2/96)
President and Director State Street Research Energy, Inc. Boston, MA
Chairman and Director Metric Holdings, Inc. San Francisco, CA
Director and Officer Certain wholly-owned subsidiaries
of Metric Holdings, Inc.
Director MetLife Securities, Inc. New York, NY
Chairman and Director (until 11/94) GFM International Investors, Ltd. London, England
President, Chief Executive SSRM Holdings, Inc. Boston, MA
Officer and Director
Director CML Group, Inc. Boston, MA
Director Colgate University Hamilton, NY
C-21
<PAGE>
Principal business
Name Connection Organization address of organization
- ---- ---------- ------------ -----------------------
Wade, Dudley Vice President State Street Research Growth Trust Boston, MA
Freeman Vice President State Street Research Master Investment Trust Boston, MA
Senior Vice
President
Wallace, Julie K. None
Vice President
Ward, Geoffrey None
Senior Vice President
Weiss, James M. Vice President State Street Research Capital Trust Boston, MA
Senior Vice President Vice President State Street Research Equity Trust Boston, MA
Vice President State Street Research Master Investment Trust Boston, MA
Chief Investment Officer IDS Equity Advisors Minneapolis, MN
(until 12/95)
Westvold, Vice President State Street Research Securities Trust Boston, MA
Elizabeth McCombs
Senior Vice President
(Vice President
until 7/96)
Wilson, John T. Vice President State Street Research Equity Trust Boston, MA
Vice President Vice President State Street Research Master Investment Trust Boston, MA
Vice President Phoenix Investment Counsel, Inc. Hartford, CT
(until 6/96)
Wing, Darman A. Senior Vice President and State Street Research Investment Services, Inc. Boston, MA
Vice President, Asst. Clerk (Vice President
Assistant Secretary until 6/95)
and Assistant Assistant Secretary State Street Research Capital Trust Boston, MA
General Counsel Assistant Secretary State Street Research Exchange Trust Boston, MA
Assistant Secretary State Street Research Growth Trust Boston, MA
Assistant Secretary State Street Research Master Investment Trust Boston, MA
Assistant Secretary State Street Research Securities Trust Boston, MA
Assistant Secretary State Street Research Equity Trust Boston, MA
Assistant Secretary State Street Research Financial Trust Boston, MA
Assistant Secretary State Street Research Income Trust Boston, MA
Assistant Secretary State Street Research Money Market Trust Boston, MA
Assistant Secretary State Street Research Tax-Exempt Trust Boston, MA
Assistant Secretary SSRM Holdings, Inc. Boston, MA
Woodbury, Robert S. Employee Metropolitan Life Insurance Company New York, NY
Vice President
Woodworth, Jr., Kennard Vice President State Street Research Exchange Trust Boston, MA
Senior Vice Vice President State Street Research Growth Trust Boston, MA
President (until 2/96)
C-22
<PAGE>
Principal business
Name Connection Organization address of organization
- ---- ---------- ------------ -----------------------
Wu, Norman N. Partner Atlantic-Acton Realty Framingham, MA
Senior Vice President Director Bond Analysts Society of Boston Boston, MA
</TABLE>
C-23
<PAGE>
Item 29: Principal Underwriters
(a) State Street Research Investment Services, Inc., serves as principal
underwriter for State Street Research Equity Trust, State Street Research
Financial Trust, State Street Research Income Trust, State Street Research
Money Market Trust, State Street Research Tax-Exempt Trust, State Street
Research Capital Trust, State Street Research Growth Trust, State Street
Research Master Investment Trust, State Street Research Securities Trust, and
State Street Research Portfolios, Inc.
(b) Directors and Officers of State Street Research Investment Services,
Inc. are as follows:
(1) (2) (3)
Positions
Name and Principal and Offices Positions and Offices
Business Address with Underwriter with Registrant
Ralph F. Verni Chairman of Chairman of the
One Financial Center the Board and Board, President,
Boston, MA 02111 Director Chief Executive Officer
and Trustee
Peter C. Bennett Director None
One Financial Center
Boston, MA 02111
Gerard P. Maus Executive Vice President Treasurer
One Financial Center Treasurer, Chief
Boston, MA 02111 Financial Officer and
Director
Thomas A. Shively Director Vice President
One Financial Center
Boston, MA 02111
C. Troy Shaver, Jr. President and Chief None
One Financial Center Executive Officer
Boston, MA 02111
George B. Trotta Executive Vice President None
One Madison Avenue
New York, NY 10010
Dennis C. Barghaan Senior Vice President None
One Madison Avenue
New York, NY 10010
Peter Borghi Senior Vice President None
One Financial Center
Boston, MA 02111
Paul V. Daly Senior Vice President None
One Financial Center
Boston, MA 02111
C-24
<PAGE>
(1) (2) (3)
Positions
Name and Principal and Offices Positions and Offices
Business Address with Underwriter with Registrant
Susan M.W. DiFazio Senior Vice President None
One Financial Center
Boston, MA 02111
Gordon Evans Senior Vice President None
One Financial Center
Boston, MA 02111
Robert Haeusler Senior Vice President None
One Madison Avenue
New York, NY 10010
Gregory R. McMahan Senior Vice President None
One Financial Center
Boston, MA 02111
Francis J. McNamara, III Senior Vice President, Secretary
One Financial Center General Counsel
Boston, MA 02111 and Clerk
Joan D. Miller Senior Vice President None
One Financial Center
Boston, MA 02111
Richard P. Samartin Senior Vice President None
One Financial Center
Boston, MA 02111
Darman A. Wing Senior Vice President, Assistant Secretary
One Financial Center Assistant General Counsel
Boston, MA 02111 and Assistant Clerk
Linda Grasso Vice President None
One Financial Center
Boston, MA 02111
Robert M. Gunville Vice President None
One Financial Center
Boston, MA 02111
Frederick H. Jamieson Vice President None
One Financial Center and Assistant
Boston, MA 02111 Treasurer
Amy L. Simmons Vice President Assistant Secretary
One Financial Center
Boston, MA 02111
C-25
<PAGE>
Item 30: Location of Accounts and Records
Gerard P. Maus
State Street Research & Management Company
One Financial Center
Boston, MA 02111
Item 31: Management Services
Inapplicable.
Item 32: Undertakings
(a) Inapplicable.
(b) Deleted.
(c) The Registrant has elected to include the information required
by Item 5A of Form N-1A in its annual report to shareholders. The
Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of the applicable fund's latest annual report to
shareholders, upon request and without charge.
(d) The Registrant undertakes to hold a special meeting of
shareholders of the Trust for the purpose of voting upon the question of
removal of any trustee or trustees when requested in writing to do so by
the record holders of not less than 10 per centum of the outstanding
shares of the Trust and, in connection with such meeting, to comply with
the provisions of Section 16(c) of the Investment Company Act of 1940
relating to shareholder communications.
(e) Deleted.
C-26
<PAGE>
Notice
A copy of the Master Trust Agreement of the Registrant is on file with the
Secretary of State of the Commonwealth of Massachusetts and notice is hereby
given that the obligations of the Registrant hereunder, and the authorization,
execution and delivery of this amendment to the Registrant's Registration
Statement, shall not be binding upon any of the Trustees, shareholders,
nominees, officers, agents or employees of the Registrant as individuals or
personally, but shall bind only the property of the Funds of the Registrant, as
provided in the Master Trust Agreement. Each Fund of the Registrant shall be
solely and exclusively responsible for all of its direct or indirect debts,
liabilities and obligations, and no other Fund shall be responsible for the
same.
C-27
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment No. 5 to its Registration Statement on Form N-1A to be
signed on its behalf by the undersigned, thereto duly authorized, in the City of
Boston and the Commonwealth of Massachusetts, on the 22nd day of January, 1997.
STATE STREET RESEARCH SECURITIES TRUST
By: *
------------------------
Ralph F. Verni
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed on the
above date by the following persons in the capacities indicated.
Signature Title
--------- -----
* Trustee, Chairman of the Board and
--------------------- Chief Executive Officer
Ralph F. Verni (Principal Executive Officer)
* Treasurer (Principal Financial and
--------------------- Accounting Officer)
Gerard P. Maus
* Trustee
---------------------
Edward M. Lamont
* Trustee
---------------------
Robert A. Lawrence
* Trustee
---------------------
Dean O. Morton
* Trustee
---------------------
Thomas L. Phillips
C-28
<PAGE>
* Trustee
---------------------
Toby Rosenblatt
* Trustee
---------------------
Michael S. Scott Morton
* Trustee
---------------------
Jeptha H. Wade
*By: /s/ Francis J. McNamara, III
-------------------------------
Francis J. McNamara, III
Attorney-in-Fact
under Powers of Attorney
dated August 24, 1995
incorporated by reference
from Post-Effective
Amendment No. 2.
C-29
<PAGE>
1933 Act Registration No. 33-74628
1940 Act File No. 811-8322
- ---------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM N-1A
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. __ [ ]
Post-Effective Amendment No. 6 [X]
and/or
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 7 [X]
--------------------
STATE STREET RESEARCH SECURITIES TRUST
(Exact Name of Registrant as Specified in Declaration of Trust)
--------------------
EXHIBITS
<PAGE>
INDEX TO EXHIBITS
(5)(b) Letter Agreement with respect to the Advisory Agreement relating
to State Street Research Strategic Income Fund
(6)(e) Letter Agreement with respect to the Distribution Agreement
relating to State Street Research Strategic Income Fund
(8)(b) Letter Agreement with respect to the Custodian Contract relating
to State Street Research Strategic Income Fund
(13)(b) Purchase Agreement and Investment Letter with respect to State
Street Research Strategic Income Fund
(14)(b) State Street Research 403(b): Brochure, Maximum Salary Reduction
Worksheet, Account Application, Salary Reduction Agreement and
Transfer of 403(b) Assets Form
(15)(b) Letter Agreement with respect to the Plan of Distribution
relating to State Street Research Strategic Income Fund
(19) Application Forms
(27) Financial Data Schedules
2
Exhibit (5)(b)
STATE STREET RESEARCH SECURITIES TRUST
One Financial Center
Boston, Massachusetts 02111-2690
August 19, 1996
State Street Research &
Management Company
One Financial Center
Boston, Massachusetts 02111-2690
Gentlemen:
This letter is to confirm to you that State Street Research Securities
Trust (the "Trust") has created a new series of shares to be known as State
Street Research Strategic Income Fund (the "Fund") and that pursuant to Section
1(b) of the Advisory Agreement dated as of May 16, 1994 (the "Agreement"), the
Trust desires to retain you to render management and investment advisory
services under the Agreement to the Fund as a "Series" thereunder for a fee
equal to 0.75% on an annual basis of the average daily net asset value of the
Fund. Nothing in the Agreement shall be construed as requiring that the initial
public shareholders of the Fund approve of the Agreement in respect of the Fund.
Notwithstanding paragraph 8(b) of the Agreement, no shareholder vote shall be
required for any amendments to the Agreement for which the Securities and
Exchange Commission has indicated that no shareholder vote is necessary, as for
example, in the case of a decrease in the advisory fee under the Agreement.
Please indicate your acceptance of this responsibility in accordance
with the terms of the Agreement by signing this letter as indicated below.
The term "State Street Research Securities Trust" means and refers to
the Trustees from time to time serving under the Master Trust Agreement dated
January 24, 1994 ("Master Trust Agreement"), as the same may subsequently
thereto have been, or subsequently hereto may be, amended. It is expressly
agreed that the obligations of the Trust hereunder shall not be binding upon any
of the Trustees, shareholders, nominees, officers, agents or employees of the
Trust as individuals or personally, but shall bind only the trust property of
the Trust, as provided in the Master Trust Agreement of the Trust. The execution
and delivery of this Agreement have been authorized by the Trustees of the Trust
and signed by a duly authorized officer of the Trust, acting as such, and
neither such authorization nor such execution and delivery shall be deemed to
have been made individually or to
<PAGE>
impose any personal liability, but shall bind only the trust property of the
Trust as provided in its Master Trust Agreement. The Master Trust Agreement of
the Trust provides, and it is expressly agreed, that each Fund of the Trust
shall be solely and exclusively responsible for the payment of its debts,
liabilities and obligations, and that no other fund shall be responsible for the
same.
STATE STREET RESEARCH
SECURITIES TRUST
By: /s/ Ralph F. Verni
-----------------------
Ralph F. Verni
President
ACCEPTED AND AGREED TO:
STATE STREET RESEARCH &
MANAGEMENT COMPANY
By: /s/ Francis J. McNamara, III
--------------------------------
Francis J. McNamara, III
Secretary
Exhibit (6)(e)
STATE STREET RESEARCH SECURITIES TRUST
One Financial Center
Boston, Massachusetts 02111-2690
August 19, 1996
State Street Research
Investment Services, Inc.
One Financial Center
Boston, Massachusetts 02111-2690
Gentlemen:
This letter is to confirm to you that State Street Research Securities
Trust (the "Trust"), has created a new series of shares to be known as State
Street Research Strategic Income Fund (the "Fund"), which is authorized to be
issued in four classes (Class A shares, Class B shares, Class C shares and Class
D shares), and that pursuant to the Distribution Agreement between the Trust and
you dated as of May 16, 1994 (the "Agreement"), you will serve as distributor
and principal underwriter of the Fund (which shall be deemed a "Fund" under the
Agreement) with respect to the sale of its shares and each class thereof. Shares
of each class of the Fund will be sold at the "net asset value per share" of the
Fund plus any applicable sales charge in accordance with the then current
prospectus and statement of additional information of the Fund, as from time to
time amended.
Please indicate your acceptance of the above in accordance with the
terms of the Agreement by signing this letter as indicated below.
The term "State Street Research Securities Trust" means and refers to
the Trustees from time to time serving under the Master Trust Agreement dated
January 25, 1994 ("Master Trust Agreement") as the same may subsequently thereto
have been, or subsequently hereto may be, amended. It is expressly agreed that
the obligations of the Trust hereunder shall not be binding upon any of the
Trustees, shareholders, nominees, officers, agents or employees of the Trust as
individuals or personally, but shall bind only the trust property of the Trust,
as provided in the Master Trust Agreement of the Trust. The execution and
delivery of this Agreement have been authorized by the Trustees of the Trust and
signed by a duly authorized officer of the Trust, acting as such, and neither
such authorization nor such execution and delivery shall be deemed to have been
made individually or to impose any personal liability, but shall bind only the
trust property of the Trust as provided in its Master Trust Agreement.
<PAGE>
The Master Trust Agreement of the Trust provides, and it is expressly agreed,
that each Fund of the Trust shall be solely and exclusively responsible for the
payment of its debts, liabilities and obligations, and that no other fund shall
be responsible for the same.
STATE STREET RESEARCH
SECURITIES TRUST
By: /s/ Ralph F. Verni
----------------------
Ralph F. Verni
President
ACCEPTED AND AGREED TO:
STATE STREET RESEARCH
INVESTMENT SERVICES, INC.
By: /s/ C. Troy Shaver, Jr.
----------------------------
C. Troy Shaver, Jr.
President
Exhibit (8)(e)
STATE STREET RESEARCH SECURITIES TRUST
One Financial Center
Boston, Massachusetts 02111-2690
August 19, 1996
State Street Bank and
Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Gentlemen:
This letter is to confirm to you that State Street Research Securities
Trust (the "Trust") has created a new series of shares to be known as State
Street Research Strategic Income Fund (the "Fund"), and that pursuant to
paragraph 17 of the Custodian Contract dated as of May 16, 1994 between the
Trust and you (the "Agreement"), the Trust desires to retain you to act as
Custodian of the assets of the Fund as set forth in the Custodian Contract.
Please indicate your acceptance of the above in accordance with the
terms of the Agreement by signing this letter as indicated below.
The term "State Street Research Securities Trust" means and refers to
the Trustees from time to time serving under the Master Trust Agreement dated
January 25, 1994 ("Master Trust Agreement") as the same may subsequently thereto
have been, or subsequently hereto may be, amended. It is expressly agreed that
the obligations of the Trust hereunder shall not be binding upon any of the
Trustees, shareholders, nominees, officers, agents or employees of the Trust as
individuals or personally, but shall bind only the trust property of the Trust,
as provided in the Master Trust Agreement of the Trust. The execution and
delivery of this Agreement have been authorized by the Trustees of the Trust and
signed by a duly authorized officer of the Trust, acting as such, and neither
such authorization nor such execution and delivery shall be deemed to have been
made individually or to impose any personal liability, but shall bind only the
trust property of the Trust as provided in its Master Trust Agreement. The
Master Trust Agreement of the Trust provides, and it is
<PAGE>
expressly agreed, that each fund of the Trust shall be solely and exclusively
responsible for the payment of its debts, liabilities and obligations, and that
no other fund shall be responsible for the same.
STATE STREET RESEARCH
SECURITIES TRUST
By: /s/ Francis J. McNamara, III
----------------------------
Francis J. McNamara, III
Secretary
ACCEPTED AND AGREED TO:
STATE STREET BANK AND
TRUST COMPANY
By: /s/ Timothy Panaro, Vice President
--------------------------------------
Exhibit (13)(b)
SUBSCRIPTION
August 19, 1996
To: The Trustees of the
State Street Research Securities Trust
One Financial Center
Boston, Massachusetts 02111-2690
The undersigned hereby subscribes to one Class A share of beneficial
interest of State Street Research Strategic Income Fund, having a par value of
$.001, at a price of $7.00 per share and agrees to pay therefor upon demand in
cash the amount of $7.00.
Very truly yours,
STATE STREET RESEARCH &
MANAGEMENT COMPANY
By: /s/ Francis J. McNamara, III
----------------------------
Francis J. McNamara, III
Secretary
<PAGE>
SUBSCRIPTION
August 19, 1996
To: The Trustees of the
State Street Research Securities Trust
One Financial Center
Boston, Massachusetts 02111-2690
The undersigned hereby subscribes to one Class B share of beneficial
interest of State Street Research Strategic Income Fund, having a par value of
$.001, at a price of $7.00 per share and agrees to pay therefor upon demand in
cash the amount of $7.00.
Very truly yours,
STATE STREET RESEARCH &
MANAGEMENT COMPANY
By: /s/ Francis J. McNamara, III
----------------------------
Francis J. McNamara, III
Secretary
<PAGE>
SUBSCRIPTION
August 19, 1996
To: The Trustees of the
State Street Research Strategic Income Trust
One Financial Center
Boston, Massachusetts 02111-2690
The undersigned hereby subscribes to one Class C share of beneficial
interest of State Street Research Strategic Income Fund, having a par value of
$.001, at a price of $7.00 per share and agrees to pay therefor upon demand in
cash the amount of $7.00.
