[State Street logo] State Street Research
State Street Research
Tax-Exempt Fund
Semiannual Report [picture of child playing with
June 30, 1995 building blocks, building a town]
WHAT'S INSIDE
New and Improved:
A new design that's
easier to read
Investment Update:
About the Fund,
economy and markets
Fund Information:
Facts and figures
Plus, Complete Portfolio Holdings
and Financial Statements
<PAGE>
STATE STREET RESEARCH TAX-EXEMPT FUND
Investment Update
Investment Environment
The Economy
(bullet) Most signs point to a slowing economy. Consumer spending has fallen,
home and auto sales are down, and job growth has eased.
(bullet) The Federal Reserve cut interest rates by one-quarter point on July
6, 1995.
(bullet) Inflation remains low, and a slower economy actually reduces the
risk of rising inflation.
The Markets
(bullet) Through June, municipal bonds have had an outstanding 1995, although
they trailed other bond sectors. The Lehman Brothers Municipal Bond Index
provided a return of 9.65% through the first six months of 1995.(1)
(bullet) So far, 1995 has been the best year for stocks since 1991. The S&P
500 was up 20.19% through the first six months of 1995.(1)
The Fund
Over the past six months
(bullet) Class A shares of the Fund provided a total return of +7.60% (not
including sales charge) for the 6 months ended June 30, 1995.(2) The average
total return for 236 funds in Lipper Analytical Services' general municipal
bond fund category was +9.01% over the same time period (does not reflect
sales charges).
(bullet) Although the Fund had a positive return through the first half of
1995, it trailed the average for its category because the portfolio was
conservatively positioned. We shortened the Fund's duration (a measure of a
fund's sensitivity to interest rate changes) to protect it if interest rates
increased, as happened throughout 1994. When interest rates fell sharply
instead, the Fund did not enjoy the full benefit of the market rally.
Current strategy
(bullet) We have extended the Fund's duration slightly, which will help in an
environment of falling rates.
(bullet) We have also upgraded the quality of bonds in the portfolio and
increased the percentage of insured bonds. As of June 30, 1995, the bonds in
the portfolio had an average credit quality of AA.
(bullet) The outlook for municipal bonds is positive. Supply is low, as fewer
new bonds have been issued. Municipal bonds also currently offer attractive
value relative to U.S. Treasury bonds.
1 The Lehman Brothers Municipal Bond Index is a commonly used measure of bond
market performance. The Standard & Poor's 500 Composite Index (S&P 500)
includes 500 widely traded common stocks and is a commonly used measure of
U.S. stock market performance. The indices are unmanaged and do not take
sales charges into account. Direct investment in the indices is not possible;
results are for illustrative purposes only.
2 +7.07% for Class B shares; +7.61% for Class C shares; +7.07% for Class D
shares.
3 All returns represent past performance, which is no guarantee of future
results. The investment return and principal value of an investment made in
the Fund will fluctuate, and shares, when redeemed, may be worth more or less
than their original cost. All returns assume reinvestment of capital gain
distributions and income dividends.
4 Performance for a class includes periods prior to the adoption of class
designations in 1993. Performance reflects up to a maximum 4.5% front-end or
5% contingent deferred sales charge. "C" shares, offered without a sales
charge, are available only to certain employee benefit plans and
institutions. Performance for "B" and "D" shares prior to class designations
in 1993 reflects annual 12b-1 fees of .25% and thereafter reflects annual
12b-1 fees of 1%, which will reduce subsequent performance.
Fund Information (all data are for periods ended June 30, 1995)
SEC Average Annual Compound Rates of Return
(at maximum applicable sales charge)(3),(4)
<TABLE>
<CAPTION>
Life of Fund
(since 5
8/25/86) years 1 year
-------- ------------ ------ -------
<S> <C> <C> <C>
Class A +6.49% +6.21% +1.46%
-------- ------------ ------ -------
Class B +6.84% +6.53% +0.32%
-------- ------------ ------ -------
Class C +7.08% +7.25% +6.38%
-------- ------------ ------ -------
Class D +6.84% +6.83% +4.32%
-------- ------------ ------ -------
</TABLE>
Cumulative Total Returns
(do not reflect sales charge)(3)
<TABLE>
<CAPTION>
Life of Fund
(since 5
8/25/86) years 1 year
-------- ------------ ------ -------
<S> <C> <C> <C>
Class A +82.81% +41.55% +6.24%
-------- ------------ ------ -------
Class B +79.81% +39.23% +5.32%
-------- ------------ ------ -------
Class C +83.32% +41.94% +6.38%
-------- ------------ ------ -------
Class D +79.78% +39.21% +5.32%
-------- ------------ ------ -------
</TABLE>
SEC Yield
<TABLE>
<S> <C>
Class A 4.84%
-------- ------
Class B 4.31%
-------- ------
Class C 5.34%
-------- ------
Class D 4.33%
-------- ------
</TABLE>
SEC yield is calculated according to Securities and Exchange Commission
requirements and is based on the net investment income produced for the 30
days ended June 30, 1995.
Bond Quality
(by percentage of net assets)
AAA 38%
AA 30%
A 12%
BBB 12%
BB/Not rated 8%
As rated by Standard & Poor's Corporation or Moody's Investors Service, Inc.,
or unrated but equivalent.
<PAGE>
STATE STREET RESEARCH TAX-EXEMPT FUND
Investment Portfolio
June 30, 1995 (Unaudited)
<TABLE>
<CAPTION>
Principal Maturity Value
Amount Date (Note 1)
---------------------------------------------------------- --------- ---------- -------------
<S> <C> <C> <C>
Municipal Bonds 95.4%
California 12.2%
California Pollution Control Financing Authority,
Pollution Control Revenue Bonds, (Southern California
Edison Company) 1988 Series A, Subject to AMT, 6.90% $3,410,000 9/01/2006 $ 3,603,995
Southern California Public Power Authority, San Juan
Project, Series A, 5.375% 4,790,000 1/01/2011 4,518,359
Rancho California Water District Financing Authority,
Revenue Refunding Bonds, AMBAC Insured, Series 1994,
5.00% 4,000,000 8/15/2014 3,531,920
San Francisco Bay Area Rapid Transit District, Sales Tax
Revenue Bonds FGIC Insured, Series 1995, 5.50% 1,500,000 7/01/2015 1,406,700
East Bay Municipal Utility District Water System, Revenue
Refunding Bonds, Series 1993, 5.00% 2,000,000 6/01/2021 1,717,580
Los Angeles County Metropolitan Transit Authority, Sales
Tax Revenue Refunding Bonds, Series A, 5.00% 6,100,000 7/01/2021 5,237,765
San Francisco City & County Sewer and Water Revenue
Refunding Bonds, FGIC Insured, 5.375% 2,395,000 10/01/2022 2,168,433
University of California, Board of Regents, Refunding
Revenue Bonds, (Multiple Purpose Projects), Series C,
AMBAC Insured, 5.00% 5,000,000 9/01/2023 4,269,950
San Joaquin Hills Transportation Corridor Agency, (Orange
County, California), Senior Lien Toll Road Revenue Bonds,
7.00% 3,000,000 1/01/2030 3,045,570
Foothill/Eastern Transportation Corridor Agency,
Convertible Toll Road Revenue Bonds, 5.00% 5,000,000 1/01/2035 3,818,750
-------------
33,319,022
-------------
Connecticut 5.5%
State of Connecticut, Clean Water Fund Revenue Bonds, 1991
Series, 7.00% 1,000,000 1/01/2011 1,095,010
State of Connecticut, Special Tax Obligation Bonds,
Transportation Infrastructure Purposes, 1991 Series A,
6.50% 1,500,000 10/01/2012 1,608,180
Connecticut Development Authority, Pollution Control
Refunding Bonds, (Pfizer Inc. Project--1982 Series),
6.55% 2,500,000 2/15/2013 2,667,175
State of Connecticut Health and Educational Facilities
Authority, Revenue Bonds, Quinnipiac College Issue,
Series D, 6.00% 5,000,000 7/01/2013 4,598,050
Connecticut Housing Finance Authority, Housing Mortgage
Finance Program Bonds, 1993 Series A, 6.20% 5,000,000 5/15/2014 4,999,500
-------------
14,967,915
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
Principal Maturity Value
Amount Date (Note 1)
---------------------------------------------------------- --------- ---------- -------------
Florida 9.1%
Dade County, Florida, Water & Sewer System, Revenue
Refunding Bonds, FGIC Insured, 5.00% $5,000,000 10/01/2013 $ 4,511,300
Hillsborough County, Florida, Refunding Utility Revenue
Bonds, Series 1991A, Pre-Refunded to 8/1/2001 @ 102,
7.00% 485,000 8/01/2014 550,606
Orlando Utilities Commission, Water and Electric
Subordinated Revenue Bonds, Series C, 6.75% 8,950,000 10/01/2017 9,991,691
Martin County, Florida, Pollution Control Revenue
Refunding Bonds, (Florida Power & Light Company Project),
Series 1990, MBIA Insured, 7.30% 1,250,000 7/01/2020 1,370,612
Vero Beach, Florida, Electric Power & Light, Revenue
Refunding Bonds, Series A, 5.375% 5,000,000 12/01/2021 4,663,250
Florida State Board of Education, Public Education
Refunding Bonds, Series D, 5.125% 2,750,000 6/01/2022 2,443,897
Orlando Utilities Commission, Water and Electric
Subordinated Revenue Bonds, Series 1989C, Pre-Refunded to
10/1/99 @ 102, 7.00% 1,000,000 10/01/2023 1,113,970
-------------
24,645,326
-------------
Georgia 9.0%
State of Georgia, General Obligation Bonds, Series 1992B,
6.25% 4,300,000 3/01/2011 4,611,707
Georgia Housing and Finance Authority, Home Ownership
Opportunity Program Bonds, Series 1992C, 6.50% 1,690,000 12/01/2011 1,726,791
State of Georgia, General Obligation Bonds, Series 94E,
6.75% 1,000,000 12/01/2012 1,126,740
Cherokee County, Georgia, School System, General
Obligation Bonds, AMBAC Insured, 5.325% 4,000,000 2/01/2014 3,812,440
Metro Atlanta Rapid Transit Authority, 2nd Indenture,
Series A, AMBAC Insured, 5.125% 2,000,000 7/01/2018 1,785,540
Metro Atlanta Rapid Transit Authority, 2nd Indenture,
Series A, AMBAC Insured, 5.125% 3,000,000 7/01/2019 2,671,890
City of Atlanta, Georgia, General Obligation Bonds, Series
1994A, 6.10% 1,650,000 12/01/2019 1,667,441
DeKalb County, Georgia, General Obligation Refunding
Bonds, 5.25% 5,000,000 1/01/2020 4,557,650
Fulton County, Georgia, School District, General
Obligation School Bonds, Series 1993, 5.625% 1,350,000 1/01/2021 1,299,632
DeKalb County, Georgia, Water & Sewer Revenue Refunding
Bonds, Series 1993, 5.25% 1,305,000 10/01/2023 1,188,933
-------------
24,448,764
-------------
Hawaii 0.8%
State of Hawaii, General Obligation Bonds of 1991, Series
BT, 6.125% 2,000,000 2/01/2010 2,153,580
-------------
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
Principal Maturity Value
Amount Date (Note 1)
---------------------------------------------------------- --------- ---------- -------------
Illinois 1.3%
City of Chigago, Illinois, Gas Supply Revenue Bonds, 1985
Series B (The Peoples Gas Light and Coke Company
Project), 7.50% $3,300,000 3/01/2015 $ 3,632,937
-------------
Iowa 0.4%
Iowa Finance Authority, Single Family Mortgage Refunding
Bonds, 1992 Series F, AMBAC Insured, 6.50% 970,000 1/01/2025 976,800
-------------
Kansas 0.4%
State of Kansas, Department of Transportation, Highway
Revenue Bonds, Series 1992, Pre-Refunded to 3/1/2002
@ 102, 6.50% 1,000,000 3/01/2008 1,107,320
-------------
Kentucky 1.5%
Owensboro, Kentucky, Electric Light & Power Revenue Bonds,
