As filed with the Securities and Exchange Commission on October 1, 1997
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. 8 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 9 [X]
--------------------
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
Executive 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)
[ ] On _____________ 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)
[X] On December 15, 1997 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.
--------------------
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, 1997 was filed by
the Registrant on or about June 30, 1997 with respect to such shares.
The Registrant hereby declares its intention to register, pursuant to Rule
24f-2(a)(1) promulgated under the 1940 Act, an indefinite number of Class A,
Class B, Class C and Class S shares of beneficial interest, par value $.001 per
share, of the State Street Research Legacy Fund series.
================================================================================
<PAGE>
The Prospectus and Statement of Additional Information of the State Street
Research Legacy Fund (the "Fund") series of the State Street Research Securities
Trust (the "Registrant") are included herein.
The Prospectuses and Statements of Additional Information of the State
Street Research Intermediate Bond Fund and the State Street Research Strategic
Income Fund are included in Post-Effective Amendment No. 7 to the Registrant's
Registration Statement on Form N-1A (File No. 33-74628) filed with the
Securities and Exchange Commission on August 29, 1997.
<PAGE>
STATE STREET RESEARCH SECURITIES TRUST
CROSS REFERENCE SHEET
Pursuant to Rule 481(a)
<TABLE>
<CAPTION>
Caption or Location in Caption or Location in Caption or Location in
Prospectus for State Street Prospectus for State Prospectus for State
Research Intermediate Street Research Street Research
Form N-1A Item No. Bond Fund Strategic Income Fund Legacy Fund
PART A
<S> <C> <C> <C>
1. Cover Page.................. Same Same Same
2. Synopsis.................... Table of Expenses Table of Expenses Investor Expenses
3. Condensed Financial
Information ................ Financial Highlights; Financial Highlights; None
Calculation of Calculation of
Performance Data Performance Data
4. General Description
of Registrant .............. The Fund's Investments; The Fund's Investments; Goal and Strategy;
Investment Practices; The Fund Limiting Investment Risk; Other Securities and Risks;
and its Shares; Appendix The Fund and its Shares; Your Account; Fund Details
Debt/Bond Ratings Appendix Debt/Bond Ratings
5. Management of the Fund...... Management of the Fund; Management of the Fund; Fund Details
Purchase of Shares; Purchase of Shares;
Shareholder Services Shareholder Services
5A. Management's Discussion of
Fund Performance ........... [To be included in Annual [To be included in Annual [To be included in
Report to Shareholders] Report to Shareholders] Financial Statements]
6. Capital Stock and
Other Securities ........... The Fund and its Shares; The Fund and its Shares; Your Account; Fund Details
Management of the Fund; Management of the Fund;
Dividends and Distributions; Dividends and Distributions;
Taxes; Shareholder Services Taxes; Shareholder Services
7. Purchase of Securities
Being Offered ............. Purchase of Shares; Purchase of Shares; Your Account
Shareholder Services; Shareholder Services;
Management of the Fund Management of the Fund
8. Redemption or Repurchase ... Redemption of Shares; Redemption of Shares; Your Account
Shareholder Services Shareholder Services
9. Legal Proceedings........... Not Applicable Not Applicable Not Applicable
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
Caption or Location in Caption or Location in Caption or Location in
Statement of Additional Statement of Additional Statement of Additional
Information for State Information for State Information for State
Street Research Intermediate Street Research Strategic Street Research
Form N-1A Item No. Bond Fund Income Fund Legacy Fund
PART B
<S> <C> <C> <C>
10. Cover Page.................... Same Same Same
11. Table of Contents............. Same Same Same
12. General Information and
History ...................... Not Applicable Not Applicable Not Applicable
13. Investment Objectives
and Policies ................. Additional Investment Investment Policies and Additional Policies and
Policies and Restrictions; Restrictions; Additional Restrictions; Additional
Additional Information Information Concerning Information Concerning
Concerning Certain Investment Certain Investment Techniques; Certain Investment Techniques;
Techniques; Debt Instruments Debt Instruments and Debt Instruments and
and Permitted Cash Investments; Permitted Cash Investments; Permitted Cash Investments;
Portfolio Transactions Portfolio Transactions Portfolio Transactions
14. Management of the Registrant . Trustees and Officers Trustees and Officers Trustees and Officers
15. Control Persons and Principal
Holders of Securities ........ Trustees and Officers Trustees and Officers Trustees and Officers
16. Investment Advisory and Other
Services ..................... Investment Advisory Services; Investment Advisory Investment Advisory
Custodian; Independent Services; Custodian; Services; Custodian;
Accountants; Distribution of Independent Accountants; Independent Accountants;
Shares of the Fund Distribution of Shares Distribution of Shares
of the Fund of the Fund
17. Brokerage Allocation.......... Portfolio Transactions Portfolio Transactions Portfolio Transactions
18. Capital Stock and
Other Securities ............. Not Applicable (Description Not Applicable (Description The Trust, the Fund
in Prospectus) in Prospectus) and its Shares
19. Purchase, Redemption and
Pricing of Securities
Being Offered ................ Purchase of Shares; Net Purchase of Shares; Purchase and Redemption
Asset Value Redemption of Shares; of Shares; Shareholder
Net Asset Value Accounts; Net Asset Value
20. Tax Status ................... Certain Tax Matters Certain Tax Matters Certain Tax Matters
21. Underwriters ................. Distribution of Shares Distribution of Shares Distribution of Shares
of the Fund of the Fund of the Fund
22. Calculation of Performance
Data ......................... Calculation of Performance Calculation of Performance Calculation of Performance
Data Data Data
23. Financial Statements ......... Financial Statements Financial Statements Financial Statements
</TABLE>
ii
<PAGE>
STATE STREET RESEARCH
LEGACY FUND
A tax-managed approach to investing in stocks for long-term growth.
Prospectus
December __, 1997
STATE STREET RESEARCH FUNDS
This prospectus has information you should know before you invest.
Please read it carefully and keep it with your investment records.
Although these securities have been registered with the Securities and
Exchange Commission, the commission has not judged them for investment merit and
does not guarantee the accuracy or adequacy of the information in this
prospectus. Anyone who informs you otherwise is committing a federal crime.
<PAGE>
WHO MAY WANT TO INVEST
State Street Research Legacy Fund is designed for tax-conscious
investors who seek one or both of the following:
* a stock investment for long-term growth
* reduced impact of taxes on their investment returns
The fund is not appropriate for:
* investors seeking either income or aggressive growth
* short-term investments
The fund's shares will rise and fall in value. There is a risk that you
could lose money by investing in the fund.
The fund cannot be certain that it will achieve its goal.
Fund shares are not bank deposits and are not guaranteed, endorsed or
insured by any financial institution, government entity or the FDIC.
2
<PAGE>
CONTENTS
Page
LEGACY FUND..................................................................4
The fund's goal and strategy, main risks and expenses
YOUR ACCOUNT.................................................................6
Managing your State Street Research investments
Opening an Account...........................................................6
Choosing a Share Class.......................................................7
Sales Charges................................................................8
Policies for Buying Shares..................................................10
Policies for Selling Shares.................................................11
Account Policies............................................................13
Distribution and Taxes......................................................14
Investors Services..........................................................14
FUND DETAILS................................................................15
The fund's business structure and dealer compensation, plus
additional policies
OTHER SECURITIES AND RISKS..................................................17
Information on additional portfolio securities and practices, and the
risks associated with them
Back Cover For Additional Information
3
<PAGE>
LEGACY FUND
(chesspiece graphic) Goal and Strategy
Fundamental Goal. The fund seeks to provide long-term growth of capital.
Strategy. Under normal market conditions, the fund invests at
least 65% of total assets in stocks and convertible securities of mid- and
large-size companies.
In managing its portfolio, the fund employs a tax-managed strategy,
generally seeking to identify stocks with long-term growth potential and holding
them for extended periods. This buy-and-hold approach is designed to allow the
fund to focus on long-term capital appreciation while reducing (though not
eliminating) capital gains distributions and their resulting tax liability for
shareholders. While the fund generally expects to invest across a broad range of
industries, it may favor companies in those industries that appear to offer
higher potential for long-term growth.
Although the fund does not expect to do so as a matter of course, it is
permitted to invest up to 35% of total assets in other securities (for example,
bonds and small-size company stocks). The fund may also use derivatives,
particularly as a way of hedging against market downturns; more information,
page 00.
(traffic sign graphic) Portfolio Risks
Because the fund invests primarily in stocks, its major risks are those
of stock investing, including sudden, unpredictable drops in value and the
potential for periods of lackluster performance.
The fund's investment approach, with its emphasis on keeping portfolio
turnover low, means that the fund could continue to hold various stocks through
adverse markets rather than selling them. This could cause the fund to have
deeper losses during down markets than a fund that invested in similar stocks
but did not seek reduced turnover. To the extent that the fund does sell
securities during times of volatility, either for investment management reasons
or to meet shareholder redemption requests, portfolio turnover and capital gains
distributions are likely to increase as a result. For this reason, shareholders
who actively trade or exchange fund shares could adversely affect the management
of the fund and are discouraged from investing in it.
While the fund's buy-and-hold approach is designed to allow it to
capture long-term gains, some stocks may not return to previous highs. To the
extent that the fund continues to hold these stocks, it may miss opportunities
to realize gains and its long-term performance may be reduced.
[column text]
Information on other securities and risks appears on page 00.
[end column text]
[sidebar text]
(magnifying glass graphic) Tax-Managed Funds
Many stock funds make their buy and sell decisions with an eye toward
maximizing pre-tax performance. Tax-managed funds consider an additional factor:
how their transactions - and the resulting taxable distributions - could affect
their shareholders' tax burden.
Federal tax laws dictate that mutual funds must distribute their net
gains from transactions each year. These distributions are taxable to you during
the year in which they are made - even if you reinvest them.
As long as a fund continues to hold a stock, any capital appreciation it
has in that stock is reflected in the fund's share price, rather than in taxable
distributions. Also, by holding a stock for a longer period, the fund can
distribute any
4
<PAGE>
gains from its sale as long-term capital gains. These distributions are taxed
as capital gains rather than ordinary income - an advantage for shareholders
in higher tax brackets.
In addition to attempting to keep portfolio turnover low, tax-managed
funds may use other techniques to reduce shareholder tax liabilities, such as
being selective in realizing gains and losses.
[end of sidebar text]
(Thinker graphic) Investment Management
The fund's investment manager is State Street Research & Management
Company. The firm traces its heritage back to 1924 and the founding of one of
America's first mutual funds. Today the firm has more than $___ billion in
assets under management (as of ____________), including more than $____ billion
in mutual funds.
Kennard Woodworth, Jr. has been responsible for the fund's
day-to-day portfolio management since its inception in December 1997. A
senior vice president, he has worked as an investment professional since
joining the firm in 19__.
INVESTOR EXPENSES
Shareholder fees are paid directly by investors.
<TABLE>
<CAPTION>
Class descriptions begin on page ___
Shareholder Fees(1) (% of offering price) Class A Class B Class C Class S
- ----------------------------------------- ------- -------- ------- -------
<S> <C> <C> <C> <C>
Maximum front-end sales charge 4.50 0.00 0.00 0.00
Maximum deferred sales charge 0.00(2) 5.00 1.00 0.00
Annual fund expenses are deducted from fund assets.
Annual Fund Expenses
(% of average net assets) Class A Class B Class C Class S
- -------------------------- ------- ------- ------- -------
Management fee(3) 0.70 0.70 0.70 0.70
Marketing (12b-1) fees 0.25 1.00 1.00 0.00
Other expenses, after voluntary reduction(3) 0.30 0.30 0.30 0.30
---- ---- ---- ----
Total annual fund expenses, after
voluntary reduction(3) 1.25 2.00 2.00 1.00
==== ==== ==== ====
EXAMPLE Here is what you would pay if you
invested $1,000 over the years indicated.
The example is for comparison only and
does not represent the fund's actual
expenses, either past or future (4).
Year Class A Class B(5) Class C(5) Class S
------- ---------- ----------- -------
1 $57 $70/$20 $30/$20 $10
3 $83 $93/$63 $63/$63 $32
</TABLE>
- -------------------
(1) Not charged on reinvestments or exchanges.
(2) Except for investments of $1 million or more; see page __.
(3) Because the fund has been newly organized, the percentage expense levels
shown in the table as "Other expenses" are based on estimates. The
investment manager and its affiliates have voluntarily undertaken to
subsidize "Other expenses" to maintain the level of "Total annual fund
expenses" shown for the next 12 months or until the Fund's net assets
reach $100 million, whichever occurs first. However, the subsidy could
be withdrawn at any time.
5
<PAGE>
"Total annual fund expenses" are estimated to be 1.95%, 2.70%, 2.70%
and 1.70% for Class A, Class B, Class C and Class S shares,
respectively, in the absences of such subsidy.
(4) Example assumes dividend reinvestment, hypothetical 5% annual return,
maximum applicable sales charges and conversion of Class B shares to
Class A after eight years.
(5) The first number assumes you sold all your shares at the end of the
period, the second assumes you stayed in the fund.
YOUR ACCOUNT
(Key Graphic) Opening an Account
If you are opening an account through a financial professional, he or
she can assist you with all phases of your investment.
If you are investing through a large retirement plan or other special
program, follow the instructions in your program materials.
To open an account without the help of a financial professional, please
use the instructions on these pages.
(checklist graphic) Choosing a Share Class
The fund offers four share classes, each with its own sales charge and
expense structure.
If you are investing a substantial amount and plan to hold your shares
for a long period, Class A shares may make the most sense for you. If you are
investing a lesser amount, you may want to consider Class B shares (if investing
for at least five years) or Class C shares (if investing for less than five
years). If you are investing through a special program, such as a large
employer-sponsored retirement plan or certain programs available through
brokers, you may be eligible to purchase Class S shares.
[sidebar text, bottom of page]
Class A -- Front Load
* Initial sales charge of 4.5% or less; schedule on page 14
* Lower sales charges for larger investments; see sidebar on facing page
and sales charge schedule
* Lower annual expenses than Class B or C shares due to lower marketing
(12b-1) fee of 0.25%
Class B -- Back Load
* No initial sales charge
* Deferred sales charge of 5% or less on shares you sell within five
years; schedule on page 14
* Annual marketing (12b-1) fee
* Automatic conversion to Class A shares after eight years, reducing
future annual expenses
Class C -- Level Load
* No initial sales charge
* Deferred sales charge of 1%, paid if you sell shares within one year
of purchase
* Lower deferred sales charge than Class B shares
6
<PAGE>
* Annual marketing (12b-1) fee
* No conversion to Class A shares after eight years, so annual expenses
do not decrease
[end of sidebar text, bottom of page]
Because all future investments in your account will be made in the share
class you designate when opening the account, you should make your decision
carefully. Your financial professional can help you choose the share class that
makes the most sense for you.
[sidebar text, bottom of page]
Class S -- No Load
* No sales charges of any kind
* No marketing (12b-1) fees; annual expenses are lower than other share
classes
* Available through a range of retirement and special programs, including
broker programs offering customized recordkeeping and other services;
these programs usually involve special conditions and separate fees
(contact your financial professional for information)
[end of sidebar text, bottom of page]
[sidebar text]
[Magnifying Glass Graphic] Class A Sales Charge Reductions and Waivers
* Substantial investments receive lower sales charge rates; see
information on the following page.
* The "right of accumulation" allows you to include your existing State
Street Research investments (except Money Market Fund Class E shares) as
part of your current investment for sales charge purposes.
* A "letter of intent" allows you to count all investments in this or
other State Street Research funds over the next 13 months as if you were
making them all at once, for purposes of calculating sales charges.
To take advantage of right of accumulation or letter of intent waivers,
consult your financial professional or State Street Research.
[end of sidebar text]
Sales Charges
Class A -- Front Load
when you invest this % is deducted which equals this % of
this amount for sales charges your net investment
Up to $99,999 4.50 4.71
$100,000 - $249,999 3.50 3.63
$250,000 - $499,999 2.50 2.56
$500,000 - $999,999 2.00 2.04
$1 million or more see next column
With Class A shares, you pay a sales charge only when you buy shares.
7
<PAGE>
If you are investing $1 million or more (either as a lump sum or through
any of the methods described on page 11), you can purchase Class A shares
without any sales charge. However, you may be charged a "contingent deferred
sales charge" (CDSC) if you sell any shares you have held for less than one
year. Policies regarding the calculation of the CDSC are the same as for Class
B.
Class A shares are also offered with low or no sales charges through
various managed, fee-based programs and other sponsored arrangements (contact
your financial professional for information).
Class B -- Back Load
This % of net asset value at
the time of purchase (or of
when you sell shares in this sale, if lower) is deducted
year after you bought them from your proceeds
First year 5.00
Second year 4.00
Third year 3.00
Fourth year 3.00
Fifth year 2.00
Sixth year or later None
With Class B shares, you pay no sales charge when you invest, but you
are charged a "contingent deferred sales charge" (CDSC) when you sell shares you
have held for five years or less, as described in the table above. Any shares
acquired through reinvestment are not subject to the CDSC. There is no CDSC on
exchanges into other State Street Research funds, and the date of your initial
investment will continue to be used as the basis for CDSC calculations when you
exchange. To ensure that you pay the lowest CDSC possible, the fund will always
use the shares with the lowest CDSC to fill your sell requests.
The CDSC is waived on shares sold for mandatory retirement distributions
or because of disability or death. Consult your financial professional or State
Street Research Shareholder Services.
Class B shares automatically convert to Class A shares after eight
years, lowering your annual expenses from that time on.
Class C -- Level Load
this % of net asset value at
the time of purchase (or of
when you sell shares in this sale, if lower) is deducted
year after you bought them from you proceeds
First year 1.00
Second year or later None
With Class C shares, you pay no sales charge when you invest, but you
are charged a "contingent deferred sales charge" (CDSC) when you sell shares you
have held for one year or less, as described in the table above.
Policies regarding the calculation of the CDSC are the same as for Class B.
Class C shares currently have the same annual expenses as Class B
shares, but never convert to Class A shares (with their lower annual expenses).
Class S -- No Load
Class S shares have no sales charges or CDSC.
8
<PAGE>
(Cash Register Graphic) Policies for Buying Shares
Once you have chosen a share class, the next step is to determine the
amount you want to invest.
Minimum Initial Investments:
* $10,000 for accounts that use the Investamatic regular investing program
* $2,000 for Individual Retirement Accounts
* $25,000 for all other accounts
Minimum Additional Investments:
* $50 for any account
Complete the enclosed application. You can avoid future inconvenience by
signing up now for any services you might later use.
Timing of Requests. All requests received by State Street Research
before 4:00 p.m. eastern time will be executed the same day, at that day's
closing share price. Orders received after 4:00 p.m. will be executed the
following day, at that day's closing share price.
Wire Transactions. Funds may be wired between 8:00 a.m. and 4:00 p.m.
eastern time. To make a same-day wire investment, please notify State Street
Research by 12:00 noon of your intention to wire funds, and make sure your wire
arrives by 4:00 p.m. Your bank may charge a fee for wiring money.
9
<PAGE>
<TABLE>
<CAPTION>
Buying Shares
To Open an Account To Add to an Account
<S> <C> <C>
(Graphic of Briefcase) Through a Contact your financial professional. Contact your financial professional.
Financial Professional.
By mail [Graphic of mailbox] Make your check payable to "State Fill out the investment stub from
Street Research Funds." Forward your account statement, or indicate
the check and your application to the fund name and account number on
State Street Research. your check. Make you check payable
to "State Street Research Funds."
Forward the check and stub to State
Street Research.
(Graphic of Federal Building) By Forward your application to State Call State Street Research to
Federal Funds Wire Street Research, then call to obtain a control number. Instruct
obtain an account number. Wire your bank to wire funds to:
funds using the instructions at * State Street Bank & Trust
right. Company, Boston MA
* ABA: 011000028
* BNF: fund name and share class
you want to buy
* AC: 99029761
* OBI: your name and your account
number
* Control: the number given you
by State Street Research
By Electronic Funds Transfer Verify that your bank is a member Call State Street Research to verify
(Graphic of Electrical Plug) of ACH (Automated Clearing House) that the necessary bank information
system. Forward your application is on file for your account. If it
to State Street Research. Please is, you may request a transfer with
be sure to include the appropriate with the same phone call. If not, please
bank information. Call State Street ask State Street Research to provide
Research to request a purchase. you with an EZ Trader application.
(Graphic of Calendar) By Forward your application, with all Call State Street Research to verify
Investamatic appropriate sections completed, to that Investamatic is in place on your
State Street Research, along with a account, or to request a form to add it.
check for your initial investment Investments are automatic once Investamatic
payable to "State Street Research is in place.
Funds."
By Exchange (Graphic of Exchange) Call State Street Research to Call State Street Research to request an
request an exchange. exchange.
State Street Research Shareholder Services PO Box 8408, Boston, MA 02266-8408
Internet www.ssrfunds.com
Call toll-free: 1-800-562-0032 (business days 8:00 a.m. - 6:00 p.m., eastern time)
</TABLE>
10
<PAGE>
(Graphic of Reciept) Policies for Selling Shares
Circumstances That Require Written Requests. Please submit instructions
in writing when any of the following apply:
* you are selling more than $50,000 worth of shares
* the name or address on the account has changed within the last
30 days
* you want the proceeds to go to a name or address not on the
account registration
* you are transferring shares to an account with a different
registration or share class
* you are selling shares held in a corporate or fiduciary account;
for these accounts, additional documents are required:
corporate accounts: certified copy of a corporate resolution
fiduciary accounts: copy of power of attorney or other
governing document
To protect your account against fraud, all signatures on these documents
must be guaranteed. You may obtain a signature guarantee at most banks and
securities dealers. A notary public cannot provide a signature guarantee.
Incomplete Sell Requests. State Street Research will attempt to notify
you promptly if any information necessary to process your request is missing.