Very truly yours,
STATE STREET RESEARCH &
MANAGEMENT COMPANY
By: /s/ Francis J. McNamara, III
----------------------------
Francis J. McNamara, III
Secretary
<PAGE>
SUBSCRIPTION
August 19, 1996
To: The Trustees of the
State Street Research Securities Trust
One Financial Center
Boston, Massachusetts 02111-2690
The undersigned hereby subscribes to one Class D share of beneficial
interest of State Street Research Strategic Income Fund, having a par value of
$.001, at a price of $7.00 per share and agrees to pay therefor upon demand in
cash the amount of $7.00.
Very truly yours,
STATE STREET RESEARCH &
MANAGEMENT COMPANY
By: /s/ Francis J. McNamara, III
----------------------------
Francis J. McNamara, III
Secretary
<PAGE>
August 19, 1996
State Street Research Securities Trust
One Financial Center
Boston, Massachusetts 02111-2690
In connection with your sale to us of one Class A share of beneficial
interest of State Street Research Strategic Income Fund (the "Share"), we
understand that: (i) the Share has not been registered under the Securities Act
of 1933, as amended (the "1933 Act"); (ii) your sale of the Share to us is made
in reliance on such sale being exempt under Section 4(2) of the 1933 Act as not
involving any public offering; and (iii) in part, your reliance on such
exemption is predicated on our representation, which we hereby confirm, that we
are acquiring the Share for investment for our own account as the sole
beneficial owner thereof, and not with a view to or in connection with any
resale or distribution of the Share or of any interest therein. We hereby agree
that we will not sell, assign or transfer the Share or any interest therein,
except upon repurchase or redemption by the Fund, unless and until the Share has
been registered under the 1933 Act or you have received an opinion of your
counsel indicating to your satisfaction that said sale, assignment or transfer
will not violate the provisions of the 1933 Act or any rules or regulations
promulgated thereunder.
STATE STREET RESEARCH &
MANAGEMENT COMPANY
By: /s/ Francis J. McNamara, III
----------------------------
Francis J. McNamara, III
Secretary
<PAGE>
August 19, 1996
State Street Research Securities Trust
One Financial Center
Boston, Massachusetts 02111-2690
In connection with your sale to us of one Class B share of beneficial
interest of State Street Research Strategic Income (the "Share"), we understand
that: (i) the Share has not been registered under the Securities Act of 1933, as
amended (the "1933 Act"); (ii) your sale of the Share to us is made in reliance
on such sale being exempt under Section 4(2) of the 1933 Act as not involving
any public offering; and (iii) in part, your reliance on such exemption is
predicated on our representation, which we hereby confirm, that we are acquiring
the Share for investment for our own account as the sole beneficial owner
thereof, and not with a view to or in connection with any resale or distribution
of the Share or of any interest therein. We hereby agree that we will not sell,
assign or transfer the Share or any interest therein, except upon repurchase or
redemption by the Fund, unless and until the Share has been registered under the
1933 Act or you have received an opinion of your counsel indicating to your
satisfaction that said sale, assignment or transfer will not violate the
provisions of the 1933 Act or any rules or regulations promulgated thereunder.
STATE STREET RESEARCH &
MANAGEMENT COMPANY
By: /s/ Francis J. McNamara, III
----------------------------
Francis J. McNamara, III
Secretary
<PAGE>
August 19, 1996
State Street Research Securities Trust
One Financial Center
Boston, Massachusetts 02111-2690
In connection with your sale to us of one Class C share of beneficial
interest of State Street Research Strategic Income Fund (the "Share"), we
understand that: (i) the Share has not been registered under the Securities Act
of 1933, as amended (the "1933 Act"); (ii) your sale of the Share to us is made
in reliance on such sale being exempt under Section 4(2) of the 1933 Act as not
involving any public offering; and (iii) in part, your reliance on such
exemption is predicated on our representation, which we hereby confirm, that we
are acquiring the Share for investment for our own account as the sole
beneficial owner thereof, and not with a view to or in connection with any
resale or distribution of the Share or of any interest therein. We hereby agree
that we will not sell, assign or transfer the Share or any interest therein,
except upon repurchase or redemption by the Fund, unless and until the Share has
been registered under the 1933 Act or you have received an opinion of your
counsel indicating to your satisfaction that said sale, assignment or transfer
will not violate the provisions of the 1933 Act or any rules or regulations
promulgated thereunder.
STATE STREET RESEARCH &
MANAGEMENT COMPANY
By: /s/ Francis J. McNamara, III
----------------------------
Francis J. McNamara, III
Secretary
<PAGE>
August 19, 1996
State Street Research Securities Trust
One Financial Center
Boston, Massachusetts 02111-2690
In connection with your sale to us of one Class D share of beneficial
interest of State Street Research Strategic Income Fund (the "Share"), we
understand that: (i) the Share has not been registered under the Securities Act
of 1933, as amended (the "1933 Act"); (ii) your sale of the Share to us is made
in reliance on such sale being exempt under Section 4(2) of the 1933 Act as not
involving any public offering; and (iii) in part, your reliance on such
exemption is predicated on our representation, which we hereby confirm, that we
are acquiring the Share for investment for our own account as the sole
beneficial owner thereof, and not with a view to or in connection with any
resale or distribution of the Share or of any interest therein. We hereby agree
that we will not sell, assign or transfer the Share or any interest therein,
except upon repurchase or redemption by the Fund, unless and until the Share has
been registered under the 1933 Act or you have received an opinion of your
counsel indicating to your satisfaction that said sale, assignment or transfer
will not violate the provisions of the 1933 Act or any rules or regulations
promulgated thereunder.
STATE STREET RESEARCH &
MANAGEMENT COMPANY
By: /s/ Francis J. McNamara, III
----------------------------
Francis J. McNamara, III
Secretary
Exhibit (14)(b)
[FRONT COVER]
[State Street Research logo]
Your Window of Opportunity
State Street Research 403(b)
[Graphic: 3 windows, one slightly open]
Inside
---------------------------------------------
State Street Research Makes It Easy page 1
Use a 403(b) Before An IRA page 3
403(b) Tax Savings page 4
The State Street Research Advantage page 5
How to Open An Account page 9
<PAGE>
RETIREMENT PLANNING TAKES TIME
A comfortable retirement is the number one reason most people invest. And,
today, successful retirement planning is more important than ever. Not only are
we retiring earlier, but we're living longer. That means your retirement nest
egg needs to last for 20 or 30 years.
Fortunately, the key to success in retirement planning isn't necessarily how
much you invest. It's giving your money time to grow and making the right
choices with your investments. This is why it pays to have a dedicated
investment representative who understands your investment goals and can help you
take advantage of investment opportunities.
STATE STREET RESEARCH 403(B) MAKES IT EASY
A 403(b) plan is your window of opportunity. It allows you to take personal
control of your retirement, deciding what to invest in, how much and when. The
State Street Research 403(b) account offers you distinct advantages:
[bullet] Tax benefits. You enjoy pre-tax contributions
and tax-deferred investing.
[bullet] A convenient loan privilege that lets you borrow against your
403(b) account.
[bullet] Convenience. Your contributions are made by
payroll deduction. [Graphic:
Window]
[bullet] The cost advantages of State Street Research
mutual funds.
[bullet] A wide range of investment options--stock funds, bond funds,
international and money market funds.
[bullet] The investment expertise of State Street Research--the result of
managing mutual funds for more than 70 years.
1
<PAGE>
IT PAYS TO START EARLY
It stands to reason that the more you invest, the more money you may have when
you retire. But one of the wonders of investing is how time, and the power of
compounding, can make your money grow faster. Consider the examples below.
[LINE CHARTS]
Chart 1 Chart 2
Year $(in thousands) Year $(in thousands)
1 5,406 1 5,406
2 10,812 2 10,812
3 16,650 3 16,650
4 22,956 4 22,956
5 29,766 5 29,766
6 37,120 6 37,120
7 45,064 7 45,064
8 53,642 8 53,642
9 62,907 9 62,907
10 72,913 10 72,913
11 83,720 11 83,720
12 95,391 12 95,391
13 107,996 13 107,996
14 121,610 14 121,610
15 136,312 15 136,312
16 152,191 16 152,191
17 169,340 17 169,340
18 187,861 18 187,861
19 207,863 ` 19 207,863
20 229,068 20 229,068
21 247,393
22 267,185
23 288,560
24 311,644
25 336,576
26 363,502
27 392,582
28 423,989
29 457,908
30 494,541
31 534,104
32 576,832
33 622,979
34 672,817
35 726,642
Linda Late began putting money away for retirement when she was 45. After 20
years of investing $400 each month--a total of $96,000--she accumulated $229,068
at age 65.
Ellen Early got a head start on her retirement planning, beginning at age 30.
She also invested $400 per month for 20 years, and then let her investment grow
for fifteen more years. After 35 years, her account grew to $726,643.
Ellen Early invested the same amount as Linda Late, yet had more than $497,000
extra to make her retirement a success. The real difference was the added time
her investment had to grow, and that's why it pays to start early.
These charts illustrate the growth of $400 monthly investments at an 8% annual
rate of return. Results are hypothetical and are for illustrative purposes only;
they are not intended to imply or guarantee a rate of return on any mutual fund
or other investment. All distributions are reinvested; sales charges are not
reflected.
How Investments Grow Over Time
Use this table as a guide in determining how your investments might grow. Choose
a number of years and an average annual rate of return. The table assumes a $100
monthly investment; but you can use it as a guide for nearly any amount. For
example, if you invest $200 (twice as much), just multiply the result in the
table by 2.
average annual rate of return
years 8% 10% 12%
5 $ 7,341 $ 7,717 $ 8,110
10 18,128 20,146 22,404
15 33,978 40,162 47,593
20 57,267 72,398 91,986
25 91,485 124,315 170,220
30 141,763 207,928 308,098
35 215,639 342,588 551,083
40 324,086 559,358 979,211
2
<PAGE>
THE BENEFITS OF 403(B)
A 403(b) retirement plan gives you the opportunity to save on taxes while you
invest. It is designed specifically for employees of public educational
institutions and certain tax-exempt organizations, such as hospitals and
colleges. The name "403(b)" refers to the part of the tax code that created the
plan.
A 403(b) is similar to the popular 401(k) plans available at many corporate
workplaces. Both allow you to invest by payroll deduction (before taxes), which
reduces the income taxes you pay. And both let your account grow free from taxes
until you withdraw money after age 59-1/2.
Why Use a State Street Research 403(b) BEFORE an IRA
For most investors, it's better to maximize contributions to a 403(b) plan
before contributing to an individual retirement account (IRA). Here's why:
- --------------------------------------------------------------------------------
State Street Research 403(b) IRA
- --------------------------------------------------------------------------------
Pre-tax contributions reduce
income taxes paid [checkmark] [checkmark](1)
- --------------------------------------------------------------------------------
Account is tax deferred until
money is withdrawn [checkmark] [checkmark]
- --------------------------------------------------------------------------------
You can invest by payroll deduction
[checkmark] [checkmark]
- --------------------------------------------------------------------------------
You can potentially invest up to
$9,500 maximum per year [checkmark]
- --------------------------------------------------------------------------------
You can take a loan against
your account [checkmark]
- --------------------------------------------------------------------------------
(1)In some cases, IRA contributions may be tax deductible.
3
<PAGE>
403(B) TAX SAVINGS
A 403(b) retirement plan helps you save on taxes in two ways. First, it reduces
your current taxable income because your contributions are made before taxes.
Pay Less Taxes Up Front
Saving with a 403(b) Plan Saving without a 403(b) Plan
- ---------------------------------- --------------------------------
Salary $50,000 Salary $50,000
403(b) savings $ 5,000 Non-403(b) savings $ 5,000
(pre-tax) (after tax)
Gross taxable income $45,000 Gross taxable income $50,000
Federal income taxes $ 7,815 Federal income taxes $ 9,215
(28% federal tax bracket) (28% federal tax bracket)
- ------------------------------------------------------------------------
Income after savings Income after savings
and taxes $37,185 and taxes $35,785
Pre-tax contributions mean you're currently taxed on less income, so your taxes
are lower!
Avoid Taxes While You Invest
Second, your 403(b) account is not taxed until you withdraw money, usually after
you reach age 59-1/2. Your account can grow tax deferred, which helps it to grow
faster! Taxes are paid when money is withdrawn from the 403(b) account.
The Advantages of Tax Deferral
(for monthly investments of $400)
[LINE CHART]
Taxable Line Tax-defered Line
Year Year
1 5,348 1 5,406
2 10,582 2 10,812
3 16,117 3 16,650
4 21,971 4 22,956
5 28,162 5 29,766
6 34,709 6 37,120
7 41,634 7 45,064
8 48,957 8 53,642
9 56,703 9 62,907
10 64,894 10 72,913
11 73,558 11 83,720
12 82,720 12 95,391
13 92,410 13 107,996
14 102,659 14 121,610
15 113,497 15 136,312
16 124,960 16 152,191
17 137,083 17 169,340
18 149,905 18 187,861
19 163,465 19 207,863
20 177,406 20 229,068
This chart illustrates general advantages of tax deferral. The chart shows
investments of $400 per month over a 20-year period. The taxable line reflects
annual taxes in the 28% tax bracket. Returns reflect hypothetical 8% annual
rates of return and are for illustrative purposes only; they are not intended to
imply or guarantee a rate of return on any mutual fund or other investment. All
distributions are reinvested; sales charges and deferred income taxes are not
reflected.
4
<PAGE>
THE MUTUAL FUND ADVANTAGE
State Street Research's mutual funds offer several advantages over other types
of investments or plans for 403(b) accounts.
Convenient loan privilege. If you have a short-term need for money, you can take
a loan against your account balance and pay the interest on the loan to your own
account.(2)
Wide range of investment options--stock, bond, international, and money market
funds. If your investment strategy changes, you can exchange your money from one
fund to another.(3)
Higher potential returns than fixed accounts. Investing in stock and bond mutual
funds can provide higher potential returns than fixed-rate investments. Of
course, the investment value and returns of mutual funds will fluctuate with
changes in market conditions.
Daily fund prices. Fund prices are reported daily in most newspapers, so it is
easy for you to keep track of your investment.
Flexible withdrawal options. When you are ready to retire, you have several
options for accessing your money.
[bullet] A lump-sum payment.
[bullet] A lump-sum payment made into another mutual fund account or
other investment.
[bullet] Regular monthly or quarterly payments from your account.
See page 7 for details on withdrawals.
(2)Subject to IRS penalty for non-repayment.
(3)The exchange privilege may be changed or discontinued at any time.
WHY STATE STREET RESEARCH
Since 1924, State Street Research has been respected by institutions and
knowledgeable individual investors. The firm has delivered exceptional results
to its clients:
[bullet] A history of selecting good stocks in both rising and falling markets.
State Street Research has successfully managed investor portfolios
throughout this century's best and worst market cycles since 1924.
[bullet] The choice of today's most demanding investors. Eight of the 10 largest
corporate pension plans and one of every four Fortune 100 companies is
a State Street Research client.
[bullet] Proprietary research. We built our reputation on the strength of our
in-house proprietary research.
[bullet] Institutional investment quality to individual investors. State Street
Research mutual fund investors receive the same distinctive portfolio
direction as our institutional clients.
[bullet] The important role of client service. State Street Research has been
recognized for providing quality shareholder service.
5
<PAGE>
RETIREMENT INVESTMENT STRATEGIES
To make it easier to develop a long-term plan,
State Street Research offers two special automatic investment strategies.
Direct Your Investment
Use our DIRECT strategy to invest gradually, moving money in pre-set amounts
from a conservative fund into a more aggressive fund.
HERE'S HOW IT WORKS:
[bullet] You transfer a lump-sum investment from an existing 403(b) plan into a
State Street Research mutual fund.(4)
[bullet] On a monthly or quarterly basis, money is "directed" from that fund
into another State Street Research fund that you select.
[bullet] You benefit from dollar cost averaging, which helps you invest in a
disciplined way whether the markets go up or down.(5)
DAP Your Dividends
Use DAP--Dividend Allocation Plan--to diversify dividends from a conservative
fund into a more aggressive fund.
HERE'S HOW IT WORKS:
[bullet] You make a lump-sum investment (plus any additional investments) in a
State Street Research mutual fund that pays regular dividend income.
[bullet] Your initial investment remains untouched, but the Fund's dividends are
transferred (or allocated) to another State Street Research fund that
you select.
[bullet] You benefit from diversification and dollar cost averaging.(5)
If you are interested in either of these automatic investing strategies, please
call 1-800-562-0032.
(4) Specific IRS rules apply to transfers. See the Transfer of 403(b) Assets
Form for more information.
(5) Dollar cost averaging will not assure that you will make a profit; neither
can it protect against losses in declining markets. Dollar cost averaging
involves continuous investment regardless of fluctuating prices, and
investors should consider their ability to purchase shares through high and
low markets.
What Has Performed Best Over the Long Term?
When investing for a long-term goal such as retirement, you may want to consider
stock funds for at least a portion of your investment. A longer time frame could
give you the time to ride out fluctuations in the market. Plus, you want your
investments to outpace inflation, and stocks have done that in the past 30
years.
[BAR CHART]
30 Years of Performance(6)
10.7% Large-company stocks
8.2% Long-term government bonds
6.9% U.S. Treasury bills
5.4% Inflation
(6) Source: Lipper Analytical Services, Johnson Charts
Average annual total returns for the years 1966-1995. All indices listed are
unmanaged and do not take sales charges into consideration. Direct investment in
the indices is not possible; results are for illustrative purposes only. Past
performance should not be considered indicative of the future performance of any
index or any available funds managed by State Street Research or its affiliates.
The Large-Company Stock data reflects the performance of the Standard & Poor's
500 Composite Index (S&P 500), which includes 500 widely traded common stocks
and is a commonly used measure of U.S. stock market performance. The Long-Term
Government Bond data are based on the performance of a one bond portfolio, which
includes a debt obligation issued by the U.S. Treasury with a 20-year maturity.
The U.S. Treasury Bill data are based on the performance of a one bill
portfolio, which includes a U.S. Treasury bill with a 30-day maturity. The
Consumer Price Index (CPI) is a measure of change in the prices of goods and
services as determined by the U.S. Bureau of Labor Statistics.
More information about stocks: Stocks are neither guaranteed nor tax advantaged.