Series B, AMBAC Insured, 0.00% 5,300,000 1/01/2018 1,369,361
Owensboro, Kentucky, Electric Light & Power Revenue Bonds,
Series B, AMBAC Insured, 0.00% 4,400,000 1/01/2019 1,070,432
Kentucky Housing Corporation, Housing Revenue Bonds, 1991
Series D-1, (Federally Insured or Guaranteed Mortgage
Loans) Subject to AMT, 6.80% 1,500,000 1/01/2024 1,530,405
-------------
3,970,198
-------------
Louisiana 2.4%
Lake Charles Harbor and Terminal District (Louisiana),
Port Facilities Revenue Refunding Bonds, Series 1992,
(Trunkline LNG Company Project), 7.75% 6,000,000 8/15/2022 6,611,220
-------------
Maryland 1.9%
Howard County, Maryland, Multifamily Housing Revenue
Refunding Bonds, Series 1994, (Chase Glen Project),
Mandatory Put 7/1/2004 @ 100, 7.00% 5,000,000 7/01/2024 5,261,800
-------------
Massachusetts 8.7%
Massachusetts Industrial Finance Agency, First Mortgage
Refunding Bonds, (Brookhaven Retirement Community,
Lexington--1994 Issue), Series A, 6.75% 4,500,000 1/01/2001 4,586,355
Massachusetts Industrial Finance Agency, First Mortgage
Revenue Bonds, (Berkshire Retirement Community,
Lenox--1994 Issue), Series A, 6.375% 1,500,000 7/01/2005 1,461,705
Massachusetts Housing Finance Agency, Residential
Development Bonds, FNMA Collateralized, 1992 Series C,
6.875% 2,000,000 11/15/2011 2,097,680
Massachusetts State Water Resource Authority, General
Revenue Bonds, 1993 Series C, 6.00% 4,480,000 12/01/2011 4,526,368
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
Principal Maturity Value
Amount Date (Note 1)
---------------------------------------------------------- --------- ---------- -------------
Massachusetts Health and Educational Facilities Authority,
Refunding Bonds, Massachusetts General Hospital Issue,
Series F, AMBAC Insured, 6.25% $3,000,000 7/01/2012 $ 3,118,170
Massachusetts Bay Transportation Authority, General
Transportation System Bonds, 1994 Series A Refunding
Bonds, 7.00% 3,385,000 3/01/2014 3,798,275
Massachusetts State General Obligation Bonds, Series A,
5.75% 3,000,000 2/01/2015 2,937,780
Massachusetts Health and Educational Facilities Authority,
Revenue Bonds, Harvard University Issue,
Series N Refunding, 6.25% 1,000,000 4/01/2020 1,053,180
-------------
23,579,513
-------------
Michigan 3.0%
State of Michigan, State Trunk Line Fund Bonds, Series
1989A, Pre-Refunded to 8/15/99 @ 102, 7.00% 3,525,000 8/15/2017 3,910,670
Michigan Public Power Agency, Revenue Refunding Bonds,
(Belle River Project), Series B, 5.00% 5,000,000 1/01/2019 4,301,450
-------------
8,212,120
-------------
Minnesota 0.5%
Minnesota Housing Finance Agency, Single Family Mortgage
Bonds, 1991 Series A, Subject to AMT, 7.45% 1,410,000 7/01/2022 1,504,949
-------------
Nebraska 0.4%
Omaha Public Power District (Nebraska), Electric System
Revenue Bonds, 1992, Series B, 6.20% 1,000,000 2/01/2017 1,045,030
-------------
Nevada 0.8%
Clark County School District, Nevada, General Obligation
(Limited Tax) School Improvement Bonds, MBIA Insured,
Pre-Refunded to 6/1/2001 @ 101, 7.00% 2,000,000 6/01/2009 2,244,300
-------------
New Hampshire 2.6%
New Hampshire Higher Educational and Health Facilities
Authority, First Mortgage Revenue Bonds, RiverMead at
Peterborough Issue, Series 1994, 7.375% 7,000,000 7/01/2000 7,044,030
-------------
New Jersey 0.4%
New Jersey Educational Facilities Authority, Seton Hall
University Project Revenue Bonds, 1991 Series D, 7.00% 1,000,000 7/01/2021 1,056,860
-------------
New York 5.8%
The City of New York, General Obligation Bonds, Fiscal
1992 Series H, 7.00% 1,000,000 2/01/2005 1,060,950
State of New York, Serial Bonds, 5.50% 4,000,000 3/01/2011 3,849,440
The City of New York, General Obligation Refunding Bonds,
Fiscal 1991 Series B, 7.75% 3,000,000 2/01/2012 3,260,790
State of New York, Serial Bonds, 5.625% 2,000,000 6/15/2012 1,937,340
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
Principal Maturity Value
Amount Date (Note 1)
---------------------------------------------------------- --------- ---------- -------------
Niagara Falls, New York, Bridge & Toll Commission, FGIC
Insured, 5.25% $3,400,000 10/01/2015 $ 3,151,936
Grand Central District Management Association, Capital
Improvement Refunding Bonds, Series 1994, 5.25% 2,750,000 1/01/2022 2,425,170
-------------
15,685,626
-------------
North Carolina 6.3%
North Carolina Municipal Power Agency Number 1, Catawba
Electric Revenue Bonds, Series 1992, 7.25% 5,000,000 1/01/2007 5,760,800
County of Durham, North Carolina, Certificates of
Participation, (1991 Jail Facilities and Computer
Equipment Financing Project), 6.625% 1,850,000 5/01/2014 1,948,216
City of Charlotte, North Carolina, General Obligation
Refunding Bonds, Series 1993, 5.25% 1,865,000 2/01/2016 1,742,619
North Carolina Housing Finance Agency, Multifamily Revenue
Refunding Bonds, (1992 Refunding Bond Resolution),
Series B, 6.90% 7,470,000 7/01/2024 7,753,113
-------------
17,204,748
-------------
Ohio 3.9%
County of Erie, Ohio, Hospital Improvement and Refunding
Revenue Bonds, Series 1992, (Firelands Community Hospital
Project), 6.75% 1,000,000 1/01/2008 1,052,690
Hamilton County, Ohio, Sewer System Improvement and
Refunding Revenue Bonds, 1991 Series A, (The Metropolitan
Sewer District of Greater Cincinnati), Pre-Refunded to
6/1/2001 @ 102, 6.70% 2,000,000 12/01/2013 2,234,400
City of Cleveland, Ohio, Public Power System Improvement
First Mortgage Revenue Refunding Bonds, Series 1991 B,
7.00% 7,000,000 11/15/2017 7,276,990
-------------
10,564,080
-------------
Oregon 0.4%
State of Oregon, Housing, Educational and Cultural
Facilities Authority, Revenue Bonds, (Reed College
Project), 1991 Series A, 6.75% 1,000,000 7/01/2021 1,051,550
-------------
Pennsylvania 1.5%
Pennsylvania Economic Development Financing Authority,
Resource Recovery Revenue Bonds, (Colver Project),
Series 1994D, 7.05% 3,000,000 12/01/2010 3,155,850
Montgomery County Industrial Development Authority,
Pollution Control Revenue Refunding Bonds, 1991 Series A,
(Philadelphia Electric Co. Project), Subject to AMT,
7.60% 1,000,000 4/01/2021 1,063,400
-------------
4,219,250
-------------
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
Principal Maturity Value
Amount Date (Note 1)
---------------------------------------------------------- --------- ---------- -------------
South Carolina 0.9%
City of Charleston, South Carolina, Waterworks and Sewer
System Revenue Bonds, Series 1988, Pre-Refunded to 1/1/98
@ 100, 7.20% $1,000,000 1/01/2019 $ 1,068,890
South Carolina Public Service Authority, (Santee Cooper),
Electric System Expansion Revenue Bonds, 1988 Refunding
Series A, 7.875% 1,310,000 7/01/2021 1,360,527
-------------
2,429,417
-------------
Tennessee 3.5%
City of Memphis, Tennessee, Electric System Revenue
Refunding Bonds, Series of 1992, 6.00% 2,250,000 1/01/2006 2,405,318
City of Memphis, Tennessee, Electric System Revenue Bonds,
Series of 1991, 6.75% 500,000 1/01/2011 550,205
City of Memphis, Tennessee, Water Division Revenue
Refunding Bonds, Series of 1992-A, 6.00% 3,000,000 1/01/2012 3,072,720
Chattanooga--Hamilton County Hospital Authority, Hospital
Revenue and Refunding Bonds (Erlanger Medical Center)
Series 1993, FSA Insured, 5.50% 2,500,000 10/01/2013 2,367,575
The Health and Educational Facilities Board of the
Metropolitan Government of Nashville and Davidson County,
Tennessee, Vanderbilt University, 1992 Series A, 6.00% 1,000,000 10/01/2022 1,004,810
-------------
9,400,628
-------------
Texas 5.1%
City of Austin, Texas, Combined Utility Systems Revenue
Refunding Bonds, Series 1993, 5.80% 2,000,000 11/15/2006 2,053,420
Houston Independent School District, Texas, Limited Tax
School House Bonds, Series 1991, PSFG Guaranteed,
Pre-Refunded to 8/15/2001 @ 100, 6.375% 1,500,000 8/15/2011 1,627,830
Texas Municipal Power Agency, Refunding Revenue Bonds,
Series 1991A, AMBAC Insured, 6.75% 1,000,000 9/01/2012 1,080,910
Harris County, Texas, General Obligation, Unlimited Tax,
Refunding and Toll Road Subordinate Lien Revenue Bonds,
Series 1991, 6.75% 5,750,000 8/01/2014 6,146,750
Harris County, Texas, General Obligation, Unlimited Tax,
Refunding and Toll Road Subordinate Lien Revenue Bonds,
6.125% 2,975,000 6/15/2020 3,011,801
-------------
13,920,711
-------------
Vermont 1.9%
City of Burlington, Vermont, Electric System Revenue
Bonds, 1992 Series A, MBIA Insured, 6.25% 5,000,000 7/01/2014 5,169,900
-------------
Virginia 3.6%
Commonwealth of Virginia, General Obligation, Unlimited
Tax Refunding Bonds, Series B, 5.00% 1,500,000 6/01/2011 1,401,480
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
Principal Maturity Value
Amount Date (Note 1)
---------------------------------------------------------- --------- ---------- -------------
The Rector and Visitors of the University of Virginia,
General Revenue Pledge Bonds, Series 1993B, 5.375% $3,250,000 6/01/2014 $ 3,117,660
State of Virginia Transportation Board, Northern Virginia
Transportation District, Series C, 5.25% 1,715,000 5/15/2019 1,554,819
City of Roanoke, Virginia, General Obligation Public
Improvement Bonds, Series 1994, 5.25% 1,750,000 8/01/2019 1,594,232
Prince William County Service Authority, (Virginia), Water
and Sewer System Revenue Bonds, Series 1991, FGIC
Insured, 6.50% 2,000,000 7/01/2021 2,216,220
-------------
9,884,411
-------------
Wisconsin 1.6%
Wisconsin Housing and Economic Development Authority, Home
Ownership Revenue Bonds, 1992 Series 2, Subject to AMT,
6.875% 4,250,000 9/01/2024 4,371,677
-------------
Total Municipal Bonds (Cost $254,539,105) 259,683,682
-------------
Short-Term Obligations 1.8%
Massachusetts General Obligation Bonds, Series B, 4.40% 1,600,000 12/01/1997++ 1,600,000
The Wake County Industrial Facilities and Pollution
Control Financing Authority, Pollution Control Revenue
Bonds, (Carolina Power & Light Co. Project), Series 1987,
3.00% 1,000,000 3/01/2017++ 1,000,000
California Pollution Control Financing Authority, Resource
Recovery Revenue Bonds, (Burney Forest Products Project),
1988 Series A, Letter of Credit, National Westminster
Bank, 4.01% 500,000 9/01/2020++ 500,000
Los Angeles, California, Airports, Series E, 3.20% 500,000 12/01/2024++ 500,000
State of New York, Energy Resource & Development, 3.95% 600,000 6/01/2029++ 600,000
State of Delaware, Delmarva Power & Light Co., 4.50% 800,000 10/01/2029++ 800,000
-------------
Total Short-Term Obligations (Cost $5,000,000) 5,000,000
-------------
Total Investments (Cost $259,539,105)--97.2% 264,683,682
Cash and Other Assets, Less Liabilities--2.8% 7,570,873
-------------
Net Assets--100.0% $272,254,555
=============
</TABLE>
Federal Income Tax Information:
At June 30, 1995, the net unrealized appreciation
of investments based on cost for Federal income
tax purposes of $259,539,105 was as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of value
over tax cost $ 8,069,228
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax
cost over value (2,924,651)
-------------
$ 5,144,577
=============
++Interest rates on these obligations may change daily.