Timing of Requests. All requests received in good order by State Street
Research before 4:00 p.m. eastern time will be executed the same day, at that
day's closing share price. Requests received after 4:00 p.m. will be executed
the following day, at that day's closing share price.
Wire Transactions. Proceeds sent by federal funds wire must total at
least $5,000. A fee of $7.50 will be deducted from all proceeds sent by wire,
and your bank may charge an additional fee to receive wired funds.
Selling Recently Purchased Shares. If you sell shares before the check
or electronic funds transfer for those shares has been collected, you will not
receive the proceeds until your initial payment has cleared. This may take up to
15 days after your purchase was recorded (in rare cases, longer). If you open an
account with shares purchased by wire, you cannot sell those shares until your
application has been processed.
To Sell Some or All of Your Shares
(Graphic of Briefcase) Through a Financial Contact your financial
Professional professional.
11
<PAGE>
<TABLE>
<CAPTION>
By Mailbox (Graphic of Mailbox)
<S> <C>
Send a letter of instruction, an endorsed stock power or Check with State Street Research to make sure that
share certificates (if you hold certificate shares) to State wire redemption privileges are in place on your
Street Research. Specify the fund, the account number account. Once these privileges are established, you may
and the dollar value or number of shares. Be sure to place your request to sell shares with State Street
include all necessary signatures and any additional Research. Proceeds will be wired to your
documents, as well as signature guarantees if required pre-designated bank account. (See "Wire Transactions"
(see facing page). (Graphic of Federal Building) By on facing page.)
Federal Funds Wire
By Electronic Funds Transfer (Graphic of Electrical Check with State Street Research to make sure that the
Plug) EZ Trader feature and a bank designation is in place on
your account. Once one of these is established, you
may place your request to sell shares with State Street
Research. Proceeds will be wired to your
pre-designated bank account.
(Graphic of Telephone) By Telephone As long as your request does not require a written
request (see facing page), you can sell shares by calling
State Street Research. A check will be mailed to you on
the following business day.
By Exchange (Graphic of Exchange) Read the prospectus for the fund into which you are
exchanging. Call State Street Research to request an
exchange.
(Graphic of Calendar) By Systematic Withdrawal Plan See plan information on page __.
State Street Research Shareholder Services PO Box 8408, Boston, MA 02266-8408
Internet www.ssrfunds.com
Call toll-free: 1-800-562-0032 (business days 8:00 a.m. - 6:00 p.m., eastern time)
</TABLE>
12
<PAGE>
(Graphic of Pages) Account Policies
The Fund's Business Hours. The fund is open the same days as the New
York Stock Exchange (generally Monday through Friday). Fund representatives are
available from 8:00 a.m. to 6:00 p.m. eastern time on these days.
Calculating Share Price. The fund calculates its net asset value per
share (NAV) every business day at the regular close of the New York Stock
Exchange (usually at 4:00 p.m. eastern time). Each class's share price is
calculated by dividing its net assets by the number of its shares outstanding.
Telephone Requests. When you open an account you automatically receive
telephone privileges, allowing you to place requests on your account by
telephone. Your broker can also use these privileges to request exchanges on
your account. For your protection, all telephone calls are recorded.
As long as State Street Research takes certain measures to authenticate
telephone requests on your account, you may be held responsible for unauthorized
requests. Unauthorized telephone requests are rare, but if you want to protect
yourself completely, you can decline the telephone privilege on your
application. The fund may suspend or eliminate the telephone privilege at any
time.
Exchange Privileges. There is no fee to exchange shares among State
Street Research funds. Your new fund shares will be the equivalent class as your
current shares. Any contingent deferred sales charges will continue to be
calculated from the date of your initial investment.
Frequent exchanges can interfere with fund management and drive up
costs for all shareholders. Because of this, the fund currently limits each
account, or group of accounts under common ownership or control, to six
exchanges per calendar year. The fund may change or eliminate the exchange
privilege at any time, may limit or cancel any shareholder's exchange privilege
and may refuse to accept any exchange request, particularly those associated
with "market timing" strategies.
For Merrill Lynch customers, exchange privileges extend to Summit Cash
Reserves Fund, which is related to the fund for purposes of investment and
investor services.
Accounts with Low Balances. If the value of your account falls below
$1,500, State Street Research may mail you a notice asking you to bring the
account back up to $1,500 or close it out. If you do not take action within 60
days, State Street Research may either sell your shares and mail the proceeds to
you at the address of record or may deduct an annual maintenance fee (currently
$18).
Reinstating Recently Sold Shares. For 120 days after you sell shares,
you have the right to "reinstate" your investment by putting some or all of the
proceeds into any currently available State Street Research fund at net asset
value. Any CDSC you paid on the amount you are reinstating will be credited to
your account. You may only use this privilege once in any twelve-month period
with respect to your shares of a given fund.
(Graphic of Uncle Sam) Distributions and Taxes
Income and Capital Gains Distributions. The fund typically distributes
its net income and net capital gains, if any, around the end of the fund's
fiscal year, which is April 30. To comply with tax regulations, the fund may
also pay an additional capital gains distribution in December.
You may have your distributions reinvested in the fund, invested in a
different State Street Research fund, deposited in a bank account, or mailed out
by check. If you do not give State Street Research other instructions, your
distributions will automatically be reinvested in the fund.
13
<PAGE>
[sidebar text]
(Magnifying Glass Graphic) Tax Considerations
You may want to avoid:
* investing a large amount in the fund close to the end of its
fiscal year (if the fund makes a capital gains distribution, you
will receive some of your investment back as a taxable
distribution)
* selling shares at a loss for tax purposes and investing in a
substantially identical investment within 30 days before or after
that sale (such a transaction is usually considered a "wash
sale," and you will not be allowed to claim a tax loss)
[end of sidebar text]
Tax Effects of Distributions and Transactions. In general, any dividends
and short-term capital gain distributions you receive from the fund are taxable
as ordinary income. Distributions of net capital gains are generally taxable as
long-term capital gains. This is true no matter how long you have owned your
shares and whether you reinvest your distributions or take them in cash.
Every year, the fund will send you information detailing the amount of
ordinary income and capital gains distributed to you for the previous year.
The sale of shares in your account may produce a gain or loss, and is a
taxable event. For tax purposes, an exchange is the same as a sale.
Your investment in the fund could have additional tax consequences.
Please consult your tax professional for assistance.
Backup Withholding. By law, the fund must withhold 31% of your
distributions and proceeds if you have not provided complete, correct taxpayer
information.
(Interlocked Hands Graphic) Investor Services
Investamatic Program. Use Investamatic to set up regular automatic
investments in the fund from your bank account. You determine the frequency and
amount of your investments, and you can skip an investment with three days
notice. Not available with Class S shares.
Systematic Withdrawal Program. This plan is designed for retirees and
other investors who want regular withdrawals from a fund account. The plan is
free and allows you to withdraw up to 8% of your fund assets a year without
incurring any contingent deferred sales charges. Certain terms and minimums
apply.
Dividend Allocation Plan. This plan automatically invests your
distributions from the fund into another fund of your choice, without any fees
or sales charges.
Automatic Bank Connection. This plan lets you route any distributions or
Systematic Withdrawal Program
payments directly to your bank account.
State Street Research also offers a full range of prototype retirement
plans for individuals, sole proprietors, partnerships, corporations and
employees. Call 1-800-562-0032 for information on retirement plans or any of the
services described above.
14
<PAGE>
FUND DETAILS
(Graphic of Column) Business Structure
Formed in 1997, the fund is a diversified series of State Street
Research Securities Trust, an open-end management investment company that is
organized as a Massachusetts business trust. A board of trustees representing
shareholder interests oversees the fund's operations, including the hiring of
the investment manager and other service providers. The fund does not hold
regular shareholder meetings, but may call meetings when matters arise that
require shareholder approval. These may include amendments to the investment
management agreement, the election of trustees or proposed changes in the fund's
fundamental goal, which cannot be changed without shareholder approval.
The investment manager is responsible for the fund's investment and
business activities, and receives the management fee as compensation. The
management fee, on an annual basis, is 0.70% of the fund's net assets. The
investment manager and the distributor are subsidiaries of Metropolitan Life
Insurance Company.
Brokers for Portfolio Trades. When placing trades for the fund's
portfolio, State Street Research chooses brokers that provide the best execution
(a term defined by service as well as price), but may also consider a broker's
sales of fund shares.
Investment Manager
State Street Research & Management Company
One Financial Center, Boston, MA 02111
Distributor
State Street Research Investment Services, Inc.
One Financial Center, Boston, MA 02111
Shareholder Services
State Street Research Shareholder Services
P.O. Box 8408, Boston, MA 02266
Custodian
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110
(Graphic of a Check) Dealer Compensation
Dealers who sell shares of the fund and perform services for fund
investors receive sales commissions and annual fees. These are paid by the
fund's distributor, using money from sales charges, marketing (12b-1) fees, and
other resources of the distributor.
<TABLE>
<CAPTION>
Maximum Dealer Compensation Class A Class B Class C Class S
- --------------------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Initial commission (%) -- 4.00 1.00 0.00
Investments up to $100,000 (%) 4.00 -- -- --
$100,000 - $249,999 (%) 3.00 -- -- --
$250,000 - $499,999 (%) 2.00 -- -- --
$500,000 - $999,999 (%) 1.75 -- -- --
First $1-3 million (%) 1.00(1) -- -- --
Next $2 million (%) 0.50(1) -- -- --
Next $1 and above (%) 0.25(1) -- -- --
Annual fee (%) 0.25 0.25 0.90 0.00
</TABLE>
- -----------------
15
<PAGE>
(1) If your broker declines this commission, the one-year CDSC on your
investment is waived
Additional Policies. Please note that the fund maintains additional
policies and reserves certain rights, including:
* The fund may vary its initial or additional investments in the
case of exchanges, reinvestments, periodic investment plans,
retirement and employee benefit plans, sponsored arrangements and
other similar programs.
* All orders to purchase shares are subject to acceptance by the fund.
* At any time, the fund may change or discontinue its sales charge
waivers and any of its order acceptance practices, and may
suspend the sale of its shares.
* To permit investors to obtain the current price, dealers are
responsible for transmitting all orders to shareholder services
promptly.
* Dealers may impose a transaction fee on the purchase or sale of
shares by shareholders.
* The distributor may also pay its affiliate, MetLife Securities,
Inc., additional compensation of up to 0.25% of certain sales.
16
<PAGE>
OTHER SECURITIES AND RISKS
(Graphic of Securities Certificates) Other Securities and Risks
Each of the fund's portfolio securities and investment practices offers
certain opportunities and carries various risks. Major investments and risk
factors are outlined in the fund description starting on page 2. Below are brief
descriptions of other securities and practices, along with their associated
risks.
Restricted and Illiquid Securities. Any securities that are thinly
traded or whose resale is restricted can be difficult to sell at a desired time
and price. Some of these securities are new and complex, and trade only among
institutions; the markets for these securities are still developing, and may not
function as efficiently as established markets. Owning a large percentage of
restricted and illiquid securities could hamper the fund's ability to raise cash
to meet redemptions. Also, because there may not be an established market price
for these securities, the fund may have to estimate their value, which means
that their valuation (and, to a much smaller extent, the valuation of the fund)
may have a subjective element.
Derivatives. Derivatives, a category that includes options and futures,
are financial instruments whose value derives from another security or an index.
The fund may use derivatives for hedging (attempting to offset a potential loss
in one position by establishing an interest in an opposite position). The fund
may also use derivatives for speculation (investing for potential income or
capital gain).
While hedging can guard against potential risks, it adds to the fund's
expenses and can eliminate some opportunities for gains. There is also a risk
that a derivative intended as a hedge may not perform as expected. The main risk
with derivatives is that some types can amplify a gain or loss, potentially
earning or losing substantially more money than the actual cost of the
derivative.
With all derivatives, whether used for hedging or speculation, there is
also the risk that the counterparty may fail to honor its contract terms,
causing a loss for the fund.
Foreign Investments. Foreign securities are more volatile than their
domestic counterparts, in part because of higher political and economic risks,
lack of reliable information, and fluctuations in currency exchange rates. These
risks are usually higher in less developed countries. The fund may use foreign
currencies and related instruments to hedge its foreign investments.
In addition, foreign securities may be more difficult to resell and the
markets for them less efficient than for comparable U.S. securities. Even where
a foreign security increases in price in its local currency, the appreciation
may be diluted by the negative effect of exchange rates when the security's
value is converted to U.S. dollars. Foreign withholding taxes also may apply and
errors and delays may occur in the settlement process for foreign securities.
Securities Lending. The fund may seek additional income by lending
portfolio securities to qualified institutions. By reinvesting the collateral it
receives in these transactions, the fund could magnify any gain or loss it
realizes on the underlying investment. If the borrower fails to return the
securities and the collateral is insufficient to cover the loss, the fund could
lose money.
Short-term Trading. While the fund ordinarily does not trade securities
for short-term profits, it will sell any security at the time it believes best,
which may result in some short-term trading. Short-term trading can increase the
fund's brokerage costs and its shareholders' tax liabilities.
Repurchase Agreements. The fund may buy securities with the
understanding that the seller will buy them back with interest at a later date.
If the seller is unable to honor its commitment to repurchase the securities,
the fund could lose money.
17
<PAGE>
Investment Limitations
<TABLE>
<CAPTION>
Limitation
Practice (% of total assets)
- -------- -------------------
<S> <C>
Investing in securities of any given issuer
(other than the U.S. government and its agencies)(1) 5(2)
Investing in any given industry(1) 25
Lending securities 33
Lending money(1) Prohibited
Repurchase agreements 30
Limitation
Security (% of net assets)
- -------- -----------------
Commodity futures contracts
(for non-hedging purposes only) 5(3)
Option contracts
(for non-hedging purposes only) 5
Swap agreements 5
Illiquid securities 15
Foreign securities 35(4)
</TABLE>
- ---------------
(1) Fundamental policy; may not be changed without shareholder approval.
(2) Applies only to 75% of fund's total assets. The fund also is
prohibited from investing in more than 10% of an issuer's voting
securities.
(3) Initial margin deposits plus premiums may not exceed 5% of the value
of the fund's net assets.
(4) Applies to all direct and indirect interests in securities of non-U.S.
issuers; includes a 5% net asset limitation on investments in
developing countries.
18
<PAGE>
FOR ADDITIONAL INFORMATION
You can obtain a free copy of the current annual/semiannual report or
SAI by contacting:
[State Street Research Logo] Shareholder Services P.O. Box 8408, Boston,
MA 02266 Telephone: 1-800-562-0032 Internet: www.ssrfunds.com
Or you can visit the SEC website at: http://www.sec.gov
You can find additional information on the fund's structure and its
performance in the following documents:
Annual/semiannual Reports. While the prospectus describes the fund's
potential investments, these reports detail the fund's actual investments as of
the report date. Reports include a discussion by fund management of recent
economic and market trends and fund performance. The annual report also includes
the report of the fund's independent accountants.
Statement of Additional Information. (SAI) A supplement to the
prospectus, the SAI contains further information about the fund and its
investment limitations and policies. It also includes the most recent annual
report and the independent accountants' report. A current SAI for this fund is
on file with the Securities and Exchange Commission and is incorporated by
reference (is legally part of this prospectus).
19
<PAGE>
State Street Research Legacy Fund
a Series of
State Street Research Securities Trust
STATEMENT OF ADDITIONAL INFORMATION
[December __,] 1997
TABLE OF CONTENTS
Page
INVESTMENT POLICIES AND RESTRICTIONS..........................................2
ADDITIONAL INFORMATION CONCERNING CERTAIN INVESTMENT TECHNIQUES...............4
DEBT INSTRUMENTS AND PERMITTED CASH INVESTMENTS..............................13
THE TRUST, THE FUND AND ITS SHARES...........................................16
TRUSTEES AND OFFICERS........................................................17
INVESTMENT ADVISORY SERVICES.................................................21
PURCHASE AND REDEMPTION OF SHARES............................................23
SHAREHOLDER ACCOUNTS.........................................................28
NET ASSET VALUE..............................................................32
PORTFOLIO TRANSACTIONS.......................................................33
CERTAIN TAX MATTERS..........................................................37
DISTRIBUTION OF SHARES OF THE FUND...........................................39
CALCULATION OF PERFORMANCE DATA..............................................42
CUSTODIAN....................................................................45
INDEPENDENT ACCOUNTANTS......................................................45
FINANCIAL STATEMENTS.........................................................45
The following Statement of Additional Information is not a Prospectus. It
should be read in conjunction with the Prospectus of State Street Research
Legacy Fund dated [December __,] 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: ______________________ ET-_________
<PAGE>
INVESTMENT POLICIES AND RESTRICTIONS
As set forth in part 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 or 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 such meeting if the holders of
more than 50% of the outstanding 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 1940 Act and the rules thereunder
or as permitted by the Securities and Exchange Commission (the
creation of general lines 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 interest 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
2
<PAGE>
estate, or securities of companies which make real estate
loans or own, or invest or deal in, real estate;
(5) not to invest in physical commodities or physical commodity
contracts or options in excess of 10% of the Fund's total
assets, except that investments in essentially financial items
or arrangements such as, but not limited to, swap
arrangements, hybrids, currencies, currency and other forward
contracts, 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
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 issuers principally engaged in any one industry,
except securities issued or guaranteed by the U.S. Government
or its agencies or instrumentalities, 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 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;
(3) not to purchase securities on margin or make short sales of
securities or maintain a short position except for short sales
"against the box" (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);
(4) not to purchase a security issued by another investment
company, except to the extent permitted under the 1940 Act or
except by purchases in the open market
3
<PAGE>
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; and
ADDITIONAL INFORMATION CONCERNING
CERTAIN INVESTMENT TECHNIQUES
Options and Futures Generally
The Fund may buy and sell certain types of derivatives such as options,
futures contracts, options on futures contracts, and swaps under circumstances
in which such instruments are expected by the Investment Manager to aid in
achieving the Fund's investment objective. The Fund may also purchase
instruments with characteristics of both futures and securities (e.g., debt
instruments with interest and principal payments determined by reference to the
value of a commodity or a currency at a future time) and which, therefore,
possess the risks of both futures and securities investments.
Derivatives such as options, futures contracts, options on futures
contracts, and swaps enable the Fund to take both "short" positions (positions
which anticipate a decline in the market value of a particular asset or index)
and "long" positions (positions which anticipate an increase in the market value
of a particular asset or index). The Fund may also use strategies which involve
simultaneous short and long positions in response to specific market conditions,
such as where the Investment Manager anticipates unusually high or low market
volatility.
The Investment Manager may enter into derivative positions for the Fund
for either hedging or non-hedging purposes. The term hedging is applied to
defensive strategies designed to protect the Fund from an expected decline in
the market value of an asset or group of assets that the Fund owns (in the case
of a short hedge) or to protect the Fund from an expected rise in the market
value of an asset or group of assets which it intends to acquire in the future
(in the case of a long or "anticipatory" hedge). Non-hedging strategies include
strategies designed to produce incremental income (such as the option writing
strategy described below) or "speculative" strategies which are undertaken to
profit from an expected decline in the market value of an asset or group of
assets asset which the Fund does not own or expected increases in the market
value of an asset which it does not plan to acquire. Information about specific
types of instruments is provided below.
Futures Contracts
Futures contracts are publicly traded contracts to buy or sell an
underlying asset or group of assets, such as a currency, or an index of
securities, at a future time at a specified price. A contract to buy establishes
a long position while a contract to sell establishes a short position.
The purchase of a futures contract on an equity security or an index of
equity securities normally enables a buyer to participate in the market movement
of the underlying asset or index
4
<PAGE>
after paying a transaction charge and posting margin in an amount equal to a
small percentage of the value of the underlying asset or index. The Fund will
initially be required to deposit with the Trust's custodian or the futures
commission merchant effecting the futures transaction an amount of "initial
margin" in cash or securities, as permitted under applicable regulatory
policies.
Initial margin in futures transactions is different from margin in
securities transactions in that the former does not involve the borrowing of
funds by the customer to finance the transaction. Rather, the initial margin is
like a performance bond or good faith deposit on the contract. Subsequent
payments (called "maintenance margin") to and from the broker will be made on a
daily basis as the price of the underlying asset fluctuates. This process is
known as "marking to market." For example, when the Fund has taken a long
position in a futures contract and the value of the underlying asset has risen,
that position will have increased in value and the Fund will receive from the
broker a maintenance margin payment equal to the increase in value of the
underlying asset. Conversely, when the Fund has taken a long position in a
futures contract and the value of the underlying instrument has declined, the
position would be less valuable, and the Fund would be required to make a
maintenance margin payment to the broker.
At any time prior to expiration of the futures contract, the Fund may
elect to close the position by taking an opposite position which will terminate
the Fund's position in the futures contract. A final determination of
maintenance margin is then made, additional cash is required to be paid by or
released to the Fund, and the Fund realizes a loss or a gain. While futures
contracts with respect to securities do provide for the delivery and acceptance
of such securities, such delivery and acceptance are seldom made.
In transactions establishing a long position in a futures contract,
assets equal to the face value of the futures contract will be identified by the
Fund to the Trust's custodian for maintenance in a separate account to insure
that the use of such futures contracts is unleveraged. Similarly, assets having
a value equal to the aggregate face value of the futures contract will be
identified with respect to each short position. The Fund will utilize such
assets and methods of cover as appropriate under applicable exchange and
regulatory policies.
Options
The Fund may use options to implement its investment strategy. There
are two basic types of options: "puts" and "calls." Each type of option can
establish either a long or a short position, depending upon whether the Fund is
the purchaser or the writer of the option. A call option on a security, for
example, gives the purchaser of the option the right to buy, and the writer the
obligation to sell, the underlying asset at the exercise price during the option
period. Conversely, a put option on a security gives the purchaser the right to
sell, and the writer the obligation to buy, the underlying asset at the exercise
price during the option period.