The value of stocks will fluctuate, based on a variety of variables, including
market conditions.
More information about U.S. debt obligations: U.S. Treasury bonds and bills
offer a government guarantee as to the repayment of principal and/or interest if
held to maturity; income from these securities is tax exempt at the state and
local level. U.S. government agency securities are not direct obligations of the
U.S. government and, with some exceptions, are not guaranteed by the U.S.
government; many are exempt from state and local taxes.
6
<PAGE>
QUESTIONS AND ANSWERS
About Your 403(b) Account
Eligibility Who can have a 403(b) account?
Generally, employees of non-profit charitable, educational, scientific or
religious organizations, such as hospitals or colleges, may have a 403(b)
account. Also eligible are employees of state or local governments who are
employed by schools. Check with your employer to determine whether you qualify
for a 403(b) account.
Contributions
How do I make contributions to my 403(b) account?
Usually, you enter into a salary reduction agreement with your employer that
specifies the amount you want to contribute. Your compensation will be reduced
by this amount. Your employer may have a salary reduction agreement for you to
use. If not, a salary reduction agreement is attached.
What about fees? Is it expensive to open a 403(b) with State Street Research?
State Street Research offers some of the most competitive pricing for 403(b)s
that you'll find. You'll pay a $10 annual account administration (trustee) fee.
This $10 fee (per 403(b) plan) allows you to choose any number of our available
mutual funds. You pay per plan, not per fund. Remember though, sales charges may
also apply to the mutual funds that you invest in for your 403(b).
Maximum Contribution
How much can be contributed each year to my 403(b) account?
Determining your maximum 403(b) contribution is complex because several
different tax law limits apply depending on your individual situation. For most
employees, the maximum salary reduction contribution for a calendar year will be
the smaller of 20% of your compensation or $9,500. In the future, the $9,500
limit will be indexed for inflation. Employees of certain kinds of qualified
employers (for example, public schools, colleges, and hospitals) and
long-service employees (15 or more years of service) of such employers may have
different limits.
Your employer may be able to calculate your maximum contribution. If not, use
the attached worksheet. You may wish to consult an accountant or tax adviser to
confirm your maximum contribution, as penalties may apply if you exceed your
maximum.
Transfers
May I transfer all or part of my existing 403(b) to State Street Research? Yes.
Complete the attached Transfer of 403(b) Assets Form. Be sure to note the
requirements for a tax-free transfer described in the Form.
Withdrawals From Your Account
When will I begin to receive retirement benefits from my account?
You choose when to make withdrawals from your 403(b) account. However,
withdrawals may not begin until you have retired or terminated employment with
your employer or reached age 59-1/2. Earlier withdrawals are permitted only if
you become disabled or suffer a financial hardship (as defined by IRS
regulations).
You must begin making withdrawals by April 1 of the year following the year when
you reach age 70-1/2 or retire from your employer (if later).
7
<PAGE>
What happens to my account if I die?
Your account balance goes to the beneficiary(ies) you designate on the 403(b)
application or on another written document you send to State Street Research
Shareholder Services. Naming a beneficiary(ies) can have estate and tax-planning
implications, so consult a qualified professional. Any contingent deferred sales
charges (Class B shares) are waived if withdrawals are made within one year of
your death or disability.
Taxes
How will I be taxed on withdrawals from my 403(b)?
Generally, amounts withdrawn from your account are taxed as ordinary income in
the year when received. In addition, with limited exceptions, such as
disability, amounts withdrawn before age 59-1/2 are subject to an additional 10%
penalty tax.
If you withdraw an amount from your State Street Research 403(b) Account that is
eligible for rollover (see next question), mandatory 20% federal income tax
withholding will apply unless the withdrawn amount is rolled over directly to
another 403(b) arrangement or to an IRA. If the amount you withdraw is not
eligible for rollover to another 403(b) arrangement or IRA, 10% withholding of
federal income tax will apply unless you elect no withholding on your Withdrawal
Form.
Can I postpone federal income tax on a withdrawal from my 403(b) account?
You can defer income taxes on withdrawals from your 403(b) account if all or
part of the withdrawal is rolled over to another 403(b) account or into an IRA
either directly by State Street Research (direct rollover) or by you (regular
rollover) within 60 days. All withdrawals are eligible for rollover except
minimum required withdrawals after age 70-1/2 or retirement from your employer
and withdrawals over a period of at least 10 years or over your life expectancy
(or that of you and your designated beneficiary(ies)).
Caution: Rollovers must meet technical IRS requirements that cannot be described
in detail here.
Important: The preceding questions and answers are general and are provided for
informative purposes only. Some rules are not covered. Always consult your tax
adviser for advice on how the tax laws apply to you and how a State Street
Research 403(b) account will affect your tax situation or for advice on specific
matters such as contribution limits or rollover requirements. More information
is available in IRS Publication 571, Tax-Sheltered Annuity Plans for Employees
of Public Schools and Certain Tax-Exempt Organizations; this publication is
available from the IRS.
[Graphic: 3 diamond-shaped windows]
8
<PAGE>
How To Open Your
STATE STREET RESEARCH 403(B) ACCOUNT
1. Carefully read the material describing the State Street Research 403(b)
Account and the prospectus(es) for the fund(s) in which you plan to invest.
You may want to review the material with your accountant, lawyer or other tax
adviser because the rules under Section 403(b) are complex and subject to
change.
2. If you are transferring your current 403(b) assets to State Street Research,
complete and sign the Transfer of 403(b) Assets Form.
3. Complete and sign the State Street Research 403(b) Account Application. Be
sure to complete the beneficiary and employer (even if you are retired)
sections of the Application.
4. If contributions to your 403(b) Account will be made by salary reduction, you
should fill out a salary reduction agreement and you and your employer should
sign it. A sample Salary Reduction Agreement is attached.
5. Mail the completed and signed Application (and the Transfer of 403(b) Assets
Form, if used) to State Street Research Shareholder Services.
9
<PAGE>
[The following 2 pages make up the Transfer of Assets form that is inserted in
the booklet]
[Tab on right edge of page: TRANSFER OF 403(b) ASSETS FORM]
State Street Research 403(b)
TRANSFER OF 403(B) ASSETS FORM
How to transfer your existing 403(b) Account to State Street Research
[bullet] If you don't have a State Street Research 403(b) Account yet, complete
this transfer form and a State Street Research 403(b) Account
Application.
[bullet] If you already have a State Street Research 403(b) Account, just
complete this transfer form.
[bullet] When completed, send this transfer form (and if necessary, your 403(b)
Account Application) to: State Street Research Shareholder Services,
P.O. Box 8408, Boston, MA 02266-8408.
Information about you
_______________________________________________________________________________
Name Social Security #
_______________________________________________________________________________
Telephone (day) Telephone (night)
_______________________________________________________________________________
Account number (if you already have a State Street Research 403(b) Account)
Where is your 403(b) Account now?
_______________________________________________________________________________
Name of current Custodian/Insurer
_______________________________________________________________________________
Address
_______________________________________________________________________________
City State ZIP
_______________________________________________________________________________
Account number Name of mutual fund or fund family (if applicable)
_______________________________________________________________________________
Maturity date (if applicable)
[ ] This is a new State Street Research 403(b) Account. My investment choices
are on my 403(b) Account Application.
[ ] I already have a State Street Research 403(b) Account. Please invest the
amount transferred as follows:
Please tell us which Fund(s) you have selected for your 403(b) investment
_______________________________________________________________________________
Fund name Account number %
_______________________________________________________________________________
Fund name Account number %
_______________________________________________________________________________
Fund name Account number %
By signing below, I acknowledge that I have received a current prospectus(es) of
the Fund(s) selected.
[State Street Research logo] OVER >
<PAGE>
Please authorize transfer of your current 403(b) account to State Street
Research
To my current Custodian/Insurer: Please redeem [ ] ALL or [ ] PART ($ )
of my current 403(b) and transfer the proceeds in cash to my State Street
Research 403(b) Account. (For partial transfers, indicate which investments are
to be liquidated.)
_______________________________________________________________________________
Your signature Date
Note: Under current IRS rulings, a transfer from another 403(b) account to a
State Street Research 403(b) Account will be a tax-free transaction as long as
the withdrawal restrictions under your existing 403(b) are not more severe than
those under the State Street Research 403(b) Account (see Section 5.2 of the
State Street Research 403(b) Agreement). Also, amounts required to be
distributed to you under the minimum distribution rules of Code Section
403(b)(10) may not be transferred or rolled over. By signing this form, you are
certifying that this transfer will be a tax-free transaction under the preceding
two sentences.
Signature Guarantee
A signature guarantee may be required. Call your current Custodian/Insurer for
requirements.
_______________________________________________________________________________
Signature guaranteed by (name of bank or dealer firm)
_______________________________________________________________________________
Signature and title of officer
Directions to Current
Custodian/Insurer
PLEASE DO NOT FILL OUT THE FOLLOWING PORTION OF THIS FORM
Please liquidate and transfer on a fiduciary-to-fiduciary basis all or part of
the designated account as instructed above. Make check payable to State Street
Bank and Trust Company, Custodian.
Include the following account number and FBO on the check.
_______________________________________________________________________________
Account number Name
Mail to: State Street Research Shareholder Services,
P.O. Box 8408, Boston, MA 02266-8408
Include a copy of this Transfer of 403(b) Assets Form with the check for proper
credit to the customer's account. State Street Research Shareholder Services
will deliver the items to Boston Financial Data Services, Inc., which serves as
Agent for the Custodian.
Successor Custodian
State Street Bank and Trust Company will accept the transfer described above
once this form has been completed by you and the transfer has been completed by
your current 403(b) Custodian/Insurer.
_______________________________________________________________________________
Authorized signature of acceptance by Date
State Street Research Shareholder
Services on behalf of State Street Bank
and Trust Company, Custodian
<PAGE>
[The following 4 pages make up the Account Applicaiton form that is inserted
in the booklet]
[Tab on right edge of page: ACCOUNT APPLICATION]
-----------------------------------
Accompanying this form is a:
[ ] Transfer of 403(b) Assets Form
[ ] A check for a regular rollover
-----------------------------------
State Street Research 403(b)
ACCOUNT APPLICATION
How to open your State Street Research 403(b) Account
1. To open a State Street Research 403(b) Account, please complete this side
of the Application.
2. Your investment dealer must complete the dealer information section of
the Application.
What type of State Street Research 403(b) are you opening?
[ ] Regular 403(b) [ ] Transfer of Assets [ ] Regular Rollover
with Salary Reduction or Direct Rollover
Amount of investment accompanying this Application $___________________________
(Enclose a check for your contribution only if this is a regular rollover
403(b).)
Employee information
Complete the following information about yourself. Your account will be
registered in your name.
_______________________________________________________________________________
Name Birth date
_______________________________________________________________________________
Street
_______________________________________________________________________________
City State ZIP
_______________________________________________________________________________
Social Security #
_______________________________________________________________________________
Daytime telephone #
Employer information
Complete the following information about your employer.
_______________________________________________________________________________
Name
_______________________________________________________________________________
Street
_______________________________________________________________________________
City State ZIP
_______________________________________________________________________________
Name of contact person Daytime telephone #
Which Fund(s) have you selected for your 403(b)?
See relevant prospectus(es) for Fund details.
Name of Fund Class of Shares Percentage
A B D
[ ] [ ] [ ] %
____________________________________________________ ____________________
[ ] [ ] [ ] %
____________________________________________________ ____________________
[ ] [ ] [ ] %
____________________________________________________ ____________________
[ ] [ ] [ ] %
____________________________________________________ ____________________
[ ] [ ] [ ] %
____________________________________________________ ____________________
Total 100%
For information on the Direct or DAP(Dividend Allocation Plan) automatic
investing strategies, please call 1-800-562-0032.
[State Street Research logo]
<PAGE>
Who is the beneficiary of your State Street Research 403(b) Account?
1. Primary Beneficiary
_______________________________________________________________________________
Name Birth date
_______________________________________________________________________________
Relationship to you
_______________________________________________________________________________
Street
_______________________________________________________________________________
City State ZIP
_______________________________________________________________________________
Social Security #
2. Secondary Beneficiary
_______________________________________________________________________________
Name Birth date
_______________________________________________________________________________
Relationship to you
_______________________________________________________________________________
Street
_______________________________________________________________________________
City State ZIP
_______________________________________________________________________________
Social Security #
Important
Naming a beneficiary(ies) can have estate and tax-planning implications. Also,
if you are married and live in a community property state (AZ, CA, ID, LA, NM,
NV, TX or WA), you may need your spouse's consent to designate someone else as
beneficiary for more than half of your Account. Consult your attorney, or other
qualified professional, for additional advice.
Keep a copy of this account application with your other important papers (such
as your will).
Telephone exchange
The Telephone Exchange Privilege is available only for shares held on deposit
with the Transfer Agent. None of the Transfer Agent, any of the Funds, State
Street Research Shareholder Services, the Investment Manager or the Distributor
will be liable for any loss, injury, damage or expense as a result of acting
upon, and will not be responsible for the authenticity of, any telephone
instructions. I understand that all telephone calls are tape recorded. I am
liable for unauthorized telephone instructions unless reasonable procedures are
not used to confirm that instructions communicated by telephone are genuine.
<PAGE>
Telephone Exchange
by Shareholder or Dealer
The Transfer Agent may effect exchanges for my account according to telephone
instructions from me or my Dealer as set forth in the prospectus, and may
register the shares of the Fund to be acquired exactly the same as my existing
account. Authorizing an exchange constitutes an acknowledgment that Ihave
received the current prospectus of the Fund to be acquired. The account will
automatically have this privilege unless I expressly decline by providing my
initials in the space below.
I DO NOT WANT THE TELEPHONE EXCHANGE PRIVILEGE.
___ (Initial here.)
Sign here to establish the 403(b) Account
I hereby establish a State Street Research 403(b) Account, the terms of which
are contained in this Application and the State Street Research 403(b) Agreement
(which I have received and which is incorporated herein by reference) and
appoint State Street Bank and Trust Company as Custodian. I direct that
contributions to my 403(b) Account be invested as specified above in this
Application (until changed by me in accordance with the Agreement), designate
the individual(s) named above as my beneficiary(ies) (unless I have filed a
separate written designation with the Custodian or its agent), acknowledge that
I have received a current prospectus(es) of the Fund(s) indicated above, and
acknowledge that there is a $10 annual maintenance fee per plan (in addition to
any fees and charges described in the prospectus(es)).
Under penalties of perjury, I certify that (1) the number shown on this
Application is my correct taxpayer identification number (or I am waiting for a
number to be issued to me), and (2) I am not subject to backup withholding
because (a) I am exempt from backup withholding, or (b) I have not been notified
by the Internal Revenue Service that I am subject to backup withholding as a
result of a failure to report all interest or dividends, or (c) the IRS has
notified me that I am no longer subject to backup withholding.
Certification Instructions--You must cross out item (2) above if you have been
notified by the IRSthat you are currently subject to backup withholding because
of underreporting interest or dividends on your tax return.
The Internal Revenue Service does not require your consent to any provision of
this document other than certification required to avoid backup withholding.
_______________________________________________________________________________
Employee signature Date
<PAGE>
Signature Guarantee and Dealer Information
(Complete section (a) or (b) as applicable.)
The undersigned guarantees the signature and legal capacity of the
shareholder.
a. Signature Guarantee (fill out if your dealer does not complete section (b)
below)
__________________________________________________ _________________________
Name of Bank or Eligible Guarantor Street Address
__________________________________________________ _________________________
Authorized Signature of Bank or Eligible Guarantor City State ZIP
b. Dealer Information and Signature Guarantee (for Dealer use only)
______________________________ ______________________________________________
Dealer Name Branch Office Number
______________________________ ______________________________________________
Street Address of Home Office Address of Branch Office Serving Account
______________________________ ______________________________________________
City State ZIP City State ZIP
______________________________ ______________________________________________
Authorized Signature of Dealer Registered Representative's Name and Number
If this application is for an account introduced through the above-named Dealer,
the Dealer agrees to all applicable provisions in this application and in the
Prospectus(es), and represents that it has provided a current Prospectus for
each fund selected to the Applicant and that the application is properly
executed by a person authorized by the Dealer to guarantee signatures. The
Dealer warrants that this application is completed in accordance with the
shareholder's instructions and agrees to indemnify the Fund(s), any other
Eligible Funds, the Distributor, the Investment Manager, State Street Research
Shareholder Services and the Transfer Agent for any loss or liability from
acting or relying upon such instructions and information. The terms and
conditions of the Distributor's currently effective Selected Dealer Agreement or
sales agreement are included by reference in this section. The Dealer represents
that it has a currently effective Selected Dealer Agreement or sales agreement
with the Distributor authorizing the Dealer to sell shares of the Fund(s) and
the other Eligible Funds, and that it may lawfully sell shares of the designated
Fund(s) in the state designated as the Applicant's address of record.
State Street Bank and Trust Company, Custodian
You are hereby authorized and appointed on behalf of the above-signed dealer to
execute purchase transactions in accordance with the terms and conditions of
this Application, and to confirm each purchase.
Acceptance by the Custodian
This Account will be deemed to have been accepted by the Custodian, State Street
Bank and Trust Company, after all necessary forms, properly completed, are
received by State Street Research Shareholder Services and delivered by
Shareholder Services to the Transfer Agent.
Send completed application to:
State Street Research Shareholder Services
P.O. Box 8408
Boston, MA 02266-8408
<PAGE>
[The following 2 pages make up the Salary Reduction Agreement form that is
inserted in the booklet]
[Tab on right edge of page: SALARY REDUCTION AGREEMENT]
State Street Research 403(b)
SALARY REDUCTION AGREEMENT
Parties
Complete the information about the Employee and the Employer.
_______________________________________________________________________________
Employee name Social Security #
_______________________________________________________________________________
Employer name
Check one box.
[ ] Original Agreement [ ] Modification
AGREEMENTS The Employee and the Employer agree as follows:
1. The Employee has signed the State Street Research 403(b) Account Application
establishing the Account for the benefit of the Employee. The Employee and the
Employer are entering into this salary reduction agreement ("this Agreement") to
provide for contributions to the Account.
Fill in the dollar amount or percentage that you want to contribute in
section 2.
2. The Employee requests, and the Employer agrees, to reduce the compensation of
the Employee by $__________ or by ________% per pay period, starting with the
first pay period that begins after the Employee and the Employer have signed
this Agreement.