Futures contracts open at June 30, 1995 are as follows:
<TABLE>
<CAPTION>
Expiration Unrealized
Type Par Value Month Depreciation
----------------------- --------- ------------------ -------------
<S> <C> <C> <C>
Municipal Bond Index $5,000,000 September, 1995 $(206,219)
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
STATE STREET RESEARCH TAX-EXEMPT FUND
Statement of Assets and Liabilities
June 30, 1995 (Unaudited)
Assets
Investments, at value (Cost $259,539,105) (Note 1) $264,683,682
Cash 36,548
Interest receivable 5,569,254
Receivable for securities sold 3,988,196
Initial margin deposits (Note 1) 75,000
Receivable for fund shares sold 65,358
Receivable for variation margin (Note 1) 12,031
Other assets 6,267
-------------
274,436,336
Liabilities
Payable for securities purchased 1,113,989
Dividends payable 312,505
Accrued transfer agent and shareholder services (Note 2) 233,535
Payable for fund shares redeemed 221,767
Accrued management fee (Note 2) 125,656
Accrued distribution fee (Note 4) 81,204
Accrued trustees' fees (Note 2) 9,128
Other accrued expenses 83,997
-------------
2,181,781
-------------
Net Assets $272,254,555
=============
Net Assets consist of:
Undistributed net investment income $ 793,577
Unrealized appreciation of investments 5,144,577
Unrealized depreciation of futures contracts (206,219)
Accumulated net realized loss (6,235,092)
Shares of beneficial interest 272,757,712
-------------
$272,254,555
=============
Net Asset Value and redemption price per share of Class A
shares ($233,411,230 / 29,860,742 shares of beneficial
interest) $7.82
=============
Maximum Offering Price per share of Class A shares
($7.82 / .955) $8.19
=============
Net Asset Value and offering price per share of
Class B shares ($37,346,620 / 4,779,340 shares of
beneficial interest)* $7.81
=============
Net Asset Value, offering price and redemption price per
share of Class C shares ($365,380 / 46,835 shares of
beneficial interest) $7.80
=============
Net Asset Value and offering price per share of
Class D shares ($1,131,325 / 144,825 shares of
beneficial interest)* $7.81
=============
*Redemption price per share for Class B and Class D is equal to net asset
value less any applicable contingent deferred sales charge.
Statement of Operations
For the six months ended June 30, 1995 (Unaudited)
Investment Income
Interest $ 8,781,083
Expenses
Management fee (Note 2) 757,953
Transfer agent and shareholder services (Note 2) 320,336
Custodian fee 76,165
Registration fees 27,300
Reports to shareholders 27,025
Audit fee 16,193
Trustees' fees (Note 2) 14,248
Legal fees 5,440
Distribution fee--Class A (Note 4) 297,172
Distribution fee--Class B (Note 4) 182,363
Distribution fee--Class D (Note 4) 5,193
Miscellaneous 7,815
-----------
1,737,203
-----------
Net investment income 7,043,880
-----------
Realized and Unrealized Gain (Loss) on
Investments and Futures Contracts
Net realized gain on investments (Notes 1 and 3) 3,548,858
Net realized loss on futures contracts (Note 1) (3,539)
-----------
Total net realized gain 3,545,319
-----------
Net unrealized appreciation of investments 9,698,196
Net unrealized depreciation of futures contracts (206,219)
-----------
Total net unrealized appreciation 9,491,977
-----------
Net gain on investments and futures contracts 13,037,296
-----------
Net increase in net assets resulting from operations $20,081,176
===========
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
STATE STREET RESEARCH TAX-EXEMPT FUND
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Six months ended Year ended
June 30, 1995 December 31,
(Unaudited) 1994
------------------------------------------------------------------------ ---------------- ----------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations:
Net investment income $ 7,043,880 $ 15,317,645
Net realized gain (loss) on investments and futures contracts* 3,545,319 (9,547,878)
Net unrealized appreciation (depreciation) of investments and futures
contracts 9,491,977 (28,974,700)
---------------- ----------------
Net increase (decrease) resulting from operations 20,081,176 (23,204,933)
---------------- ----------------
Dividends from net investment income:
Class A (6,279,255) (13,276,823)
Class B (817,879) (1,437,982)
Class C (10,270) (21,125)
Class D (23,465) (42,707)
---------------- ----------------
(7,130,869) (14,778,637)
---------------- ----------------
Distribution from net realized gains:
Class A -- (379,796)
Class B -- (58,307)
Class C -- (535)
Class D -- (1,436)
---------------- ----------------
-- (440,074)
---------------- ----------------
Net decrease from fund share transactions (Note 5) (15,423,139) (18,980,504)
---------------- ----------------
Total decrease in net assets (2,472,832) (57,404,148)
Net Assets
Beginning of period 274,727,387 332,131,535
---------------- ----------------
End of period (including undistributed net investment income of $793,577
and $880,566, respectively) $272,254,555 $274,727,387
================ ================
*Net realized gain (loss) for Federal income tax purposes (Note 1) $ 2,663,317 $ (8,429,917)
================ ================
</TABLE>
The accompanying notes are an integral part of the financial statements.
Notes to Unaudited Financial Statements
June 30, 1995
Note 1
State Street Research Tax-Exempt Fund (the "Fund"), formerly MetLife-State
Street Tax-Exempt Fund, is a series of State Street Research Tax-Exempt Trust
(the "Trust"), formerly MetLife-State Street Tax-Exempt Trust, which was
organized as a Massachusetts business trust in December, 1985 and is
registered under the Investment Company Act of 1940, as amended, as an
open-end management investment company. The Fund commenced operations in
August, 1986. Five series of the Trust are publicly offered: State Street
Research Tax-Exempt Fund, State Street Research California Tax-Free Fund,
State Street Research New York Tax-Free Fund, State Street Research Florida
Tax-Free Fund and State Street Research Pennsylvania Tax-Free Fund.
The Fund offers four classes of shares. Class A shares are subject to an
initial sales charge of up to 4.50% and pay a service fee equal to 0.25% of
average daily net assets. Class B shares are subject to a contingent deferred
sales charge on certain redemptions made within five years of purchase and
pay annual distribution and service fees of 1.00%. Class B shares
automatically convert into Class A shares (which pay lower ongoing expenses)
at the end of eight years after the issuance of the Class B shares. Class C
shares are only offered to certain employee benefit plans and large
institutions. No sales charge is imposed at the time of purchase or
redemption of Class C shares. Class C shares do not pay any distribution or
service fees. Class D shares are subject to a contingent deferred sales
charge of 1.00% on any shares redeemed within one year of their purchase.
Class D shares also pay annual distribution and service fees of 1.00%. The
Fund's expenses are borne pro-rata by each class, except that each class
bears expenses, and has exclusive voting rights with respect to provisions of
the Plan of Distribution, related specifically to that class. The Trustees
declare separate dividends on each class of shares.
The following significant accounting policies are consistently followed by
the Fund in preparing its financial statements, and such policies are in
conformity with generally accepted accounting principles for investment
companies.
A. Investment Valuation
Tax-exempt securities are valued by a pricing service, which utilizes market
transactions, quotations from dealers, and various relationships among
securities in determining value. Short-term obligations are valued at
amortized cost. Other securities, if any, are valued at their fair value as
determined in accordance with established methods consistently applied.
B. Security Transactions
Security transactions are accounted for on the trade date (date the order to
buy or sell is executed). Realized gains or losses are reported on the basis
of identified cost of securities delivered.
C. Net Investment Income
Net investment income is determined daily and consists of interest accrued
and discount earned, less amortization of premium and the estimated daily
expenses of the Fund. Interest income is accrued daily as earned. The Fund is
charged for expenses directly attributable to it, while indirect expenses are
allocated among all funds in the Trust.
10
<PAGE>
STATE STREET RESEARCH TAX-EXEMPT FUND
D. Dividends
Dividends are declared daily by the Fund based upon projected net investment
income and paid or reinvested monthly. Net realized capital gains, if any,
are distributed annually, unless additional distributions are required for
compliance with applicable tax regulations.
Income dividends and capital gain distributions are determined in accordance
with Federal income tax regulations which may differ from generally accepted
accounting principles.
E. Federal Income Taxes
No provision for Federal income taxes is necessary because the Fund has
elected to qualify under Subchapter M of the Internal Revenue Code and its
policy is to distribute all of its taxable income, including net realized
capital gains, within the prescribed time periods. At December 31, 1994, the
Fund had a capital loss carryforward of $8,429,917 available, to the extent
provided in regulations, to offset future capital gains, if any, which
expires on December 31, 2002.
