The overhaul which Lipper, of Summit, N.J., is making in its fund ranking system is prompting some funds to make changes in how they describe their investment objectives.

State Street Research & Management Co. of Boston is asking shareholders to approve a change in the investment objective of two of its funds because of the revised Lipper fund classification system which goes into effect Sept. 1.

Elizabeth McKown, vice president of product management for State Street Research, said last week that the proposed changes in investment objectives will have no significant effect on the way in which the firm's Alpha and Argo funds invest.

Rather, State Street Research wants to make it clear to investors and intermediaries who sell the funds what investment strategy the funds follow, McKown said.

Investors or intermediaries could be confused when a fund has an objective such as equity income but finds itself placed in a value category as a result of the Lipper reclassification, State Street Research said in a preliminary proxy statement filed with the SEC May 28. Revising the fund investment objectives more clearly discloses the fund's strategy, McKown said.

Changes in the definitions of objectives of other State Street Research funds are possible, McKown said. She declined to identify the funds.

Other fund companies have indicated that they too are considering changes in investments because of Lipper's reclassification, said Steven Lipper, marketing director for Lipper. Lipper declined to identify the companies.

It was unclear if State Street Research's plans arising out of the Lipper reclassification are the first to be made public. State Street Research has approximately $51 billion in assets under management. Fund companies use Lipper rankings to advertise fund performance and establish benchmarks for portfolio manager bonuses. In December, Lipper proposed changes to its ranking system for U.S. diversified equity funds.

Historically, Lipper used the definitions in prospectuses of the fund's intended investment strategy to classify funds in categories such as growth and growth and income. Lipper proposed changing the categories so that they were primarily based on the market capitalization of the stocks which funds hold, with further refinements based on the levels of aggressiveness of the funds' investments.

Lipper modified its earlier plan in April in response to suggestions from the fund industry and financial media who use the Lipper rankings. The new system will increase the number of classifications from eight to 15 for U.S. diversified equity funds. The revised ranking system will provide more clarity and precision for investors, Steven Lipper said. McKown praised the revision of classifications, saying the new categories should discourage fund managers from drifting from their stated investment strategy. Intermediaries increasingly select funds based on their investment strategies, McKown said.

"There is a greater awareness that style drift is a no-no in the fund industry today," said Burton Greenwald, a fund consultant in Philadelphia.

State Street Research's moves are indicative of the increased importance of fund rating firms in a market which is crowded with product, Greenwald said.

"You're starting to see these third-party ratings drive sales," McKown said.

Alpha, currently categorized as an equity income fund, will be classified as a mid-cap value fund under the Lipper reclassification, according to State Street Research's SEC filing.

Alpha's investment objective defined in its existing prospectus calls for it to seek a high level of current income with long-term capital appreciation as a secondary goal by investing in stocks with above-average dividends and in convertible securities. The proposed change says the fund's investment objective will be to seek long-term capital growth and drops reference to particular securities.

State Street Research also plans to revise the prospectus in discussing the fund's principal investment strategies. The new prospectus will show that the fund invests at least 65 percent of its assets in mid-cap value stocks. That description of investment strategy is more general in the existing prospectus.

Argo, a growth and income fund, will be classified either as a large-cap core or large-cap value fund, according to the proxy statement. Alpha's prospectus describes its investment objective as seeking long-term capital growth, with long-term income growth as a secondary goal by investing in established companies with above-average prospects for growth. The proposed change says the fund will seek long-term capital growth, with income as a secondary goal while dropping reference to particular securities.

State Street Research also plans to revise the current Argo prospectus to say the fund invests at least 65 percent of its assets in large-cap value stocks. The existing prospectus has more general language.

Shareholders are scheduled to vote on the proposals to change the funds' investment objectives at a meeting scheduled for Sept. 14.

As of April 30, Argo had assets under management of $209 million in all classes of shares, according to Lipper. Alpha had assets of nearly $334 as of that date, Lipper said.

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