Purchased options have defined risk, that is, the premium paid for the
option, no matter how adversely the price of the underlying asset moves, while
affording an opportunity for gain corresponding to the increase or decrease in
the value of the optioned asset. In general, a purchased put increases in value
as the value of the underlying security falls and a purchased call increases in
value as the value of the underlying security rises
5
<PAGE>
The principal reason to write options is to generate extra income (the
premium paid by the buyer). Written options have varying degrees of risk. An
uncovered written call option theoretically carries unlimited risk, as the
market price of the underlying asset could rise far above the exercise price
before its expiration. This risk is tempered when the call option is covered,
that is, when the option writer owns the underlying asset. In this case, the
writer runs the risk of the lost opportunity to participate in the appreciation
in value of the asset rather than the risk of an out-of-pocket loss. A written
put option has defined risk, that is, the difference between the agreed-upon
price that the Fund must pay to the buyer upon exercise of the put and the
value, which could be zero, of the asset at the time of exercise.
The obligation of the writer of an option continues until the writer
effects a closing purchase transaction or until the option expires. To secure
its obligation to deliver the underlying asset in the case of a call option, or
to pay for the underlying asset in the case of a put option, a covered writer is
required to deposit in escrow the underlying security or other assets in
accordance with the rules of the applicable clearing corporation and exchanges.
Among the options which the Fund may enter are options on securities
indices. In general, options on indices of securities are similar to options on
the securities themselves except that delivery requirements are different. For
example, a put option on an index of securities does not give the holder the
right to make actual delivery of a basket of securities but instead gives the
holder the right to receive an amount of cash upon exercise of the option if the
value of the underlying index has fallen below the exercise price. The amount of
cash received will be equal to the difference between the closing price of the
index and the exercise price of the option expressed in dollars times a
specified multiple. As with options on equity securities or futures contracts, a
Fund may offset its position in index options prior to expiration by entering
into a closing transaction on an exchange or it may let the option expire
unexercised.
A securities index assigns relative values to the securities included
in the index and the index options are based on a broad market index. In
connection with the use of such options, the Fund may cover its position by
identifying assets having a value equal to the aggregate face value of the
option position taken.
Options on Futures Contracts
An option on a futures contract gives the purchaser the right, in
return for the premium paid, to assume a position in a futures contract (a long
position if the option is a call and a short position if the option is a put) at
a specified exercise price at any time during the period of the option.
Limitations and Risks of Options and Futures Activity
The Fund may not establish a position in a commodity futures contract
or purchase or sell a commodity option contract for other than bona fide hedging
purposes if immediately thereafter the sum of the amount of initial margin
deposits and premiums required to establish such positions for such nonhedging
purposes would exceed 5% of the market value of the Fund's net assets.
6
<PAGE>
As noted above, the Fund may engage in both hedging and nonhedging
strategies. Although effective hedging can generally capture the bulk of a
desired risk adjustment, no hedge is completely effective. The Fund's ability to
hedge effectively through transactions in futures and options depends on the
degree to which price movements in its holdings correlate with price movements
of the futures and options.
Nonhedging strategies typically involve special risks. The
profitability of the Fund's non-hedging strategies will depend on the ability of
the Investment Manger to analyze both the applicable derivatives market and the
market for the underlying asset or group of assets. Derivatives markets are
often more volatile than corresponding securities markets and a relatively small
change in the price of the underlying asset or group of assets can have a
magnified effect upon the price of a related derivative instrument.
Derivatives markets also are often less liquid than the market for the
underlying asset or group of assets. Some positions in futures and options may
be closed out only on an exchange which provides a secondary market therefor.
There can be no assurance that a liquid secondary market will exist for any
particular futures contract or option at any specific time. Thus, it may not be
possible to close such an option or futures position prior to maturity. The
inability to close options and futures positions also could have an adverse
impact on the Fund's ability to effectively carry out their derivative
strategies and might, in some cases, require a Fund to deposit cash to meet
applicable margin requirements. The Fund will enter into an option or futures
position only if it appears to be a liquid investment.
Swaps
The Fund may invest up to 5% of its total assets in swaps. The Fund may
enter into various forms of swap arrangements with counterparties with respect
to interest rates, currency rates or indices, including purchase of caps, floors
and collars as described below. In an interest rate swap the Fund could agree
for a specified period to pay a bank or investment banker the floating rate of
interest on a so-called notional principal amount (i.e., an assumed figure
selected by the parties for this purpose) in exchange for agreement by the bank
or investment banker to pay the Fund a fixed rate of interest on the notional
principal amount. In a currency swap the Fund would agree with the other party
to exchange cash flows based on the relative differences in values of a notional
amount of two (or more) currencies; in an index swap, the Fund would agree to
exchange cash flows on a notional amount based on changes in the values of the
selected indices. Purchase of a cap entitles the purchaser to receive payments
from the seller on a notional amount to the extent that the selected index
exceeds an agreed upon interest rate or amount whereas purchase of a floor
entitles the purchaser to receive such payments to the extent the selected index
falls below an agreed upon interest rate or amount. A collar combines a cap and
a floor.
The Fund may enter into swap arrangements involving default options.
The Fund would sell a put option for premium income or a debt security that is
subject to a possible default by the debtor. In the event of a default, the
holder of the put may exercise the option to sell the defaulted security, or
equivalent debt securities, to the Fund.
7
<PAGE>
Most swaps entered into by the Fund will be on a net basis; for
example, in an interest rate swap, amounts generated by application of the fixed
rate and the floating rate to the notional principal amount would first offset
one another, with the Fund either receiving or paying the difference between
such amounts. In order to be in a position to meet any obligations resulting
from swaps, the Fund will set up a segregated custodial account to hold
appropriate liquid assets, including cash; for swaps entered into on a net
basis, assets will be segregated having a daily net asset value equal to any
excess of the Fund's accrued obligations over the accrued obligations of the
other party, while for swaps on other than a net basis assets will be segregated
having a value equal to the total amount of the Fund's obligations.
These arrangements will be made primarily for hedging purposes, to
preserve the return on an investment or on a portion of the Fund's portfolio.
However, the Fund may as noted enter into such arrangements for income purposes
to the extent permitted by the Commodities Futures Trading Commission for
entities which are not commodity pool operators, such as the Fund. In entering a
swap arrangement, the Fund is dependent upon the creditworthiness and good faith
of the counterparty. The Fund attempts to reduce the risks of nonperformance by
the counterparty by dealing only with established, reputable institutions. The
swap market is still relatively new and emerging; positions in swap arrangements
may become illiquid to the extent that nonstandard arrangements with one
counterparty are not readily transferable to another counterparty or if a market
for the transfer of swap positions does not develop. The use of interest rate
swaps is a highly specialized activity which involves investment techniques and
risks different from those associated with ordinary portfolio securities
transactions. If the Investment Manager is incorrect in its forecasts of market
values, interest rates and other applicable factors, the investment performance
of the Fund would diminish compared with what it would have been if these
investment techniques were not used. Moreover, even if the Investment Manager is
correct in its forecasts, there is a risk that the swap position may correlate
imperfectly with the price of the asset or liability being hedged.
Currency Transactions
The Fund may engage in currency exchange transactions in order to
protect against the effect of uncertain future exchange rates on securities
denominated in foreign currencies. The Fund will conduct its currency exchange
transactions either on a spot (i.e., cash) basis at the rate prevailing in the
currency exchange market, or by entering into forward contracts to purchase or
sell currencies. The Fund's dealings in forward currency exchange contracts will
be limited to hedging involving either specific transactions or aggregate
portfolio positions. A forward currency contract involves an obligation to
purchase or sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract agreed upon by the parties, at a
price set at the time of the contract. These contracts are not commodities and
are entered into in the interbank market conducted directly between currency
traders (usually large commercial banks) and their customers. In entering a
forward currency contract, the Fund is dependent upon the creditworthiness and
good faith of the counterparty. The Fund attempts to reduce the risks of
nonperformance by the counterparty by dealing only with established, reputable
institutions. Although spot and forward contracts will be used primarily to
protect the Fund from adverse currency movements, they also involve the risk
that anticipated currency
8
<PAGE>
movements will not be accurately predicted, which may result in losses to the
Fund. This method of protecting the value of the Fund's portfolio securities
against a decline in the value of a currency does not eliminate fluctuations
in the underlying prices of the securities. It simply establishes a rate of
exchange that can be achieved at some future point in time. Although such
contracts tend to minimize the risk of loss due to a decline in the value of
hedged currency, they tend to limit any potential gain that might result
should the value of such currency increase.
Repurchase Agreements
The Fund may enter into repurchase agreements. Repurchase agreements
occur when the Fund acquires a security and the seller, which may be either (i)
a primary dealer in U.S. Government securities or (ii) an FDIC-insured bank
having gross assets in excess of $500 million, simultaneously commits to
repurchase it at an agreed-upon price on an agreed-upon date within a specified
number of days (usually not more than seven) from the date of purchase. The
repurchase price reflects the purchase price plus an agreed-upon market rate of
interest which is unrelated to the coupon rate or maturity of the acquired
security. The Fund will only enter into repurchase agreements involving U.S.
Government securities. Repurchase agreements could involve certain risks in the
event of default or insolvency of the other party, including possible delays or
restrictions upon the Fund's ability to dispose of the underlying securities.
Repurchase agreements will be limited to 30% of the Fund's total assets, except
that repurchase agreements extending for more than seven days when combined with
any other illiquid securities held by the Fund will be limited to 10% of the
Fund's total assets.
When-Issued Securities
The Fund may purchase "when-issued" securities, which are traded on a
price or yield basis prior to actual issuance. Such purchases will be made only
to achieve the Fund's investment objective and not for leverage. The when-issued
trading period generally lasts from a few days to months, or over a year or
more; during this period dividends or interest on the securities are not
payable. A frequent form of when-issued trading occurs when corporate securities
to be created by a merger of companies are traded prior to the actual
consummation of the merger. Such transactions may involve a risk of loss if the
value of the securities falls below the price committed to prior to actual
issuance. The Trust's custodian will establish a segregated account when the
Fund purchases securities on a when-issued basis consisting of cash or liquid
securities equal to the amount of the when-issued commitments. Securities
transactions involving delayed deliveries or forward commitments are frequently
characterized as when-issued transactions and are similarly treated by the Fund.
Restricted Securities
It is the Fund's policy not to make an investment in restricted
securities, including restricted securities sold in accordance with Rule 144A
under the Securities Act of 1933 ("Rule 144A Securities") if, as a result, more
than 35% of the Fund's total assets are invested in restricted securities,
provided not more than 10% of the Fund's total assets are invested in restricted
securities other than Rule 144A Securities.
9
<PAGE>
Securities may be resold pursuant to Rule 144A under certain
circumstances only to qualified institutional buyers as defined in the rule, and
the markets and trading practices for such securities are relatively new and
still developing; depending on the development of such markets, Rule 144A
Securities may be deemed to be liquid as determined by or in accordance with
methods adopted by the Trustees. Under such methods the following factors are
considered, among others: the frequency of trades and quotes for the security,
the number of dealers and potential purchasers in the market, market making
activity, and the nature of the security and marketplace trades. Investments in
Rule 144A Securities could have the effect of increasing the level of the Fund's
illiquidity to the extent that qualified institutional buyers become, for a
time, uninterested in purchasing such securities. Also, the Fund may be
adversely impacted by the subjective valuation of such securities in the absence
of a market for them. Restricted securities that are not resalable under Rule
144A may be subject to risks of illiquidity and subjective valuations to a
greater degree than Rule 144A Securities.
Lower Quality Debt Securities ("Junk Bonds")
The Fund may invest in lower quality debt securities. Lower quality
convertible or nonconvertible debt securities generally involve more credit risk
than higher rated securities and are considered by S&P and Moody's to be
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. Further, such securities may be
subject to greater market fluctuations and risk of loss of income and principal
than lower yielding, higher rated debt securities. Risk of lower quality debt
securities, commonly known as "junk bonds," include (i) limited liquidity and
secondary market support; (ii) substantial market price volatility resulting
from changes in prevailing interest rates and/or investor perceptions; (iii)
subordination to the prior claims of banks and other senior lenders; (iv) the
operation of mandatory sinking fund or call/redemption provisions during periods
of declining interest rates when the Fund may be required to reinvest premature
redemption proceeds in lower yielding portfolio securities; (v) the possibility
that earnings of the issuer may be insufficient to meet its debt service; and
(vi) the issuer's low creditworthiness and potential for insolvency during
period of rising interest rates and economic downturn. For further information
concerning the rating categories of debt securities, see the Appendix to this
Statement of Additional Information.
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.
Foreign Investments
The Fund reserves the right to invest without limitation in securities
of non-U.S. issuers directly, or indirectly in the form of American Depositary
Receipts ("ADRs") and European Depositary Receipts ("EDRs"). Under current
policy, however, the Fund limits such investments, including ADRs and EDRs, to a
maximum of 35% of its total assets.
ADRs are receipts, typically issued by a U.S. bank or trust company,
which evidence ownership of underlying securities issued by a foreign
corporation or other entity. EDRs are
10
<PAGE>
receipts issued in Europe which evidence a similar ownership arrangement.
Generally, ADRs in registered form are designed for use in U.S. securities
markets and EDRs are designed for use in European securities markets. The
underlying securities are not always denominated in the same currency as the
ADRs or EDRs. Although investment in the form of ADRs or EDRs facilitates
trading in foreign securities, it does not mitigate all the risks associated
with investing in foreign securities.
ADRs are available through facilities which may be either "sponsored"
or "unsponsored." In a sponsored arrangement, the foreign issuer establishes the
facility, pays some or all of the depository's fees, and usually agrees to
provide shareholder communications. In an unsponsored arrangement, the foreign
issuer is not involved, and the ADR holders pay the fees of the depository.
Sponsored ADRs are generally more advantageous to the ADR holders and the issuer
than are unsponsored ADRs. More and higher fees are generally charged in an
unsponsored program compared to a sponsored facility. Only sponsored ADRs may be
listed on the New York or American Stock Exchanges. Unsponsored ADRs may prove
to be more risky due to (a) the additional costs involved to the Fund; (b) the
relative illiquidity of the issue in U.S. markets; and (c) the possibility of
higher trading costs in the over-the-counter market as opposed to exchange based
tradings. The Fund will take these and other risk considerations into account
before making an investment in an unsponsored ADR.
The risks associated with investments in foreign securities include
those resulting from fluctuations in currency exchange rates, revaluation of
currencies, future political and economic developments, including the risks of
nationalization or expropriation, the possible imposition of currency exchange
blockages, higher operating expenses, foreign withholding and other taxes which
may reduce investment return, reduced availability of public information
concerning issuers, the difficulties in obtaining and enforcing a judgment
against a foreign issuer and the fact that foreign issuers are not generally
subject to uniform accounting, auditing and financial reporting standards or to
other regulatory practices and requirements comparable to those applicable to
domestic issuers. Moreover, securities of many foreign issuers may be less
liquid and their prices more volatile than those of securities of comparable
domestic issuers.
It is anticipated that a majority of the foreign investments by the
Fund will consist of securities of issuers in countries with developed
economies. However, the Fund may also invest in the securities of issuers in
countries with less developed economies as deemed appropriate by the Investment
Manager. Such countries include countries that have an emerging stock market
that trades a small number of securities; countries with low- to middle-income
economies; and/or countries with economies that are based on only a few
industries. Eastern European countries are considered to have less developed
capital markets.
Securities Lending
The Fund may lend portfolio securities with a value of up to 33 1/3% of
its total assets. The Fund will receive cash or cash equivalents (e.g., U.S.
Government obligations) as collateral in an amount equal to at least 100% of the
current market value of any loaned securities plus accrued interest. Collateral
received by the Fund will generally be held in the form tendered, although cash
may be invested in unaffiliated mutual funds with quality short-term portfolios,
11
<PAGE>
securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities or certain unaffiliated mutual funds, irrevocable stand-by
letters of credit issued by a bank, or repurchase agreements, or other similar
investments. The investing of cash collateral received from loaning portfolio
securities involves leverage which magnifies the potential for gain or loss on
monies invested and, therefore, results in an increase in the volatility of the
Fund's outstanding securities. Such loans may be terminated at any time.
The Fund will retain rights to dividends, interest or other
distributions, on the loaned securities. Voting rights pass with the lending,
although the Fund may call loans to vote proxies if desired. Should the borrower
of the securities fail financially, there is a risk of delay in recovery of the
securities or loss of rights in the collateral. Loans are made only to borrowers
which are deemed by the Investment Manager to be of good financial standing.
Temporary and Defensive Investments
The Fund may hold up to 100% of its assets in cash or short-term debt
securities for temporary defensive purposes. The Fund will adopt a temporary
defensive position when, in the opinion of the Investment Manager, such a
position is more likely to provide protection against adverse market conditions
than adherence to the Fund's other investment policies. The types of short-term
instruments in which the Fund may invest for such purposes include short-term
money market securities, such as repurchase agreements, and securities issued or
guaranteed by the U.S. Government or its agencies or instrumentalities,
certificates of deposit, time deposits and bankers' acceptances of certain
qualified financial institutions and corporate commercial paper, which at the
time of purchase are rated at least within the "A" major rating category by S&P
or the "Prime" major rating category by Moody's (or, if not rated, issued by
companies having an outstanding long-term unsecured debt issued rated at least
within the "A" category by S&P or Moody's).
Industry Classifications
In determining how much of the Fund's portfolio is invested in a given
industry, the following industry classifications are currently used. Securities
issued or guaranteed as to principal or interest by the U.S. Government or its
agencies or instrumentalities or mixed-ownership Government corporations or
sponsored enterprises (including repurchase agreements involving U.S. Government
securities to the extent excludable under relevant regulatory interpretations)
are excluded. Securities issued by foreign governments are also excluded.
Companies engaged in the business of financing may be classified according to
the industries of their parent or sponsor companies or industries that otherwise
most affect such financing companies. Issuers of asset-backed pools will be
classified as separate industries based on the nature of the underlying assets,
such as mortgages and credit card receivables. "Asset-backed-Mortgages" includes
private pools of nongovernment backed mortgages.
12
<PAGE>
<TABLE>
<CAPTION>
Basic Industries Consumer Staple Science & Technology
- ---------------- --------------- --------------------
<S> <C> <C>
Chemical Business Service Aerospace
Diversified Container Computer Software & Service
Electrical Equipment Drug Electronic Components
Forest Products Food & Beverage Electronic Equipment
Machinery Hospital Supply Office Equipment
Metal & Mining Personal Care
Railroad Printing & Publishing
Truckers Tobacco
Utility Energy Consumer Cyclical
- ------- ------ -----------------
Electric Oil Refining & Marketing Airline
Gas Oil Production Automotive
Gas Transmission Oil Service Building
Telephone Hotel & Restaurant
Photography
Other Finance Recreation
- ----- ------ Retail Trade
Trust Certificates- Bank Textile & Apparel
Government Related Lending Financial Service
Asset-backed--Mortgages Insurance
Asset-backed--Credit
Card Receivables
</TABLE>
DEBT INSTRUMENTS AND
PERMITTED CASH INVESTMENTS
The Fund's may invest in long-term and short-term debt securities.
Certain debt securities and money market instruments in which the Fund may
invest are described below.
U.S. Government and Related Securities. U.S. Government securities are
securities which are issued or guaranteed as to principal or interest by the
U.S. Government, a U.S. Government agency or instrumentality, or certain
mixed-ownership Government corporations as described herein. The U.S. Government
securities in which the Fund invests include, among others:
[bullet] direct obligations of the U.S. Treasury, i.e., U.S. Treasury bills,
notes, certificates and bonds;
[bullet] obligations of U.S. Government agencies or instrumentalities, such
as the Federal Home Loan Banks, the Federal Farm Credit Banks, the
Federal National Mortgage Association, the Government National
Mortgage Association and the Federal Home Loan Mortgage Corporation;
and
[bullet] obligations of mixed-ownership Government corporations such as
Resolution Funding Corporation.
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<PAGE>
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 transaction (to finance
the import, export,
14
<PAGE>
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 within the "A" major rating category by S&P or within the
"Prime" major rating category by Moody's, or, if not rated, issued by companies
having an outstanding long-term unsecured debt issue rated at least within the
"A" category by S&P or by Moody's. The money market investments in corporate
bonds and debentures (which must have maturities at the date of settlement of
one year or less) must be rated at the time of purchase at least within the "A"
category by S&P or within the "Prime" category by Moody's.
Commercial paper rated within the "A" category (highest quality) by S&P
is issued by entities which have liquidity ratios which are adequate to meet
cash requirements. Long-term senior debt is rated within the "A" category or
better, although in some cases credits within the "BBB" category may be allowed.
The issuer has access to at least two additional channels of
15
<PAGE>
borrowing. Basic earnings and cash flow have an upward trend with allowance made
for unusual circumstances. Typically, the issuer's industry is well established
and the issuer has a strong position within the industry. The reliability and
quality of management are unquestioned. The relative strength or weakness of
the above factors determines whether the issuer's commercial paper is rated
A-1, A-2 or A-3. (Those A-1 issues determined to possess overwhelming safety
characteristics are denoted with a plus (+) sign: A-1+.)
The rating Prime is the highest commercial paper rating category
assigned by Moody's. Among the factors considered by Moody's in assigning
ratings are the following: evaluation of the management of the issuer; economic
evaluation of the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain areas; evaluation of the
issuer's products in relation to competition and customer acceptance; liquidity;
amount and quality of long-term debt; trend of earnings over a period of 10
years; financial management of obligations which may be present or may arise as
a result of public interest questions and preparations to meet such obligations.
These factors are all considered in determining whether the commercial paper is
rated Prime-1, Prime-2 or Prime-3.
In the event the lowering of ratings of debt instruments held by the
Fund by applicable rating agencies results in a material decline in the overall
quality of the Fund's portfolio, the Trustees of the Trust will review the
situation and take such action as they deem in the best interests of the Fund's
shareholders, including, if necessary, changing the composition of the
portfolio.