In order to meet certain excise tax distribution requirements under Section
4982 of the Internal Revenue Code, the Fund is required to measure and
distribute annually, if necessary, net capital gains realized during a
twelve-month period ending October 31. In this connection, the Fund is
permitted to defer into its next fiscal year any net capital losses incurred
between each November 1 and the end of its fiscal year. From November 1, 1994
through December 31, 1994 the Fund incurred net capital losses of $882,002
and intends to defer and treat such losses as arising in the fiscal year
ending December 31, 1995.
F. Futures Contracts
The Fund may enter into futures contracts as a hedge against unfavorable
market conditions and to enhance income. The Fund will not purchase any
futures contract if, after such purchase, more than one-third of net assets
would be represented by long futures contracts. The Fund will limit its risks
by entering into a futures position only if it appears to be a liquid
investment.
Upon entering into a futures contract, the Fund deposits with the selling
broker sufficient cash or U.S. Government securities to meet the minimum
"initial margin" requirements. Thereafter, the Fund receives from or pays to
the broker cash or U.S. Government securities equal to the daily fluctuation
in value of the contract ("variation margin"), which is recorded as
unrealized gain or loss. When the contract is closed, the Fund records a
realized gain or loss equal to the difference between the value of the
contract at the time it was opened and the value at the time it was closed.
Note 2
The Trust and State Street Research & Management Company (the "Adviser"), an
indirect wholly-owned subsidiary of Metropolitan Life Insurance Company
("Metropolitan"), have entered into an agreement under which the Adviser
earns monthly fees at an annual rate of 0.55% of the Fund's average daily net
assets. In consideration of these fees, the Adviser furnishes the Fund with
management, investment advisory, statistical and research facilities and
services. The Adviser also pays all salaries, rent and certain other expenses
of management. During the six months ended June 30, 1995, the fees pursuant
to such agreement amounted to $757,953.
State Street Research Shareholder Services, a division of State Street
Research Investment Services, Inc., the Trust's principal underwriter (the
"Distributor"), an indirect wholly-owned subsidiary of Metropolitan, provides
certain shareholder services to the Fund such as responding to inquiries and
instructions from investors with respect to the purchase and redemption of
shares of the Fund. During the six months ended June 30, 1995, the amount of
such expenses was $54,525.
The fees of the Trustees not currently affiliated with the Adviser amounted
to $14,248 during the six months ended June 30, 1995.
Note 3
For the six months ended June 30, 1995, purchases and sales of securities,
exclusive of short-term obligations, aggregated $118,263,499 and
$136,175,160, respectively.
Note 4
The Trust has adopted a Plan of Distribution Pursuant to Rule 12b-1 (the
"Plan") under the Investment Company Act of 1940, as amended. Under the Plan,
the Fund pays annual service fees to the Distributor at a rate of 0.25% of
average daily net assets for Class A, Class B and Class D shares. In
addition, the Fund pays annual distribution fees of 0.75% of average daily
net assets for Class B and Class D shares. The Distributor uses such payments
for personal services and/or the maintenance of shareholder accounts, to
reimburse securities dealers for distribution and marketing services, to
furnish ongoing assistance to investors and to defray a portion of its
distribution and marketing expenses. For the six months ended June 30, 1995,
fees pursuant to such plan amounted to $297,172, $182,363 and $5,193 for
Class A, Class B and Class D, respectively.
The Fund has been informed that the Distributor and MetLife Securities, Inc.,
a wholly-owned subsidiary of Metropolitan, earned initial sales charges
aggregating $32,608 and $223,626, respectively, on sales of Class A shares of
the Fund during the six months ended June 30, 1995, and that MetLife
Securities, Inc. earned commissions aggregating $109,448 on sales of Class B
shares, and the Distributor collected contingent deferred sales charges 11
aggregating $110,058 on redemptions of Class B shares during the same period.
11
<PAGE>
STATE STREET RESEARCH TAX-EXEMPT FUND
Note 5
The Trustees have the authority to issue an unlimited number of shares of
beneficial interest, $.001 par value per share. At June 30, 1995,
Metropolitan owned 122 Class C shares and 61,135 Class D shares and the
Distributor owned 13,825 Class A shares of the Fund.
Share transactions were as follows:
<TABLE>
<CAPTION>
Six months ended
June 30, 1995 Year ended
(Unaudited) December 31, 1994
-------------------------- -----------------------------
Class A Shares Amount Shares Amount
--------------------------------------------- ---------- ------------ ----------- --------------
<S> <C> <C> <C> <C>
Shares sold 1,176,844 $ 9,177,822 4,795,156 $ 38,277,992
Issued upon reinvestment of:
Dividends from net investment income 588,004 4,583,638 1,261,918 9,851,273
Distribution from net realized gains -- -- 43,200 322,270
Shares repurchased (3,809,240) (29,665,918) (10,125,093) (79,111,629)
---------- ------------ ----------- --------------
Net increase (decrease) (2,044,392) $(15,904,458) 4,024,819 $(30,660,094)
========== ============ =========== ==============
Class B Shares Amount Shares Amount
--------------------------------------------- ---------- ------------ ----------- --------------
Shares sold 409,139 $ 3,185,246 2,332,039 $ 18,581,303
Issued upon reinvestment of:
Dividends from net investment income 82,618 643,860 148,150 1,150,376
Distribution from net realized gains -- -- 6,731 50,145
Shares repurchased (450,284) (3,490,594) (1,035,950) (7,990,693)
---------- ------------ ----------- --------------
Net increase 41,473 $ 338,512 1,450,970 $ 11,791,131
========== ============ =========== ==============
Class C Shares Amount Shares Amount
--------------------------------------------- ---------- ------------ ----------- --------------
Shares sold 9,373 $ 73,335 10,183 $ 81,311
Issued upon reinvestment of:
Dividends from net investment income 1,184 9,225 2,602 20,345
Distribution from net realized gains -- -- 72 535
Shares repurchased (8,510) (66,723) (24,703) (192,917)
---------- ------------ ----------- --------------
Net increase (decrease) 2,047 $ 15,837 (11,846) $ (90,726)
========== ============ =========== ==============
Class D Shares Amount Shares Amount
--------------------------------------------- ---------- ------------ ----------- --------------
Shares sold 35,566 $ 280,457 36,875 $ 296,347
Issued upon reinvestment of:
Dividends from net investment income 1,196 9,327 1,725 13,235
Distribution from net realized gains -- -- 180 1,341
Shares repurchased (20,439) (162,814) (42,597) (331,738)
---------- ------------ ----------- --------------
Net increase (decrease) 16,323 $ 126,970 (3,817) $ (20,815)
========== ============ =========== ==============
</TABLE>
12
<PAGE>
STATE STREET RESEARCH TAX-EXEMPT FUND
Financial Highlights
For a share outstanding throughout each period:
<TABLE>
<CAPTION>
Class A
-------------------------------------------------------------------
Six months
ended Year ended December 31
June 30, 1995
(Unaudited) --------------------------------------------------
1994 1993 1992 1991 1990
----------------------------------- ------------- ------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $7.46 $8.43 $7.94 $7.69 $7.30 $7.42
Net investment income* .20 .40 .40 .43 .44 .46
Net realized and unrealized gain
(loss) on investments .36 (.98) .54 .27 .39 (.12)
Dividends from net investment
income (.20) (.38) (.39) (.43) (.44) (.46)
Distributions from net realized
gains -- (.01) (.06) (.02) -- --
------------- ------- ------- ------- ------- --------
Net asset value, end of period $7.82 $7.46 $8.43 $7.94 $7.69 $7.30
============= ======= ======= ======= ======= ========
Total return 7.60%+++ (6.90)%+ 12.11%+ 9.34%+ 11.81%+ 4.84%+
Net assets at end of period (000s) $233,411 $238,097 $302,845 $203,312 $118,157 $84,925
Ratio of operating expenses to
average net assets* 1.16%++ 1.20% 1.20% 1.20% 1.25% 1.25%
Ratio of net investment income to
average net assets* 5.21%++ 5.07% 4.85% 5.48% 6.00% 6.43%
Portfolio turnover rate 44.22% 78.63% 36.16% 27.44% 81.75% 84.12%
*Reflects voluntary assumption of
fees or expenses per share in each
period. -- $ .00 -- $ .00 $ .00 $ .01
</TABLE>
<TABLE>
<CAPTION>
Class B Class C Class D
--------------------------- --------------------------- ----------------------------
Six Six Six
months months months
ended ended ended
June Year June Year June Year
30, ended 30, ended 30, ended
1995 December 1995 December 1995 December
(Unaudited) 31, 1994 1993** (Unaudited) 31, 1994 1993** (Unaudited) 31, 1994 1993**
---------------- ------- --------- -- ------- --------- -- ------- --------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period $7.46 $8.43 $8.25 $7.45 $8.41 $8.25 $7.46 $8.43 $8.25
Net investment
income* .17 .34 .19 .21 .42 .23 .17 .34 .19
Net realized and
unrealized gain
(loss) on
investments .36 (.97) .24 .35 (.96) .22 .36 (.97) .23
Dividends from
net investment
income (.18) (.33) (.19) (.21) (.41) (.23) (.18) (.33) (.18)
Distributions
from net
realized gains -- (.01) (.06) -- (.01) (.06) -- (.01) (.06)
------- --------- -- ------- --------- -- ------- --------- ----
Net asset value,
end of period $7.81 $7.46 $8.43 $7.80 $7.45 $8.41 $7.81 $7.46 $8.43
======= ========= == ======= ========= == ======= ========= ====
Total return 7.07%+++ (7.59)%+ 5.20%+++ 7.61%+++ (6.56)% +5.54%+++ 7.07%+++ (7.59)%+ 5.19%+++
Net assets at
end of period
(000s) $37,347 $35,338 $27,695 $365 $334 $477 $1,131 $958 $1,115
Ratio of
operating
expenses to
average net
assets* 1.91%++ 1.95% 1.95%++ 0.91%++ 0.95% 0.96%++ 1.91%++ 1.95% 1.99%++
Ratio of net
investment
income to
average net
assets* 4.45%++ 4.35% 3.93%++ 5.45%++ 5.26% 4.92%++ 4.44%++ 4.31% 3.92%++
Portfolio
turnover rate 44.22% 78.63% 36.16% 44.22% 78.63% 36.16% 44.22% 78.63% 36.16%
*Reflects
voluntary
assumption of
fees or
expenses per
share in each
period. -- $.00 -- -- $.00 -- -- $.00 --
</TABLE>
**June 7, 1993 (commencement of share class designations) to December 31,
1993.
++Annualized.
+Total return figures do not reflect any front-end or contingent deferred
sales charges.
+++Represents aggregate return for the period without annualization and does
not reflect any front-end or contingent deferred sales charges.
13
<PAGE>
STATE STREET RESEARCH TAX-EXEMPT FUND
Fund Information, Officers and Trustees of State Street Research Tax-Exempt
Trust
Fund Information
State Street Research
Tax-Exempt Fund
One Financial Center
Boston, MA 02111
Investment Adviser
State Street Research &
Management Company
One Financial Center
Boston, MA 02111
Distributor
State Street Research
Investment Services, Inc.