3. As soon as possible after each pay day, the Employer will transmit the amount
by which the Employee's compensation is reduced for that pay period to the agent
for the Custodian of the Employee's Account, to be credited to the Employee's
Account in accordance with the State Street Research 403(b) Account Agreement.
For federal income tax purposes, such amounts are considered Employer
contributions to the Employee's Account.
Where to send contributions.
Checks should be made payable to "State Street Bank and Trust Company,
Custodian, FBO [insert name of Employee] 403(b) Account." Mail checks to State
Street Research, P.O. Box 8408, Boston, MA 02266-8408.
[State Street Research logo] OVER >
<PAGE>
4. This Agreement will be effective only with respect to compensation not yet
earned by the Employee, and not with respect to compensation already earned by
the Employee on the date this Agreement is signed.
This Agreement is binding and irrevocable with respect to compensation earned by
the Employee while this Agreement is in effect. The Employer or the Employee may
terminate this Agreement at any time with respect to compensation not yet earned
by the Employee at the date of termination, by giving written notice to the
other party. After termination, the Employee may reinstate this Agreement (with
the same or a different salary reduction amount).
The Employee may modify the amount of salary reduction elected in Paragraph 2
above at any time by giving the Employer signed instructions specifying the new
salary reduction amount.
Notwithstanding the preceding two paragraphs, the Employer may impose reasonable
restrictions on the frequency with which the Employee may terminate, reinstate
or modify this Agreement and the number of days of advance notice required. Any
termination, reinstatement or modification will relate only to compensation not
yet earned, and not to compensation already earned, by the Employee as of the
effective date of such termination, reinstatement or modification.
5. Unless the Employer agrees to calculate the Employee's maximum 403(b)
contribution, the Employer has no responsibility for determining that the amount
by which the Employee's compensation is reduced, as set forth in Paragraph 2
above, does not exceed the limitations applicable to the Employee under the
Internal Revenue Code. The Employee agrees to indemnify the Employer, State
Street Research Investment Services, Inc., the State Street Research Funds, and
their affiliates and agents for any and all charges, expenses, taxes, interest
or penalties imposed on the Employer as a result of any reduction in
compensation in excess of such limitations.
Signatures
In witness whereof, the parties hereto have signed this Agreement
on___________________________ ,19_____.
Employee Employer
_________________________________________ ________________________________
(Signature) (Name of employer)
By:________________________________
(Signature and title of
authorized official)
<PAGE>
[Tab on right edge of page: SALARY REDUCTION WORKSHEET]
State Street Research 403(b)
MAXIMUM SALARY REDUCTION WORKSHEET
If your Employer's benefits or personnel department or business office does not
calculate your 403(b) maximum, use this worksheet to compute the maximum amount
by which you can reduce your salary to make 403(b) contributions. This worksheet
covers the main 403(b) rules and limits, but does not cover certain exceptions
and special rules that might permit larger contributions than the main rules. If
your employer will make contributions on your behalf as an addition to your
salary, or if you will contribute by foregoing an increase in compensation,
there are different rules to determine your maximum. Be sure to consult a tax
adviser to help you apply the rules to your personal situation. This worksheet
and the questions and answers following it are not intended to be tax advice.
You are responsible for meeting the tax law limits on contributions to your
403(b) account.
In the example, a college teacher will earn $40,000 in 1996. She will have
worked for the college 15 years at the end of 1996. The college has previously
contributed $20,000 on her behalf to its 403(b) retirement plan. The college
will contribute 10% of her salary ($4,000) to its retirement plan for 1996. In
addition, the employee reduced her salary in prior years by a total of $10,000
for contribution to her 403(b) account. The example shows how much this employee
can reduce her salary for 1996. Use the spaces for your own calculations.
Step 1--Determine Your Exclusion Allowance
(example)(your calculations)
(a) Expected salary for the current year
before reduction for 403(b)
contributions. $40,000 ________
(b) Number of whole and fractional years of
service as of the end of the current
year. 15 ________
(c) Multiply (a) by (b) by .20. $120,000 ________
(d) Your salary reduction contributions and
employer contributions for you to a
403(b) plan or to a tax-qualified plan
in prior years. $30,000 ________
(e) Your employer's contributions for you to
a 403(b) retirement plan for the current
year. $ 4,000 ________
(f) Subtract (d) and (e) from (c). $ 86,000 ________
(g) Multiply your years of service in (b) by
.20 and add 1. 4 ________
(h) Divide (f) by (g) to determine your
exclusion allowance for the year. $ 21,500 ________
Step 2--Determine Your Section 415 Limitation*
(a) Multiply your expected current year
salary (before reduction for 403(b)
contributions) by .20. $8,000 ________
(b) Multiply your employer's expected
current year contributions for you to a
403(b) plan by .80. $3,200 ________
(c) Subtract (b) from (a) to determine your
Section 415 general limitation (but not
in excess of $30,000). $4,800 ________
Step 3--Apply the $9,500 Limit*
Enter $9,500 (reduced by any salary
reduction contributions you make during the
same calendar year to other salary reduction
arrangements, such as a 401(k) plan). $9,500 ________
Step 4--Salary Reduction Agreement
Your maximum salary reduction amount is the smallest of the amounts determined
in Steps 1, 2 and 3. In the example, that amount was $4,800. Enter a salary
reduction agreement with your Employer, which reduces your compensation each pay
period so that the correct amount is contributed to your 403(b) account.
*See questions and answers for alternative ways to calculate the Section 415
limits and possible increases in the $9,500 limit.
[State Street Research logo]
<PAGE>
QUESTIONS AND ANSWERS
on calculating your maximum
1. What is the maximum annual contribution to my 403(b) account?
The maximum contribution you can exclude from your taxable income is the smaller
of your "403(b) exclusion allowance" (Questions 2 and 3) or your "415 limit"
(Question 4). Finally, your salary reduction contributions for a year cannot
exceed $9,500 (Question 5).
2. How do I compute my 403(b) "exclusion allowance"?
Follow these steps (see Step 1 of the worksheet) to compute your 403(b)
exclusion allowance.
(a) Take your expected salary for the current year (before reduction for your
403(b) contributions, but after reduction for salary reduction contributions
under a cafeteria or flexible benefits plan or 401(k) plan if your employer
maintains such a plan).
(b) Multiply (a) by your number of years of service with your current employer
as of the end of the current year, and then multiply the results by .20.
(c) Subtract the following total from (b):
[bullet] your total 403(b) salary reduction contributions in previous years
(which you excluded from your income).
[bullet] your employer's contributions in previous years on your behalf to a
403(b) retirement plan or to a qualified retirement plan, plus your
employer's expected contributions to a 403(b) retirement plan for
you for the current year.
(d) Divide (c) by the sum of one plus 20 percent of your years of service as of
the end of the current year.
The resulting figure is the amount of your exclusion allowance for the
current year.
For Step 1(d) of the worksheet, you need to know how much your employer has
contributed to a tax-qualified plan in prior years for you. If you cannot learn
this from your employer's benefits or personnel office, IRS regulations provide
a way to determine your employer's prior contributions. Consult your employer or
tax adviser for further information.
3. How do I determine my years of service?
Count one year of service for each full year you were a full-time employee.
Count a fraction of a year of service for years in which you were a part-time
employee or did not work a full year. (For additional information, see your
employer or your tax adviser). Add your full and fractional years of service
together to determine your total years of service. Only service with your
current employer can be counted. You may compute your exclusion allowance based
on one year of service even if you have worked for your employer for less than a
year or if your fractional years total less than a year.
4. What is my 415 limit?
Certain limits from Internal Revenue Code section 415 apply even though your
403(b) exclusion allowance for the year is greater. Section 415 has a general
limit and certain alternatives that may permit a larger 415 maximum.
Your 415 general limit is the smaller of (a) or (b) (see Step 2 of the
worksheet).
(a) 20 percent of your compensation for the year (before reduction for
contributions to your 403(b) account, but after reduction for salary
reduction contributions under any cafeteria or flexible benefits plan or
401(k) plan your employer maintains); this amount must be reduced by 80% of
your employer's contribution for the year to the 403(b) retirement plan; or
(b) $30,000. (This $30,000 figure will eventually be indexed for cost-of-living
changes. However, the indexing will not begin for some years depending on
future inflation.)
There are three section 415 alternative limits, which are available only to
employees of an educational organization, a hospital, a home health service
agency, a health and welfare service agency, or a church or association of
churches. If you do not work for such an employer, the alternatives do not apply
to you.
<PAGE>
Only one alternative may be used; in other words, if you elect to use one of the
alternatives in a year, you may not use either other alternative in any other
year. This means that choosing an alternative is an important decision.
The specific limits available under the different alternatives and the rules for
electing an alternative are complex. Consult your employer or your tax adviser
for additional information.
5. How does the $9,500 limit work?
Your salary reduction contributions for any calendar year are limited to $9,50 0
(indexed for future cost-of-living increases). This $9,500 cap applies as a
maximum salary reduction contribution even though your 403(b) exclusion
allowance or 415 limit is higher. This cap applies only to salary reduction
contributions, including your contributions to another 403(b) or 401(k) plan,
not to employer contributions to a 403(b) retirement plan for you.
An increased cap is available to certain employees who meet two requirements.
First, your employer must be one of the types listed in Answer 4 (eligibility
for 415 alternatives). Second, you must have 15 or more years of service with
your employer. If you qualify, consult your employer or tax adviser for more
information.
6. If for the current year my employer or any other employer contributes to
another 403(b) account or annuity for me, must such contributions be added to
my salary reduction contributions when determining my maximum contribution?
Yes. To determine your 403(b) exclusion allowance, your 415 limit or one of the
alternatives, your employer's current contributions to a 403(b) plan or
arrangement for you must be included. (See the worksheet for an example of this
situation). If your employer has a retirement plan, you should find out whether
it is a 403(b) plan.
7. If for the current year my employer makes contributions for me to a
retirement plan that is "qualified" under section 401(a) of the Code must
such contributions be counted when determining my maximum contributions?
The rules governing the limits for combinations of plans are very difficult and
can easily be violated unless you have expert professional guidance. This is
especially important if you "control" another employer (by owning a 50% or
greater interest), for example your own consulting business, which maintains a
plan covering you in addition to your employer's 403(b) plan.
<PAGE>
State Street Research 403(b)
ACCOUNT AGREEMENT [State Street Research logo]
Article 1: Introduction
1.1 Establishment of Account. This Agreement is intended to establish a 403(b)
Custodial Account meeting the requirements of Code Section 403(b)(7) and any
other applicable requirements of the Code or ERISA. This Agreement and the
Application will be interpreted and administered so as to carry out such intent.
The Application signed by the Employee and accepted by the Custodian (or its
agent) and this Agreement (which is incorporated by reference into the
Application), as either may be amended from time to time, are the legal
documents governing the Account.
1.2 Effective Date. This Agreement will become effective on the date on which
the Custodian accepts the Application signed by the Employee. Such acceptance
may be indicated in writing by the Custodian (or its agent) or by the
Custodian's opening the Account for the benefit of the Employee. The Account
will be opened on the date, coinciding with or after the date when this
Agreement is effective, when the Custodian receives and accepts a contribution
to the Account.
Article 2: Definition
2.1 Account or Employee's Account means the account established and maintained
by the Custodian under this Agreement for the benefit of the Employee.
2.2 Agreement means this State Street Research 403(b) Account Agreement, as it
may be amended from time to time.
2.3 Application means the State Street Research 403(b) Account Application
signed by the Employee as it may be amended from time to time.
2.4 Code means the Internal Revenue Code of 1986, as it may be amended from time
to time or any successor statute enacted in lieu thereof. Reference to any
provision of the Code includes reference to a similar provision in a successor
Statute.
2.5 Custodian means the Custodian named in the Application as Custodian, and any
party serving as successor Custodian in accordance with this Agreement.
2.6 Employee means the individual who is employed by the Employer and who signed
the Application.
The Employee must be an employee of an employer described in subsection 2.7(a),
or an employee of an employer described in subsection 2.7(b) who performs
services for an educational organization (as defined in Code Section
170(b)(1)(A)(ii)).
2.7 Employer means the Employer of the Employee. The Employer must be:
(a) an organization described in Code Section 501(c)(3) exempt from taxation
under Code Section 501(a), or
(b) a state, political subdivision of a state, or an agency or
instrumentality of a state or political subdivision of a state.
2.8 ERISA means the Employee Retirement Income Security Act of 1974, as it may
be amended from time to time.
2.9 Fund or Funds means one or more mutual funds designated from time to time by
the Sponsor as available for investment by the Account under this Agreement,
provided however that shares of the Fund may legally be offered for sale in the
state where the Employee resides.
2.10 Sponsor means State Street Research Investment Services, Inc., or its
successor.
Article 3: Contributions To Account
3.1 Establishment of Account. The Custodian will open and maintain the Account
in the name of the Employee. The Employee's interest in the Account will be
nonforfeitable at all times.
3.2 Contributions to Account.
(a) Salary Reduction Contributions. The Employee and the Employer may enter
into a salary reduction agreement, and the Employer will contribute to
the Employee's Account all amounts by which the Employee's salary is
reduced under such salary reduction agreement. Any salary reduction
agreement between the Employer and the Employee will be effective only
as to amounts earned by the Employee after such agreement becomes
effective. A salary reduction agreement may not be retroactively revoked
or modified with respect to amounts already earned by the Employee.
Either the Employee or the Employer may terminate a salary reduction
agreement at the end of any payroll period, and such agreement will not
apply to compensation subsequently earned by the Employee. The Employee
may modify his salary reduction agreement at any time, but such
modification will be effective only with respect to amounts earned by
the Employee after the effective date of the modification.
Contributions on behalf of the Employee pursuant to a salary reduction
agreement for any calendar year may not exceed the amount specified in
Code Section 402(g).
(b) Employer Contributions. The Employer may make contributions to the
Account other than under a salary reduction agreement with the Employee.
(c) Transfers or Rollovers. The Employee may by appropriate instructions
direct a transfer or direct rollover to the Account from an existing
custodial account described in Code Section 403(b)(7) or any annuity
contract described in Code Section 403(b)(1). Transfers must be in cash.
The Custodian will accept cash rollover contributions from the Employee
provided such amounts constitute rollover amounts under Code Section
403(b)(8) or rollover contributions under Code Section
408(d)(3)(A)(iii).
Transfers or rollovers will be accepted only if the Employee verifies
that the 403(b) account or annuity from which the transfer or rollover
is being made does not contain withdrawal or distribution restrictions
that are more restrictive than those contained herein. The Employee will
be responsible for insuring such a transfer or rollover satisfies the
applicable provisions of the Code in order to be a tax-free transaction.
Article 4:Investment Of Contributions
4.1 Purchase of Shares. As soon as is practicable after the Custodian receives a
contribution under Section 3.2, it will invest such contribution in shares or
fractional shares of one or more Funds in accordance with the Employee's
investment instructions. The Account may be invested in the shares of more than
one Fund provided that any applicable minimum investment requirements are met.
The Employee's initial investment instructions for the investment of
contributions to his Account will be specified in the Application for the
Account, and such instructions will remain in effect until the Custodian
receives new instructions, in writing or (if permitted)by telephone or other
electronic means, acceptable to the Custodian. If any instructions received by
the Custodian are incomplete or ambiguous in the judgment of the Custodian, the
Custodian may continue to invest contributions to the Account in accordance with
the Employee's most recent investment instructions (if any) until such
incompleteness or ambiguity has been resolved to the Custodian's satisfaction;
alternatively, the Custodian may return any contributions received for the
Employee's Account or may hold such contributions in a money market fund or
uninvested until such incompleteness or ambiguity has been resolved. In either
event, the Custodian will have no liability for interest or for loss or changes
in investment values of Fund shares which occur.
<PAGE>
Any shares of a Fund held hereunder for the Employee's Account may be registered
in the name of the Custodian or its nominee and will be held in uncertificated
form.
4.2 Reports and Voting of Securities. The Custodian will deliver to the
Employee or, if applicable, his or her Beneficiary, all notices or reports to
shareholders, prospectuses, financial statements, proxies and proxy solicitation
materials received by it with respect to shares of a Fund held in the Employee's
Account. The Custodian will vote shares in accordance with the timely
instructions of the Employee (or, if applicable, Beneficiary) as expressed in a
proxy, if received. If no timely instructions are received from the Employee (or
Beneficiary), the Custodian may vote such shares in such manner as it deems
appropriate, including "present" or in accordance with the instructions of the
Sponsor (provided that the Custodian will not take any action with respect to
voting which would render it an "affiliated person" as defined in the Investment
Company Act of 1940, as amended).
4.3 Dividends. The Custodian will invest all dividends and capital gains or
other distributions received on the shares of a Fund held in the Account in
additional shares and fractional shares of that Fund.
4.4 Change of Investments. Subject to any minimum investment requirement
applicable to a Fund, an Employee (or his or her Beneficiary, if the Employee is
deceased) may at any time direct the Custodian to exchange all or a specified
portion of the shares of a Fund in the Employee's Account for shares and
fractional shares of one or more other Funds.
The Employee (or Beneficiary) shall give such directions, by written or (if
permitted) telephonic notice or other electronic means, acceptable to the
Custodian, and the Custodian will process such directions as soon as practicable
after receipt thereof. If any such exchange instructions are incomplete or
ambiguous in the judgment of the Custodian, the Custodian may refrain from
carrying out any exchange until such incompleteness or ambiguity has been
resolved to its satisfaction, without liability for any loss or change in
investment values which occur.
Any sales or redemption fee or other charge payable in connection with such
exchange will be paid from the Employee's Account.
Article 5: Withdrawals
5.1 Instructions to Custodian. The Custodian will process written directions
from the Employee to make withdrawals. However, the Employee must insure that
withdrawals directed by the Employee comply with the requirements of this
article. No withdrawals will be processed upon the death of the Employee unless
the Custodian has been notified in writing of the Employee's death, and the
Custodian has been provided with verification of such death and of the due
authority of the person requesting the withdrawal which is adequate in the
Custodian's opinion.
5.2 Withdrawals by Employee. The Employee may make withdrawals from his Account
at the time(s) directed by the Employee on a form filed with the Custodian,
subject to the provisions of this section.