THE TRUST, THE FUND AND ITS SHARES
State Street Research Securities Trust is currently comprised of the
following series: State Street Research Intermediate Bond Fund, State Street
Research Strategic Income Fund and State Street Research Legacy Fund. The
Trustees of the Trust have authority to issue an unlimited number of shares of
beneficial interest of separate series, $.001 par value per share. The Trustees
also have authority, without the necessity of a shareholder vote, to create any
number of new series or classes or to commence the public offering of shares of
any previously established series or class. A "series" is a separate pool of
assets of the Trust which is separately managed and has a different investment
objective and different investment policies from those of another series.
The Trustees have authorized shares of the Fund to be issued in four
classes: Class A, Class B, Class C and Class S shares.
Each share of each class of shares represents an identical legal
interest in the same portfolio of investments of the Fund, has the same rights
and is identical in all respects, except that Class A, Class B and Class C
shares bear the expenses of the deferred sales arrangement and any expenses
(including the higher service and distribution fees) resulting from such sales
arrangement, and certain other incremental expenses related to a class. Each
class will have exclusive voting rights with respect to provisions of the Rule
12b-1 distribution plan pursuant to which the service and distribution fees, if
any, are paid. Although the legal rights of holders of each class of shares are
identical, it is likely that the different expenses borne by each class will
16
<PAGE>
result in different net asset values and dividends. The different classes of
shares of the Fund also have different exchange privileges. Except for those
differences between classes of shares described above, in the Fund's Prospectus
and otherwise this Statement of Additional Information, each share of the Fund
has equal dividend, redemption and liquidation rights with other shares of the
Fund, and when issued, is fully paid and nonassessable [by the Fund].
The rights of holders of shares may be modified by the Trustees at any
time, so long as such modifications do not have a material, adverse effect on
the rights of any shareholder. Under the Trust's Master Trust Agreement, the
Trustees may reorganize, merge or liquidate the Fund without prior shareholder
approval. On any matter submitted to the shareholders, the holder of a Fund
share is entitled to one vote per share (with proportionate voting for
fractional shares) regardless of the relative net asset value thereof.
Under the Master Trust Agreement, no annual or regular meeting of
shareholders is required. Thus, there ordinarily will be no shareholder meetings
unless required by the 1940 Act. Except as otherwise provided under the 1940
Act, the Board of Trustees will be a self-perpetuating body until fewer than
two-thirds of the Trustees serving as such are Trustees who were elected by
shareholders of the Trust. In the event less than a majority of the Trustees
serving as such were elected by shareholders of the Trust, a meeting of
shareholders will be called to elect Trustees. Under the Master Trust Agreement,
any Trustee may be removed by vote of two thirds of the outstanding Trust
shares; holders of 10% or more of the outstanding shares of the Trust can
require that the Trustees call a meeting of shareholders for purposes of voting
on the removal of one or more Trustees. In connection with such meetings called
by shareholders, shareholders will be assisted in shareholder communications to
the extent required by applicable law.
Under Massachusetts law, the shareholders of the Trust could, under
certain circumstances, be held personally liable for the obligations for the
Trust. However, the Master Trust Agreement of the Trust disclaims shareholder
liability for acts or obligations of the Trust and provides for indemnification
for all losses and expenses of any shareholder of the Fund held personally
liable for the obligations of the Trust. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is limited to
circumstances in which the Fund would be unable to meet its obligations. The
Investment Manager believes that, in view of the above, the risk of personal
liability to shareholders is remote.
TRUSTEES AND OFFICERS
The Trustees and principal officers of the Trust, their addresses, and
their principal occupations and positions with certain affiliates of the
Investment Manager are set forth below.
17
<PAGE>
+Steve A. Garban, The Pennsylvania State University, 210 Old Main,
University Park, PA 16802, serves as Trustee of the Trust. He is 60. He is
retired and was formerly Senior Vice President for Finance and Operations and
Treasurer of The Pennsylvania State University.
*+Bartlett R. Geer, One Financial Center, Boston, MA 02111, serves as
Vice President of the Trust. He is 42. His principal occupation is Senior Vice
President of State Street Research & Management Company. During the past five
years he has also served as Vice President of State Street Research & Management
Company.
+Malcolm T. Hopkins, 14 Brookside Road, Biltmore Forest, Asheville, NC
28803, serves as Trustee of the Trust. He is 69. He is engaged principally in
private investments. Previously, he was Vice Chairman of the Board and Chief
Financial Officer of St. Regis Corp.
*+John H. Kallis, One Financial Center, Boston, MA 02111, serves as
Vice President of the Trust. He is 56. 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 71. His principal occupation is
Associate of Saltonstall & Co., a private investment firm. During the past five
years he has also served as Partner of that firm.
*+Gerard P. Maus, One Financial Center, Boston, MA 02111, serves as
Treasurer of the Trust. He is 46. His principal occupation is Executive Vice
President, Treasurer, Chief Financial Officer and Director of State Street
Research & Management Company. During the past five years he has also served as
Executive Vice President and Chief Financial Officer of New England Investment
Companies and as Senior Vice President and Vice President of New England Mutual
Life Insurance Company. Mr. Maus's other principal business affiliations include
Executive Vice President, Treasurer, Chief Financial Officer and Director of
State Street Research Investment Services, Inc.
*+Francis J. McNamara, III, One Financial Center, Boston, MA 02111
serves as Secretary and General Counsel of the Trust. He is 42. His principal
occupation is Executive Vice President, General Counsel and Secretary of State
Street Research & Management Company. During the past five years he has also
served as Senior Vice President of State Street Research & Management Company
and as Senior Vice President, General Counsel and Assistant Secretary of The
Boston Company, Inc., Boston Safe Deposit and Trust Company and The Boston
Company Advisors, Inc. Mr. McNamara's other principal business affiliations
include Senior Vice President, Clerk and General Counsel of State Street
Research Investment Services, Inc.
- -------------------------
* or +, see footnotes on page 20.
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<PAGE>
+Dean O. Morton, 3200 Hillview Avenue, Palo Alto, CA 94304, serves as
Trustee of the Trust. He is 65. He is retired, having served during the past
five years, until October 1992, as Executive Vice President, Chief Operating
Officer and Director of Hewlett-Packard Company.
*+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.
+Thomas L. Phillips, 141 Spring Street, Lexington, MA 02173 serves as
Trustee of the Trust. He is 73. He is retired and was formerly Chairman of the
Board and Chief Executive Officer of Raytheon Company, of which he remains a
Director.
+Toby Rosenblatt, 3409 Pacific Avenue, San Francisco, CA 94118, serves
as Trustee of the Trust. He is 59. His principal occupations during the past
five years have been President of The Glen Ellen Company, a private investment
company, and Vice President of Founders Investments Ltd.
+Michael S. Scott Morton, Massachusetts Institute of Technology, 77
Massachusetts Avenue, Cambridge, MA 02139, serves as Trustee of the Trust. He is
60. His principal occupation during the past five years has been Jay W.
Forrester Professor of Management at Sloan School of Management, Massachusetts
Institute of Technology.
*+Thomas A. Shively, One Financial Center, Boston, MA 02111, serves as
Vice President of the Trust. He is 43. His principal occupation is Executive
Vice President and Director of State Street Research & Management Company.
During the past five years he 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 54. His principal occupation is Chairman of the Board, President,
Chief Executive Officer and Director of State Street Research & Management
Company. During the past five years he also served as President and Chief
Executive Officer of New England Investment Companies and as Chief Investment
Officer and Director of New England Mutual Life Insurance Company. Mr. Verni's
other principal business affiliations include Chairman of the Board and Director
of State Street Research Investment Services, Inc., and until February 1996,
prior positions as President and Chief Executive Officer of that company.
+Jeptha H. Wade, 251 Old Billerica Road, Bedford, MA 01730, serves as
Trustee of the Trust. He is 72. He is retired and was formerly Of Counsel for
the law firm Choate, Hall & Stewart. He was a partner of that firm from 1960 to
1987.
- -------------------------
* or +, see footnotes on page 20.
19
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*Elizabeth M. Westvold, One Financial Center, Boston, MA 02111, serves
as Vice President of the Trust. She is 37. Her principal occupation is Senior
Vice President of State Street Research & Management Company. During the past
five years, she also has 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, Director and/or officer of one or more of the
following investment companies, each of which has a direct or indirect
advisory relationship with the Investment Manager or its affiliates:
State Street Research Equity Trust, State Street Research Financial
Trust, State Street Research Income Trust, State Street Research Money
Market Trust, State Street Research Tax-Exempt Trust, State Street
Research Capital Trust, State Street Research Exchange Trust, State
Street Research Growth Trust, State Street Research Master Investment
Trust, State Street Research Securities Trust, State Street Research
Portfolios, Inc. and Metropolitan Series Fund, Inc.
As of the approximate date of this Statement of Additional Information,
the Investment Manager, the Distributor and/or Metropolitan Life Insurance
Company ("Metropolitan"), their indirect parent, were the beneficial owners of
all or a substantial amount of the outstanding Class A, Class B, Class C and
Class S shares of the Fund, and may be deemed to be in "control," as defined in
the 1940 Act. Although sales of Fund shares to other investors will reduce their
percentage ownership, 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.
[Rest of Page Intentionally Left Blank]
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The Trustees were compensated as follows:
Total
Compensation
Aggregate From Trust and
Compensation Complex Paid
Name of Trustee From Trust(a) to Trustees(b)
Steve A. Garban $ 496 $ 34,750
Malcolm T. Hopkins $ 496 $ 34,750
Edward M. Lamont $ 2,750 $ 59,375
Robert A. Lawrence $ 2,950 $ 92,125
Dean O. Morton $ 3,150 $ 96,125
Thomas L. Phillips $ 2,950 $ 59,375
Toby Rosenblatt $ 2,750 $ 59,375
Michael S. Scott Morton $ 3,750 $100,325
Ralph F. Verni $ 0 $ 0
Jeptha H. Wade $ 3,350 $ 63,375
(a) For the fiscal year ended April 30, 1997. Includes compensation from
multiple series of the Trust. See "The Trust, the Fund and its Shares"
in this Statement of Additional Information for a listing of series.
(b) Includes compensation on behalf of all series of 12 investment
companies for which the Investment Manager served directly or
indirectly as investment adviser or for which the Investment Manager
served as sub-investment adviser, and series of State Street Research
Portfolios, Inc., for which State Street Research Investment Services,
Inc. served as distributor. "Total Compensation from Trust and Complex
Paid to Trustees" for the 12 months ended December 31, 1996. The Trust
does not provide any pension or retirement benefits for the Trustees.
INVESTMENT ADVISORY SERVICES
State Street Research & Management Company, the Investment Manager, a
Delaware corporation, with offices at One Financial Center, Boston,
Massachusetts 02111-2690, acts as investment adviser to the Fund. The Investment
Manager was founded by Paul Cabot, Richard Saltonstall and Richard Paine to
serve as investment adviser to one of the nation's first mutual funds, presently
known as State Street Research Investment Trust, which they had formed in 1924.
Their investment management philosophy emphasized comprehensive
fundamental research and analysis, including meetings with the management of
companies under consideration for investment. The Investment Manager's portfolio
management group has extensive investment industry experience managing equity
and debt securities. In managing debt securities, if any, for a portfolio, the
Investment Manager may consider yield curve positioning, sector rotation and
duration, among other factors.
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<PAGE>
The Advisory Agreement provides that the Investment Manager shall
furnish the Fund with an investment program, office facilities and such
investment advisory, research and administrative services as may be required
from time to time. The Investment Manager compensates all executive and clerical
personnel and Trustees of the Trust if such persons are employees of the
Investment Manager or its affiliates. The Investment Manager is an indirect
wholly-owned subsidiary of Metropolitan.
The advisory fee payable monthly by the Fund to the Investment Manager
is computed as a percentage of the average of the value of the net assets of the
Fund as determined at the close of the New York Stock Exchange (the "NYSE") on
each day the NYSE is open for trading.
The Distributor and its affiliates may from time to time and in varying
amounts voluntarily assumed some portion of fees or expenses relating to the
Fund.
The 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 the Fund's Administration Agreement between the Investment
Manager and the Distributor, the Distributor provides assistance to the
Investment Manager in performing certain fund administration services for the
Trust, such as assistance in determining the daily net asset value of shares of
series of the Trust and in preparing various reports required by regulations.
Under a Shareholders' Administrative Services Agreement between the
Trust and the Distributor, the Distributor provides shareholders' administrative
services, such as responding to inquiries and instructions from investors
respecting the purchase and redemption of shares of the Fund, and is entitled to
reimbursements of its costs for providing such services. Under certain
arrangements for Metropolitan to provide subadministration services,
Metropolitan may receive a fee for the maintenance of certain share ownership
records for participants in sponsored arrangements, such as employee benefit
plans, through or under which the Fund's shares may be purchased.
Under the Code of Ethics of the Investment Manager, investment
management personnel are only permitted to engage in personal securities
transactions in accordance with certain conditions relating to such person's
position, the identity of the security, the timing of
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<PAGE>
the transaction, and similar factors. Such personnel must report their personal
securities transactions quarterly and supply broker confirmations of such
transactions to the Investment Manager.
PURCHASE AND REDEMPTION OF SHARES
Shares of the Fund are distributed by State Street Research Investment
Services, Inc., the Distributor. The Fund offers four classes of shares which
may be purchased at the next determined net asset value per share plus, in the
case of all classes except Class S shares, a sales charge which, at the election
of the investor, may be imposed (i) at the time of purchase (the Class A shares)
or (ii) on a deferred basis (the Class B and Class C shares). General
information on how to buy shares of the Fund, as well as sales charges involved,
are set forth under "Your Account" in the Prospectus. The following supplements
that information.
Public Offering Price. The public offering price for each class of
shares is based on their net asset value determined as of the close of the NYSE
on the day the purchase order is received by State Street Research Shareholder
Services ("Shareholder Services") [the Distributor] provided that the order is
received prior to the close of the NYSE on that day; otherwise the net asset
value used is that determined as of the close of the NYSE on the next day it is
open for unrestricted trading. When a purchase order is placed through a dealer,
that dealer is responsible for transmitting the order promptly to Shareholder
Services in order to permit the investor to obtain the current price. Any loss
suffered by an investor which results from a dealer's failure to transmit an
order promptly is a matter for settlement between the investor and the dealer.
Class A Shares--Reduced Sales Charges. The reduced sales charges set
forth under "Your Account--Class A Sales Charge Reductions and Waivers" in the
Fund's Prospectus apply to purchases made at any one time by any "person," which
includes: (i) an individual, or an individual combining with his or her spouse
and their children and purchasing for his, her or their own account; (ii) a
"company" as defined in Section 2(a)(8) of the 1940 Act; (iii) a trustee or
other fiduciary purchasing for a single trust estate or single fiduciary account
(including a pension, profit sharing or other employee benefit trust created
pursuant to a plan qualified under Section 401 of the Internal Revenue Code);
(iv) a tax-exempt organization under Section 501(c)(3) or (13) of the Internal
Revenue Code; and (v) an employee benefit plan of a single employer or of
affiliated employers.
Investors may purchase Class A shares of the Fund at reduced sales
charges by executing a Letter of Intent to purchase no less than an aggregate of
$100,000 of the Fund or any combination of Class A shares of "Eligible Funds"
(as designated by the Distributor) within a 13-month period. The sales charge
applicable to each purchase made pursuant to a Letter of Intent will be that
which would apply if the total dollar amount set forth in the Letter of Intent
were being bought in a single transaction. Purchases made within a 90-day period
prior to the execution of a Letter of Intent may be included therein; in such
case the date of the earliest of such purchases marks the commencement of the
13-month period.
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<PAGE>
An investor may include toward completion of a Letter of Intent the
value (at the current public offering price) of all of his or her Class A shares
of the Fund and of any of the other Class A shares of Eligible Funds held of
record as of the date of his or her Letter of Intent, plus the value (at the
current offering price) as of such date of all of such shares held by any
"person" described herein as eligible to join with the investor in a single
purchase. Class B, Class C and Class S shares may also be included in the
combination under certain circumstances.
A Letter of Intent does not bind the investor to purchase the specified
amount. Shares equivalent to 5% of the specified amount will, however, be taken
from the initial purchase (or, if necessary, subsequent purchases) and held in
escrow in the investor's account as collateral against the higher sales charge
which would apply if the total purchase is not completed within the allotted
time. The escrowed shares will be released when the Letter of Intent is
completed or, if it is not completed, when the balance of the higher sales
charge is, upon notice, remitted by the investor. All dividends and capital
gains distributions with respect to the escrowed shares will be credited to the
investor's account.
Investors may purchase Class A shares of the Fund or a combination of
Eligible Funds at reduced sales charges pursuant to a Right of Accumulation. The
applicable sales charge under the right is determined on the amount arrived at
by combining the dollar amount of the purchase with the value (at the current
public offering price) of all Class A shares of the other Eligible Funds owned
as of the purchase date by the investor plus the value (at the current public
offering price) of all such shares owned as of such date by any "person"
described herein as eligible to join with the investor in a single purchase.
Class B, Class C and Class S shares may also be included in the combination
under certain circumstances. Investors must submit to the Distributor sufficient
information to show that they qualify for this Right of Accumulation.
Other Programs Related to Class A Shares. Class A shares of the Fund
may be sold or issued in an exchange at a reduced sales charge or without sales
charge pursuant to certain sponsored arrangements, which include programs under
which a company, employee benefit plan or other organization makes
recommendations to, or permits group solicitation of, its employees, members or
participants, except any organization created primarily for the purpose of
obtaining shares of the Fund at a reduced sales charge or without a sales
charge. Sales without a sales charge, or with a reduced sales charge, may also
be made through brokers, registered investment advisers, financial planners,
institutions, and others, under managed fee-based programs (e.g., "wrap fee" or
similar programs) which meet certain requirements established from time to time
by the Distributor. Information on such arrangements and further conditions and
limitations is available from the Distributor.
In addition, no sales charge is imposed in connection with the sale of
Class A shares of the Fund to the following entities and person: (A) the
Investment Manager, Distributor or any affiliated entities, including any direct
or indirect parent companies and other subsidiaries of such parents
(collectively "Affiliated Companies"); (B) employees, officers, sales
representatives or current or retired directors or trustees of the Affiliated
Companies or any
24
<PAGE>
investment company managed by any of the Affiliated Companies, any relatives of
any such individuals whose relationship is directly verified by such individuals
to the Distributor, or any beneficial account for such relatives or individuals;
and (C) employees, officers, sales representatives or directors of dealers and
other entities with a selling agreement with the Distributor to sell shares of
any aforementioned investment company, any spouse or child of such person, or
any beneficial account for any of them. The purchase must be made for investment
and the shares purchased may not be resold except through redemption. This
purchase program is subject to such administrative policies, regarding the
qualification of purchasers and any other matters, as may be adopted by the
Distributor from time to time.
Conversion of Class B Shares to Class A Shares. A shareholder's Class B
shares of the Fund, including all shares received as dividends or distributions
with respect to such shares, will automatically convert to Class A shares of the
Fund at the end of eight years following the issuance of such Class B shares;
consequently, they will no longer be subject to the higher expenses borne by
Class B shares. The conversion rate will be determined on the basis of the
relative per share net asset values of the two classes and may result in a
shareholder receiving either a greater or fewer number of Class A shares than
the Class B shares so converted. As noted above, holding periods for Class B
shares received in exchange for Class B shares of other Eligible Funds will be
counted toward the eight-year period.
Contingent Deferred Sales Charges. The amount of any contingent
deferred sales charge paid on Class A shares (on sales of $1 million or more and
on which a commission has been paid by the Distributor but no initial sales
charge has been paid by the shareholder) or on Class B or Class C shares of the
Fund will be paid to the Distributor. The Distributor will pay dealers at the
time of sale a 4% commission for selling Class B shares and a 1% commission for
selling Class C shares. In certain cases, a dealer may elect to waive the 4%
commission on Class B shares and receive in lieu thereof a 1% annual fee with
respect to such shares until the shares convert to Class A shares. The proceeds
of the contingent deferred sales charges and the distribution fees are used to
offset distribution expenses and thereby permit the sale of Class B and Class C
shares without an initial sales charge.
In determining the applicability and rate of any contingent deferred
sales charge of Class B or Class C shares, it will be assumed that a redemption
of the shares is made first of those shares having the greatest capital
appreciation, next of shares representing reinvestment of dividends and capital
gains distributions and finally of remaining shares held by shareholder for the
longest period of time. Class B shares that are redeemed within a five-year
period after their purchase, and Class C shares that are redeemed within a
one-year period after their purchase, will not be subject to a contingent
deferred sales charge to the extent that the value of such shares represents (1)
capital appreciation of Fund assets or (2) reinvestment of dividends or capital
gains distributions. The holding period for purposes of applying a contingent
deferred sales charge for a particular class of shares of the Fund acquired
through an exchange from another Eligible Fund will be measured from the date
that such shares were initially acquired in the other Eligible Fund, and shares
of the same class being redeemed will be considered to represent, as applicable,
capital appreciation or dividend and capital gains distribution reinvestments in
such other Eligible Fund. These determinations will result in any
25
<PAGE>
contingent deferred sales charge being imposed at the lowest possible rate. For
federal income tax purposes, the amount of the contingent deferred sales charge
will reduce the gain or increase the loss, as the case may be, on the amount
realized on redemption.
Contingent Deferred Sales Charge Waivers. With respect to Class A
shares (on sales of $1 million or more and on which a commission has been paid
by the Distributor but no initial sales charge has been paid by the
shareholder), and Class B and Class C shares of the Fund, the contingent
deferred sales charge does not apply to exchanges or to redemptions under a
systematic withdrawal plan which meets certain conditions. In addition, the
contingent deferred sales charge will be waived for: (i) redemptions made within
one year of the death or total disability, as defined by the Social Security
Administration, of all shareholders of an account; (ii) redemptions made after
attainment of a specific age in an amount which represents the minimum
distribution required at such age under Section 401(a)(9) of the Internal
Revenue Code of 1986, as amended, for retirement accounts or plans (e.g., age
702 for Individual Retirement Accounts and Section 403(b) plans), calculated
solely on the basis of assets invested in the Fund or other Eligible Funds; and
(iii) a redemption resulting from a tax-free return of an excess contribution to
an Individual Retirement Account. (The foregoing waivers do not apply to a
tax-free rollover or transfer of assets out of the Fund). The Fund may modify or
terminate the waivers at any time; for example, the Fund may limit the
application of multiple waivers and establish other conditions for employee
benefit plans.