One Financial Center
Boston, MA 02111
Shareholder Services
State Street Research
Shareholder Services
P.O. Box 8408
Boston, MA 02266-8408
1-800-562-0032
Custodian
State Street Bank and
Trust Company
225 Franklin Street
Boston, MA 02110
Legal Counsel
Goodwin, Procter & Hoar
Exchange Place
Boston, MA 02109
Officers
Ralph F. Verni
Chairman of the Board,
President and Chief
Executive Officer
Paul J. Clifford, Jr.
Vice President
Susan W. Drake
Vice President
John H. Kallis
Vice President
Thomas A. Shively
Vice President
Gerard P. Maus
Treasurer
Joseph W. Canavan
Assistant Treasurer
Douglas A. Romich
Assistant Treasurer
Francis J. McNamara, III
Secretary and General Counsel
Darman A.Wing
Assistant Secretary and
Assistant General Counsel
Trustees
Ralph F. Verni
Chairman of the Board,
President, Chief Executive
Officer and Director,
State Street Research &
Management Company
Edward M. Lamont
Formerly in banking
(Morgan Guaranty Trust Company of
New York); presently engaged
in private investments and
civic affairs
Robert A. Lawrence
Partner, Saltonstall & Co.
Dean O. Morton
Retired; formerly Executive
Vice President, Chief
Operating Officer and Director,
Hewlett-Packard Company
Thomas L. Phillips
Retired; formerly Chairman of the Board
and Chief Executive Officer, Raytheon Company
Toby Rosenblatt
President,
The Glen Ellen Company
Vice President,
Founders Investments Ltd.
Michael S. Scott Morton
Jay W. Forrester Professor of
Management, Sloan School
of Management, Massachusetts Institute of Technology
Jeptha H. Wade
Retired; formerly Of Counsel, Choate, Hall & Stewart
14
<PAGE>
State Street Research Tax-Exempt Fund Bulk Rate
One Financial Center U.S. Postage
Boston, MA 02111 PAID
Brockton, MA
Permit No. 600
Questions? Comments?
Call us at 1-800-562-0032,
or write us at:
State Street Research
Shareholder Services
P.O. Box 8408
Boston, MA 02266-8408
[State Street logo] State Streeet Research
This report is prepared for the general information of current shareholders
only. It is not authorized for use as sales material with prospective
investors.
CONTROL NUMBER: 2520-950822(0996)SSR-LD
Cover Illustration by Dorothy Cullinan
TE-393D-895
<PAGE>
[Graphic: State Street Logo] State Street Research
STATE STREET RESEARCH
CALIFORNIA TAX-FREE FUND
SEMIANNUAL REPORT
June 30, 1995
[Graphic: Building Blocks]
WHAT'S INSIDE
New and Improved:
A new design that's easier to read
Investment Update:
About theFund,
economy and markets
Fund Information:
Facts and figures
Plus, Complete Portfolio Holdings
and Financial Statements
<PAGE>
STATE STREET RESEARCH CALIFORNIA TAX-FREE FUND
Investment Update
INVESTMENT ENVIRONMENT
The Economy
(bullet) Most signs point to a slowing national economy. Consumer spending
has fallen, home and auto sales are down, and job growth has eased. The
California economy remains weak.
(bullet) The Federal Reserve cut interest rates by one-quarter point on July 6,
1995.
(bullet) Inflation remains low, and a slower economy actually reduces the risk
of rising inflation.
The Markets
(bullet) Through June, municipal bonds have had an outstanding 1995, although
they have trailed other bond sectors. The Lehman Brothers Municipal Bond
Index provided a return of 9.65% through the first six months of 1995.(1)
(bullet) The California municipal bond market rebounded as well, despite the
bankruptcy of Orange County in December 1994.
(bullet) So far, 1995 has been the best year for stocks since 1991. The S&P 500
was up 20.19% through the first six months of 1995.(1)
The Fund
Over the past six months
(bullet) Class A shares of the Fund provided a total return of +8.88% (not
including sales charge) for the 6 months ended June 30, 1995.(2) The average
total return for 104 funds in Lipper Analytical Services' California
municipal debt fund category was +9.70% over the same time period (does not
reflect sales charge).
(bullet) Although the Fund has a positive return through the first half of
1995, it trailed the average for its category because the portfolio was
conservatively positioned. We shortened the Fund's duration (a measure of a
fund's sensitivity to interest rate changes) to protect it if interest rates
increased, as happened throughout 1994. When interest rates fell sharply
instead, the Fund did not enjoy the full benefit of the market rally.
Current strategy
(bullet) We extended the Fund's duration slightly, which will help performance
in an environment of stable or falling rates.
(bullet) We upgraded the quality of bonds in the portfolio and increased the
percentage of insured bonds. As of June 30, 1995, the bonds in the portfolio
had an average credit quality of AA.
(bullet) The outlook for municipal bonds is positive. Supply is low, as fewer
new bonds have been issued. Municipal bonds also currently offer attractiv
value relative to U.S. Treasury bonds.
(1) The Lehman Brothers Municipal Bond Index is a commonly used measure of bond
market performance. The Standard & Poor's 500 Composite Index (S&P 500) includes
500 widely traded common stocks and is a commonly used measure of U.S. stock
market performance. The indices are unmanaged and do not take sales charges into
account. Direct investment in the indices is not possible; results are for
illustrative purposes only.
(2) +8.62% for Class B shares; +9.01% for Class C shares; +8.47% for Class D
shares.
(3) All returns represent past performance, which is no guarantee of
future results. The investment return and principal value of an investment
made in the Fund will fluctuate, and shares, when redeemed,
may be worth more or less than their original cost. All returns assume
reinvestment of capital gain distributions and income dividends.
(4) Performance for a class includes periods prior to the adoption of class
designations in 1993. Performance reflects up to a maximum 4.5% front-end or
5% contingent deferred sales charge. "C" shares, offered without a sales
charge, are available only to certain employee benefit plans and
institutions. Performance prior to class designations in 1993 does not
reflect annual 12b-1 fees of .25% for "A" shares and 1% for "B" and "D"
shares, which will reduce subsequent performance.
FUND INFORMATION (all data are for periods ended June 30, 1995)
SEC Average Annual Compound Rates of Return
(at maximum applicable sales charge)(3),(4)
<TABLE>
<CAPTION>
Life of Fund
(since 7/5/89) 5 years 1 year
<S> <C> <C> <C>
Class A +6.04%/+4.98% +6.37%/+5.48% +2.29%/+1.63%
Class B +6.60%/+5.54% +6.74%/+5.84% +1.45%/+0.76%
Class C +6.97%/+5.93% +7.49%/+6.62% +7.37%/+6.68%
Class D +6.60%/+5.56% +7.04%/+6.18% +5.31%/+4.62%
</TABLE>
Cumulative Total Returns
(do not reflect sales charge)(3)
<TABLE>
<CAPTION>
Life of Fund
(since /5/89) 5 years 1 year
<S> <C> <C> <C>
Class A +48.86%/+40.12% +42.63%/+36.75% +7.11%/+6.42%
Class B +46.75%/+38.14% +40.61%/+34.81% +6.45%/+5.76%
Class C +49.79%/+41.21% +43.52%/+37.81% +7.37%/+6.68%
Class D +46.73%/+38.29% +40.59%/+34.96% +6.31%/+5.62%
</TABLE>
SEC Yield
<TABLE>
<CAPTION>
<S> <C>
Class A 4.72%/4.18%
Class B 4.17%/3.61%
Class C 5.19%/4.63%
Class D 4.17%/3.61%
</TABLE>
SEC yield is calculated according to Securities and Exchange Commission
requirements and is based on the net investment income produced for the 30 days
ended June 30, 1995. A small portion of the Fund's income may be subject to
federal, state and local income tax, and/or alternative minimum tax. Investors
should consult their tax adviser.
Performance results for the Fund are increased by the Distributor's voluntary
reduction of Fund fees and expenses. The first figure reflects expense
reduction; the second shows what results would have been without
subsidization.
Bond Quality
(by percentage of net assets)
[Graphic: Pie Chart]
A 17%
AA 9%
AAA 48%
BBB 13%
Not rated 13%
As rated by Standard & Poor's Corporation or Moody's
Investors Services, Inc., or unrated by equivalent.
<PAGE>
STATE STREET RESEARCH CALIFORNIA TAX-FREE FUND
INVESTMENT PORTFOLIO
June 30, 1995 (Unaudited)
<TABLE>
<CAPTION>
Principal Maturity Value
Amount Date (Note 1)
------------------------------------------- --------- --------- -------------
<S> <C> <C> <C>
MUNICIPAL BONDS 99.7%
General Obligation 10.9%
State of California, Various Purpose,
General Obligation Bonds, 7.00% $ 300,000 8/01/2008 $ 335,874
City and County of San Francisco, General
Obligation Bonds, Series 1991 A, (Various
Purpose Projects), 6.50% 500,000 12/15/2010 515,405
Santa Monica-Malibu Unified School
District, Los Angeles County, California,
General Obligation Bonds, Series 1993,
5.50% 500,000 8/1/2013 471,050
Puerto Rico Municipal Finance Agency, 1994
Series A Bonds, FSA Insured, 6.00% 1,000,000 7/01/2014 1,009,590
Commonwealth of
Puerto Rico, Public Improvement Refunding
Bonds, (General Obligation Bonds) Series
1995, MBIA Insured 5.65% 500,000 7/01/2015 492,345
Roseville Joint Union High School District,
1992 General Obligation Bonds, Series B,
FGIC Insured, 0.00% 1,000,000 8/01/2015 289,100
-------------
3,113,364
-------------
Certificates of Participation 9.0%
County of Los Angeles, Certificates of
Participation, Series A (Marina Del Ray),
Los Angeles County Capital Asset Leasing
Corporation, 6.50% 1,000,000 7/01/2008 979,430
County of Marin, Certificates of
Participation, (1991 Capital Improvements
Project), 6.375% 500,000 8/01/2011 518,290
City of Stockton, Revenue Certificates of
Participation, 1995 Series A, (Wastewater
Treatment Plant Expansion), FGIC Insured,
6.70% $1,000,000 9/01/2014 $1,069,660
-------------
2,567,380
-------------
College & University 6.3%
The Trustees of the California State
University Housing System, 1991 Housing
System Refunding Revenue Bonds, AMBAC
Insured, 7.00% 300,000 11/01/2011 325,119
University of California, Board of Regents,
Refunding Revenue, (Multiple Purpose
Projects), Series C, Ambac Insured, 5.00% 500,000 9/01/2012 447,350
California Educational Facilities
Authority, Series 1994 Revenue Bonds
(Southwestern University Project), 6.60% 1,000,000 11/01/2014 1,032,890
-------------
1,805,359
-------------
Hospital/Health Care 5.9%
City of Duarte, California, Certificates of
Participation, (Hope National Medical
Center), 6.00% 500,000 4/01/2008 480,175
Santa Clara County Financing Authority,
(VMC Facility Replacement Project), 1994
Series A Bonds, AMBAC Insured, 7.75% 1,000,000 11/15/2008 1,198,130
-------------
1,678,305
-------------
Industrial Development/Pollution Control 5.0%
Puerto Rico Industrial, Medical and
Environmental Pollution Control Facilities
Financing Authority, Revenue Bonds, Series
A, 6.25% 750,000 11/15/2013 787,425
The accompanying notes are an integral part of the financial statements.