(a) Events Permitting Withdrawal. No withdrawal may be made before the
earliest of:
(i) the date the Employee reaches age 59-1/2;
(ii) the date the Employee terminates service with the Employer for any
reason, including retirement;
(iii) the date the Employee becomes disabled; as used in this subsection
(iii), "disabled" means unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental
impairment which can be expected to result in death or to be of
long-continued and indefinite duration; the Custodian may require the
Employee to furnish a certificate of a licensed physician stating that
the Employee is so disabled or may require the Employee to provide
satisfactory evidence that the Employee has been awarded Social
Security disability benefits before processing any withdrawals on
account of the Employee's disability; or
(iv) the date the Employee encounters financial hardship within the meaning
of Code Section 403(b)(7)(A)(ii); before processing a hardship
withdrawal, the Custodian may require the Employer to provide a
certificate of an independent person appointed by the Employer,
stating that the Employee has a financial hardship and the amount
needed to meet the financial hardship, or the Custodian may rely upon
the representations and statements of the Employee. Hardship
withdrawals are limited to the Employee's salary reduction
contributions (no earnings).
(b) Withdrawal of Excess Contributions or Deferrals. If for any taxable
year, contributions to the Employee's Account include an amount that
is an excess contribution under Code Section 4973, the Employee may
notify the Custodian to pay such amount (plus earnings) to the Em
ployee and the Custodian will process such withdrawal. Alternatively
the Employee may designate such amount as a contribution for a
subsequent taxable year.
If, on or before March 1 following the close of a calendar year, the Employee
notifies the Custodian in writing that an amount in the Account constitutes a
deferral (including salary reduction contributions) in excess of the limit set
forth in Code Section 402(g) (generally, $9,500, indexed as provided in such
Code section) and requests to withdraw such amount (plus earnings), the
Custodian will process such withdrawal and pay such amount (and any earnings
allocable to such amount) on or before the next following April 15.
(c) Required Start of Withdrawals. An Employee must begin taking
withdrawals from his Account no later than the April 1 of the year
following the year in which the Employee reaches age 70-1/2 or
(effective January 1, 1997), if later, the Employee's date of
retirement from the Employer, in accordance with the minimum
withdrawal rules applicable to 403(b) custodial accounts (compliance
with such rules is the responsibility of the Employee or Beneficiary).
5.3 Form of Distribution. The Employee may elect to receive the assets of his
Account in cash or in shares, in either or any combination of the following
forms (as directed by the Employee):
(a) a single sum;
(b) in monthly, quarterly or annual installment payments over a period
certain specified by the Employee, but not exceeding the life
expectancy of the Employee or the joint life and last survivor
expectancy of the Employee and his designated beneficiary or such
shorter period as is necessary to meet any applicable minimum
distribution requirement under Code Section 403(b)(10) and regulations
thereunder. The life expectancy of the Employee or the joint life and
last survivor expectancy of the Employee and his designated
beneficiary will be determined at the time of the first mandatory
distribution from the Account; life expectancies of the Employee and
his spouse will not be recalculated annually thereafter (unless the
Employee or spouse elects to recalculate--which election may be made
by calculating the amount of the required withdrawal using
recalculated life expectancies). Only life expectancies of the
Employee or spouse (not any other Beneficiary) may be recalculated.
Life expectancies will be determined in accordance with applicable
regulations. If the Employee elects to receive installments in
accordance with this subsection (b), the amount of any installment
will be calculated by dividing the value of the assets in the Account
by the number of installments remaining in the specified period
certain.
The Custodian will not be required to make any distributions, in the absence of
written instructions from the Employee. However, if the Employee does not make
an election specifying the form of payment within the prescribed time, the
Custodian may either assume that the Employee is satisfying all applicable
requirements through withdrawals from another 403(b) account or annuity, or may
distribute the assets of the Employee's Account to the Employee beginning as
soon as practicable thereafter in annual installments for ten years or, if
shorter, for the number of years in the Employee's life expectancy.
5.4 Distributions at the Employee's Death. At the Employee's death,
distributions will be made in the form elected by the Beneficiary unless the
Employee has specified the form of distribution. The Beneficiary must notify the
Custodian in writing of the Employee's death and provide such evidence of the
Employee's death as the Custodian requests. To the extent the Beneficiary may
elect the form of distribution, the Beneficiary must provide written notice to
the Custodian listing the date on which distribution will commence, and the
manner in which and the period over which distribution will be made. Any form of
distribution must comply with the following requirements, and it is the
responsibility of the Beneficiary (or other person directing distributions) to
insure that all distributions do so comply:
(a) Death While Receiving Withdrawals Under An Installment Program. If the
Employee had already begun taking withdrawals in a program of periodic
installments from the Account after the required beginning date, the
balance remaining in the Account at the time of the Employee's
<PAGE>
death must continue to be withdrawn at least as rapidly as under the
installment schedule in effect at the time of the Employee's death.
(b) Death Before Starting Required Installment Withdrawals.
(i) If the Employee dies before starting to take installment
withdrawals from the Account or before the required beginning
date, and the Employee's spouse is not the Beneficiary, the
Employee's Account must be withdrawn by the Beneficiary either (A)
within five years after the Employee's death, or (B) if the
Beneficiary was designated by the Employee and withdrawals by the
Beneficiary begin within one year after the Employee's death, in
substantially equal annual or more frequent installments over a
period not exceeding the life expectancy of the Beneficiary (as
determined as of the date of the Employee's death using applicable
regulations).
(ii) If the Employee dies before starting to take installment
withdrawals from the Account or before the required beginning
date, and the Em ployee's spouse is the Beneficiary, the
Employee's entire Account must be distributed to the Employee's
spouse either (A) within five years after the Employee's death, or
(B) in substantially equal annual or more frequent installments
over a period not longer than the spouse's life expectancy as
determined as of the time distribution is commenced (without
annual recalculation thereafter unless the spouse elects to
recalculate), using applicable regulations, provided that
withdrawals under this clause (B) must begin on or before the
later of the date on which the Employee would have attained age
70-1/2 or one year after the Employee's death.
5.5 Incompetent Recipient. If an amount is payable to a person known by the Cus
todian to be a minor or under a legal disability, the Custodian may, in its ab
solute discretion, pay all or any part of such amount to (a) a parent of such
person, (b) the guardian, committee or other legal representative, wherever
appointed, of such person, including a custodian for such person under a Uniform
Gifts to Minors Act or similar act, (c) any person having the control and
custody of such person, or (d) to such person directly.
5.6 Distributions Pursuant to Domestic Relations or Other Court Orders. Where
required by law, the Custodian will make payments pursuant to any "qualified
domestic relations order" (as defined in ERISA) or any other domestic relation s
or other order issued by a court having authority over the Account, where
applicable. The Employer will determine whether any domestic relations order m
eets the requirements of a qualified domestic order and will notify the
Custodian.
The Employee will direct the Custodian whether or not to contest or defend
against any such order and the Custodian will do so, provided that the Custodian
will have no responsibility to so contest or defend unless it has first been
indemnified to its satisfaction by the Employee against its costs, expenses
(including attorney's fees) and other liabilities arising therefrom.
5.7 Withdrawals Payable in Cash or in Shares. All withdrawals will be paid in
cash or in shares of one or more Funds, as designated in writing by the Employ
ee or Beneficiary. When required to pay a withdrawal in cash, the Custodian will
redeem sufficient shares of one or more Funds in the Employee's Account t o
provide the amount necessary; any such redemptions will be in accordance with
the Employee's instructions (or, in the absence of such instruction, in
proportion to the value of the shares of each Fund held in the Account). Payment
in shares will be carried out by reregistering the appropriate number of shares
in the name of the Employee.
5.8 Transfer of Account. At the written direction of the Employee, the Custod
ian will redeem a portion or all of the shares of one or more Funds in the
Employee's Account and will transfer the cash received, less any charges, to the
custodian or insurer of another custodial account or annuity contract esta
blished for the benefit of the Employee under Code Section 403(b) or to the
trustee or custodian of a rollover individual retirement account specified by
the Employee. Neither the Custodian nor the Sponsor will have any responsibili
ty to determine whether such other custodial account or annuity contract or
individual retirement account or annuity meets the requirements of Code Section
403(b) or 408 or whether the transfer or rollover will constitute a tax-free
transaction.
5.9 Loans. Loans may be made to Employees on the following basis:
(a) Upon receipt of a properly completed and signed written application and
promissory note payable to the Custodian from the Employee, the
Custodian may make a loan to the Employee from his or her Account. The
minimum loan will be $1,000, or such smaller amount as the Custodian may
specify in its rules and procedures for loans. In no event will the
total of any outstanding loan or loans to the Employee exceed the lesser
of $50,000 or 50% of the balance of his or her Account. The $50,000
limitation is reduced by the excess, if any, of the highest outstanding
balance of loans from the Account during the one-year period ending on
the day before the date of the current loan over the outstanding balance
of loans from the Account on the date of the current loan. All loans
will be secured by one-half of the Employee's Account balance. Interest
and principal repayments on the loan will be credited to the Employee's
Account and will be invested in shares and fractional shares of one or
more Funds in accordance with the Employee's investment instructions
under Section 4.1 in effect at the time each loan repayment is received
by the Custodian.
(b) All loans from the Employee's 403(b) Account will bear a reasonable rate
of interest; and the manner of determining such reasonable interest rate
may be specified in the Custodian's rules and procedures.
(c) If Section 12.2 is applicable, loans will be made available to all
Employees on a reasonably equivalent basis.
(d) Any loan or loans to an Employee from his or her 403(b) Account will be
repaid by the Employee over a specified period of time, in the form and
manner specified in the Note signed by the Employee, but in no event
over a longer period than five years from the date of borrowing. Any
loan must be amortized on a substantially level basis with payments not
less frequently than monthly. In the event the Employee does not repay
all or a portion of the principal amount on such loan within the time
prescribed, he or she will continue to be liable for any balance on the
loan not paid in addition to interest owed on principal payments not
made. Any default in the payment of principal or interest on a loan from
the Employee's account will reduce the amount available in such Account
for distribution to the Employee (or the Employee's beneficiary in the
event of the Employee's death). In addition, any default which is not
cured within the period of time provided in the Custodian's rules and
procedures will be treated as a taxable distribution to the Employee (or
beneficiary, if applicable).
(e) The Custodian may prescribe such rules and procedures as are deemed
proper in order to administer the provisions of this Section 5.9, and
reserves the right to charge an administration fee for processing and
maintaining such loans.
5.10 Direct Rollovers. Notwithstanding any provision of this Agreement to the
contrary that would otherwise limit a distributee's election under this section,
effective for distributions or withdrawals from the Employee's Account on or
after January 1, 1993, a distributee may elect (at the time and in the manner
specified by the Custodian) to have any portion of an eligible rollover
distribution paid directly to an eligible retirement plan specified by the
distributee in a direct rollover.
For purposes of this section, the following terms have the meaning given.
(a) Eligible rollover distribution means any withdrawal or distribution of
all or any portion of the amount in the Employee's Account, except that
an eligible rollover distribution does not include: any withdrawal or
distribution that is one of a series of substantially equal periodic
payments (not less frequently than annually) made for the life (or life
expectancy) of the distributee or the joint lives (or joint life
expectancies) of the distributee and the distributee's designated
beneficiary, or for a specified period of ten years or more; any
withdrawal or distribution to the extent such distribution is required
under Code Section 403(b)(10); and the portion (if any) of any
withdrawal or distribution that is not includable in gross income.
(b) Eligible retirement plan means an individual retirement account
described in Code Section 408(a), an individual retirement annuity
described in Code Section 408(b), or an arrangement described in Code
Section 403(b), that accepts the distributee's eligible rollover
distribution. However, in the case of an eligible rollover distribution
to the surviving spouse, an eligible retirement plan is an individual
retirement account or individual retirement annuity.
(c) Distributee means the Employee. In addition, the Employee's surviving
spouse and the Employee's spouse or former spouse who is the alternate
payee under a qualified domestic relations order, as defined in Code
Section 4l4(p) (if applicable), are distributees with regard to the
interest of the spouse or former spouse.
(d) Direct rollover means a payment from the Employee's account to the
eligible retirement plan specified by the distributee.
Article 6: Custodian
6.1 Duties. The Custodian will perform the following duties related to the
administration of the Employee's Account:
(a) Receive contributions under Section 3.2 (or, if applicable, loan
repayments), invest such contributions (or repayments) in shares of one
or more Funds in accordance with the Employee's investment instructions,
and credit such shares to the Employee's Account;
(b) Maintain custody of the assets in the Account;
(c) Collect income and reinvest such income as provided in this Agreement;
(d) Execute orders for purchase, sale or exchange of shares of Funds in
accordance with the Employee's instructions and make settlements in
accordance with general practice;
(e) Maintain records of all transactions in the Account;
(f) Not less frequently than annually, provide the Employee appropriate
statements of the Account showing all transactions of the Account;
(g) File with the Internal Revenue Service and/or any other government
agency such returns, reports, forms, and other information as may be
required of it as Custodian;
(h) Perform such other duties and services as may be necessary under this
Agreement.
The Custodian may appoint one or more agents, attorneys or contractors,
including the Sponsor (or a contractor or affiliate of the Sponsor), to carry
out any of its duties hereunder.
6.2 Share Redemptions. If cash is needed to pay taxes, fees, or other expenses
properly chargeable to the Account or to make payments to the Employee or his
Beneficiary under Article 5, the Employee (or Beneficiary, if applicable) will
instruct the Custodian in writing (or, if applicable, by telephone or other
electronic means) which Fund should be redeemed or sold if the Account is
invested in more than one Fund. In the absence of such written instructions, the
Custodian will redeem shares of all Funds in the Account in proportion to the
value of the shares of each such Fund held in the Account.
6.3 Limitations on Liabilities and Duties.
(a) The Custodian will be fully protected in acting in accordance with and
in reliance upon any document, order or other direction believed by the
Custodian to be genuine and properly given. Conversely, the Custodian
will be fully protected in not acting in the absence of proper
instructions or when it believes that any document, order or other
direction either is not genuine or was not properly given.
(b) To the extent permitted by law, 30 days after providing to the Employee
any statement (whether required under Section 6.1(f), or otherwise), the
Custodian will be released and discharged from all liability to the
Employee and any other person as to the matters contained in such
statement unless the Employee files written objections with the
Custodian within such 30-day period.
(c) The Employee (or Beneficiary) will be solely responsible for his
investment directions and the selection of Fund(s). The Custodian and
the Sponsor will not be under any fiduciary duty to the Employee (or
Beneficiary) with respect to the selection of investments (or otherwise)
or be liable for any loss or diminution in value incurred on account of
a selected investment.
(d) Neither the Custodian nor the Sponsor will have any responsibility for
determining the proper amount of any contribution or for collecting any
contribution (or, if applicable, loan repayment) from the Employer or
the Employee. Neither will have any responsibility for determining
whether the amount of any contribution is within any applicable
limitation under the Code. The Employee will have sole responsibility
for the computation of the Employee's exclusion allowance under Code
Section 403(b)(2), the limitation(s) on contributions under Code Section
415(c), any election available to the Employee under Code Section 415,
any limit on elective deferrals (including salary reduction
contributions) under Code Section 402(g), and all matters relating to
any tax consequences with respect to contributions, earnings,
withdrawals, loans or loan repayments, transfers or rollovers to or from
the Account (whether on account of the amount or time thereof or
otherwise).
(e) Neither the Custodian nor the Sponsor will be responsible for
determining the propriety, amount or timing of any withdrawal by the
Employee (or Beneficiary); in particular, neither the Custodian nor the
Sponsor will be responsible for compliance with the minimum withdrawal
rules of Code Section 403(b)(10) and will be entitled to assume that the
Employee (or Beneficiary) is satisfying such requirements from another
403(b) arrangement if the Employee (or Beneficiary) does not comply with
such requirements by withdrawals from the Account.
(f) The Custodian will not be required to carry out any instructions not
given in accordance with this Agreement. Neither the Custodian nor the
Sponsor will be liable for loss of income, or for appreciation or
depreciation in share value resulting from the Custodian's failure to
follow instructions not given in accordance with this Agreement.
(g) The Custodian will have no responsibility to pay any withdrawal unless
directed by the Employee or Beneficiary and unless the Employee's or
Beneficiary's written withdrawal instructions state the reason for the
withdrawal and contain all signature guarantees and other documents
(including proof of any legal representative's authority) requested by
the Custodian.
(h) Neither the Custodian nor the Sponsor will have any liability to the
Employee or Beneficiary for any tax penalty or other damages resulting
from any inadvertent failure by the Custodian to pay a withdrawal when
requested.
(i) To the extent permitted by law, the Employee agrees to indemnify the
Custodian, Sponsor and Funds ("Indemnitees") and hold them harmless from
any and all liability whatsoever which may arise either (i) in
connection with this Agreement and the Employee's Account (except
liability arising from the gross negligence or willful misconduct of any
Indemnitee) or (ii) with respect to making or failing to pay any
withdrawal, other than for failure to make any distribution in
accordance with instructions therefor which are in full compliance with
this Agreement.
(j) The Custodian will not be obligated to commence or to defend a legal
action or proceeding in connection with this Agreement unless the
Custodian agrees to do so and is indemnified to its satisfaction.
(k) Neither the Employer nor the Sponsor will have any responsibility or
liability for any acts or omissions of the Custodian hereunder.
6.4 Compensation. The Custodian will receive the fees specified in its then c
urrent fee schedule. The Custodian may substitute a revised fee schedule from
time to time upon 30 days written notice to the Employee. The Custodian will be
entitled to such reasonable additional fees as it may from time to time
determine for services required of it in addition to those reflected in the fee
schedule.
6.5 Resignation and Removal. The Custodian may resign by giving at least 30 d
ays written notice to the Employee at his last known address as shown on the
Custodian's records. The Sponsor may remove the Custodian hereunder by giving at
least 30 days written notice to the Custodian and the Employee at his last known
address as shown on the records of the Custodian or Sponsor. In each case, the
Sponsor will designate a successor custodian which successor custodian accepts
such appointment. Any Custodian appointed hereunder must be a bank or other
person who meets the requirements of Code Section 401(f)(2). If the Sponsor
fails to appoint a successor custodian in accordance with the preceding two
sentences, the Custodian may do so, or will have the right to apply to a court
of competent jurisdiction for the appointment of a successor.
On the effective date of its resignation or removal, the incumbent Custodian
will transfer to the successor custodian the assets and records (or copies
thereof) of the Account; provided, however, that the Custodian may retain
whatever assets it deems necessary for payment of its fees, costs, expenses,
compensation, and any other liabilities which constitute a charge on or against
the assets of the Account or on or against the Custodian.