Class S Shares. Class S shares are currently available to certain
employee benefit plans such as qualified retirement plans which meet criteria
relating to number of participants, service arrangements, or similar factors;
insurance companies; investment companies; endowment funds of nonprofit
organizations with substantial minimum assets (currently a minimum of $10
million); and other similar institutional investors. Class S shares may be
acquired through programs or products sponsored by Metropolitan, its affiliates,
or both for which Class S shares have been designated. In addition, Class S
shares are available through programs under which investors pay an asset-based
fee and a transaction fee to an intermediary. Class S share availability is
determined by the Distributor and intermediaries based on the overall direct and
indirect costs of a particular program, expected assets, account sizes and
similar considerations.
Reorganizations. In the event of mergers or reorganizations with other
public or private collective investment entities, including investment companies
as defined in the 1940 Act, the Fund may issue its shares at net asset value (or
more) to such entities or to their security holders.
Redemptions. The Fund reserves the right to pay redemptions in kind
with portfolio securities in lieu of cash. In accordance with its election
pursuant to Rule 18f-1 under the 1940 Act, the Fund may limit the amount of
redemption proceeds paid in cash. Although it has no present intention to do so,
the Fund may, under unusual circumstances, limit redemptions in cash with
respect to each shareholder during any ninety-day period to the lesser of (i)
$250,000 or (ii) 1% of the net asset value of the Fund at the beginning of such
period.
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<PAGE>
In connection with any redemptions paid in kind with portfolio securities,
brokerage and other costs may be incurred by the redeeming shareholder in the
sale of the securities received.
Systematic Withdrawal Plan. A shareholder who owns noncertificated
Class A or Class S shares with a value of $5,000 or more, or Class B or Class C
shares with a value of $10,000 or more, may elect, by participating in the
Fund's Systematic Withdrawal Plan, to have periodic checks issued for specified
amounts. These amounts may not be less than certain minimums, depending on the
class of shares held. The Plan provides that all income dividends and capital
gains distributions of the Fund shall be credited to participating shareholders
in additional shares of the Fund. Thus, the withdrawal amounts paid can only be
realized by redeeming shares of the Fund under the Plan. To the extent such
amounts paid exceed dividends and distributions from the Fund, a shareholder's
investment will decrease and may eventually be exhausted.
In the case of shares otherwise subject to contingent deferred sales
charges, no such charges will be imposed on withdrawals of up to 8% annually of
either (a) the value, at the time the Systematic Withdrawal Plan is initiated,
of the shares then in the account or (b) the value, at the time of a withdrawal,
of the same number of shares as in the account when the Systematic Withdrawal
Plan was initiated, whichever is higher.
Expenses of the Systematic Withdrawal Plan are borne by the Fund. A
participating shareholder may withdraw from the Systematic Withdrawal Plan, and
the Fund may terminate the Systematic Withdrawal Plan at any time on written
notice. Purchase of additional shares while a shareholder is receiving payments
under a Systematic Withdrawal Plan is ordinarily disadvantageous because of
duplicative sales charges. For this reason, a shareholder may not participate in
the Investamatic Program (see "Your Account--Investor Services--Investamatic
Program" in the Fund's Prospectus) and the Systematic Withdrawal Plan at the
same time.
Request to Dealer to Repurchase. For the convenience of shareholders,
the Fund has authorized the Distributor as its agent to accept orders from
dealers by wire or telephone for the repurchase of shares by the Distributor
from the dealer. The Fund may revoke or suspend this authorization at any time.
The repurchase price is the net asset value for the applicable shares next
determined following the time at which the shares are offered for repurchase by
the dealer to the Distributor. The dealer is responsible for promptly
transmitting a shareholder's order to the Distributor.
Signature Guarantees. Signature guarantees are required for, among
other things: (1) written requests for redemptions for more than $50,000; (2)
written requests for redemptions for any amount if the proceeds are transmitted
to other than the current address of record (unchanged in the past 30 days); (3)
written requests for redemptions for any amount submitted by corporations and
certain fiduciaries and other intermediaries; and (4) requests to transfer the
registration of shares to another owner. Signatures must be guaranteed by a
bank, a member firm of a national stock exchange, or other eligible guarantor
institution. The Transfer Agent will not accept guarantees (or notarizations)
from notaries public. The above requirements may be waived in certain instances.
27
<PAGE>
Dishonored Checks. If a purchaser's check is not honored for its full
amount, the purchaser could be subject to additional charges to cover collection
costs and any investment loss, and the purchase may be canceled.
Processing Charges. Purchases and redemptions processed through
securities dealers may be subject to processing charges imposed by the
securities dealer in addition to sales charges that may be imposed by the Fund
or the Distributor.
SHAREHOLDER ACCOUNTS
General information on shareholder accounts is included in the Fund's
Prospectus under "Your Account." The following supplements that information.
Maintenance Fees and Involuntary Redemption. Because of the relatively
high cost of maintaining small shareholder accounts, the Fund reserves the right
to redeem at its option any shareholder account which remains below $1,500 for a
period of 60 days after notice is mailed to the applicable shareholder, or to
impose a maintenance fee on such account after 60 days' notice. Such
involuntarily redemptions will be subject to applicable sales charges, if any.
The Fund may increase such minimum account value above such amount in the future
after notice to affected shareholders. Involuntarily redeemed shares will be
priced at the net asset value on the date fixed for redemption by the Fund, and
the proceeds of the redemption will be mailed to the affected shareholder at the
address of record. Currently, the maintenance fee is $18 annually, which is paid
to the Transfer Agent. The fee does not apply to certain retirement accounts or
if the shareholder has more than an aggregate $50,000 invested in the Fund and
other Eligible Funds combined. Imposition of a maintenance fee on a small
account could, over time, exhaust the assets of such account.
To cover the cost of additional compliance administration, a $20 fee
will be charged against any shareholder account that has been determined to be
subject to escheat under applicable state laws.
The Fund may not suspend the right of redemption or postpone the date
of payment of redemption proceeds for more than seven days, except that (a) it
may elect to suspend the redemption of shares or postpone the date of payment of
redemption proceeds: (1) during any period that the NYSE is closed (other than
customary weekend and holiday closings) or trading on the NYSE is restricted;
(2) during any period in which an emergency exists as a result of which disposal
of portfolio securities is not reasonably practicable or it is not reasonably
practicable to fairly determine the Fund's net asset values; or (3) during such
other periods as the Securities and Exchange Commission (the "SEC") may by order
permit for the protection of investors; and (b) the payment of redemption
proceeds may be postponed as otherwise provided under "Purchase and Redemption
of Shares" in this Statement of Additional Information.
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<PAGE>
The Open Account System. Under the Open Account System full and
fractional shares of the Fund owned by shareholders are credited to their
accounts by the Transfer Agent, State Street Bank and Trust Company, 225
Franklin Street, Boston, Massachusetts 02110. Certificates representing Class B
or Class C shares will not be issued, while certificates representing Class A or
Class S shares will only be issued if specifically requested in writing and, in
any case, will only be issued for full shares, with any fractional shares to be
carried on the shareholder's account. Shareholders will receive periodic
statements of transactions in their accounts.
The Fund's Open Account System provides the following options:
1. Additional purchases of shares of the Fund may be made through
dealers, by wire or by mailing a check payable to the Fund to
Shareholder Services under the terms set forth above under
"Purchase and Redemption of Shares" in this Statement of
Additional Information.
2. The following methods of receiving dividends from investment
income and distributions from capital gains generally are
available:
(a) All income dividends and capital gains distributions
reinvested in additional shares of the Fund.
(b) All income dividends and capital gains distributions
in cash.
(c) All income dividends and capital gains distributions
invested in any one available Eligible Fund
designated by the shareholder as described below. See
"--Dividend Allocation Plan" herein.
Dividend and distribution selections should be made on the Application
accompanying the initial investment. If no selection is indicated on the
Application, that account will be automatically coded for reinvestment of all
dividends and distributions in additional shares of the same class of the Fund.
Selections may be changed at any time by telephone or written notice to
Shareholder Services. Dividends and distributions are reinvested at net asset
value without a sales charge.
Exchange Privileges. Shareholders of the Fund may exchange their shares
for available shares with corresponding characteristics of any of the other
Eligible Funds at any time on the basis of the relative net asset values of the
respective shares to be exchanged, subject to compliance with applicable
securities laws. Shareholders of any other Eligible Fund may similarly exchange
their shares for Fund shares with corresponding characteristics. Prior to making
an exchange, shareholders should obtain the Prospectus of the Eligible Fund into
which they are exchanging. Under the Direct Program, subject to certain
conditions, shareholders may make arrangements for regular exchanges from the
Fund into other Eligible Funds. To effect an exchange, Class A, Class B and
Class C shares may be redeemed without the payment of any contingent deferred
sales charge that might otherwise be due upon an
29
<PAGE>
ordinary redemption of such shares. The State Street Research Money Market Fund
issues Class E shares which are sold without any sales charge. Exchanges of
State Street Research Money Market Fund Class E shares into Class A shares of
the Fund or any other Eligible Fund are subject to the initial sales charge or
contingent deferred sales charge applicable to an initial investment in such
Class A shares, unless a prior Class A sales charge has been paid directly or
indirectly with respect to the shares redeemed. For purposes of computing the
contingent deferred sales charge that may be payable upon disposition of any
acquired Class A, Class B and Class C shares, the holding period of the
redeemed shares is "tacked" to the holding period of any acquired shares. No
exchange transaction fee is currently imposed on any exchange.
Shares of the Fund may also be acquired or redeemed in exchange for
shares of the Summit Cash Reserves Fund ("Summit Cash Reserves") by customers of
Merrill Lynch, Pierce, Fenner & Smith Incorporated (subject to completion of
steps necessary to implement the program). The Fund and Summit Cash Reserves are
related mutual funds for purposes of investment and investor services. Upon the
acquisition of shares of Summit Cash Reserves by exchange for redeemed shares of
the Fund, (a) no sales charge is imposed by Summit Cash Reserves, (b) no
contingent deferred sales charge is imposed by the Fund on the Fund shares
redeemed, and (c) any applicable holding period of the Fund shares redeemed is
"tolled," that is, the holding period clock stops running pending further
transactions. Upon the acquisition of shares of the Fund by exchange for
redeemed shares of Summit Cash Reserves, (a) the acquisition of Class A shares
shall be subject to the initial sales charges or contingent deferred sales
charges applicable to an initial investment in such Class A shares, unless a
prior Class A sales charge has been paid indirectly, and (b) the acquisition of
Class B or Class C shares of the Fund shall restart any holding period
previously tolled, or shall be subject to the contingent deferred sales charge
applicable to an initial investment in such shares.
The exchange privilege may be terminated or suspended or its terms
changed at any time, subject, if required under applicable regulations, to 60
days' prior notice. New accounts established for investments upon exchange from
an existing account in another fund will have the same telephone privileges with
respect to the Fund (see "Your Account--Account Policies--Telephone Requests" in
the Fund's Prospectus and "--Telephone Privileges," below) as the existing
account unless Shareholder Services is instructed otherwise. Related
administrative policies and procedures may also be adopted with regard to a
series of exchanges, street name accounts, sponsored arrangements and other
matters.
The exchange privilege is not designed for use in connection with
short-term trading or market timing strategies. To protect the interests of
shareholders, the Fund reserves the right to temporarily or permanently
terminate the exchange privilege for any person who makes more than six
exchanges out of or into the Fund per calendar year. Accounts under common
ownership or control, including accounts with the same taxpayer identification
number, may be aggregated for purposes of the six exchange limit.
Notwithstanding the six exchange limit, the Fund reserves the right to refuse
exchanges by any person or group if, in the Investment Manager's judgment, the
Fund would be unable to invest effectively in accordance with its investment
objective and policies, or would otherwise
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potentially be adversely affected. Exchanges may be restricted or refused
if the Fund receives or anticipates simultaneous orders affecting significant
portions of the Fund's assets. In particular, a pattern of exchanges that
coincides with a "market timing" strategy may be disruptive to the Fund. The
Fund may impose these restrictions at any time. The exchange limit may be
modified for accounts in certain institutional retirement plans because of plan
exchange limits, Department of Labor regulations or administrative and other
considerations. Subject to the foregoing, if an exchange request in good order
is received by Shareholder Services and delivered by Shareholder Services to the
Transfer Agent by 12 noon Boston time on any business day, the exchange usually
will occur that day. For further information regarding the exchange privilege,
shareholders should contact Shareholder Services.
Reinvestment Privilege. A shareholder of the Fund who has redeemed
shares or had shares repurchased at his or her request may reinvest all or any
portion of the proceeds (plus that amount necessary to acquire a fractional
share to round off his or her reinvestment to full shares) in shares, of the
same class as the shares redeemed, of the Fund or any other Eligible Fund at net
asset value and without subjecting the reinvestment to an initial sales charge,
provided such reinvestment is made within 120 calendar days after a redemption
or repurchase. Upon such reinvestment, the shareholder will be credited with any
contingent deferred sales charge previously charged with respect to the amount
reinvested. The redemption of shares is, for federal income tax purposes, a sale
on which the shareholder may realize a gain or loss. If a redemption at a loss
is followed by a reinvestment within 30 days, the transaction may be a "wash
sale" resulting in a denial of the loss for federal income tax purposes.
Any reinvestment pursuant to the reinvestment privilege will be subject
to any applicable minimum account standards imposed by the fund into which the
reinvestment is made. Shares are sold to a reinvesting shareholder at the net
asset value thereof next determined following timely receipt by Shareholder
Services of such shareholder's written purchase request and delivery of the
request by Shareholder Services to the Transfer Agent. A shareholder may
exercise this reinvestment privilege only once per 12-month period with respect
to his or her shares of the Fund.
Dividend Allocation Plan. The Dividend Allocation Plan allows
shareholders to elect to have all their dividends and any other distributions
from the Fund or any Eligible Fund automatically invested at net asset value in
one other such Eligible Fund designated by the shareholder, provided the account
into which the dividends and distributions are directed is initially funded with
the requisite minimum amount.
Telephone Privileges. Unless a shareholder declines telephone
privileges that are offered with his or her Account, (see "Your Account--Account
Policies--Telephone Requests"), he or she is deemed to authorize Shareholder
Services and the Transfer Agent to: (1) act upon the telephone instructions of
any person purporting to be the shareholder to redeem, or purporting to be the
shareholder or the shareholder's dealer to exchange, shares from any account;
and (2) honor any written instructions for a change of address regardless of
whether such request is accompanied by a signature guarantee. All telephone
calls will be recorded. Neither the Fund, the other Eligible Funds, the Transfer
Agent, the Investment
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Manager nor the Distributor will be liable for any loss, expense or cost
arising out of any request, including any fraudulent or unauthorized requests.
Shareholders assume the risk to the full extent of their accounts that
telephone requests may be unauthorized. Reasonable procedures will be followed
to confirm that instructions communicated by telephone are genuine. The
shareholder will not be liable for any losses arising from unauthorized or
fraudulent instructions if such procedures are not followed.
Alternative Means of Contacting the Fund. It is unlikely, during
periods of extraordinary market conditions, that a shareholder may have
difficulty in reaching Shareholder Services. In that event, however, the
shareholder should contact Shareholder Services at 1-800-562-0032,
1-617-357-7800 or otherwise at its main office at One Financial Center, Boston,
Massachusetts 02111-2690.
NET ASSET VALUE
The net asset value of the shares of the Fund is determined once daily
as of the close of the NYSE, ordinarily 4 P.M. New York City time, Monday
through Friday, on each day during which the NYSE is open for unrestricted
trading. The NYSE is currently closed on New Year's Day, Presidents Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
The net asset value per share of the Fund is computed by dividing the
sum of the value of the securities held by the Fund plus any cash or other
assets minus all liabilities by the total number of outstanding shares of the
Fund at such time. Any expenses, except for extraordinary or nonrecurring
expenses, borne by the Fund, including the investment management fee payable to
the Investment Manager, are accrued daily.
In determining the values of portfolio assets as provided below, the
Trustees utilize one or more pricing services in lieu of market quotations for
certain securities which are not readily available on a daily basis. Such
services utilize information with respect to market transactions, quotations
from dealers and various relationships among securities in determining value and
may provide prices determined as of times prior to the close of the NYSE.
In general, securities are valued as follows. Securities which are
listed or traded on the New York or American Stock Exchange are valued at the
price of the last quoted sale on the respective exchange for that day.
Securities which are listed or traded on a national securities exchange or
exchanges, but not on the New York or American Stock Exchange, are valued at the
price of the last quoted sale on the exchange for that day prior to the close of
the NYSE. Securities not listed on any national securities exchange which are
traded "over the counter" and for which quotations are available on the National
Association of Securities Dealers' NASDAQ System are valued at the closing price
supplied through such system for that day at the close of the NYSE. Other
securities are, in general, valued at the mean of the bid and asked quotations
last quoted prior to the close of the NYSE if there are market quotations
readily available, or in the absence of such market quotations, then at the fair
value thereof as
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determined by or under authority of the Trustees of the Trust with the use of
such pricing services as may be deemed appropriate or methodologies approved
by the Trustees.
The Trustees have authorized the use of the amortized cost method to
value short-term debt instruments issued with a maturity of one year or less and
having a remaining maturity of 60 days or less when the value obtained is fair
value, provided that during any period in which more than 25% of the Fund's
total assets is invested in short-term debt securities the current market value
of such securities will be used in calculating net asset value per share in lieu
of the amortized cost method. Under the amortized cost method of valuation, the
security is initially valued at cost on the date of purchase (or in the case of
short-term debt instruments purchased with more than 60 days remaining to
maturity, the market value on the 61st day prior to maturity), and thereafter a
constant amortization to maturity of any discount or premium is assumed
regardless of the impact of fluctuating interest rates on the market value of
the security.
PORTFOLIO TRANSACTIONS
Portfolio Turnover
The Fund anticipates that its portfolio turnover rate will not exceed
75% under normal conditions. The Fund, however, reserves full freedom with
respect to portfolio turnover. In periods when there are rapid changes in
economic conditions or security price levels, or when [the Investment Manager's]
investment strategy changes significantly, portfolio turnover may be higher that
during times of economic and market price stability or when [the Investment
Manager's] investment strategy remains relatively constant.
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).
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,
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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 analysis of various aspects of the securities
markets, including technical charts; computer hardware used for brokerage and
research purposes; computer software and databases (including those used for
portfolio analysis and modeling and including software providing investment
personnel with efficient access to current and historical data from a variety of
internal and external sources) and portfolio evaluation services and relative
performance of accounts.
In the case of the Fund and other registered investment companies
advised by the Investment Manager or its affiliates, the above services may
include data relating to performance, expenses and fees of those investment
companies and other investment companies; this information is used by the
Trustees or Directors of the investment companies to fulfill their
responsibility to oversee the quality of the Investment Manager's advisory
contracts between the investment companies and the Investment Manager. The
Investment Manager considers these investment company services only in
connection with the execution of transactions on behalf of its investment
company clients and not its other clients.
Certain of the nonexecution services provided by broker-dealers may in
turn be obtained by the broker-dealers from third parties who are paid for such
services by the broker-dealers. The Investment Manager has an investment in less
than ten percent of the outstanding equity of one such third party which is
engaged in the development and licensing of trading systems which include
portfolio analysis and modeling and other research and investment
decision-making capabilities. The Investment Manager may allocate brokerage to
broker-dealers who in turn pay this third party for the portion of the third
party's trading
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system provided to the Investment Manager, which is estimated by the Investment
Manager to provide appropriate assistance in the investment decision-making
process. Because of its minority interest in the third party, the Investment
Manager could be said to benefit indirectly from such brokerage allocation.
The Investment Manager regularly reviews and evaluates the services
furnished by broker-dealers. Among other measures, the Investment Manager's
investment management personnel seek to evaluate the quality of research and
other services received, and the results of this effort are made available to
the equity trading department, which sometimes uses this information as
consideration in the selection of brokers to execute portfolio transactions.
Some services furnished by broker-dealers may be used for research and
investment decision-making purposes, and also for marketing or administrative
purposes. Under these circumstances, the Investment Manager allocates the cost
of such services to determine the appropriate proportion of the cost which is
allocable to purposes other than research or investment decision-making and the
Investment Manager pays for that portion directly from its own funds. Some
research and execution services may benefit the Investment Manager's clients as
a whole, while others may benefit a specific segment of clients. Not all such
services will necessarily be used exclusively in connection with the accounts
which pay the commissions to the broker-dealer producing the services.
The Investment Manager has no fixed agreements or understandings with
any broker-dealer as to the amount of brokerage business which the firm may
expect to receive for services supplied to the Investment Manager or otherwise.
There may be, however, understandings with certain firms that in order for such
firms to be able to continuously supply certain services, they need to receive
allocation of a specified amount of brokerage business. These understandings are
honored to the extent possible in accordance with the policies set forth above.
It is not the Investment Manager's policy to intentionally pay a firm a
brokerage commission higher than that which another firm would charge for
handling the same transaction in recognition of services (other than execution
services) provided. However, the Investment Manager is aware that this is an
area where differences of opinion as to fact and circumstances may exist, and in
such circumstances, if any, the Investment Manager relies on the provisions of
Section 28(e) of the Securities Exchange Act of 1934, to the extent applicable.