</TABLE>
2
<PAGE>
STATE STREET RESEARCH CALIFORNIA TAX-FREE FUND
INVESTMENT PORTFOLIO (con't)
<TABLE>
<CAPTION>
Principal Maturity Value
Amount Date (Note 1)
------------------------------------------- --------- --------- -------------
<S> <C> <C> <C>
Industrial Development/Pollution Control (cont'd)
California Pollution Control Financing
Authority, Pollution Control Revenue Bonds,
(San Diego Gas & Electric Company), 1991
Series A, Subject to AMT, 6.80% $ 600,000 6/01/2015 $ 661,212
-------------
1,448,637
-------------
Lease Revenue 4.9%
State Public Works Board of the State of
California, Lease Revenue Bonds,
(Department of Justice Building), 1995
Series A, 5.625% 1,500,000 5/01/2020 1,393,080
-------------
Power 3.7%
Sacramento Municipal Utility District,
Electric Revenue Refunding Bonds, 1991
Series Z, FGIC Insured, 6.35% 1,100,000 7/01/2005 1,062,950
-------------
Pre-Refunded Bonds 7.8%
Northern California Power Agency,
Geothermal Project Number 3, Revenue Bonds,
1987 Refunding, Series A, Pre-Refunded to
7/1/96 @ 101.5, 7.00% 250,000 7/01/2007 259,425
Fresno, California Water Systems, Revenue
Bonds, 1990 Series A, Pre-Refunded to
6/1/98 @ 102, 7.25% 200,000 6/01/2010 219,752
Alameda Unified School District, Unlimited
Tax, Alameda County, California, General
Obligation Bonds, Series 1989, Subject to
Crossover Refunding 7/1/99 @ 102, 7.00% 250,000 7/01/2014 277,242
California Educational Facilities
Authority,
Revenue Bonds
(Pepperdine University) Series 1990, MBIA
Insured, Pre-Refunded to
10/1/2000 @ 102, 7.20% $ 250,000 11/01/2015 $ 285,540
Commonwealth of
Puerto Rico, Public Improvement Bonds of
1989, Series A, General Obligation Bonds,
Pre-Refunded to 7/1/99 @ 101.5, 7.75% 300,000 7/01/2017 341,340
California Educational Facilities
Authority, Revenue Bonds (St. Mary's
College of California Project) Series 1990,
Pre-Refunded to 10/1/2000 @ 102, 7.50% 250,000 10/01/2020 288,578
Transmission Agency of Northern California,
California-Oregon Transmission Project,
Revenue Bonds, MBIA Insured, 1990 Series A,
Pre-Refunded to
5/1/2000 @ 101.5, 7.00% 500,000 5/01/2024 559,625
-------------
2,231,502
-------------
Public Facilities 3.3%
Puerto Rico Public Buildings Authority,
Government Facilities Revenue Bonds, Series
A, 5.50% 1,000,000 7/01/2021 942,090
-------------
Resource Recovery/Solid Waste 2.8%
Stanislaus Waste-to-Energy Financing
Agency, Solid Waste Facility Refunding
Revenue Certificates, (Ogden Martin Systems
of Stanislaus, Inc. Project), Series 1990,
Subject to AMT, 7.625% 760,000 1/01/2010 808,480
-------------
The accompanying notes are an integral part of the financial statements.
3
</TABLE>
<PAGE>
STATE STREET RESEARCH CALIFORNIA TAX-FREE FUND
<TABLE>
<CAPTION>
Principal Maturity Value
Amount Date (Note 1)
------------------------------------------- --------- --------- -------------
<S> <C> <C> <C>
Single-Family Housing 6.6%
California Housing Finance Agency, Home
Mortgage Revenue Bonds, 1991 Series G,
Subject to AMT, 6.95% $ 260,000 8/01/2011 $ 267,569
California Housing Finance Agency, Home
Mortgage Revenue Bonds, 1994 Series G,
7.20% 1,500,000 8/01/2014 1,601,400
California Housing Finance Agency, Home
Mortgage Revenue Bonds, 1990 Series D,
Subject to AMT, 7.875% 35,000 8/01/2031 37,101
-------------
1,906,070
-------------
Special/Sales Tax Revenue 15.9%
Orange County Transportation Authority,
Orange County, California, Measure M Sales
Tax Revenue Bonds (Limited Tax Bonds),
Second Senior Bonds, Series 1992, FGIC
Insured, 6.00% 500,000 2/15/2007 507,480
Redevelopment Agency of the City of San
Jose, Merged Area Redevelopment Project,
Tax Allocation Bonds, MBIA Insured, Series
1993, 6.00% 1,000,000 8/01/2007 1,041,830
South Orange County Public Financing
Authority, Special Tax Revenue Bonds, 1994
Series B (Junior Lien Bonds), 7.00% 500,000 9/01/2007 502,500
Redevelopment Agency of the City of San
Diego, California, Centre City
Redevelopment Project, Tax Allocation
Refunding Bonds, Series 1992, AMBAC
Insured, 6.00% 1,000,000 9/01/2008 1,019,640
South Orange County Public Financing
Authority, Special Tax Revenue Bonds, 1994
Series B (Junior Lien Bonds), 7.00% $1,000,000 9/01/2009 $ 1,002,860
San Francisco Bay Area Rapid Transit
District, Sales Tax Revenue Bonds, FGIC
Insured, Series 1995, 5.50% 500,000 7/01/2015 468,900
-------------
4,543,210
-------------
Structured Financing 4.5%
Sacramento Cogeneration Authority,
(Cogeneration Authority Project), Revenue
Bonds, Series 1995, 6.50% 1,300,000 7/01/2014 1,284,634
-------------
Toll Roads/Turnpike Authorities 6.7%
Foothill/Eastern Transportation Corridor
Agency, Toll Road Revenue Bonds, 0.00% 1,695,000 1/1/2008 899,774
San Joaquin Hills Transportation Corridor
Agency, Orange County, California, Senior
Lien Toll Road Revenue Bonds, 7.00% 1,000,000 1/01/2030 1,015,190
-------------
1,914,964
-------------
Transit/Highway 6.4%
San Francisco Bay Area Rapid Transit
District, Sales Tax Revenue Bonds, Series
1991, FGIC Insured, 6.40% 500,000 7/01/2005 536,000
City of Sacramento, 1991 Refunding
Certificates of Participation, Sacramento
Light Rail Transit Project, 6.75% 250,000 7/01/2007 270,033
Government of Guam, Limited Obligation
Highway Bonds, 1992 Series A, Capital
Guaranty Insurance Co. Insured, 6.30% 1,000,000 5/01/2012 1,036,130
-------------
1,842,163
-------------
Total Municipal Bonds (Cost $27,436,238) 28,542,188
-------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
STATE STREET RESEARCH CALIFORNIA TAX-FREE FUND
INVESTMENT PORTFOLIO (cont'd)
<TABLE>
<CAPTION>
Principal Maturity Value
Amount Date (Note 1)
--------------------------- ------- --------- ------------
<S> <C> <C> <C>
Short-Term Obligations 3.2%
California Pollution
Control Financing Authority
(Burney Forest Products
Project), Revenue Bonds,
3.65% $400,000 9/01/2020++ $ 400,000
Georgia Power Company,
Pollution Control Revenue
Bonds, 3.30% 200,000 7/01/2024++ 200,000
New York State Energy
Research and Development
Authority, Pollution
Control Refunding Revenue
Bonds, (New York State
Electric and Gas
Corporation Project), 1994
Series C, 3.95% 300,000 6/01/2029++ 300,000
------------
Total Short-Term Obligations (Cost $900,000) 900,000
------------
Total Investments (Cost $28,336,238)--102.9% 29,442,188
Cash and Other Assets, Less Liabilities--(2.9)% (818,888)
------------
Net Assets--100.0% $28,623,300
============
Federal Income Tax Information:
At June 30, 1995, the net unrealized appreciation
of investments based on cost for Federal income tax
purposes of $28,336,238 was as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of value
over tax cost $ 1,282,119
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax cost
over value (176,169)
------------
$ 1,105,950
============
</TABLE>
++ Interest rates on these obligations may change daily.
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1995 (Unaudited)
<TABLE>
<CAPTION>
<S> <C>
Assets
Investments, at value (Cost $28,336,238) (Note 1) $29,442,188
Cash 32,447
Receivable for securities sold 883,409
Interest receivable 544,827
Receivable from Distributor (Note 3) 13,547
Receivable for fund shares sold 2,621
Other assets 1,483
------------
30,920,522
Liabilities
Payable for securities purchased 2,045,262
Payable for fund shares redeemed 98,682
Dividends payable 50,614
Accrued transfer agent and shareholder services
(Note 2) 25,206
Accrued management fee (Note 2) 13,168
Accrued distribution fee (Note 5) 5,146
Other accrued expenses 59,144
------------
2,297,222
------------
$28,623,300
============
Net Assets
Net Assets consist of:
Undistributed net investment income $ 45,652
Unrealized appreciation of investments 1,105,950
Accumulated net realized loss (1,012,260)
Shares of beneficial interest 28,483,958
------------
$28,623,300
============
Net Asset Value and redemption price per share of
Class A shares ($8,079,494 (divided by) 1,032,698
shares of beneficial interest) $7.82
============
Maximum Offering Price per share of Class A shares
($7.82 (divided by) .955) $8.19
============
Net Asset Value and offering price per share of
Class B shares ($3,479,279 (divided by) 444,447
shares of beneficial interest)* $7.83
============
Net Asset Value, offering price and redemption
price per share of Class C shares ($16,361,322
(divided by) 2,088,885 shares of beneficial
interest) $7.83
============
Net Asset Value and offering price per share of
Class D shares ($703,205 (divided by)
89,776 shares of beneficial interest)* $7.83
============
</TABLE>
* Redemption price per share for Class B and Class D is equal to net
asset value less any applicable contingent deferred sales charge.