<PAGE>
Article 7: Fees, Taxes, And Other Expenses
Any income or other taxes that may be levied or assessed upon the Account
(including any transfer taxes incurred in connection with the investment and
reinvestment of Account assets), expenses, fees and administrative costs
incurred by the Custodian in the performance of its duties (including fees for
legal services rendered to the Custodian), and the Custodian's compensation
under Section 6.4, will constitute a charge upon the assets of the Account. If
not paid by the Employee within 30 days after being billed therefor by the
Custodian, the Custodian will withdraw such fee, tax or expense from the Account
and may redeem sufficient shares of any Fund held in the Account to effect such
payment without liability for any loss incurred thereby.
Article 8: Protection Of Account
Except as specifically
permitted hereunder, no part of the Account will be used for purposes other than
for the exclusive benefit of the Employee. No right or benefit under this
Agreement will be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, or charge, and any attempt at such
will be void. No right or benefit hereunder will be subject to the debts,
contracts, liabilities, engagements or torts of the person who is entitled to
such right or benefit, and no such right or benefit shall be subject to
attachment or legal process for or against such person. However, the Custodian
will carry out the requirements of any qualified domestic relations or other
court order relating to the Account.
Article 9: Beneficiary Designation
Each Employee may submit to the Custodian a signed written designation of bene
ficiary acceptable to the Custodian. Any such designation of beneficiary will be
effective when filed with the Custodian during the Employee's lifetime. Whether
or not fully dispositive of the Account, the most recently filed designation of
beneficiary accepted by the Custodian will revoke all previously filed
designations. Any amount payable as a result of the Employee's death that is not
disposed of by a designation of beneficiary, for any reason whatsoever, will be
paid to the Employee's estate. If a Beneficiary dies while receiving
distributions, the portion of the Account to which the Beneficiary would have
been entitled (had he or she survived) shall be paid to the Beneficiary's
beneficiary or beneficiaries (or to the Beneficiary's estate) in a lump sum
within 90 days after the Custodian receives notification and evidence acceptable
to it of the Beneficiary's death.
Article 10: Amendment
10.1 Amendment. The Sponsor may amend this Agreement in its entirety or any por
tion thereof. The Sponsor will provide copies of such amendment to the Employer
and/or Employee. Nothing in this Agreement will impose on the Sponsor an
affirmative obligation to amend the Agreement.
10.2 Limitations. No amendment will be made:
(a) Which would cause or permit any part of the Account to be diverted to
purposes other than for the exclusive benefit of the Employee (or
Beneficiary), or cause or permit any portion of such assets to revert to
or become the property of the Employer,
(b) Which would increase the duties or responsibilities of the Custodian
without its written consent, or
(c) Which would retroactively deprive any Employee of any benefit to which
he or she was entitled under the Agreement, unless such amendment is
necessary, in the opinion of counsel to the Sponsor, to conform the
Agreement to, or satisfy the conditions of, Code Section 403(b) or any
other applicable law.
Article 11: Termination
11.1 Automatic Termination on
Distribution. This Agreement will terminate when all the assets held in the
Account have been distributed or otherwise transferred out of the Account.
11.2 Termination on Disqualification. This Agreement will terminate if, after
notification by the Internal Revenue Service that the Employee's Account does
not qualify under Code Section 403(b)(7), the Sponsor does not make such
amendments as are necessary to so qualify the Account. On such termination of
this Agreement, the Custodian will distribute all assets in an Account to the
Employee or, in the event of the Employee's death, to the Beneficiary, subject
to the Custodian's right to reserve funds as provided in Section 6.5.
11.3 Survival of Indemnification. Notwithstanding Sections 11.1 and 11.2,
Section 6.3(i) will survive the termination of this Agreement.
Article 12: Miscellaneous
12.1 Applicable Law. This Agreement will be construed, administered and
enforced in accordance with the laws of the Commonwealth of Massachusetts.
Any action concerning the Account or this Agreement must be brought in a state
or federal court located in such Commonwealth.
12.2 Employer Plan. In any instance where the Account is part of an employee
pension benefit plan within the meaning of Section 3(2) of ERISA (and
regulations thereunder) maintained by the Employer, the following provisions
will apply:
(a) The Employer will be the "plan administrator" within the meaning of
ERISA and will be responsible for compliance with the reporting and
disclosure and other responsibilities imposed on the plan administrator
under ERISA.
(b) If the Employee is married on the date that any distributions are made
from the Account to the Employee, such distribution will be made by
purchasing an annuity contract from an insurance company and
distributing such contract to the Employee; the form of payment under
such contract will meet the requirements of a joint and survivor annuity
under Section 205 of ERISA. However, the preceding sentence will not
apply if the Employee elects another form of payment permitted under
Section 5.3 of this Agreement and the Employee's spouse consents thereto
in writing. Notifications concerning such an election and consent by the
Employee's spouse will be in accordance with Section 205 of ERISA and
regulations thereunder.
If an Employee dies before the commencement of distributions to the Em
ployee from the Account, the Beneficiary will be the Employee's spouse
if the Employee is married, and the form of payment to the spouse will
be the purchase from an insurance company and delivery to the spouse of
an annuity contract providing for periodic payments to the spouse for
the spouse's lifetime. However, the Employee may designate a different
Beneficiary or the Employee or spouse may designate a different form of
payment provided that the notifications and procedures for spousal
consent under Section 205 of ERISA and regulations thereunder are
complied with.
No loan under Section 5.9 will be made from the Account in the case of a
married Employee unless the Employee's spouse consents to the loan.
(c) The plan administrator will determine whether any domestic relations
order purporting to award all or any portion of the Account to anyone
other than the Employee is a "qualified domestic relations order"within
the meaning of Section 206 of ERISA.
(d) The limitation provided in the third paragraph of Section 3.2(a) will be
applied taking into account salary reduction contributions on behalf of
the employee under all plans or arrangements maintained by the Employer.
(e) Contributions to an Employee's Account must be in accordance with the
plan document adopted by the Employer (which may be a separate plan
document, or may be this Agreement with such additional provisions
relating to eligibility, participation, contributions and other matters
as the Employer may adopt); the Employer will be responsible for the
plan's compliance with all applicable provisions (including those
relating to nondiscrimination) of the Code and ERISA.
12.3 Change of Address. The Employer or the Employee will notify the Custodian
in writing of any change of address within 30 days of such change.
12.4 Notice. Any notice from the Custodian or Sponsor to the Employee under this
Agreement will be effective when sent by U.S. mail to the address of the
Employer or Employee as then shown on the Custodian's or Sponsor's records. Any
notice to the Custodian under this Agreement will be by first class mail
addressed to its home office.
12.5 Successors. This Agreement will be binding upon and inure to the benefit of
the successors in interest of the parties hereto.
12.6 Separability. If any provision of this Agreement is held invalid or illegal
for any reason, such determination will not affect any remaining provisions of
this Agreement, but this Agreement will be construed and enforced as if such
invalid or illegal provision has never been included in this Agreement.
<PAGE>
[Graphic: Window slightly open]
<PAGE>
[State Street Research logo]
A MetLife Company
This brochure must be preceded or accompanied by the relevant fund
prospectus(es), which include(s) investment policies, sales charges and
expenses. Please read the prospectus(es) carefully before investing.
Control Number: 3494-961107(1297) SSR-LD 403B-447E-1096
#
Exhibit (15)(b)
STATE STREET RESEARCH SECURITIES TRUST
One Financial Center
Boston, MA 02111
August 19, 1996
State Street Research Investment
Services, Inc.
One Financial Center
Boston, Massachusetts 02111
Ladies and Gentlemen:
This letter is to confirm to you that the Plan of Distribution Pursuant
to Rule 12b-1 dated as of May 16, 1994 (the "Plan") adopted by State Street
Research Securities Trust (the "Trust") shall apply to State Street Research
Strategic Income Fund (the "Fund") as a "Series" thereunder and under the terms
set forth in the then current prospectus and statement of additional information
of the Fund, as from time to time amended. No approval of the Plan in respect of
the Fund shall be required (a) on behalf of any initial public shareholders, or
(b) on behalf of any other initial shareholders if so determined by the
Securities and Exchange Commission in its Release IC-21660, January 5, 1996.
Please indicate your acceptance of the above in accordance with the
terms of the Plan by signing this letter as indicated below.
The term "State Street Research Securities Trust" means and refers to
the Trustees from time to time serving under the Master Trust Agreement ("Master
Trust Agreement") of the Trust dated January 25, 1994 as the same may
subsequently thereto have been, or subsequently hereto may be, amended. It is
expressly agreed that the obligations of the Trust hereunder shall not be
binding upon any of the Trustees, shareholders, nominees, officers, agents or
employees of the Trust as individuals or personally, but shall bind only the
trust property of the Trust, as provided in the Master Trust Agreement of the
Trust. This Agreement has been authorized by the Trustees of the Trust and
signed by a duly authorized officer of the Trust, acting as such, and neither
such authorization nor such execution shall be deemed to have been made
individually or to impose any personal liability, but shall bind only the trust
property of the Trust as provided in its Master Trust Agreement. The Master
Trust Agreement of the Trust provides, and it is expressly agreed, that each
Fund of the Trust shall be solely and exclusively responsible for the payment of
<PAGE>
its debts, liabilities and obligations, and that no other fund shall be
responsible for the same.
STATE STREET RESEARCH
SECURITIES TRUST
By: /s/ Ralph F. Verni
------------------
Ralph F. Verni
President
ACCEPTED AND AGREED TO:
STATE STREET RESEARCH
INVESTMENT SERVICES, INC.
By: /s/ C. Troy Shaver, Jr.
-----------------------
C. Troy Shaver, Jr.
President
Exhibit (19)
[STATE STREET RESEARCH LOGO]
MUTUAL FUND ACCOUNT APPLICATION
Mail this application to State Street Research Shareholder Services,
P.O. Box 8408, Boston, MA 02266-8408
- --------------------------------------------------------------------------------
1 Type of Account (PLEASE PRINT FULL NAME(S) CONSISTENT WITH YOUR SIGNATURE(S)
IN SECTION 5.)
<TABLE>
<S> <C> <C>
[ ] Individual--complete (a) only [ ] Joint Tenant--complete (a & b) [ ] Gift to a Minor--complete (c) only
[ ] Trust(1)--complete (d) only [ ] Corporation(1)--complete (e) only [ ] Partnership/Other Entity--complete (e) only
</TABLE>
Note: If the investment is to be used for an Individual Retirement Account
(IRA), a separate IRA application must be used.
(1)Call 1-800-562-0032 for additional forms.
Individual or Joint Tenant
a _____________________________________________________________________________
Name of Investor Social Security Number
b _____________________________________________________________________________
Name(s) of Joint Tenant(s)
Gift to a Minor
as custodian for under the
c _____________________________________________________________________________
Name of Custodian (one only) Name of Minor (one only)
"Uniform Gifts to Minors Act"
- -------------------------------------------------------------------------------
Minor's State of Residence Minor's Social Security Number
Trust Account
d _____________________________________________________________________________
Trustee(s) Name(s)
- -------------------------------------------------------------------------------
Name and Date of Trust Agreement Tax Identification Number
Corporation, Partnership or Other Entity (Please include corporate resolution.)
e _____________________________________________________________________________
Name of Corporation or Other Entity
------------------------------------------------------------------------------
Type of Business (specify corporation, Tax Identification Number
partnership, estate, guardian, etc.)
-----------------------------------------------------------------------------
2 Your Mailing Address (PLEASE PRINT.)
( )
- -------------------------------------------------------------------------------
Street Address Home Telephone Number
( )
- -------------------------------------------------------------------------------
City State ZIP Business Telephone Number
Residency [ ] U.S. (State ______) [ ] Other_____________________________
Specify Country
- --------------------------------------------------------------------------------
3 Fund Selection(s) and Distribution Option(s) (Choose only one distribution
option per Fund; see Fund prospectus for minimum initial investment
requirements.)
[ ] By Mail--Make check payable to "State Street Research" [ ] By Dealer
[ ] By Federal Funds Wire (Control #___________)
<TABLE>
<CAPTION>
Class Wire Order
Fund Name Designation(2) Amount Distribution Option by Dealer
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends & Dividends in Dividends & Dividend
Capital Gains Cash; Capital Capital Gains Allocation Confirmation
A B D Reinvested Gains Reinvested(3) in Cash Plan (DAP)(4) Number
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- -------------- [ ] [ ] [ ] $------- [ ] [ ] [ ] [ ] -----------
- -------------- [ ] [ ] [ ] $------- [ ] [ ] [ ] [ ] -----------
- -------------- [ ] [ ] [ ] $------- [ ] [ ] [ ] [ ] -----------
- -------------- [ ] [ ] [ ] $------- [ ] [ ] [ ] [ ] -----------
</TABLE>
(2)All Money Market Fund investments will purchase Class E shares. Be sure to
designate share class for Money Market Fund DAP allocations.
(3)Does not apply to Money Market Fund.
(4)Dividend Allocation Plan: The Transfer Agent is authorized to invest all
dividends and distributions from ___________________________________________
Fund Name
in the following Eligible Fund: ____________________________________________
Fund Name Account Number
(Fund must meet (if existing
minimum investment account)
requirements)
Authorization of Dividend Allocation Plan constitutes an acknowledgment that the
shareholder has received the current prospectus of the Fund to be acquired.
Except for Money Market Fund Class E, DAP must be allocated to same class
designation.
<PAGE>
4 _____________________________________________________________________________
Reduced Sales Charges (Applies to Class A shares only)
[ ] Right of Accumulation (ROA): I apply for Right of Accumulation reduced sales
charges subject to the Transfer Agent's confirmation of the following holdings
of certain designated persons, e.g. family members, in the Eligible Funds:
- --------------------------------------------------------------------------------
Name on Account Account Number
- --------------------------------------------------------------------------------
Name on Account Account Number
[ ] Letter of Intent (LOI): Although I am not obligated to purchase and the
Funds are not obligated to sell, I intend to invest over a 13-month period
beginning___________, 19___ (purchase date not more than 90 days prior to this
letter) at least an aggregate of [ ] $100,000 [ ] $250,000 [ ] $500,000
[ ] $1,000,000 of Eligible Funds.
5 _____________________________________________________________________________
Your Signature (All registered shareholders must sign.)
I have received the current prospectus of the Fund and confirm that all the
information, instructions and agreements set forth hereon shall apply to the
account, and if applicable, shall also apply to any other fund account with
shares acquired upon exchange of shares of the Fund.
Under penalties of perjury, I certify that (1) the number shown on this form is
my correct taxpayer identification number (or I am waiting for a number to be
issued to me), and (2) I am not subject to backup withholding because (a) I am
exempt from backup withholding, or (b) I have not been notified by the Internal
Revenue Service that I am subject to backup withholding as a result of a failure
to report all interest or dividends, or (c) the IRS has notified me that I am no
longer subject to backup withholding.
Certification instructions: You must cross out item (2) above if you have been
notified by the IRS that you are currently subject to backup withholding because
of underreporting interest or dividends on your tax return.
The Internal Revenue Service does not require your consent to any provision of
this document other than the certification required to avoid backup withholding.
- --------------------------------------------------------------------------------
Signature of Shareholder (exactly as your name appears in Section 1) Date
- --------------------------------------------------------------------------------
Signature of Joint Tenant (if any) Date
6 _____________________________________________________________________________
Signature Guarantee and Dealer Information (Complete section (a) or (b) as
applicable.)
The undersigned guarantees the signature and legal capacity of the shareholder.
a. Signature Guarantee (fill out if your Dealer does not complete section below)
- --------------------------------- -------------------------------------------
Name of Bank or Street Address
Eligible Guarantor
- --------------------------------- -------------------------------------------
Authorized Signature of Bank City State ZIP
or Eligible Guarantor
b. Dealer Information and Signature Guarantee (for Dealer use only)
- --------------------------------- -------------------------------------------
Dealer Name Branch Office Number
- --------------------------------- -------------------------------------------
Street Address of Home Office Address of Branch Office Servicing Account
- --------------------------------- -------------------------------------------
City State ZIP City State ZIP
- --------------------------------- -------------------------------------------
Authorized Signature of Dealer Registered Representative's Name and Number
If this application is for an account introduced through the above-named Dealer,
the Dealer agrees to all applicable provisions in this application and in the
Prospectus, and represents that it has provided a current Prospectus to the
Applicant and that the application is properly executed by a person authorized
by the Dealer to guarantee signatures. The Dealer warrants that this application
is completed in accordance with the shareholder's instructions and agrees to
indemnify the Fund, any other Eligible Funds, the Distributor, the Investment
Manager, State Street Research Shareholder Services and the Transfer Agent for
any loss or liability from acting or relying upon such instructions and
information. The terms and conditions of the Distributor's currently effective
Selected Dealer Agreement or sales agreement are included by reference in this
section. The Dealer represents that it has a currently effective Selected Dealer
Agreement or sales agreement with the Distributor authorizing the Dealer to sell
shares of the Fund and the Eligible Funds, and that it may lawfully sell shares
of the designated Fund(s) in the state designated as the Applicant's address of
record.
<PAGE>
Application for Optional Shareholder Services
Your Bank Account (You must complete this section if you request Section A, B, D
or E.)
Type of Bank Account: [ ] Checking [ ] NOW or Money Market
- --------------------------------------------------------------------------------
Account Title (print exactly as it Bank Routing Number
appears on bank records)
- --------------------------------------------------------------------------------
Bank Account Number Bank Name
- --------------------------------------------------------------------------------
Bank Address City State ZIP
- --------------------------------------------------------------------------------
Depositor's Signature(s) (exactly Date
as it appears on bank records)
- --------------------------------------------------------------------------------
Depositor's Address City State ZIP
You must attach a blank check marked "VOID."
A _____________________________________________________________________________
Telephone Redemption and Exchange Privileges (Service available only for shares
held on deposit with Transfer Agent)
None of the Transfer Agent, the Fund, any other Eligible Funds, State Street
Research Shareholder Services, the Investment Manager or the Distributor will be
liable for any loss, injury, damage or expense as a result of acting upon, and
will not be responsible for the authenticity of, any telephone instructions. I
understand that all telephone calls are tape recorded. My liability shall be
subject to the use of reasonable procedures to confirm that instructions
communicated by telephone are genuine.
Telephone Exchange By Shareholder OR DEALER
The Transfer Agent may effect exchanges for my account according to telephone
instructions FROM ME OR MY DEALER as set forth in the Prospectus, and may
register the shares of the fund to be acquired exactly the same as my existing
account. Authorizing an exchange constitutes an acknowledgment that the
shareholder has received the current prospectus of the fund to be acquired. The
account will automatically have this privilege unless it is expressly declined
by providing your initials in the space below.