In the case of the purchase of fixed income securities in underwriting
transactions, the Investment Manager follows any instructions received from its
clients as to the allocation of new issue discounts, selling commissions and
designations to brokers or dealers which provide the client with research,
performance evaluation, master trustee and other services. In the absence of
instructions from the client, the Investment Manager may make such allocations
to broker-dealers which have provided the Investment Manager with research and
brokerage services.
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When more than one client of the Investment Manager is seeking to buy
or sell the same security, the sale or purchase is carried out in a manner which
is considered fair and equitable to all accounts. In allocating investments
among various clients (including in what sequence orders for trades are placed),
the Investment Manager will use its best business judgment and will take into
account such factors as the investment objectives of the clients, the amount of
investment funds available to each, the amount already committed for each client
to a specific investment and the relative risks of the investments, all in order
to provide on balance a fair and equitable result to each client over time.
Although sharing in large transactions may sometimes affect price or volume of
shares acquired or sold, overall it is believed there may be an advantage in
execution. The Investment Manager may follow the practice of grouping orders of
various clients for execution to get the benefit of lower prices or commission
rates. In certain cases where the aggregate order may be executed in a series of
transactions at various prices, the transactions are allocated as to amount and
price in a manner considered equitable to each so that each receives, to the
extent practicable, the average price of such transactions. Exceptions may be
made based on such factors as the size of the account and the size of the trade.
For example, the Investment Manager may not aggregate trades where it believes
that it is in the best interests of clients not to do so, including situations
where aggregation might result in a large number of small transactions with
consequent increased custodial and other transactional costs which may
disproportionately impact smaller accounts. Such disaggregation, depending on
the circumstances, may or may not result in such accounts receiving more or less
favorable execution relative to other clients.
CERTAIN TAX MATTERS
Federal Income Taxation of the Fund -- In General
The Fund intends to qualify and elect to be treated each taxable year
as a "regulated investment company under Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Code"), although it cannot give complete
assurance that it will do so. Accordingly, the Fund must, among other things,
(a) derive at least 90% of its gross income in each taxable year from dividends,
interest, payments with respect to securities loans, gains from the sale or
other disposition of stock, securities or foreign currencies, or other income
(including, but not limited to, gains from options, futures or forward
contracts) derived with respect to its business of investing in such stock,
securities or currencies (the "90% test"); (b) satisfy certain diversification
requirements; and (c) in order to be entitled to utilize the dividends paid
deduction, distribute annually at least 90% of its investment company taxable
income (determined without regard to the deduction for dividends paid).
If the Fund should fail to qualify as a regulated investment company in
any year, it would lose the beneficial tax treatment accorded regulated
investment companies under Subchapter M of the Code and all of its taxable
income would be subject to tax at regular corporate rates without any deduction
for distributions to shareholders, and such distributions will be taxable to
shareholders as ordinary income to the extent of the Fund's current or
accumulated earnings and profits. Also, the shareholders, if they received a
distribution in
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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' 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 federal
income tax purposes. In the case of any debt security issued after July 18,
1984, having a fixed maturity date of more than one year from the date of issue
and having market discount, the gain realized on disposition will be treated as
interest to the extent it does not exceed the accrued market discount on the
security (unless the Fund elects to include such accrued market discount in
income in the tax year to which it is attributable). Generally, market discount
is accrued on a daily basis. The Fund may be required to capitalize, rather than
deduct currently, part or all of any direct interest expense incurred or
continued to purchase or carry any debt security having market discount, unless
the Fund makes the election to include market discount currently. Because the
Fund must include original issue discount in income, it will be more difficult
for the Fund to make the distributions required for the Fund to maintain its
status as a regulated investment company under Subchapter M of the Code or to
avoid the 4% excise tax described above.
Options and Futures Transactions. Certain of the Fund's investments may
be subject to provisions of the Code that (i) require inclusion of unrealized
gains or losses in the Fund's income for purposes of the 90% test, the excise
tax and the distribution requirements
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applicable to regulated investment companies; (ii) defer recognition of
realized losses; and (iii) characterize both realized and unrealized gain or
loss as short-term or long-term gain or loss. Such provisions generally apply
to, among other investments, options on debt securities, indices on securities
and futures contracts.
Federal Income Taxation of Shareholders
Dividends paid by the Fund may be eligible for the 70%
dividends-received deduction for corporations. The percentage of the Fund's
dividends eligible for such tax treatment may be less than 100% to the extent
that less than 100% of the Fund's gross income may be from qualifying dividends
of domestic corporations. Any dividend declared in October, November or December
and made payable to shareholders of record in any such month is treated as
received by such shareholder on December 31, provided that the Fund pays the
dividend during January of the following calendar year.
Distributions by the Fund can result in a reduction in the fair market
value of the Fund's shares. Should a distribution reduce the fair market value
below a shareholder's cost basis, such distribution nevertheless may be taxable
to the shareholder as ordinary income or long-term capital gain, even though,
from an investment standpoint, it may constitute a partial return of capital. In
particular, investors should be careful to consider the tax implications of
buying shares just prior to a taxable distribution. The price of shares
purchased at that time includes the amount of any forthcoming distribution.
Those investors purchasing shares just prior to a taxable distribution will then
receive a return of investment upon distribution which will nevertheless be
taxable to them.
DISTRIBUTION OF SHARES OF THE FUND
The Trust has entered into a Distribution Agreement with State Street
Research Investment Services, Inc., as Distributor, whereby the Distributor acts
as agent to sell and distribute shares of the Fund. Shares of the Fund are sold
through dealers who have entered into sales agreements with the Distributor. The
Distributor distributes shares of the Fund on a continuous basis at an offering
price which is based on the net asset value per share of the Fund plus (subject
to certain exceptions) a sales charge which, at the election of the investor,
may be imposed (i) at the time of purchase (the Class A shares) or (ii) on a
deferred basis (Class B and Class C shares). The Distributor may reallow all or
portions of such sales charges as concessions to dealers.
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,
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employees, their relatives and other persons directly or indirectly related to
the Fund or associated entities. Where shares of the Fund are offered at a
reduced sales charge or without a sales charge pursuant to sponsored
arrangements, managed fee-based programs and so-called "mutual fund
supermarkets," among other programs, the amount of the sales charge reduction
will similarly reflect the anticipated reduction in sales expenses associated
with such arrangements. The reductions in sales expenses, and therefore the
reduction in sales charges, will vary depending on factors such as the size and
other characteristics of the organization or program, and the nature of its
membership or the participants. The Fund reserves the right to make variations
in, or eliminate, sales charges at any time or to revise the terms of or to
suspend or discontinue sales pursuant to sponsored arrangements or similar
programs at any time.
On any sale of Class A shares to a single investor in the amount of
$1,000,000 or more, the Distributor may pay the authorized securities dealer
making such sale a commission based on the aggregate of such sales unless the
commission is waived by the dealer. 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 C shares, including, but not limited to, (1) the
payment of commissions and/or reimbursement to underwriters, securities dealers
and others engaged in the sale of shares, including payments to the Distributor
to be used to pay commissions and/or reimbursement to securities dealers (which
securities dealers may be affiliates of the Distributor) engaged in the
distribution and marketing of shares and furnishing ongoing assistance to
investors, (2) reimbursement of direct out-of-pocket expenditures incurred by
the Distributor in connection with the distribution and marketing of shares and
the servicing of investor accounts including expenses relating to the
formulation and implementation of marketing strategies and promotional
activities such as direct mail promotions and television, radio, newspaper,
magazine and other mass media advertising, the preparation, printing and
distribution of Prospectuses of the Fund and reports for recipients other than
existing shareholders of the Fund, and obtaining such information, analyses and
reports with respect to marketing and promotional activities and investor
accounts as the Fund may, from time to time, deem advisable, and (3)
reimbursement of expenses incurred by the Distributor in connection with the
servicing of shareholder accounts including payments to securities dealers and
others in consideration of the provision of personal service to investors and/or
the maintenance or servicing of shareholder accounts and expenses
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associated with the provision of personal service by the Distributor directly to
investors. In addition, the Distribution Plan is deemed to authorize the
Distributor and the Investment Manager to make payments out of general profits,
revenues or other sources to underwriters, securities dealers and others in
connection with sales of shares, to the extent, if any, that such payments may
be deemed to be within the scope of Rule 12b-1 under the 1940 Act.
Some or all of the service fees are used to pay or reimburse dealers
(including dealers that are affiliates of the Distributor) or others for
personal services and/or the maintenance of shareholder accounts. A portion of
any initial commission paid to dealers for the sale of shares of the Fund
represents payment for personal services and/or the maintenance or servicing of
shareholder accounts by such dealers. Dealers who have sold Class A shares are
eligible for further reimbursement commencing as of the time of such sale.
Dealers who have sold Class B and Class C shares are eligible for further
reimbursement after the first year during which such shares have been held of
record by such dealer as nominee for its clients (or by such clients directly).
Any service fees received by the Distributor and not allocated to dealers may be
applied by the Distributor in reduction of expenses incurred by it directly for
personal services and the maintenance or servicing of shareholder accounts.
The distribution fees are used primarily to offset initial and ongoing
commissions paid to dealers for selling such shares. Any distribution fees
received by the Distributor and not allocated to dealers may be applied by the
Distributor in connection with sales or marketing efforts, including special
promotional fees and cash and noncash incentives based upon sales by dealers.
The Distributor provides distribution services on behalf of other funds
having distribution plans and receives similar payments from, and incurs similar
expenses on behalf of, such other funds. When expenses of the Distributor cannot
be identified as relating to a specific fund, the Distributor allocates expenses
among the funds in a manner deemed fair and equitable to each fund.
Commissions and other cash and noncash incentives and payments to
dealers, to the extent payable out of the general profits, revenues or other
sources of the Distributor (including the advisory fees paid by the Fund), have
also been authorized pursuant to the Distribution Plan.
The expenditures to be made pursuant to the Distribution Plan may not
exceed (i) with respect to Class A shares, an annual rate of 0.25% of the
average daily value of net assets represented by such Class A shares, and (ii)
with respect to Class B and Class C shares, an annual rate of 0.75% of the
average daily value of the net assets represented by such Class B or Class C
shares (as the case may be) to finance sales or promotion expenses and an annual
rate of 0.25% of the average daily value of the net assets represented by such
Class B or Class C shares (as the case may be) to make payments for personal
services and/or the maintenance or servicing of shareholder accounts. The
distribution and servicing expenses of a particular class will be borne solely
by that class. Payments to the Distributor or to dealers funded under the
Distribution Plan may be discontinued at any time.
40
<PAGE>
A rule of the National Association of Securities Dealers, Inc. ("NASD")
limits annual expenditures that the Fund may incur under the Distribution Plan
to 1%, of which 0.75% may be used to pay distribution expenses and 0.25% may be
used to pay shareholder service fees. The NASD Rule also limits the aggregate
amount that the Fund may pay for such distribution costs to 6.25% of gross share
sales of a class since the inception of any asset-based sales charge plus
interest at the prime rate plus 1% on unpaid amounts thereof (less any
contingent deferred sales charges). Such limitation does not apply to
shareholder service fees.
The Distributor may pay certain dealers and other intermediaries
additional compensation for sales and administrative services. The Distributor
may provide cash and noncash incentives to intermediaries who, for example, sell
significant amounts of shares or develop particular distribution channels. The
Distributor may compensate dealers with clients who maintain their investments
in the Fund over a period of years. The incentives can include merchandise and
trips to, and attendance at, sales seminars at resorts. The Distributor may pay
for administrative services, such as technological and computer systems support
for the maintenance of pension plan participant records, for subaccounting, and
for distribution through mutual fund supermarkets or similar arrangements.
No interested Trustee of the Trust has any direct or indirect financial
interest in the operation of the Distribution Plan or any related agreements
thereunder. The Distributor's interest in the Distribution Plan is described
above.
To the extent that the Glass-Steagall Act may be interpreted as
prohibiting banks and other depository institutions from being paid for
performing services under the Distribution Plan, the Fund will make alternative
arrangements for such services for shareholders who acquired shares through such
institutions.
CALCULATION OF PERFORMANCE DATA
From time to time, in advertisements or in communications to
shareholders or prospective investors, the Fund may compare the performance of
its Class A, Class B, Class C or Class S shares to the performance of other
mutual funds with similar investment objectives, to certificates of deposit
and/or to other financial alternatives. The Fund may also compare its
performance to appropriate indices, such as Standard & Poor's 500 Index,
Consumer Price Index and Dow Jones Industrial Average and/or to appropriate
rankings and averages such as those compiled by Lipper Analytical Services,
Inc., Morningstar, Inc., CDC/Wisenberger, Investment Companies Service, Frank
Russell Company, Money Magazine, Business Week, Forbes Magazine, The Wall Street
Journal and Investor's Daily. For example, the performance of the Fund might be
compared to the Lipper Fund categories for Growth, Balanced, Growth and Income
and Small Company Growth funds.
The average annual total return ("standard total return") and yield of
the Class A, Class B, Class C and Class S shares of the Fund will be calculated
as set forth below. Total return and yield are computed separately for each
class of shares of the Fund.
41
<PAGE>
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 and Recurring Charges" 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 highest
applicable initial or contingent deferred sales charge is deducted, and that all
dividends and distributions by the Fund are reinvested at net asset value on the
reinvestment dates during the periods. All accrued expenses and recurring
charges are also taken into account as described later herein.
Yield
Yield for the Fund's Class A, Class B, Class C and Class S shares is
computed by dividing the net investment income per share earned during a recent
month or other specified 30-day period by the maximum offering price per share
on the last day of the period and annualizing the result in accordance with the
following formula:
YIELD = 2[(a-b + 1)6 -1]
--
cd
Where: a = dividends and interest earned during the period
b = expenses accrued for the period (net of
voluntary expense reductions by the
Investment Manager)
c = the average daily number of shares outstanding
during the period that were entitled to
receive dividends
42
<PAGE>
d = the maximum offering price per share on the
last day of the period
To calculate interest earned (for the purpose of "a" above) on debt
obligations, the Fund computes the yield to maturity of each obligation held by
the Fund based on the market value of the obligation (including actual accrued
interest) at the close of the last business day of the preceding period, or,
with respect to obligations purchased during the period, the purchase price
(plus actual accrued interest). The yield to maturity is then divided by 360 and
the quotient is multiplied by the market value of the obligation (including
actual accrued interest) to determine the interest income on the obligation for
each day of the period that the obligation is in the portfolio. Dividend income
is recognized daily based on published rates.
With respect to the treatment of discount and premium on mortgage or
other receivables-backed obligations which are expected to be subject to monthly
payments of principal and interest ("paydowns"), the Fund accounts for gain or
loss attributable to actual monthly paydowns as realized capital gain or loss
during the period. The Fund has elected not to amortize discount or premium on
such securities.
Undeclared earned income, computed in accordance with generally
accepted accounting principles, may be subtracted from the maximum offering
price. Undeclared earned income is the net investment income which, at the end
of the base period, has not been declared as a dividend, but is reasonably
expected to be declared as a dividend shortly thereafter. The maximum offering
price includes, as applicable, a maximum sales charge of 4.5%.
All accrued expenses and recurring charges are taken into account as
described later herein.
Yield information is useful in reviewing the Fund's performance, but
because yields fluctuate, such information cannot necessarily be used to compare
an investment in the Fund's shares with bank deposits, savings accounts and
similar investment alternatives which often are insured and/or provide an agreed
or guaranteed fixed yield for a stated period of time. Shareholders should
remember that yield is a function of the kind and quality of the instruments in
the Fund's portfolio, portfolio maturity and operating expenses and market
conditions.
Accrued Expenses and Recurring Charges
Accrued expenses include all recurring charges that are charged to all
shareholder accounts in proportion to the length of the base period. The
standard total return and yield results take sales charges, if applicable, into
account, although the results do not take into account recurring and
nonrecurring charges for optional services which only certain shareholders elect
and which involve nominal fees, such as the $7.50 fee for wire orders.
Accrued expenses do not include the subsidization, if any, by
affiliates of fees or expenses during the subject period. In the absence of such
subsidization, the performance of the Fund will have been lower.
43
<PAGE>
Nonstandardized Total Return
The Fund may provide the above described standard total return results
for Class A, Class B, Class C and Class S shares for periods which end no
earlier than the most recent calendar quarter end and which begin twelve months
before, five years before and ten years before. In addition, the Fund may
provide nonstandardized total return results for differing periods, such as for
the most recent six months, and/or without taking sales charges into account.
Such nonstandardized total return is computed as otherwise described under
"--Total Return" except the result may or may not be annualized, and as noted
any applicable sales charge may not be taken into account and therefore not
deducted from the hypothetical initial payment of $1,000.
Distribution Rates
The Fund may also quote its distribution rate for each class of shares.
The distribution rate is calculated by annualizing the latest per-share
distribution from ordinary income and dividing the result by the maximum
offering price per share as of the end of the period to which the distribution
relates. A distribution can include gross investment income from debt
obligations purchased at a premium and in effect include a portion of the
premium paid. A distribution can also include nonrecurring, gross short-term
capital gains without recognition of any unrealized capital losses. Further, a
distribution can include income from the sale of options by the Fund even though
such option income is not considered investment income under generally accepted
accounting principles.
Because a distribution can include such premiums, capital gains and
option income, the amount of the distribution may be susceptible to control by
the Investment Manager through transactions designed to increase the amount of
such items. Also, because the distribution rate is calculated in part by
dividing the latest distribution by the offering price, which is based on net
asset value plus any applicable sales charge, the distribution rate will
increase as the net asset value declines. A distribution rate can be greater
than the yield rate calculated as described above.
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.
44
<PAGE>
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 SEC filings and (3) review of the
annual income tax returns filed on behalf of the Fund.
FINANCIAL STATEMENTS
In addition to the reports provided to holders of record on a
semiannual basis, other supplementary financial reports may be made available
from time to time through electronic or other media. Shareholders with
substantial holdings in one or more State Street Research Funds may also receive
reports and other information which reflect or analyze their positions in a
consolidated manner. For more information, call State Street Research
Shareholder Services.
45
<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 April 30, 1997
incorporated by reference from Post-Effective Amendment
No. 7.
Financial Highlights for the State Street Research
Intermediate Bond Fund for the period May 16, 1994
(commencement of operations) through April 30, 1997
incorporated by reference from Post-Effective Amendment
No. 7.
(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 April 30, 1997
incorporated by reference from Post-Effective Amendment
No. 7.
Investment Portfolio
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
(for the period August 30, 1996
(commencement of operations)
to April 30, 1997))
Notes to Financial Statements
(including financial highlights)
Report of Independent Accountants
Financial Statements for the State Street Research
Intermediate Bond Fund for the fiscal year ended April
30, 1997 incorporated by reference from Post-Effective
Amendment No. 7.
Investment Portfolio
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
(for the fiscal years ended April 30, 1997 and
April 30, 1996
Notes to Financial Statements
(including financial highlights)
Report of Independent Accountants
Management's Discussion of Fund Performance
(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)
(1)(c) Form of Amendment No. 3 to the Master Trust Agreement
(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
(5)(c) Form of Letter Agreement with respect to the Advisory
Agreement relating to State Street Research Legacy Fund
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(6)(a) Distribution Agreement with State Street Research Investment
Services, Inc. (5)
(6)(b) Form of Selected Dealer Agreement, as Supplemented(9)
(6)(c) Form of Bank and Bank-Affiliated Broker-Dealer Agreement (3)*
(6)(e) Letter Agreement with respect to the Distribution Agreement
relating to State Street Research Strategic Income Fund (8)
(6)(f) Form of Letter Agreement with respect to the Distribution
Agreement relating to State Street Research Legacy 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 (8)
(8)(c) Form of Letter Agreement with respect to Custodian Contract
relating to the State Street Research Legacy 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)
(10)(c) Opinion and Consent of Goodwin, Procter & Hoar LLP with
respect to State Street Research Legacy Fund
(11) Consent of Independent Accountants (9)
(12) Not applicable
(13)(a) Purchase Agreement and Investment Letter with respect to State
Street Research Intermediate Bond Fund (8)
(13)(b) Purchase Agreement and Investment Letter with respect to
State Street Research Strategic Income Fund (8)
(13)(c) Form of Purchase Agreements and Investment Letters with
respect to State Street Research Legacy 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 (8)
(14)(c) State Street Research SIMPLE IRA: Application, Terms &
Conditions & Disclosure Statement (9)
(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 (8)
(15)(c) Form of Letter Agreement with respect to Plan of Distribution
Pursuant to Rule 12b-1 relating to State Street Research
Legacy Fund
(16) Calculation of Performance Data with respect to State Street
Research Intermediate Bond Fund (4)
(17) Powers of Attorney (9)
(18) Certificate of Board Resolution Respecting Powers of
Attorney (9)
(19) Application Forms (8)
(20) First Amended and Restated Multiple Class Expense Allocation
Plan (5)
(27) Financial Data Schedules (9)
* Restated in electronic format in Post-Effective Amendment No. 7, filed on
August 29, 1997
- -------------------------------
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
8 Post-Effective Amendment No. 6 January 23, 1997
9 Post-Effective Amendment No. 7 August 29, 1997
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Item 25. Persons Controlled by or Under Common Control with Registrant
ORGANIZATIONAL STRUCTURE OF METROPOLITAN AND SUBSIDIARIES
AS OF DECEMBER 31, 1996
The following is a list of subsidiaries of Metropolitan Life Insurance Company
("Metropolitan") as of December 31, 1996. 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 (Rhode Island)
a. Metropolitan Group Property and Casualty Insurance Company
(Rhode Island)
i. Metropolitan Reinsurance Company (U.K.) Limited (Great
Britain)
b. Metropolitan Casualty Insurance Company (Rhode Island)
c. Metropolitan General Insurance Company (Rhode Island)
d. First General Insurance Company (Georgia)
e. Metropolitan P&C Insurance Services, Inc. (California)
f. Metropolitan Lloyds, Inc. (Texas)
g. Met P&C Managing General Agency, 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)
f. MetLife General Insurance Agency of Massachusetts, Inc.