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
STATE STREET RESEARCH CALIFORNIA TAX-FREE FUND
STATEMENT OF OPERATIONS
For the six months ended June 30, 1995 (Unaudited)
<TABLE>
<CAPTION>
<S> <C>
Investment Income
Interest $ 902,158
Expenses
Management fee (Note 2) 78,266
Custodian fee 45,859
Transfer agent and shareholder services (Note 2) 45,461
Reports to shareholders 12,856
Audit fee 12,275
Trustees' fees (Note 2) 6,013
Registration fees 4,585
Distribution fee--Class A (Note 5) 9,455
Distribution fee--Class B (Note 5) 16,930
Distribution fee--Class D (Note 5) 3,394
Legal fees 930
Miscellaneous 1,893
----------
237,917
Expenses borne by the Distributor (Note 3) (87,181)
----------
150,736
----------
Net investment income 751,422
----------
Realized and Unrealized Gain on Investments
Net realized gain on investments (Notes 1 and 4) 298,964
Net unrealized appreciation of investments 1,393,476
----------
Net gain on investments 1,692,440
----------
Net increase in net assets resulting from operations $2,443,862
==========
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six months
ended
June 30, Year Ended
1995 December 31,
(Unaudited) 1994
------------------------------------ ------------ ----------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations:
Net investment income $ 751,422 $ 1,733,441
Net realized gain (loss) on
investments* 298,964 (1,166,695)
Net unrealized appreciation
(depreciation) of investments 1,393,476 (3,114,285)
------------ ----------------
Net increase (decrease) resulting
from operations 2,443,862 (2,547,539)
------------ ----------------
Dividends from net investment
income:
Class A (207,189) (332,285)
Class B (80,430) (120,570)
Class C (483,485) (1,215,189)
Class D (16,105) (31,740)
------------ ----------------
(787,209) (1,669,784)
------------ ----------------
Net decrease from fund share
transactions (Note 7) (1,526,950) (4,011,134)
------------ ----------------
Total increase (decrease) in net
assets 129,703 (8,258,457)
Net Assets
Beginning of period 28,493,597 36,752,054
------------ ----------------
End of period (including
undistributed net investment income
of $45,652 and $81,439,
respectively) $28,623,300 $28,493,597
============ ================
*Net realized loss for Federal
income tax purposes
(Note 1) $ (176,626) $ (830,250)
============ ================
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
STATE STREET RESEARCH CALIFORNIA TAX-FREE FUND
NOTES TO UNAUDITED FINANCIAL STATEMENTS
June 30, 1995
Note 1
State Street Research California Tax-Free Fund (the "Fund"), is a series of
State Street Research Tax-Exempt Trust (the "Trust"), formerly MetLife-State
Street Tax-Exempt Trust, which was organized as a Massachusetts business
trust in December, 1985 and is registered under the Investment Company Act of
1940, as amended, as an open-end management investment company. The Fund
commenced operations in July, 1989. Five series of the Trust are publicly
offered: State Street Research California Tax-Free Fund, State Street
Research Tax-Exempt Fund, State Street Research New York Tax-Free Fund,
State Street Research Florida Tax-Free Fund and State Street Research
Pennsylvania Tax-Free Fund.
The Fund offers four classes of shares. Class A shares are subject to an
initial sales charge of up to 4.50% and pay a service fee equal to 0.25% of
average daily net assets. Class B shares are subject to a contingent deferred
sales charge on certain redemptions made within five years of purchase and
pay annual distribution and service fees of 1.00%. Class B shares
automatically convert into Class A shares (which pay lower ongoing expenses)
at the end of eight years after the issuance of the Class B shares. Class C
shares are only offered to certain employee benefit plans and large
institutions. No sales charge is imposed at the time of purchase or
redemption of Class C shares. Class C shares do not pay any distribution or
service fees. Class D shares are subject to a contingent deferred sales
charge of 1.00% on any shares redeemed within one year of their purchase.
Class D shares also pay annual distribution and service fees of 1.00%. The
Fund's expenses are borne pro rata by each class, except that each class
bears expenses, and has exclusive voting rights with respect to provisions of
the Plan of Distribution, related specifically to that class. The Trustees
declare separate dividends on each class of shares.
The following significant policies are consistently followed by the Fund in
preparing its financial statements, and such policies are in conformity with
generally accepted accounting principles for investment companies.
A. Investment Valuation
Tax-exempt securities are valued by a pricing service, which utilizes market
transactions, quotations from dealers, and various relationships among
securities in determining value. Short-term obligations are valued at
amortized cost. Other securities, if any, are valued at their fair value as
determined in accordance with established methods consistently applied.
B. Security Transactions
Security transactions are accounted for on the trade date (date the order to
buy or sell is executed). Realized gains or losses are reported on the basis
of identified cost of securities delivered.
C. Net Investment Income
Net investment income is determined daily and consists of interest accrued
and discount earned, less amortization of premium and the estimated daily
expenses of the Fund. Interest income is accrued daily as earned. The Fund is
charged for expenses directly attributable to it, while indirect expenses are
allocated among all funds in the Trust.
D. Dividends
Dividends are declared daily by the Fund based upon projected net investment
income and paid or reinvested monthly. Net realized capital gains, if any,
are distributed annually, unless additional distributions are required for
compliance with applicable tax regulations.
Income dividends and capital gain distributions are determined in accordance
with Federal income tax regulations which may differ from generally accepted
accounting principles.
E. Federal Income Taxes
No provision for Federal income taxes is necessary because the Fund has
elected to qualify under Subchapter M of the Internal Revenue Code and its
policy is to distribute all of its taxable income, including net realized
capital gains, within the prescribed time periods. At December 31, 1994, the
Fund had a capital loss carryforward of $830,250 available, to the extent
provided in regulations, to offset future capital gains, if any, which expire
on December 31, 2002.
In order to meet certain excise tax distribution requirements under Section
4982 of the Internal Revenue Code, the Fund is required to measure and
distribute annually, if necessary, net capital gains realized during a
twelve-month period ending October 31. In this connection, the Fund is
permitted to defer into its next fiscal year any net capital losses incurred
between each November 1 and the end of its fiscal year. From November 1, 1993
through December 31, 1993 the Fund incurred net capital losses of $139,145
and has deferred and treated such losses as arising in the fiscal year ending
December 31, 1994. From November 1, 1994 through December 31, 1994 the Fund
incurred net capital losses of $475,590 and intends to defer and treat such
losses as arising in the fiscal year ending December 31, 1995.
Note 2
The Trust and State Street Research & Management Company (the "Adviser"), an
indirect wholly-owned subsidiary of Metropolitan Life Insurance Company 7
("Metropolitan"), have entered into an agreement under which the Adviser
earns monthly fees at an annual rate of 0.55% of the Fund's average daily net
assets. In consideration of these fees, the Adviser furnishes the Fund with
management, investment advisory, statistical and research facilities and
services. The Adviser also pays all salaries, rent and certain other expenses
of management. During the six months ended June 30, 1995, the fees pursuant
to such agreement amounted to $78,266.
State Street Research Shareholder Services, a division of State Street
Research Investment Services, Inc., the Trust's principal underwriter (the
"Distributor"), an indirect wholly-owned subsidiary of Metropolitan, provides
certain shareholder services to the Fund such as responding to inquiries and
instructions from investors with respect to the purchase and redemption of
shares of the Fund. During the six months ended June 30, 1995, the amount of
such expenses was $8,155.
The fees of the Trustees not currently affiliated with the Adviser amounted
to $6,013 during the six months months ended June 30, 1995.
7
<PAGE>
STATE STREET RESEARCH CALIFORNIA TAX-FREE FUND
Note 3
The Distributor and its affiliates may from time to time and in varying
amounts voluntarily assume some portion of fees or expenses relating to the
Fund. During the six months ended June 30, 1995, the amount of such expenses
assumed by the Distributor and its affiliates was $87,181.
Note 4
For the six months ended June 30, 1995, purchases and sales of securities,
exclusive of short-term obligations, aggregated $10,225,279 and $11,773,378,
respectively.
Note 5
The Trust has adopted a Plan of Distribution Pursuant to Rule 12b-1 (the
"Plan") under the Investment Company Act of 1940, as amended. Under the Plan,
the Fund pays annual service fees to the Distributor at a rate of 0.25% of
average daily net assets for Class A, Class B and Class D. In addition, the
Fund pays annual distribution fees of 0.75% of average daily net assets for
Class B and Class D shares. The Distributor uses such payments for personal
services and/or the maintenance of shareholder accounts, to reimburse
securities dealers for distribution and marketing services, to furnish
ongoing assistance to investors and to defray a portion of its distribution
and marketing expenses. For the six months ended June 30, 1995, fees pursuant
to such plan amounted to $9,455, $16,930 and $3,394, for Class A, Class B and
Class C, respectively.
The Fund has been informed that the Distributor and MetLife Securities, Inc.,
a wholly-owned subsidiary of Metropolitan, earned initial sales charges
aggregating $4,676 and $32,318, respectively, on sales of Class A shares of
the Fund during the six months ended June 30, 1995, and that MetLife
Securities, Inc. earned commissions aggregating $7,852 on sales of Class B
shares, and that the Distributor collected contingent deferred sales charges
of $7,675 on redemptions of Class B shares during the same period.
Note 6
Under normal circumstances at least 80% of the Fund's net assets will be
invested in California Municipal Obligations. Certain proposed California
constitutional amendments, legislative measures, executive orders,
administrative regulations and voter initiatives could result in adverse
consequences affecting California Municipal Obligations. Also, the Fund is
able to invest up to 25% of total assets in a single industry. Accordingly,
the Fund's investments may be subject to greater risk than those in a fund
with more restrictive concentration limits.
At June 30, 1995, investments totalling 12.0% and 10.5% of the Fund's net
assets were insured as to the timely payment of principal and interest by
Financial Guaranty Insurance Co. (FGIC) and AMBAC Indemnity Corp. (AMBAC),
respectively.
8
<PAGE>
STATE STREET RESEARCH CALIFORNIA TAX-FREE FUND
NOTES (cont'd)
Note 7
The Trustees have the authority to issue an unlimited number of shares of
beneficial interest, $.001 par value per share. At June 30, 1995,
Metropolitan owned 61,260 Class A shares, 269,839 Class C shares and 61,259
Class D shares of the Fund and the Distributor owned one Class C share of the
Fund.
Share transactions were as follows:
<TABLE>
<CAPTION>
Six months ended
June 30, 1995 Year ended
(Unaudited) December 31, 1994
----------------------- ---------------------------
Class A Shares Amount Shares Amount
------------------------------------- -------- ----------- ---------- -------------
<S> <C> <C> <C> <C>
Shares sold 178,894 $ 1,402,926 843,050 $ 6,591,849
Issued upon reinvestment of dividends 20,104 156,605 34,127 262,217
Shares repurchased (256,293) (1,947,242) (311,716) (2,398,869)
-------- ----------- ---------- -------------
Net increase (decrease) (57,295) $ (387,711) 565,461 $ 4,455,197
======== =========== ========== =============
Class B Shares Amount Shares Amount
------------------------------------- -------- ----------- ---------- -------------
Shares sold 48,464 $ 374,117 267,768 $ 2,088,623
Issued upon reinvestment of dividends 7,190 56,064 11,199 86,347
Shares repurchased (34,024) (265,389) (103,916) (797,596)
-------- ----------- ---------- -------------
Net increase 21,630 $ 164,792 175,051 $ 1,377,374
======== =========== ========== =============
Class C Shares Amount Shares Amount
------------------------------------- -------- ----------- ---------- -------------
Shares sold 6,554 $ 50,981 18,896 $ 146,037
Issued upon reinvestment of dividends 34,876 271,918 91,990 716,444
Shares repurchased (224,539) (1,750,595) (1,346,147) (10,458,308)
-------- ----------- ---------- -------------
Net decrease (183,109) $(1,427,696) (1,235,261) $ (9,595,827)
======== =========== ========== =============
Class D Shares Amount Shares Amount
------------------------------------- -------- ----------- ---------- -------------
Shares sold 22,369 $ 168,293 28,255 $ 219,339
Issued upon reinvestment of dividends 415 3,242 686 5,282
Shares repurchased (6,334) (47,870) (61,234) (472,499)
-------- ----------- ---------- -------------
Net increase (decrease) 16,450 $ 123,665 (32,293) $ (247,878)
======== =========== ========== =============
</TABLE>
9
<PAGE>
STATE STREET RESEARCH CALIFORNIA TAX-FREE FUND
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period.