I DO NOT WANT THE TELEPHONE EXCHANGE PRIVILEGE. ____ (Initial here.)
Telephone Redemption By Shareholder Only
1. Proceeds to Shareholder's Address of Record. The Transfer Agent may effect
redemptions of shares from my account according to telephone instructions from
me, as set forth in the Prospectus, and send the proceeds to my address of
record. The account will automatically have this privilege unless it is
expressly declined by providing your initials in the space below.
I DO NOT WANT THE TELEPHONE REDEMPTION PRIVILEGE (to address of record).
____ (Initial here.)
2. Proceeds to Bank Designated by Shareholder. The Telephone Redemption
Privilege (to bank designated by shareholder) is not provided automatically;
please check the box below if you want this Privilege for the account. ATTACH A
BLANK CHECK MARKED "VOID" AND FILL OUT "YOUR BANK ACCOUNT" SECTION.
The Transfer Agent may effect redemptions of shares from my
account according to telephone instructions from me, as set forth in the
Prospectus, and send the proceeds to the bank named in "Your Bank Account."
[ ] (Check here.)
B _____________________________________________________________________________
Investamatic Check Program (YOU MUST ATTACH A BLANK CHECK MARKED "VOID.")
I hereby request and authorize the bank named in "Your Bank Account" section to
pay and charge checks drawn on, or debits against, my account initiated by and
payable to the order of the mutual fund transfer agent designated by the
Distributor. I agree that the named Bank's rights in respect to each such check
or debit shall be the same as if it were a check drawn on or debit against my
account authorized personally by me. This authority is to remain in effect until
revoked by me in writing, and until the named Bank actually receives such
notice, I agree that the named Bank shall be fully protected in honoring any
such check or debit authorization. I further agree that if any check or debit
authorization be dishonored, whether with or without cause and whether
intentionally or inadvertently, the named Bank shall be under no liability
whatsoever, unless the nonpayment is because of insufficient funds. I understand
that this Program may be revoked by the Transfer Agent or the Distributor
without prior notice if any check is not paid upon presentation, and that this
Program may be discontinued by the Distributor, the Transfer Agent or me upon
thirty (30) business days' notice prior to the due date of any deposit.
<TABLE>
<S> <C> <C> <C>
$
- ----------------------------------------------------------------------------------------------------
Fund Name Class Designation Amount ($50 minimum) Account Number
$
- ----------------------------------------------------------------------------------------------------
Fund Name Class Designation Amount ($50 minimum) Account Number
------------------------------------------------------------
Total Amount of Investment: $________ Account Registration (exactly as it appears on Fund records)
</TABLE>
<TABLE>
<S> <C> <C>
[ ] Monthly Investment Date: [ ] 5th or [ ] 20th If you do not choose a date, the 5th will be chosen automatically.
[ ] Quarterly Investment Date: [ ] 5th or [ ] 20th
</TABLE>
C _____________________________________________________________________________
Checkwriting Privilege
(Available for Class A shares and
Money Market Fund Class E shares only)
[ ] I request the checkwriting feature and have
completed the signature card to the right.
- --------------------------------------------------------------------------------
Account Number (if existing account)
- --------------------------------------------------------------------------------
Account Number (if existing account)
Signature Card Complete and sign this card and return it with your application
and investment. Do not detach.
<TABLE>
<CAPTION>
Check applicable Fund(s) TO: State Street Bank and Trust Company ("Bank")
<S> <C> <C> <C> <C>
[ ] Government Income ----------------------------------------------------------------------------
[ ] NY Tax-Free Name (please print)
[ ] Money Market, Class E
[ ] High Income ----------------------------------------------------------------------------
[ ] Tax-Exempt Name (please print)
[ ] Strategic Income
----------------------------------------------------------------------------
Address City State ZIP
----------------------------------------------------------------------------
Signature (exactly as it appears in the Application, including any capacity)
----------------------------------------------------------------------------
Signature (exactly as it appears in the Application, including any capacity)
----------------------------------------------------------------------------
Indicate the number of signatures required----------------------------------
----------------------------------------------------------------------------
Tax Identification Number
</TABLE>
Corporate and other accounts must include appropriate resolution forms. In
signing this signature card, the signator(s) signifies his/her or their
agreement to be subject to the rules and regulations of State Street Bank and
Trust Company pertaining thereto, as amended from time to time, and subject to
the conditions printed on the reverse side.
<PAGE>
D _____________________________________________________________________________
Automatic Bank Connection (ABC) Not available for retirement plan accounts. YOU
MUST ATTACH A BLANK CHECK MARKED "VOID."
[ ] I authorize the Transfer Agent to liquidate $________________ (minimum-$50)
from my fund account beginning the month of ________________ to provide [ ]
monthly, [ ] quarterly, [ ] semiannual or [ ] annual payments. I would like the
following payment to be deposited directly into the bank account named in "Your
Bank Account" section. (Choose only one.)
[ ] Income dividends only
[ ] Income dividends and capital gains
[ ] Systematic Withdrawal Plan payments (see below)
Specify Fund(s):
- --------------------------------------------------------------------------------
Fund Name Class Designation
- --------------------------------------------------------------------------------
Fund Name Class Designation
I hereby authorize the Fund and the Transfer Agent to effect the deposit of the
above indicated items by initiating credit entries to my account at the bank
named in "Your Bank Account" section. The named Bank shall not be responsible
for the correctness of the items, and the Transfer Agent is authorized to
correct and adjust any incorrect items to my bank account. This authorization
may be terminated at any time by written notification to the Fund, the Transfer
Agent and the Bank.
E _____________________________________________________________________________
Systematic Withdrawal Plan (SWP) Not available for retirement plan accounts. See
the prospectus for minimum account size and maximum withdrawal amounts. YOU MUST
ATTACH A BLANK CHECK MARKED "VOID."
[ ] I authorize the Transfer Agent to liquidate shares in and withdraw cash
(minimum-$50) from my fund account beginning the month of ________________ to
provide [ ] monthly, [ ] quarterly, [ ] semiannual or [ ] annual Systematic
Withdrawal Plan (SWP) payments in the amount of $________________ to [ ] me, [ ]
the bank named in "Your Bank Account" section, or[ ]the following payee. (Note:
If you authorize a SWP, you may not receive dividend or capital gain
distributions in cash.)
- --------------------------------------------------------------------------------
Name of Payee
- --------------------------------------------------------------------------------
Street Address City State ZIP
Specify Fund(s):
- --------------------------------------------------------------------------------
Fund Name Class Designation
- --------------------------------------------------------------------------------
Fund Name Class Designation
The payment of monies is authorized by the signature(s) on the reverse side.
If the shareholder's account with the Fund is joint, all checks drawn upon this
account must include the signatures of all persons named in the account, unless
the persons signing this card have indicated on the reverse side of this card
that the Bank is authorized to accept any one signature. Each person guarantees
the genuineness of the other's signature. Checks may not be for less than $500
or such other minimum or maximum amounts as may from time to time be established
by the Fund.
The Bank is hereby appointed agent by the person(s) signing this card (the
"Depositor(s)") and, as agent, is authorized and directed to present checks
drawn on this checking account to the Fund or its redemption agent as requests
to redeem shares of the Fund registered in the name of the Depositor(s) in the
amounts of such checks and to deposit the proceeds of such redemptions in this
checking account. The Bank shall be liable only for its own negligence.
Depositor(s) hereby authorize(s) the Fund or its redemption agent to honor
redemption requests presented in the above manner by the Bank. The Fund and its
redemption agent will not be liable for any loss, expense or cost arising out of
check redemptions. If shares of the Fund are purchased by check, redemption
proceeds will ordinarily be withheld until the Fund is reasonably assured that
payment has been collected on the check. The Bank has the right not to honor
checks in amounts exceeding the value of the depositor(s) shareholder account at
the time the check is presented for payment.
The Bank reserves the right to change, modify or terminate this checking account
at any time upon notification mailed to the address of record of the
Depositor(s).
SSR-543E-197
<PAGE>
[STATE STREET RESEARCH LOGO] [METLIFE SECURITIES LOGO]
Mutual Fund Account Application
Mail this application to MetLife Securities, Inc., P.O. Box 30421, Tampa, FL
33630
[ ] New Application [ ] Change--Account #_____________________
1 _____________________________________________________________________________
Type of Account (PLEASE PRINT FULL NAME(S) CONSISTENT WITH YOUR SIGNATURE(S) IN
SECTION 6.)
<TABLE>
<S> <C> <C>
[ ] Individual--complete (a) only [ ] Joint Tenant--complete (a & b) only [ ] Gift to a Minor--complete (c) only
[ ] Trust(1)--complete (d) only [ ] Corporation(1)--complete (e) only [ ] Partnership/Other Entity--complete (e) only
</TABLE>
Note: If the investment is to be used for an Individual Retirement Account
(IRA), a separate IRA application must be used.
(1)Call 1-800-638-8378 for additional forms.
Do you have any other mutual fund accounts with State Street Research?
[ ] Yes [ ] No
Individual or Joint Tenant
a _____________________________________________________________________________
Name of Investor Social Security Number
b _____________________________________________________________________________
Name(s) of Joint Tenant(s)
Gift to a Minor
as custodian for under the
_______________________________________________________________________________
Name of Custodian (one only) Name of Minor (one only)
"Uniform Gifts to Minors Act"
_______________________________________________________________________________
Minor's State of Residence Minor's Social Security Number
Trust Account
d _____________________________________________________________________________
Trustee(s) Name(s)
_______________________________________________________________________________
Name and Date of Trust Agreement Tax Identification Number
Corporation, Partnership or Other Entity (Please include corporate resolution.)
e _____________________________________________________________________________
Name of Corporation or Other Entity
_____________________________________________________________________________
Type of Business (specify corporation, Tax Identification Number
partnership, estate, guardian, etc.)
2 _____________________________________________________________________________
Your Mailing Address (Please print.)
( )
_______________________________________________________________________________
Street Address Home Telephone Number
( )
_______________________________________________________________________________
City State ZIP Business Telephone Number
Residency [ ] U.S. (State _____) [ ] Other(2)________________________
Specify Country
(2)Call 1-800-638-8378 for additional forms.
3 _____________________________________________________________________________
Fund Selection(s) and Distribution Option(s) (Choose only one distribution
option per Fund; see Fund prospectus for minimum initial investment
requirements.)
[ ] By Mail--Make check payable to "State Street Research"
[ ] By Federal Funds Wire
<TABLE>
<CAPTION>
Class
Fund Name Designation(3) Amount Distribution Option
- ----------------------------------------------------------------------------------------------------------------------------
Dividends & Dividends in Dividends & Dividend
Capital Gains Cash; Capital Capital Gains Allocation
A B(4) Reinvested Gains Reinvested(5) in Cash Plan (DAP)6
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
________________ [ ] [ ] $____________ [ ] [ ] [ ] [ ]
________________ [ ] [ ] $____________ [ ] [ ] [ ] [ ]
________________ [ ] [ ] $____________ [ ] [ ] [ ] [ ]
________________ [ ] [ ] $____________ [ ] [ ] [ ] [ ]
</TABLE>
(3)All Money Market Fund investments will purchase Class E shares. Be sure to
designate Class A or B shares for Money Market Fund DAP allocations.
(4)For purchase of Class B shares of more than $250,000, I hereby acknowledge
that I am aware of the reduced front-end sales charges available to me for
the purchase of Class A shares, and have chosen to purchase Class B shares. I
am aware that Class B shares have higher asset-based charges than Class A
shares for the first eight years.
(5)Does not apply to Money Market Fund.
(6)Dividend Allocation Plan: The Transfer Agent is authorized to invest all
dividends and distributions from ______________________
Fund Name
in the following Eligible Fund: _______________________________________________
Fund Name (Fund must Account Number
meet minimum investment (if existing
requirements) account)
Authorization of Dividend Allocation Plan constitutes an acknowledgment that the
shareholder has received the current prospectus of the Fund to be acquired.
Except for Money Market Fund Class E, DAP must be allocated to same class
designation.
<PAGE>
4 _____________________________________________________________________________
Reduced Sales Charges (Applies to Class A shares only)
[ ] Right of Accumulation (ROA): I apply for Right of Accumulation reduced sales
charges subject to the Transfer Agent's confirmation of the following holdings
of certain designated persons, e.g. family members, in the Eligible Funds:
- --------------------------------------------------------------------------------
Name of Account Account Number
- --------------------------------------------------------------------------------
Name of Account Account Number
[ ] Letter of Intent (LOI): Although I am not obligated to purchase and the
Funds are not obligated to sell, I intend to invest over a 13-month period
beginning ___________________, 19__ (purchase date not more than 90 days prior
to this letter) at least an aggregate of [ ] $100,000 [ ] $250,000 [ ] $500,000
[ ] $1,000,000 of Eligible Funds.
5 _____________________________________________________________________________
Optional Shareholder Services
Your Bank Account (You must complete this section if you request Section A, B, C
or D below.)
Type of Bank Account: [ ] Checking [ ] NOW or Money Market
- --------------------------------------------------------------------------------
Account Title (print exactly as it Bank Routing Number
appears on bank records)
- --------------------------------------------------------------------------------
Bank Account Number Bank Name
- --------------------------------------------------------------------------------
Bank Address City State ZIP
- --------------------------------------------------------------------------------
Depositor's Signature(s) (exactly as it Date
appears on bank records)
- --------------------------------------------------------------------------------
Depositor's Address City State ZIP
YOU MUST ATTACH A BLANK CHECK MARKED "VOID."
A _____________________________________________________________________________
Telephone Redemption and Exchange Privileges (Service available only for shares
held on deposit with Transfer Agent)
None of the Transfer Agent, the Fund, any other Eligible Funds, State Street
Research Shareholder Services, the Investment Manager or the Distributor will be
liable for any loss, injury, damage or expense as a result of acting upon, and
will not be responsible for the authenticity of, any telephone instructions. I
understand that all telephone calls are tape recorded. My liability shall be
subject to the use of reasonable procedures to confirm that instructions
communicated by telephone are genuine.
Telephone Exchange By Shareholder OR DEALER
The Transfer Agent may effect exchanges for my account according to telephone
instructions FROM ME OR MY DEALER as set forth in the Prospectus, and may
register the shares of the fund to be acquired exactly the same as my existing
account. Authorizing an exchange constitutes an acknowledgment that the
shareholder has received the current prospectus of the fund to be acquired. The
account will automatically have this privilege unless it is expressly declined
by providing your initials in the space below.
I DO NOT WANT THE TELEPHONE EXCHANGE PRIVILEGE. ____ (Initial here.)
Telephone Redemption By Shareholder Only
1. Proceeds to Shareholder's Address of Record. The Transfer Agent may effect
redemptions of shares from my account according to telephone instructions from
me, as set forth in the Prospectus, and send the proceeds to my address of
record. The account will automatically have this privilege unless it is
expressly declined by providing your initials in the space below. I DO NOT WANT
THE TELEPHONE REDEMPTION PRIVILEGE (to address of record). ____ (Initial here.)
2. Proceeds to Bank Designated by Shareholder. The Telephone Redemption
Privilege (to bank designated by shareholder) is not provided automatically;
please check the box below if you want this Privilege for the account. ATTACH A
BLANK CHECK MARKED "VOID" AND FILL OUT "YOUR BANK ACCOUNT" SECTION.
The Transfer Agent may effect redemptions of shares from my account according to
telephone instructions from me, as set forth in the Prospectus, and send the
proceeds to the bank named in "Your Bank Account." [ ] (Check here.)
<PAGE>
B _____________________________________________________________________________
Investamatic Check Program (YOU MUST ATTACH A BLANK CHECK MARKED "VOID.")
I hereby request and authorize the bank named in "Your Bank Account" section to
pay and charge checks drawn on, or debits against, my account initiated by and
payable to the order of the mutual fund transfer agent designated by the
Distributor. I agree that the named Bank's rights in respect to each such check
or debit shall be the same as if it were a check drawn on or debit against my
account authorized personally by me. This authority is to remain in effect until
revoked by me in writing, and until the named Bank actually receives such
notice, I agree that the named Bank shall be fully protected in honoring any
such check or debit authorization. I further agree that if any check or debit
authorization be dishonored, whether with or without cause and whether
intentionally or inadvertently, the named Bank shall be under no liability
whatsoever, unless the nonpayment is because of insufficient funds. I understand
that this Program may be revoked by the Transfer Agent or the Distributor
without prior notice if any check is not paid upon presentation, and that this
Program may be discontinued by the Distributor, the Transfer Agent or me upon
thirty (30) business days' notice prior to the due date of any deposit.
$
- --------------------------------------------------------------------------------
Fund Name Class Designation Amount ($50 minimum) Account Number
$
- --------------------------------------------------------------------------------
Fund Name Class Designation Amount ($50 minimum) Account Number
-----------------------------------------
Total Amount of Investment: $______ Account Registration (exactly as it
appears on Fund records)
[ ] Monthly Investment Date: [ ] 5th or [ ] 20th If you do not choose a date,
the 5th will be chosen
automatically.
[ ] Quarterly Investment Date: [ ] 5th or [ ] 20th
C _____________________________________________________________________________
Automatic Bank Connection (ABC) Not available for retirement plan accounts.
YOU MUST ATTACH A BLANK CHECK MARKED "VOID."
[ ] I authorize the Transfer Agent to liquidate $ _________ (minimum-$50) from
my fund account beginning the month of _________ to provide [ ] monthly,
[ ] quarterly, [ ] semiannual or [ ] annual payments. I would like the following
payment to be deposited directly into the bank account named in "Your Bank
Account" section. (Choose only one.)
[ ] Income dividends only
[ ] Income dividends and capital gains
[ ] Systematic Withdrawal Plan payments (see below)
- --------------------------------------------------------------------------------
Fund Name Class Designation
- --------------------------------------------------------------------------------
Fund Name Class Designation
I hereby authorize the Fund and the Transfer Agent to effect the deposit of the
above indicated items by initiating credit entries to my account at the bank
named in "Your Bank Account" section. The named Bank shall not be responsible
for the correctness of the items, and the Transfer Agent is authorized to
correct and adjust any incorrect items to my bank account. This authorization
may be terminated at any time by written notification to the Fund, the Transfer
Agent and the Bank.
D _____________________________________________________________________________
Systematic Withdrawal Plan (SWP) Not available for retirement plan accounts.