(Massachusetts)
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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) CLJFinco, 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)
(7) MetLife Capital Funding Corp. II (Delaware)
ii. MetLife Capital Financial Corporation (Delaware)
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<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.
iv. MetLife Capital International Ltd. (Delaware).
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 Investments Asia Limited (Hong Kong). One share of
MetLife Investments Asia Limited is held by W&C Services, Inc., a
nominee of Metropolitan Asset Management Corporation.
d. GFM International Investors Limited (United Kingdom). The common
stock of GFM International Investors Limited ("GFM") is held by
Metropolitan (99.5%) and by the former CEO 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)
iii. SSRM Management Company (Luxembourg).
b. Metric Holdings, Inc. (Delaware)
i. Metric Management Inc. (Delaware)
ii. Metric Realty Corp. (Delaware)
(1) Metric Realty Services, Inc. (Delaware). Metric
Holdings, Inc. and Metric Realty Corp. each hold 50% of
the common stock of Metric Realty Services, Inc.
(a) Metric Colorado, Inc. (Colorado). Metric Realty
Services, Inc. holds 80% of the common stock of
Metric Colorado, Inc.
(2) Metric AV, Inc.
iii. Metric Realty (Illinois). Metric Realty Corp. and Metric
Holdings, Inc. each hold 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%
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interest as general partner in Metric Institutional
Realty Advisors, L.P.
(5) 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.
iv. MetLife Realty Group, Inc. (Delaware)
6. MetLife Holdings, Inc. (Delaware)
a. MetLife Funding, Inc. (Delaware)
b. MetLife Credit Corp. (Delaware)
7. Metropolitan Tower Realty Company, Inc. (Delaware)
8. Met Life Real Estate Advisors, Inc. (California)
9. MetLife HealthCare Holdings, Inc. (Delaware)
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)
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<PAGE>
3. Morguard Investments Limited (Ontario, Canada)
Shares of Morguard Investments Limited ("Morguard") are held by
Metropolitan Life Holdings Limited (80%) and by employees of Morguard
(20%).
4. Services La Metropolitaine Quebec, Inc. (Quebec, Canada)
5. 3309347 Canada, Inc. (Canada)
H. MetLife (UK) Limited (Great Britain). One share held by Metropolitan Tower
Corp.
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.
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<PAGE>
K. Metropolitan Life Seguros de Vida S.A. (Argentina)
L. Metropolitan Life Seguros de Retiro S.A. (Argentina).
M. Met Life Holdings Luxembourg (Luxembourg)
N. Metropolitan Life Holdings, Netherlands BV (Netherlands)
O. MetLife International Holdings, Inc. (Delaware)
P. Metropolitan Life Insurance Company of Hong Kong Limited (Hong Kong)
C-8
<PAGE>
Q. Metropolitan Realty Management, Inc. (Delaware)
1. Edison Supply and Distribution, Inc. (Delaware)
2. Cross & Brown Company (New York)
a. Cross & Brown Associates of New York, Inc. (New York)
b. Cross & Brown Construction Corp. (New York)
c. CBNJ, Inc. (New Jersey)
d. SubBrown Corp. (New York)
R. MetPark Funding, Inc. (Delaware)
S. 2154 Trading Corporation (New York)
T. Transmountain Land & Livestock Company (Montana)
U. Met West Agribusiness, Inc. (Delaware)
V. Farmers National Company (Nebraska)
1. Farmers National Commodities, Inc. (Nebraska)
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<PAGE>
W. MetLife Trust Company, National Association. (United States)
X. PESCO Plus, L.C. (Florida). Metropolitan holds a 50% interest in
PESCO Plus, L.C. and an unaffiliated party holds a 50% interest.
1. Public Employees Equities Services Company (Florida)
Y. Benefit Services Corporation (Georgia)
Z. G.A. Holding Corporation (MA)
A.A. TNE-Y, Inc. (DE)
A.B. CRH Companies, Inc. (MA)
A.C. NELRECO Troy, Inc. (MA)
A.D. TNE Funding Corporation (DE)
A.E. L/C Development Corporation (CA)
A.F. Boylston Capital Advisors, Inc. (MA)
1. New England Portfolio Advisors, Inc. (MA)
A.G. CRB Co., Inc. (MA) AEW Real Estate Advisors, Inc. holds 49,000 preferred
non-voting shares of CRB Co., Inc. AEW Advisors, Inc. holds 1,000
preferred non-voting shares of CRB Co., Inc.
A.H. DPA Holding Corp. (MA)
A.I. Lyon/Copley Development Corporation (CA)
A.J. NEL Partnership Investments I, Inc. (MA)
A.K. New England Life Mortgage Funding Corporation (MA)
A.L. Mercadian Capital L.P. (DE). Metropolitan holds a 95% limited partner
interest and an unaffiliated third party holds 5% of Mercadian Capital
L.P.
A.M. Mercadian Funding L.P. ( DE). Metropolitan holds a 95% limited partner
interest and an unaffiliated third party holds 5% of Mercadian
Funding L.P.
A.N. MetLife New England Holdings, Inc. (DE)
1. New England Life Insurance Company (MA)
a. New England Securities Corporation (MA)
b. Hereford Insurance Agency, Inc. (MA)
c. Hereford Insurance Agency of Alabama, Inc. (AL)
d. Hereford Insurance Agency of Minnesota, Inc. (MN)
e. Newbury Insurance Company, Limited (Bermuda)
f. TNE Information Services, Inc. (MA)
g. Exeter Reassurance Company, Ltd. (MA)
h. Omega Reinsurance Corporation (AZ)
i. New England Pension and Annuity Company (DE)
j. TNE Advisers, Inc. (MA)
k. New England Investment Companies, Inc. (MA)
1. New England Investment Companies, L.P. (DE) New England
Investment Companies, Inc. hold a 0.29% general partnership
interest in New England Investment Companies, L.P. MetLife New
England Holdings, Inc. holds a 54.90% limited partnership
interest in New England Investment Companies, L.P.
a. NEIC Holdings, Inc. (MA)
i. (1) Back Bay Advisors, Inc. (MA)
(2) Back Bay Advisors, L.P. (DE)
Back Bay Advisors, Inc.
holds a 1% general partner
interest and NEIC
Holdings, Inc. holds a 99%
limited partner interest
in Back Bay Advisors, L.P.
ii. Reich & Tang Asset Management, Inc. (MA)
(1) Reich & Tang Distributors, L.P. (DE)
Reich & Tang Asset Management Inc.
holds a 1% general interest and
Reich & Tang Asset Management, L.P.
holds a 99.5% limited partner
interest in Reich Tang Distributors, L.P.
(2) Reich & Tang Asset Management L.P.
Reich & Tang Asset Management, Inc.
holds a 0.5% general partner interest and
NEIC Holdings, Inc. hold a 99.5% limited
partner interest in Reich & Tang
Asset Management, L.P.
(3) Reich & Tang Services, L.P. (DE)
Reich & Tang Asset Management, Inc.
holds a 1% general partner interest and
Reich & Tang Asset Management, L.P.
holds a 99% limited partner interest
in Reich & Tang Services, L.P.
iii. Loomis, Sayles & Company, Inc. (MA)
(1) Loomis Sayles & Company, L.P. (DE)
Loomis Sayles & Company, Inc.
holds a 1% general partner interest and
Reich & Tang Asset Management, Inc. holds a 99%
limited partner interest in Loomis Sayles &
Company, L.P.
iv. Westpeak Investment Advisors, Inc. (MA)
(1) Westpeak Investment Advisors, L.P. (DE)
Westpeak Investment Advisors, Inc.
holds a 1% general partner interest and
Reich & Tang holds a 99% limited partner interest in
Westpeak Investment Advisors, L.P.
v. VNSM, Inc. (DE)
(1) Vaughan, Nelson Scarborough & McConnell, L.P. (DE)
VNSM, Inc. holds a 1% general partner interest and
Reich & Tang Asset Management, Inc. holds a 99%
limited partner interest in Vaughan, Nelson
Scarborough & McConnell, L.P.
vi. MC Management, Inc. (MA)
(1) MC Management, L.P. (DE)
MC Management, Inc. holds a 1% general partner
interest and Reich & Tang Asset Management,
Inc. holds a 99% limited partner interest in MC
Management, L.P.
vii. Harris Associates, Inc. (DE)
(1) Harris Associates Securities L.P. (DE)
Harris Associates, Inc. holds a 1% general partner
interest and Harris Associates L.P. holds a
99% limited partner interest in Harris Associates
Securities, L.P.
(2) Harris Associates L.P. (DE)
Harris Associates, Inc. holds a 0.33% general
partner interest and New England Investment Company,
L.P. Inc. holds a 99.67% limited partner interest in
Harris Associates L.P.
(a) Harris Partners, Inc. (DE)
(b) Harris Partners L.L.C. (DE)
Harris Partners, Inc. holds a 1%
membership interest and
Harris Associates L.P. holds a 99%
membership interest in Harris Partners L.L.C.
(i) Aurora Limited Partnership (DE)
Harris Partners L.L.C. holds a 1% general
partner interest
(ii)Perseus Partners L.P. (DE) Harris
Partners L.L.C. holds a 1% general
partner interest
(iii)Pleiades Partners L.P. (DE) Harris
Partners L.L.C. holds a 1% general partner
interest
(iv) Stellar Partners L.P. (DE)
Harris Partners L.L.C. holds a 1% general
partner interest
(v) SPA Partners L.P. (DE) Harris Partners
L.L.C. holds a 1% general partner interest
viii. Graystone Partners, Inc. (MA)
(1) Graystone Partners, L.P. (DE)
Graystone Partners, Inc. holds a 1%
general partner interest and New England
Investment Company, L.P.
holds a 99% limited partner interest in
Graystone Partners, L.P.
ix. NEF Corporation (MA)
(1) New England Funds, L.P. (DE) NEF Corporation holds a
1% general partner interest and New England
Investment Company, L.P. holds a 99% limited partner
interest in New England Funds, L.P.
(2) New England Funds Management, L.P. (DE) NEF
Corporation holds a 1% general partner interest and
New England Investment Company, L.P. holds a 99%
limited partner interest in New England Funds
Management, L.P.
l. Capital Growth Management, L.P. (DE)
New England Investment Companies, L.P. holds a 50% limited partner
interest in Capital Growth Management, L.P.
m. AEW Capital Management L.P. (DE)
New England Investment Companies, L.P. holds a 99% limited partner
interest and AEW Capital Management, Inc. holds a 1% general partner
interest in AEW Capital Management, L.P.
1. AEW Investment Group, Inc. (MA)
a. BBC Investment Advisors, Inc. (MA)
b. Copley/Ochard Investors, Inc. (MA)
i. Copley/Ochard Investors, L.P. (DE)
Copley/Ochard Investors, Inc.
holds a 1% general partner interest in
Copley/Ochard Investors, L.P.
c. AEW Real Estate Advisors, Inc. (MA)
i. AEW Advisors, Inc. (MA)
(1) Copley Management Partnership (MA)
Copley Advisors, Inc. holds a 1% general partner
interest in Copley Management Partnership.
(2) Coptel Associates L.P. (DE)
Copley Advisors, Inc. holds a 1% general partner
interest in Coptel Associates L.P.
(3) CIIF Associates (MA)
Copley Advisors, Inc. holds a .15% general partner
interest in CIIF Associates.
(4) CIIF Associates II Limited Partnership (DE)
Copley Advisors, Inc. holds a .15% general partner
interest in CIIF Associates II Limited Partnership.
(5) CIIF McInnes Associates (MA)
AEW Advisors, Inc. holds a .15% general partnership
interest in CIIF McInnes Associates.
(6) CIIF Oxnard Associates (MA)
AEW Advisors, Inc. holds a .15% general partnership
in CIIF Oxnard Associates.
(7) CIIF II Crossroads Limited Partnership (DE)
AEW Advisors, Inc. holds a 1% general partnership
in CIIF II Crossroads Limited Partnership.
(8) CIIF II Tech Center Associates L.P. (DE)
AEW Advisors, Inc. holds a 1% general partnership
in CIIF II Tech Center Associates L.P.
(9) CIIF II Tech Center, Inc. (MA)
AEW Advisors, Inc. holds a 5% interest in CIIF
II Tech Center Associates, Inc.
ii. Copley Properties Company, Inc. (MA)
(1) New England Life Pension Properties (MA).
Copley Properties Company, Inc. holds a 1% general
partner interest in New England Life Pension
Properties.
iii. Copley Properties Company II, Inc. (MA)
(1) New England Life Pension Properties II (MA).
Copley Properties Company II, Inc. holds a 1%
general partner interest in New England Life
Pension Properties II.
iv. Copley Properties Company III, Inc. (MA)
(1) New England Life Pension Properties III (MA).
Copley Properties Company III, Inc. holds a 1%
general partner interest in New England Life
Pension Properties III.
v. Copley Securities Corporation (MA)
vi. Copley Margarita Associates L.P. (MA)
AEW Real Estate Advisors, Inc. holds a 0.001% general
partner interest in Copley Margarita Associates L.P.
vii. Fourth Copley Corp. (MA)
(1) New England Life Pension Properties IV (MA).
Fourth Copley Corp. holds a 1% general partner
interest in New England Life Pension Properties IV.
viii. Fifth Copley Corp. (MA)
(1) New England Life Pension Properties V (MA).
Fifth Copley Corp. holds a 1% general partner
interest in New England Life Pension Properties V.
ix. Sixth Copley Corp. (MA)
(1) Copley Pension Properties VI (MA).
Sixth Copley Corp. holds a 1% general partner
interest in Copley Pension Properties VI.
x. Seventh Copley Corp. (MA).
(1) Copley Pension Properties VII (MA).
Seventh Copley Corp. holds a 1% general partner
interest in Copley Pension Properties VII.
xi. Eighth Copley Corp. (MA).
xii. First Income Corp. (MA).
(1) Copley Realty Income Partners 1 (MA).
First Income Corp. holds a 1% general partner
interest in Copley Realty Income Partners 1.
xiii. Second Income Corp. (MA).
(1) Copley Realty Income Partners 2 (MA).
Second Income Corp. holds a 1% general partner
interest in Copley Realty Income Partners 2.
xiv. Third Income Corp. (MA).
(1) Copley Realty Income Partners 3 (MA).
Third Income Corp. holds a 1% general partner
interest in Copley Realty Income Partners 3.
xv. Fourth Income Corp. (MA).
(1) Copley Realty Income Partners 4 (MA).
Fourth Income Corp. holds a 1% general partner
interest in Copley Realty Income Partners 4.
xvi. Third Singleton Corp. (MA).
(1) Copley Business Parks Associates L.P. (MA).
Third Singleton Corp. holds a 1% general partner
interest in Copley Business Parks Associates L.P.
xvii. Fourth Singleton Corp. (MA)
xviii. Fifth Singleton Corp. (MA)
(1) Copley Regional Centers Associates L.P. (MA).
Fifth Singleton Corp. holds a 1% general partner
interest in Copley Regional Centers Associates L.P.
xix. Sixth Singleton Corp. (MA).
(1) Copley Commerce Centers Associates L.P. (MA).
Sixth Singleton Corp. holds a 1% general partner
interest in Copley Commerce Centers Associates L.P.
xx. CTR Corp. (MA ).
xxi. New England Investment Associates, Inc. (DE)
xxii. BCOP Associates L.P. (MA)
AEW Real Estate Advisors, Inc. holds a 1% general
partner interest in BCOP Associates L.P.
xxiii AEW Real Estate Advisors Limited Partnership.
AEW Real Estate Advisors, Inc. holds a 25% general
partner interest in AEW Real Estate Advisors, Limited
Partnership.
d. BBC Investment Advisors, Inc. (MA)
AEW Investment Group, Inc. holds a 60% general partner
interest in BBC Investment Advisors, Inc. and Back Bay
Advisors, L.P. holds a 40% limited partner interest.
N. AEW Capital Management, Inc. (MA)
(i) Copley Management and Advisors, L.P. (DE)
AEW Capital Management, Inc. holds a 75% limited
partner interest and AEW Investment Group, Inc.
holds a 25% general partner interest in Copley
Management and Advisors, L.P.
(a) BBC Investment Advisors, L.P. (DE)
Copley Management Advisors, L.P. holds a
59.4% limited partner interest, Back Bay
Advisors, L.P. holda 39.6% limited partner
interest and BBC Investment Advisors, Inc.
holds a 1% general partner interest in
BBC Investment Advisors, L.P.
2. Copley Public Partners Holding, L.P. (DE)
AEW Capital Management, L.P. holds a 75% limited partner interest and
AEW Investment Group, Inc. holds a 25% general partner interest.
3. AEW Hotel Investment Corporation.
C-10
<PAGE>
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 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.
5) 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.
6) 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% mt ST, owns a 50% interest and has the right to
designate 2 of the 4 members of the Board of Directors.
C-11
<PAGE>
Item 26: Number of Holders of Securities
- -----------------------------------------
As of July 31, 1997, 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 0
Class B 0
Class C 7
Class D 0
State Street Research Strategic Income Fund
Class A 689
Class B 791
Class C 23
Class D 157
State Street Research Legacy Fund
Class A *
Class B *
Class C *
Class S *
- ----------
*The Registrant anticipates that State Street Research & Management
Company will be the sole initial record holder on or about the effective date.
C-12
<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-13
<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-14
<PAGE>
Item 28. Business and Other Connections of Investment Adviser
Describe any other business, profession, vocation or employment of a
substantial nature in which each investment adviser of the Registrant, and each
director, officer or partner of any such investment adviser, is or has been, at
any time during the past two fiscal years, engaged for his own account or in the
capacity of director, officer, employee, partner or trustee.
<TABLE>
<CAPTION>
Principal business
Name Connection Organization address of organization
- ---- ---------- ------------ -----------------------
<S> <C> <C> <C>
State Street Investment Adviser Various investment Boston, MA
Research & advisory clients
Management
Company
Arpiarian, Tanya None
Vice President
Bangs, Linda L. None
Vice President
Bennett, Peter C. Executive Vice GFM International Investors
Director and President Limited London, England
Executive Vice Vice President State Street Research Capital Trust Boston, MA
President Vice President State Street Research Exchange Trust Boston, MA
Vice President State Street Research Financial Trust Boston, MA
Vice President State Street Research Growth Trust Boston, MA
Vice President State Street Research Master Investment Trust Boston, MA
Vice President State Street Research Equity Trust
Vice President State Street Research Income Trust Boston, MA
Vice President State Street Research Portfolios, Inc. Boston, MA
Director State Street Research Investment Services, Inc Boston, MA
Director Boston Private Bank & Trust Co. Boston, MA
President and Director Christian Camps & Conferences, Inc. Boston, MA
Chairman and Trustee Gordon College Wenham, MA
Bochman, Kathleen None
Vice President
Borzilleri, John Vice President Montgomery Securities San Francisco, CA
Vice President (until 6/97)
Bray, Michael J. Employee Merrill Lynch & Co. Boston, MA
Vice President (until 7/97)
Brooks, David None
Vice President
Brown, Susan H. None
Vice President
Buffum, Andrea Project Manager BankBoston Boston, MA
Vice President (until 12/96)
Managing Director State Street Global Advisors Boston, MA
(until 12/95)
Burbank, John F. None
Senior Vice President
(Vice President until
7/96)
Cabrera, Jesus A. Vice President First Chicago Investment Management Co. Chicago, IL
Vice President (until 5/96)
Vice President State Street Research Capital Trust Boston, MA
Canavan, Joseph W. Vice President GFM International Investors Limited London, England
Vice President Assistant Treasurer State Street Research Equity Trust Boston, MA
Assistant Treasurer State Street Research Financial Trust Boston, MA
Assistant Treasurer State Street Research Income Trust Boston, MA
Assistant Treasurer State Street Research Money Market Trust Boston, MA
Assistant Treasurer State Street Research Tax-Exempt Trust Boston, MA
Assistant Treasurer State Street Research Capital Trust Boston, MA
Assistant Treasurer State Street Research Exchange Trust Boston, MA
Assistant Treasurer State Street Research Growth Trust Boston, MA
Assistant Treasurer State Street Research Master Investment Trust Boston, MA
Assistant Treasurer State Street Research Securities Trust Boston, MA
Assistant Treasurer State Street Research Portfolios, Inc. Boston, MA
C-15
<PAGE>
Principal business
Name Connection Organization address of organization
- ---- ---------- ------------ -----------------------
Carstens, Linda C. None
Vice President
Clifford, Jr., Paul J. Vice President State Street Research Tax-Exempt Trust Boston, MA
Vice President
Coleman, Thomas J. None
Vice President
D'Vari, Ronald None
Vice President
Depp, Maureen Vice President Wellington Management Company Boston, MA
Vice President (until 9/97)
DeVeuve, Donald None
Vice President
DiFazio, Susan M.W. Senior Vice President State Street Research Investment Services, Inc. Boston, MA
Vice President
Dillman, Thomas J 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 None
Vice President
Federoff, Alex G. None
Vice President
Fee, Richard CIGNA Retirement and Hartford, CT
Vice President Investment Services
Feliciano, Rosalina None
Vice President
Gardner, Michael D. Partner Prism Group Seattle, WA
Senior Vice President
Geer, Bartlett R. Vice President State Street Research Equity Trust Boston, MA
Senior Vice President Vice President State Street Research Income Trust Boston, MA
Vice President State Street Research Securities Trust Boston, MA
Giroux, June Investment Analyst First National Bank Chicago, IL
Vice President of Chicago
Govoni, Electra None
Vice President
C-16
<PAGE>
Principal business
Name Connection Organization address of organization
- ---- ---------- ------------ -----------------------
Granger, Allison None
Vice President
Hamilton, Jr., William A. Treasurer and Director Ellis Memorial and Eldredge House Boston, MA
Senior Vice President Treasurer and Director Nautical and Aviation Publishing Company, Inc. Baltimore, MD
Treasurer and Director North Conway Institute Boston, MA
Hanson, Phyllis None
Vice President
Haverty, Jr., Lawrence J. None
Senior Vice President
Heineke, George R. None
Vice President
Jackson, Jr., Trustee Certain trusts of related and
F. Gardner non-related individuals
Senior Vice President Trustee and Chairman Vincent Memorial Hospital Boston, MA
of the Board
Jamieson, Frederick H. Vice President and Asst. Treasurer State Street Research Investment Services, Inc. Boston, MA
Senior Vice President Vice President and Asst. Treasurer SSRM Holdings, Inc. Boston, MA
Vice President and Controller MetLife Securities, Inc. New York, NY
Senior Vice President GFM International Investors Limited London, England
Kallis, John H. Vice President State Street Research Financial Trust Boston, MA
Senior Vice President Vice President State Street Research Income Trust Boston, MA
Vice President State Street Research Money Market Trust Boston, MA
Vice President State Street Research Portfolios, Inc. Boston, MA
Vice President State Street Research Tax-Exempt Trust Boston, MA
Vice President State Street Research Securities Trust Boston, MA
Trustee 705 Realty Trust Washington, D.C.
Director and President K&G Enterprises Washington, D.C.
Kasper, M. Katherine None
Vice President
C-17
<PAGE>
Principal business
Name Connection Organization address of organization
- ---- ---------- ------------ -----------------------
Kluiber, Rudolph K. Vice President State Street Research Capital Trust Boston, MA
Vice President
Langholm, Knut Director State Street Research SICAV Luxembourg
Vice President
Leary, Eileen M. None
Vice President
Maisonneuve, Virginie Portfolio Manager Batterymarch Financial Management Boston, MA
Vice President (until 6/97)
Vice President GFM International Investors, Ltd. London, England
McNamara, III, Francis J. Director and Executive GFM International Investors
Executive Vice Vice President Limited London, England
President, Senior Vice President, Clerk State Street Research Investment Services, Inc. Boston, MA
Secretary and and General Counsel
General Counsel Secretary and General Counsel State Street Research Master Investment Trust Boston, MA
(Senior Vice President, Secretary and General Counsel State Street Research Capital Trust Boston, MA
Secretary and General Secretary and General Counsel State Street Research Exchange Trust Boston, MA
Counsel until 7/96) Secretary and General Counsel State Street Research Growth Trust Boston, MA
Secretary and General Counsel State Street Research Securities Trust Boston, MA
Secretary and General Counsel State Street Research Equity Trust Boston, MA
Secretary and General Counsel State Street Research Financial Trust Boston, MA
Secretary and General Counsel State Street Research Income Trust Boston, MA
Secretary and General Counsel State Street Research Money Market Trust Boston, MA
Secretary and General Counsel State Street Research Portfolios, Inc. Boston, MA
Secretary and General Counsel State Street Research Tax-Exempt Trust Boston, MA
Secretary and General Counsel SSRM Holdings, Inc. Boston, MA
C-18
<PAGE>
Principal business
Name Connection Organization address of organization
- ---- ---------- ------------ -----------------------
Maus, Gerard P. Executive Vice President GFM International Investors
Director, Executive and Director Limited London, England
Vice President, Treasurer State Street Research Equity Trust Boston, MA
Treasurer, Chief Treasurer State Street Research Financial Trust Boston, MA
Financial Officer and Treasurer State Street Research Income Trust Boston, MA
Chief Administrative Treasurer State Street Research Money Market Trust Boston, MA
Officer Treasurer State Street Research Tax-Exempt Trust Boston, MA
Treasurer State Street Research Capital Trust Boston, MA
Treasurer State Street Research Exchange Trust Boston, MA
Treasurer State Street Research Growth Trust Boston, MA
Treasurer State Street Research Master Investment Trust Boston, MA
Treasurer State Street Research Portfolios, Inc. Boston, MA
Treasurer State Street Research Securities Trust Boston, MA
Director, Executive Vice President, State Street Research Investment Services, Inc. Boston, MA
Treasurer and Chief
Financial Officer
Director Metric Holdings, Inc. San Francisco, CA
Director Certain wholly-owned subsidiaries
of Metric Holdings, Inc.
Treasurer and Chief Financial SSRM Holdings, Inc. Boston, MA
Officer
Treasurer (until 1/97) MetLife Securities, Inc. New York, NY
Director State Street Research SICAV Luxembourg
Milder, Judith J. None
Senior Vice President
Miles, Deborah C.
Vice President
Miller, Joan D. Senior Vice President State Street Research Investment Services, Inc. Boston, MA
Senior Vice President
(Vice President
until 7/96)
Moore, Jr., Thomas P. Vice President State Street Research Capital Trust Boston, MA
Senior Vice (until 11/96)
President Vice President State Street Research Exchange Trust Boston, MA
(until 2/97)
Vice President State Street Research Growth Trust Boston, MA
(until 2/97)
Vice President State Street Research Master Investment Trust Boston, MA
(until 2/97)
Vice President State Street Research Equity Trust Boston, MA
Vice President State Street Research Energy, Inc. Boston, MA
Director Hibernia Savings Bank Quincy, MA
Governor on the Association for Investment Management
Board of Governors and Research Charlottesville, VA
Morey, Andrew
Vice President None
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-19
<PAGE>
Principal business
Name Connection Organization address of organization
- ---- ---------- ------------ -----------------------
Paddon, Steven W. Employee Metropolitan Life Insurance Company New York, NY
Senior Vice President (until 10/96)
Pannell, James C. None
Vice President
(Vice President
until 3/97)
Peters, Kim M. Vice President State Street Research Securities Trust Boston, MA
Senior Vice President
Poritzky, Dean E. Portfolio Manager Fidelity Investments Boston, MA
Vice President
Pyle, David
Vice President
Ragsdale, E.K. Easton Senior Vice President GFM International Investors, Limited London, England
Senior Vice President
(Vice President
until 7/96)
Rawlins, Jeffrey A. None
Senior Vice President
(Vice President
until 7/96)
Rice III, Daniel Joseph Vice President State Street Research Equity Trust Boston, MA
Senior Vice President
Richards, Scott None
Vice President
Romich, Douglas A. Vice President GFM International Investors Limited London, England
Vice President Assistant Treasurer State Street Research Equity Trust Boston, MA
Assistant Treasurer State Street Research Financial Trust Boston, MA
Assistant Treasurer State Street Research Income Trust Boston, MA
Assistant Treasurer State Street Research Money Market Trust Boston, MA
Assistant Treasurer State Street Research Tax-Exempt Trust Boston, MA
Assistant Treasurer State Street Research Capital Trust Boston, MA
Assistant Treasurer State Street Research Exchange Trust
Assistant Treasurer State Street Research Growth Trust Boston, MA
Assistant Treasurer State Street Research Master Investment Trust Boston, MA
Assistant Treasurer State Street Research Securities Trust Boston, MA
Assistant Treasurer State Street Research Portfolios, Inc. Boston, MA
Saperstone, Paul None
Vice President
C-20
<PAGE>
Principal business
Name Connection Organization address of organization
- ---- ---------- ------------ -----------------------
Schrage, Michael None
Vice President
Schultz, David C. Director and Treasurer Mafraq Hospital Association Mafraq, Jordan
Executive Vice Member Association of Investment
President Management Sales Executives Atlanta, GA
Member, Investment Committee Lexington Christian Academy Lexington, MA
Shaver, Jr. C. Troy President and Chief Executive State Street Research Investment Services, Inc. Boston, MA
Executive Vice Officer
President President and Chief Executive John Hancock Funds, Inc. Boston, MA
Officer (until 1/96)
Shean, William G. None
Vice President
Shively, Thomas A. Vice President State Street Research Financial Trust Boston, MA
Director and Vice President State Street Research Money Market Trust Boston, MA
Executive Vice Vice President State Street Research Tax-Exempt Trust
President Director State Street Research Investment Services, Inc Boston, MA
Vice President State Street Research Securities Trust Boston, MA
Shoemaker, Richard D. Senior Vice President GFM International Investors Limited London, England
Senior Vice President
Stambaugh, Kenneth None
Vice President
Strelow, Dan R. None
Senior Vice President
C-21
<PAGE>
Principal business
Name Connection Organization address of organization
- ---- ---------- ------------ -----------------------
Swanson, Amy McDermott None
Senior Vice President
Trebino, Anne M. Vice President SSRM Holdings, Inc. Boston, MA
Senior Vice President
Verni, Ralph F. Chairman, President, GFM International Investors
Chairman, President, CEO and Director Limited London, England
Chief Executive Chairman, President, Chief State Street Research Capital Trust Boston, MA
Officer and Executive Officer and Trustee
Director Chairman, President, Chief State Street Research Exchange Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief State Street Research Growth Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief State Street Research Master Investment Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief State Street Research Securities Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief State Street Research Equity Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief State Street Research Financial Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief State Street Research Income Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief State Street Research Money Market Trust Boston, MA
Executive Officer and Trustee
Chairman, President, Chief State Street Research Portfolios, Inc. Boston, MA
Executive Officer and Director
Chairman, President, Chief State Street Research Tax-Exempt Trust Boston, MA
Executive Officer and Trustee
Chairman and Director State Street Research Investment Services, Inc. Boston, MA
(President and Chief Executive
Officer until 2/96)
Chairman and Director Metric Holdings, Inc. San Francisco, CA
Director and Officer Certain wholly-owned subsidiaries
of Metric Holdings, Inc.
Chairman of the Board and Director MetLife Securities, Inc. New York, NY
(until 1/97)
President, Chief Executive SSRM Holdings, Inc. Boston, MA
Officer and Director
Director CML Group, Inc. Boston, MA
Director Colgate University Hamilton, NY
Director State Street Research SICAV Luxembourg
C-22
<PAGE>
Principal business
Name Connection Organization address of organization
- ---- ---------- ------------ -----------------------
Wade, Dudley Vice President State Street Research Growth Trust Boston, MA
Freeman Vice President State Street Research Master Investment Trust Boston, MA
Senior Vice
President
Wallace, Julie K. None
Vice President
Weiss, James M. Vice President State Street Research Equity Trust Boston, MA
Senior Vice President Vice President State Street Research Exchange Trust Boston, MA
Vice President State Street Research Growth Trust Boston, MA
Vice President State Street Research Master Investment Trust Boston, MA
Vice President State Street Research Capital Trust Boston, MA
President and Chief Investment IDS Equity Advisors Minneapolis, MN
Officer (until 12/95)
Westvold, Vice President State Street Research Securities Trust Boston, MA
Elizabeth McCombs
Senior Vice President
(Vice President
until 7/96)
Wilkins, Kevin Vice President State Street Research Investment Services, Inc. Boston, MA
Vice President Vice President Fidelity Investments Boston, MA
Various positions Fidelity Investments Boston, MA
(until 10/96)
Wilson, John T. Vice President State Street Research Equity Trust Boston, MA
Vice President Vice President State Street Research Master Investment Trust Boston, MA
Vice President Phoenix Investment Counsel, Inc. Hartford, CT
(until 6/96)
Wing, Darman A. Senior Vice President and State Street Research Investment Services, Inc. Boston, MA
Vice President, Asst. Clerk
Assistant Secretary Assistant Secretary State Street Research Capital Trust Boston, MA
and Assistant Assistant Secretary State Street Research Exchange Trust Boston, MA
General Counsel Assistant Secretary State Street Research Growth Trust Boston, MA
Assistant Secretary State Street Research Master Investment Trust Boston, MA
Assistant Secretary State Street Research Securities Trust Boston, MA
Assistant Secretary State Street Research Equity Trust Boston, MA
Assistant Secretary State Street Research Financial Trust Boston, MA
Assistant Secretary State Street Research Income Trust Boston, MA
Assistant Secretary State Street Research Money Market Trust Boston, MA
Assistant Secretary State Street Research Tax-Exempt Trust Boston, MA
Assistant Secretary 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-23
<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-24
<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
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-25
<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
Deborah C. Miles 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
Donald Doherty Vice President None
One Financial Center
Boston, MA 02111
Linda Grasso Vice President None
One Financial Center
Boston, MA 02111
Robert M. Gunville Vice President None
One Financial Center
Boston, MA 02111
Frederick H. Jamieson Vice President None
One Financial Center and Assistant
Boston, MA 02111 Treasurer
Susan Volpe Martin Vice President None
One Financial Center
Boston, MA 02111
Amy L. Simmons Vice President Assistant Secretary
One Financial Center
Boston, MA 02111
Kevin Wilkins Vice President None
One Financial Center
Boston, MA 02111
C-26
<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) The Registrant hereby undertakes to file a post-effective
amendment to this Registration Statement, using financial statements with
respect to State Street Research Legacy Fund which need not be certified,
within four to six months after such Fund commences an offering to the
general public, subject to applicable provisions of the Division of
Investment Management generic comment letter dated February 25, 1994.
C-27
<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-28
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment No. 8 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 1st day of October,
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
---------------------
Steve A. Garban
* Trustee
---------------------
Malcolm T. Hopkins
* Trustee
---------------------
Edward M. Lamont
* Trustee
---------------------
Robert A. Lawrence
* Trustee
---------------------
Dean O. Morton
* Trustee
---------------------
Thomas L. Phillips
C-29
<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 29, 1997,
incorporated by reference
from Post-Effective Amendment
No 7.
C-30
<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. 8 [X]
and/or
REGISTRATION STATEMENT
UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 9 [X]
--------------------
STATE STREET RESEARCH SECURITIES TRUST
(Exact Name of Registrant as Specified in Declaration of Trust)
--------------------
EXHIBITS
<PAGE>
INDEX TO EXHIBITS
(1)(c) Form of Amendment No. 3 to the Master Trust Agreement
(5)(c) Form of Letter Agreement with respect to the Advisory
Agreement relating to State Street Research Legacy Fund
(6)(f) Form of Letter Agreement with respect to the Distribution
Agreement relating to State Street Research Legacy Fund
(8)(c) Form of Letter Agreement with respect to the Custodian Contract
relating to the State Street Research Legacy Fund
(10)(c) Opinion and Consent of Goodwin, Procter & Hoar LLP with respect
to State Street Research Legacy Fund
(13)(c) Form of Purchase Agreements and Investment Letters with respect
to State Street Research Legacy Fund
(15)(c) Form of Letter Agreement with respect to Plan of Distribution
Pursuant to Rule 12b-1 relating to State Street Reserach
Legacy Fund
2
Exhibit (1)(c)
STATE STREET RESEARCH SECURITIES TRUST
Amendment No. 3 to Master Trust Agreement
INSTRUMENT OF AMENDMENT
Pursuant to Article IV, Sections 4.1 and 4.2 and Article VII, Section
7.3 of the Master Trust Agreement of the State Street Research Securities Trust
(the "Trust") dated January 25, 1994 ("Master Trust Agreement"), as heretofore
amended, the Master Trust Agreement is hereby amended to establish and designate
an additional series of shares to be known as State Street Research __________
Fund, such new series to have the relative rights and preferences set forth in
Article IV, Section 4.2, subsections (a) through (1) of the Master Trust
Agreement.
Pursuant to Article VII, Section 7.3 of the Master Trust Agreement, the
following is added immediately prior to the last sentence of Article V, Section
5.1:
"Execution of a proxy by a person or organization, which has
been authorized to do so by a Shareholder pursuant to telephonic
or electronically transmitted instructions, shall constitute
execution of such proxy by or on behalf of such Shareholder."
This Amendment shall be effective as of December ___, 1997.
IN WITNESS WHEREOF, the undersigned officer of the Trust hereby adopts
the foregoing on behalf of the Trust pursuant to authorization by the Trustees
of the Trust.
-------------------------
Francis J. McNamara, III
Secretary
m:\n1a\securiti\taxmngd\mta3.doc
Exhibit (5)(c)
STATE STREET RESEARCH SECURITIES TRUST
One Financial Center
Boston, Massachusetts 02111-2690
December ___, 1997
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 ___________ 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
0.70% 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 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: ____________________________
Ralph F. Verni
President
ACCEPTED AND AGREED TO:
STATE STREET RESEARCH &
MANAGEMENT COMPANY
By: ____________________________
Francis J. McNamara, III
Secretary
m:\n1a\securiti\taxmngd\advisagr.doc
Exhibit (6)(f)
STATE STREET RESEARCH SECURITIES TRUST
One Financial Center
Boston, Massachusetts 02111-2690
December ___, 1997
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 __________ Fund (the "Fund"), which is authorized to be issued
in four classes (Class A shares, Class B shares, Class S shares and Class C
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. 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: _____________________
Ralph F. Verni
President
ACCEPTED AND AGREED TO:
STATE STREET RESEARCH
INVESTMENT SERVICES, INC.
By: ___________________________
C. Troy Shaver, Jr.
President
m:\n1a\securiti\taxmngd\distragr.doc
Exhibit (8)(c)
STATE STREET RESEARCH SECURITIES TRUST
One Financial Center
Boston, Massachusetts 02111-2690
December ___, 1997
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 ___________ 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: ____________________________
Francis J. McNamara, III
Secretary
ACCEPTED AND AGREED TO:
STATE STREET BANK AND
TRUST COMPANY
By: ________________________
m:\n1a\securiti\taxmngd\custdian.doc
Exhibit (10)(c)
December 15, 1997
State Street Research Securities Trust
One Financial Center
Boston, Massachusetts 02111
Ladies and Gentlemen:
As counsel to State Street Research Securities Trust, a business trust
organized under the laws of the Commonwealth of Massachusetts (the "Trust"), we
have been asked to render our opinion in connection with the proposed issuance
by the Trust of shares of beneficial interest of State Street Research Legacy
Fund (the "Fund"), which is a series of the Trust that has been established and
designated pursuant to Section 4.1 of Article IV of the Trust's Master Trust
Agreement dated January 25, 1994, as amended, all as more fully described in the
Prospectus and Statement of Additional Information contained in Post-Effective
Amendment No. 8 under the Securities Act of 1933, as amended, to the
Registration Statement on Form N-1A (Securities Act File No. 33-74628) filed
October 1, 1997 by the Trust with the Securities and Exchange Commission (as
amended, the "Registration Statement").
We wish to advise you that we have examined such documents and questions of
law as we have deemed necessary for purposes of this opinion. Based upon the
foregoing, we are of the opinion that:
1. The Trust has been duly organized and is validly existing pursuant to
the laws of the Commonwealth of Massachusetts; and
2. The shares of beneficial interest of the Fund which are described in the
foregoing Registration Statement will, when sold in accordance with the terms of
the Prospectus and Statement of Additional Information in effect at the time of
the sale, be legally issued, fully paid and non-assessable by the Trust.
We consent to a copy of this opinion being filed as an exhibit to the
foregoing Registration Statement.
Very truly yours,
/s/ GOODWIN, PROCTER & HOAR LLP
GOODWIN, PROCTER & HOAR LLP
Exhibit (13)(c)
SUBSCRIPTION
December ___, 1997
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 __________ Fund, having a par value of $.001,
at a price of $_____ per share and agrees to pay therefor upon demand in cash
the amount of $________.
Very truly yours,
STATE STREET RESEARCH &
MANAGEMENT COMPANY
By: ______________________________
Francis J. McNamara, III
Secretary
m:\n1a\securiti\taxmngd\sbscrptn
<PAGE>
SUBSCRIPTION
December ___, 1997
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 _________ Fund, having a par value of $.001,
at a price of $_______ per share and agrees to pay therefor upon demand in cash
the amount of $_______.
Very truly yours,
STATE STREET RESEARCH &
MANAGEMENT COMPANY
By: __________________________
Francis J. McNamara, III
Secretary
m:\n1a\securiti\taxmngd\sbscrptn
<PAGE>
SUBSCRIPTION
December ____, 1997
To: The Trustees of the
State Street Research Securities Trust
One Financial Center
Boston, Massachusetts 02111-2690
The undersigned hereby subscribes to one Class C share of beneficial
interest of State Street Research _________ Fund, having a par value of $.001,
at a price of $______per share and agrees to pay therefor upon demand in cash
the amount of $_____.
Very truly yours,
STATE STREET RESEARCH &
MANAGEMENT COMPANY
By: __________________________
Francis J. McNamara, III
Secretary
m:\n1a\securiti\taxmngd\sbscrptn
<PAGE>
SUBSCRIPTION
December ____, 1997
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 S share of beneficial
interest of State Street Research _________ Fund, having a par value of $.001,
at a price of $______ per share and agrees to pay therefor upon demand in cash
the amount of $______.
Very truly yours,
STATE STREET RESEARCH &
MANAGEMENT COMPANY
By: __________________________
Francis J. McNamara, III
Secretary
m:\n1a\securiti\taxmngd\sbscrptn
<PAGE>
December _____, 1997
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 __________ 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: _______________________________
Francis J. McNamara, III
Secretary
m:\n1a\securiti\taxmngd\sbscrptn
<PAGE>
December ____, 1997
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 __________ 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: __________________________
Francis J. McNamara, III
Secretary
m:\n1a\securiti\taxmngd\sbscrptn
<PAGE>
December ___, 1997
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 __________ 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: __________________________
Francis J. McNamara, III
Secretary
m:\n1a\securiti\taxmngd\sbscrptn
<PAGE>
December ____, 1997
State Street Research Securities Trust
One Financial Center
Boston, Massachusetts 02111-2690
In connection with your sale to us of one Class S share of beneficial
interest of State Street Research __________ 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: __________________________
Francis J. McNamara, III
Secretary
m:\n1a\securiti\taxmngd\sbscrptn
Exhibit B(15)(c)
STATE STREET RESEARCH SECURITIES TRUST
One Financial Center
Boston, MA 02111
December , 1997
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 ___
_________ 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 on behalf of any initial public shareholders,
provided that prior to any initial public offering, no Fund shares are sold to
persons who are not affiliated persons of the Fund, affiliated persons of such
persons, promoters of the Fund, or affiliated persons of such promoters.
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: _________________________
Ralph F. Verni
President
ACCEPTED AND AGREED TO:
STATE STREET RESEARCH
INVESTMENT SERVICES, INC.
By: _________________________
C. Troy Shaver, Jr.
President
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