See the prospectus for minimum account size and maximum withdrawal amounts.
YOU MUST ATTACH A BLANK CHECK MARKED "VOID."
[ ] I authorize the Transfer Agent to liquidate shares in and withdraw cash
(minimum-$50) from my fund account beginning the month of _____________ to
provide [ ] monthly, [ ] quarterly, [ ] semiannual or [ ] annual Systematic
Withdrawal Plan (SWP) payments in the amount of $_____________ to [ ] me, [ ]
the bank named in "Your Bank Account" section, or [ ] the following payee.
(Note: If you authorize a SWP, you may not receive dividend or capital gain
distributions in cash.)
- --------------------------------------------------------------------------------
Name of Payee
- --------------------------------------------------------------------------------
Street Address City State ZIP
- --------------------------------------------------------------------------------
Fund Name Class Designation
- --------------------------------------------------------------------------------
Fund Name Class Designation
E _____________________________________________________________________________
Checkwriting Privilege
(Available for Class A shares and Money Market Fund Class E shares only)
[ ] I request the checkwriting feature and have completed the signature card
below.
- --------------------------------------------------------------------------------
Account Number (if existing account)
- --------------------------------------------------------------------------------
Account Number (if existing account)
Signature Card Complete and sign this card and return it with your application
and investment. Do not detach.
<TABLE>
<CAPTION>
Check applicable Fund(s) TO: State Street Bank and Trust Company ("Bank")
<S> <C> <C> <C> <C>
[ ] Money Market, Class E ----------------------------------------------------------------------------
[ ] High Income Name (please print)
[ ] Tax-Exempt
[ ] Government Income ----------------------------------------------------------------------------
[ ] NY Tax-Free Name (please print)
[ ] Strategic Income
----------------------------------------------------------------------------
Address City State ZIP
----------------------------------------------------------------------------
Signature (exactly as it appears in the Application, including any capacity)
----------------------------------------------------------------------------
Signature (exactly as it appears in the Application, including any capacity)
Indicate the number of signatures required----------------------------------
----------------------------------------------------------------------------
Tax Identification Number
</TABLE>
Corporate and other accounts must include appropriate resolution forms. In
signing this signature card, the signator(s) signifies his/her or their
agreement to be subject to the rules and regulations of State Street Bank and
Trust Company pertaining thereto, as amended from time to time, and subject to
the conditions printed on the reverse side.
<PAGE>
6 _____________________________________________________________________________
Your Signature (All registered shareholders must sign.)
The undersigned confirms that all the information, instructions and agreements
set forth hereon shall apply to the account, and if applicable, shall also apply
to any other fund account with shares acquired upon exchange of shares of the
Fund.
Under penalties of perjury, I certify that (1) the number shown on this
form is my correct taxpayer identification number (or I am waiting for a number
to be issued to me), and (2) I am not subject to backup withholding because (a)
I am exempt from backup withholding, or (b) I have not been notified by the
Internal Revenue Service that I am subject to backup withholding as a result of
a failure to report all interest or dividends, or (c) the IRS has notified me
that I am no longer subject to backup withholding.
Certification instructions: You must cross out item (2) above if you have been
notified by the IRS that you are currently subject to backup withholding because
of underreporting interest or dividends on your tax return.
1. Arbitration
(i) Arbitration is final and binding on the parties.
(ii) The parties are waiving their right to seek remedies in court, including
the right to jury trial.
(iii) Pre-arbitration discovery is generally more limited than and different
from court proceedings.
(iv) The arbitrators' award is not required to include factual findings or legal
reasoning and any party's right to appeal or to seek modification of rulings by
the arbitrators is strictly limited.
(v) The panel of arbitrators will typically include a minority of arbitrators
who were or are affiliated with the securities industry.
(vi) No person shall bring a putative or certified class action to arbitration,
nor seek to enforce any pre-dispute arbitration agreement against any person who
has initiated in court a putative class action; or who is a member of a putative
class who has not opted out of the class with respect to any claims encompassed
by the putative class action until (i) the class certification is denied; or
(ii) the class is decertified; or (iii) the customer is excluded from the class
by the court. Such forbearance to enforce an agreement to arbitrate shall not
constitute a waiver of any rights under this agreement except to the extent
stated herein.
2. MetLife Securities, Inc. (hereinafter "MSI") and the purchaser of the shares,
who is the signatory below (hereinafter the "Customer"), agree that any
controversy between MSI, its employees, directors, agents, officers or
affiliates and the Customer arising out of or relating to any transactions
between such parties shall be determined by arbitration. Any arbitration
pursuant to this agreement shall be conducted before, and under the rules of,
the National Association of Securities Dealers, Inc. Judgment upon the award of
the arbitrators may be entered in any federal or state court having
jurisdiction.
3. This agreement and any arbitration hereunder shall be governed and construed
in accordance with the laws of the State of New York, United States of America,
including New York procedural and substantive arbitration laws and rules,
without giving effect to conflicts of law principles. The predispute arbitration
agreement located immediately above is accepted and agreed to. I have also
received the current prospectus of the fund and have given a check in the amount
of $_______ on this, the ________ day of __________________ 19__
The Internal Revenue Service does not require your consent to any provision of
this document other than the certification required to avoid backup withholding.
- ------------------------------- ----------------------------------------
Customer Signature (exactly as Registered Representative's Signature
your name appears in Section 1)
/s/Ralph F. Verni
- ------------------------------- ----------------------------------------
Customer Signature MetLife Securities, Inc.;
by: Ralph F. Verni,
Chairman of the Board
- -------------------------------
Capacity
7 _____________________________________________________________________________
Dealer Information and Signature Guarantee (For Dealer use only)
The Dealer agrees to all applicable provisions in this application and in the
Prospectus, guarantees the signature and legal capacity of the shareholder, and
represents that it has provided a current Prospectus to the Applicant and that
the application is properly executed by a person authorized by the Dealer to
guarantee signatures. The Dealer warrants that this application is completed in
accordance with the shareholder's instructions and information and agrees to
indemnify the Fund, any other Eligible Funds, the Investment Manager, the
Distributor, State Street Research Shareholder Services and the Transfer Agent
for any loss or liability from acting or relying upon such instructions and
information.
Signature(s) Guaranteed By
MetLife Securities, Inc.
- ------------------------------- --------------------------------------------
Dealer Name Branch Office Number
P.O. Box 30421
- ------------------------------- --------------------------------------------
Address of Home Office Address of Branch Office Servicing Account
Tampa, FL 33630
- ------------------------------- --------------------------------------------
City State ZIP City State ZIP
- ------------------------------- --------------------------------------------
Authorized Signature of Registered Representative's
Dealer - Tampa, FL Name and Number
- -------------------------------
Signature Guarantee
The payment of monies is authorized by the signature(s) on the reverse side.
If the shareholder's account with the Fund is joint, all checks drawn upon this
account must include the signatures of all persons named in the account, unless
the persons signing this card have indicated on the reverse side of this card
that the Bank is authorized to accept any one signature. Each person guarantees
the genuineness of the other's signature. Checks may not be for less than $500
or such other minimum or maximum amounts as may from time to time be established
by the Fund.
The Bank is hereby appointed agent by the person(s) signing this card (the
"Depositor(s)") and, as agent, is authorized and directed to present checks
drawn on this checking account to the Fund or its redemption agent as requests
to redeem shares of the Fund registered in the name of the Depositor(s) in the
amounts of such checks and to deposit the proceeds of such redemptions in this
checking account. The Bank shall be liable only for its own negligence.
Depositor(s) hereby authorize(s) the Fund or its redemption agent to honor
redemption requests presented in the above manner by the Bank. The Fund and its
redemption agent will not be liable for any loss, expense or cost arising out of
check redemptions. If shares of the Fund are purchased by check, redemption
proceeds will ordinarily be withheld until the Fund is reasonably assured that
payment has been collected on the check. The Bank has the right not to honor
checks in amounts exceeding the value of the depositor(s) shareholder account at
the time the check is presented for payment.
The Bank reserves the right to change, modify or terminate this checking account
at any time upon notification mailed to the address of record of the
Depositor(s).
The terms and conditions of the Distributor's currently effective Selected
Dealer Agreement are included by reference in this section. The Dealer
represents that it has a currently effective Selected Dealer Agreement with the
Distributor authorizing the Dealer to sell shares of the Fund and the Eligible
Funds, and that it may lawfully sell shares of the designated Fund(s) in the
state designated as the Applicant's address of record.
- -----------------------------------
DO NOT COMPLETE
MSI - Tampa
Dealer #____________ ST _________
Rep #______________________________
Rep Name___________________________
- -----------------------------------
CONTROL NUMBER: 3659-970115(0298)SSR-LD
ML-544E-197
<PAGE>
MetLife Securities, Inc. Customer Profile
1
- --------------------------------------------------------------------------------
Client's Name (or minor if U.G.M.A.) Age Social Security Number
- --------------------------------------------------------------------------------
Joint Tenant Name (if any, or Age Social Security Number
custodian if U.G.M.A.)
Occupation______________________________________ State of Residence_________
Name/Address of Employer________________________________________________________
________________________________________________________
Is client an associated person of a broker/dealer? [ ] Yes [ ] No
If yes, furnish name and address________________________________________________
2 Client's Estimated Annual Income (Not including income from this investment)
(N/A for UGMA, Trust, Partnership or Corp.)
[ ] $0-9,999 [ ] $20-39,999 [ ] $60-79,999 [ ] $100,000-199,999
[ ] $10-19,999 [ ] $40-59,999 [ ] $80-99,999 [ ] $200,000+
3 Savings and Investments (Exclusive of personal residence, home furnishings,
personal automobiles, and the amount of this investment) (N/A for UGMA, Trust,
Partnership or Corp.)
[ ] $0-9,999 [ ] $20-39,999 [ ] $60-79,999 [ ] $100,000-199,999 [ ] $400,000+
[ ] $10-19,999 [ ] $40-59,999 [ ] $80-99,999 [ ] $200,000-399,999
4 Net Worth (Assets minus liabilities exclusive of assets and liabilities
relating to personal residence, home furnishings and automobiles) (N/A for UGMA,
Trust, Partnership or Corp.)
[ ] $0-9,999 [ ] $20-39,999 [ ] $60-79,999 [ ] $100,000-199,999 [ ] $400,000+
[ ] $10-19,999 [ ] $40-59,999 [ ] $80-99,999 [ ] $200,000-399,999
5 Main Investment Objective (select one)
[ ] Aggressive Growth [ ] Growth & Income [ ] Tax Advantages
[ ] Growth [ ] Current Income
Secondary Investment Objective (optional)
[ ] Aggressive Growth [ ] Growth & Income [ ] Tax Advantages
[ ] Growth [ ] Current Income
6 Source of Funds for This Investment
[ ] CD (Certificate of Deposit) [ ] Savings [ ] Money Market Fund
[ ] Surrender Life/Annuity Contract [ ] Rollover/Transfer of Pension Assets
[ ] Another MetLife Policy, Account or Contract [ ] Discretionary Income
[ ] Loan [ ] Other_________________
7 This account was: [ ] Solicited [ ] Unsolicited
8 Tax Status of These Funds: [ ] Qualified [ ] Non-Qualified
9 Prior Investment Experience: (complete all that apply) Stocks yrs.
Bonds yrs. Mutual Funds yrs. Margin yrs.
Limited Partnerships yrs. Options yrs. Other____ None
Investor Receipt and Arbitration Agreement
1. Arbitration
(i) Arbitration is final and binding on the parties.
(ii) The parties are waiving their right to seek remedies in court, including
the right to jury trial.
(iii) Pre-arbitration discovery is generally more limited than and different
from court proceedings.
(iv) The arbitrators' award is not required to include factual findings or legal
reasoning and any party's right to appeal or to seek modification of rulings by
the arbitrators is strictly limited.
(v) The panel of arbitrators will typically include a minority of arbitrators
who were or are affiliated with the securities industry.
(vi) No person shall bring a putative or certified class action to arbitration,
nor seek to enforce any pre-dispute arbitration agreement against any person who
has initiated in court a putative class action; or who is a member of a putative
class who has not opted out of the class with respect to any claims encompassed
by the putative class action until: (i) the class certification is denied; or
(ii) the class is decertified; or (iii) the customer is excluded from the class
by the court. Such forbearance to enforce an agreement to arbitrate shall not
constitute a waiver of any rights under this agreement except to the extent
stated herein.
2. MetLife Securities, Inc. (hereinafter "MSI") and the purchaser of the shares,
who is the signatory below (hereinafter the "Customer"), agree that any
controversy between MSI, its employees, directors, agents, officers or
affiliates and the Customer arising out of or relating to any transactions
between such parties shall be determined by arbitration. Any arbitration
pursuant to this agreement shall be conducted before, and under the rules of,
the National Association of Securities Dealers, Inc. Judgment upon the award of
the arbitrators may be entered in any federal or state court having
jurisdiction.
3. This agreement and any arbitration hereunder shall be governed and construed
in accordance with the laws of the State of New York, United States of America,
including New York procedural and substantive arbitration laws and rules,
without giving effect to conflicts of law principles.
The predispute arbitration agreement located immediately above is accepted and
agreed to. I have also received the current prospectus of the fund and have
given a check in the amount of $_______________ on this, the ____________ day of
______________________ 19__
- ----------------------------------- ------------------------------------------
Customer Signature (exactly as Registered Representative's Signature
your name appears in Section 1)
/s/ Ralph F. Verni
- ----------------------------------- ------------------------------------------
Customer Signature MetLife Securities, Inc.;
by: Ralph F. Verni, Chairman of the Board
- ----------------------------------- ------------------------------------------
Capacity
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000918572
<NAME> STATE STREET RESEARCH SECURITIES TRUST
<SERIES>
<NUMBER> 011
<NAME> STATE STREET RESEARCH INTERMEDIATE BOND FUND CLASS A
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 16,769,861
<INVESTMENTS-AT-VALUE> 16,767,892
<RECEIVABLES> 674,831
<ASSETS-OTHER> 62,439
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 17,505,162
<PAYABLE-FOR-SECURITIES> 394,656
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 77,719
<TOTAL-LIABILITIES> 472,375
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 16,874,637
<SHARES-COMMON-STOCK> 61,397
<SHARES-COMMON-PRIOR> 60,764
<ACCUMULATED-NII-CURRENT> 182,450
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (23,928)
<ACCUM-APPREC-OR-DEPREC> (372)
<NET-ASSETS> 17,032,787
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 577,277
<OTHER-INCOME> 0
<EXPENSES-NET> 64,048
<NET-INVESTMENT-INCOME> 513,229
<REALIZED-GAINS-CURRENT> (12,440)
<APPREC-INCREASE-CURRENT> 196,025
<NET-CHANGE-FROM-OPS> 696,814
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (16,318)
<DISTRIBUTIONS-OF-GAINS> (4,744)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 138
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 495
<NET-CHANGE-IN-ASSETS> 364,870
<ACCUMULATED-NII-PRIOR> 156,154
<ACCUMULATED-GAINS-PRIOR> 122,677
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 46,420
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 176,830
<AVERAGE-NET-ASSETS> 16,880,000
<PER-SHARE-NAV-BEGIN> 9.75
<PER-SHARE-NII> 0.29
<PER-SHARE-GAIN-APPREC> 0.11
<PER-SHARE-DIVIDEND> (0.27)
<PER-SHARE-DISTRIBUTIONS> (0.08)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.80
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000918572
<NAME> STATE STREET RESEARCH SECURITIES TRUST
<SERIES>
<NUMBER> 013
<NAME> STATE STREET RESEARCH INTERMEDIATE BOND FUND CLASS C
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-END> OCT-31-1996
<INVESTMENTS-AT-COST> 16,769,861
<INVESTMENTS-AT-VALUE> 16,767,892
<RECEIVABLES> 674,831
<ASSETS-OTHER> 62,439
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 17,505,162
<PAYABLE-FOR-SECURITIES> 394,656
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 77,719
<TOTAL-LIABILITIES> 472,375
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 16,874,637
<SHARES-COMMON-STOCK> 1,689,499
<SHARES-COMMON-PRIOR> 1,659,934
<ACCUMULATED-NII-CURRENT> 182,450
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (23,928)
<ACCUM-APPREC-OR-DEPREC> (372)
<NET-ASSETS> 17,032,787
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 577,277
<OTHER-INCOME> 0
<EXPENSES-NET> 64,048
<NET-INVESTMENT-INCOME> 513,229
<REALIZED-GAINS-CURRENT> (12,440)
<APPREC-INCREASE-CURRENT> 196,025
<NET-CHANGE-FROM-OPS> 696,814
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (470,615)
<DISTRIBUTIONS-OF-GAINS> (129,421)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 23,977
<NUMBER-OF-SHARES-REDEEMED> (15,894)
<SHARES-REINVESTED> 21,482
<NET-CHANGE-IN-ASSETS> 364,870
<ACCUMULATED-NII-PRIOR> 156,154
<ACCUMULATED-GAINS-PRIOR> 122,677
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 46,420
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 176,830
<AVERAGE-NET-ASSETS> 16,880,000
<PER-SHARE-NAV-BEGIN> 9.68
<PER-SHARE-NII> 0.30
<PER-SHARE-GAIN-APPREC> 0.11
<PER-SHARE-DIVIDEND> (0.28)
<PER-SHARE-DISTRIBUTIONS> (0.08)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.73
<EXPENSE-RATIO> 0.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000918572
<NAME> STATE STREET RESEARCH SECURITIES TRUST
<SERIES>
<NUMBER> 021
<NAME> STATE STREET RESEARCH STRATEGIC INCOME FUND CLASS A
<S> <C>
<PERIOD-TYPE> 6-MOS
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000918572
<NAME> STATE STREET RESEARCH SECURITIES TRUST
<SERIES>
<NUMBER> 022
<NAME> STATE STREET RESEARCH STRATEGIC INCOME FUND CLASS B
<S> <C>
<PERIOD-TYPE> 6-MOS
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000918572
<NAME> STATE STREET RESEARCH SECURITIES TRUST
<SERIES>
<NUMBER> 023
<NAME> STATE STREET RESEARCH STRATEGIC INCOME FUND CLASS C
<S> <C>
<PERIOD-TYPE> 6-MOS
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000918572
<NAME> STATE STREET RESEARCH SECURITIES TRUST
<SERIES>
<NUMBER> 024
<NAME> STATE STREET RESEARCH STRATEGIC INCOME FUND CLASS D
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-END> OCT-31-1996
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</TABLE>