<TABLE>
<CAPTION>
Class A Class B
-------------------------------------- ----------------------------------------
Six months Six months
ended ended
June 30, Year ended June 30, Year ended
1995 December 31, 1995 December 31,
(Unaudited) 1994 1993** (Unaudited) 1994 1993**
------------------------ ------------ ------------ ------ ------------ ------------ --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $7.38 $8.37 $8.24 $7.38 $8.38 $8.24
Net investment income* .21 .40 .22 .18 .34 .19
Net realized and
unrealized gain (loss)
on investments .44 (1.00) .21 .45 (1.01) .21
Dividends from net
investment income (.21) (.39) (.22) (.18) (.33) (.18)
Distributions from net
realized gains -- -- (.08) -- -- (.08)
------------ ------------ ------ ------------ ------------ --------
Net asset value, end of
period $7.82 $7.38 $8.37 $7.83 $7.38 $8.38
============ ============ ====== ============ ============ ========
Total return 8.88%+++ (7.26)%+ 5.26%+++ 8.62%+++ (8.07)%+ 4.94%+++
Net assets at end of
period (000s) $8,079 $8,044 $4,392 $3,479 $3,122 $2,076
Ratio of operating
expenses to average net
assets* 1.10%++ 1.10% 1.10%++ 1.85%++ 1.85% 1.85%++
Ratio of net investment
income to average net
assets* 5.24%++ 5.16% 4.66%++ 4.49%++ 4.40% 3.91%++
Portfolio turnover rate 36.36% 59.22% 56.62% 36.36% 59.22% 56.62%
*Reflects voluntary
assumption of fees or
expenses per share in
each period (Note 3) $.05 $.05 $.03 $.04 $.05 $.03
</TABLE>
<TABLE>
<CAPTION>
Class C Class D
--------------------------------------------------- -------------------------------
Six Six
months months
ended ended
June 30, Year ended December 31 June 30, Year ended
1995 ------------------------------------- 1995 December 31,
(Unaudited) 1994 1993 1992 1991 1990 (Unaudited) 1994 1993**
------------------- --------- ----- ----- ----- ----- ----- -------- ----------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $7.39 $8.38 $7.90 $7.73 $7.30 $7.35 $7.39 $8.38 $8.24
Net investment
income* .22 .43 .42 .42 .44 .45 .17 .34 .19
Net realized and
unrealized gain
(loss) on
investments .44 (1.01) .55 .22 .42 (.05) .45 (1.00) .21
Dividends from net
investment income (.22) (.41) (.41) (.43) (.43) (.44) (.18) (.33) (.18)
Distributions from
net realized gains -- -- (.08) (.04) -- (.01) -- -- (.08)
--------- ----- ----- ----- ----- ----- -------- ----------- ----
Net asset value,
end of period $7.83 $7.39 $8.38 $7.90 $7.73 $7.30 $7.83 $7.39 $8.38
========= ===== ===== ===== ===== ===== ======== =========== ====
Total return 9.01%+++ (7.02)%+ 12.53%+ 8.51%+ 12.19%+ 5.59%+ 8.47%+++ (7.95)%+ 4.93%+++
Net assets at end
of period (000s) $16,361 $16,786 $29,398 $25,558 $12,757 $8,131 $703 $542 $885
Ratio of operating
expenses to average
net assets* 0.85%++ 0.85% 0.85% 0.85% 0.85% 0.85% 1.85%++ 1.85% 1.85%++
Ratio of net
investment income
to average net
assets* 5.49%++ 5.34% 5.06% 5.51% 5.94% 6.22% 4.48%++ 4.35% 3.91%++
Portfolio turnover
rate 36.36% 59.22% 56.62% 31.55% 42.24% 34.62% 36.36% 59.22% 56.62%
*Reflects voluntary
assumption of fees
or expenses per
share in each
period (Note 3) $.05 $.05 $.03 $.05 $.09 $.13 $.04 $.05 $.02
</TABLE>
** June 7, 1993 (commencement of share class designations) to December 31, 1993.
++ Annualized.
+ Total return figures do not reflect any front-end or contingent deferred
sales charges. Total return would be lower if the Distributor and its
affiliates had not voluntarily assumed a portion of the Fund's expenses.
+++Represents aggregate return for the period without annualization and does not
reflect any front-end or contingent deferred sales charges. Total return
would be lower if the Distributor and its affiliates had not voluntarily
assumed a portion of the Fund's expenses.
10
<PAGE>
STATE STREET RESEARCH CALIFORNIA TAX-FREE FUND
FUND INFORMATION, OFFICERS AND TRUSTEES OF STATE STREET RESEARCH TAX-EXEMPT
TRUST
Fund Information
State Street Research
California Tax-Free Fund
One Financial Center
Boston, MA 02111
Investment Adviser
State Street Research &
Management Company
One Financial Center
Boston, MA 02111
Distributor
State Street Research
Investment Services, Inc.
One Financial Center
Boston, MA 02111
Shareholder Services
State Street Research
Shareholder Services
P.O. Box 8408
Boston, MA 02266-8408
1-800-562-0032
Custodian
State Street Bank and
Trust Company
225 Franklin Street
Boston, MA 02110
Legal Counsel
Goodwin, Procter & Hoar
Exchange Place
Boston, MA 02109
Officers
Ralph F. Verni
Chairman of the Board,
President and
Chief Executive Officer
Paul J. Clifford, Jr.
Vice President
Susan W. Drake
Vice President
John H. Kallis
Vice President
Thomas A. Shively
Vice President
Gerard P. Maus
Treasurer
Joseph W. Canavan
Assistant Treasurer
Douglas A. Romich
Assistant Treasurer
Francis J. McNamara, III
Secretary and General Counsel
Darman A. Wing
Assistant Secretary and
Assistant General Counsel
Trustees
Ralph F. Verni
Chairman of the Board,
President, Chief Executive
Officer and Director,
State Street Research & Management Company
Edward M. Lamont
Formerly in banking (Morgan
Guaranty Trust Company of New
York); presently
engaged in private investments and civic affairs
Robert A. Lawrence
Partner, Saltonstall & Co.
Dean O. Morton
Retired; formerly Executive
Vice President, Chief
Operating Officer and Director,
Hewlett-Packard Company
Thomas L. Phillips
Retired; formerly Chairman of the Board and Chief Executive Officer, Raytheon
Company
Toby Rosenblatt
President,
The Glen Ellen Company
Vice President,
Founders Investments Ltd.
Michael S. Scott Morton
Jay W. Forrester Professor of
Management, Sloan School
of Management, Massachusetts
Institute of Technology
Jeptha H. Wade
Retired; formerly Of Counsel, Choate, Hall & Stewart
11
<PAGE>
State Street Research California Tax-Free Fund Bulk Rate
One Financial Center U.S. Postage
Boston, MA 02111 PAID
Brockton, MA
Permit No. 600
Questions? Comments?
Call us at 1-800-562-0032,
or write us at:
State Street Research
Shareholder Services
P.O. Box 8408
Boston, MA 02266-8408
[Graphic: State Street Logo] State Street Research
This report is prepared for the general information of current shareholders
only. It is not authorized for use as sales material with prospective investors.
CONTROL NUMBER: 2521-950822(0996) SSR-LD
Cover Illustration by Dorothy Cullinan CTF-071E-895
<PAGE>
[cover]
[State Street logo] State Street Research
State Street Research
New York Tax-Free Fund
Semiannual Report [picture of child playing with
June 30, 1995 building blocks, building a town]
WHAT'S INSIDE
New and Improved:
A new design that's
easier to read
Investment Update:
About the Fund,
economy and markets
Fund Information:
Facts and figures
Plus, Complete Portfolio Holdings
and Financial Statements
<PAGE>
State Street Research New York Tax-Free Fund
Investment Update
Investment Environment
The Economy
(bullet) Most signs point to a slowing national economy. Consumer spending
has fallen, home and auto sales are down, and job growth has eased. The New
York economy remains slow.
(bullet) The Federal Reserve cut interest rates by one-quarter point on July
6, 1995.
(bullet) Inflation remains low, and a slower economy actually reduces the
risk of rising inflation.
The Markets
(bullet) Through June, municipal bonds have had an outstanding 1995, although
they have trailed other bond sectors. The Lehman Brothers Municipal Bond
Index provided a return of 9.65% through the first six months of 1995.(1)
(bullet) So far, 1995 has been the best year for stocks since 1991. The S&P
500 was up 20.19% through the first six months of 1995.(1)
The Fund
Over the past six months
(bullet) Class A shares of the Fund provided a total return of +7.57% (not
including sales charge) for the 6 months ended June 30, 1995.(2) The average
total return for 95 funds in Lipper Analytical Services' New York municipal
debt fund category was +9.00% over the same time period (does not reflect
sales charge).
(bullet) Although the Fund had a positive return through the first half of
1995, it trailed the average for its category because the portfolio was
conservatively positioned. We shortened the Fund's duration (a measure of a
fund's sensitivity to interest rate changes) to protect it if interest rates
increased, as happened throughout 1994. When interest rates fell sharply
instead, the Fund did not enjoy the full benefit of the market rally.
Current strategy
(bullet) We extended the Fund's duration slightly, which will help in an
environment of stable or falling interest rates.
(bullet) We upgraded the quality of bonds in the portfolio and increased the
percentage of insured bonds. As of June 30, 1995, the bonds in the portfolio
had an average credit quality of AA.
(bullet) The outlook for municipal bonds is positive. Supply is low, as fewer
new bonds have been issued. Municipal bonds also currently offer attractive
value relative to U.S. Treasury bonds.
(1)The Lehman Brothers Municipal Bond index is a commonly used measure of
bond market performance. The Standard & Poor's 500 Composite Index (S&P 500)
includes 500 widely traded common stocks and is a commonly used measure of
U.S. stock market performance. The indices are unmanaged and do not take
sales charges into account. Direct investment in the indices is not possible;
results are for illustrative purposes only.
(2)+7.17% for Class B shares; +7.69% for Class C shares; +7.31% for Class D
shares.
(3)All returns represent past performance, which is no guarantee of future
results. The investment return and principal value of an investment made in
the Fund will fluctuate, and shares, when redeemed, may be worth more or less
than their original cost. All returns assume reinvestment of capital gain
distributions and income dividends.
(4) Performance for a class includes periods prior to the adoption of class
designations in 1993. Performance reflects up to a maximum 4.5% front-end or
5% contingent deferred sales charge. "C" shares, offered without a sales
charge, are available only to certain employee benefit plans and
institutions. Performance prior to class designations in 1993 does not
reflect annual 12b-1 fees of .25% for "A" shares and 1% for "B" and "D"
shares, which will reduce subsequent performance.
Fund Information (all data are for periods ended June 30, 1995)
SEC Average Annual Compound Rates of Return
(at maximum applicable sales charge)(3,4)
<TABLE>
<CAPTION>
---------- ------------------ ------------------ --------------------
Life of Fund
(since 7/5/89) 5 years 1 year
---------- ------------------ ------------------ --------------------
<S> <C> <C> <C>
Class A +6.10%/+5.50% +6.79%/+6.34% +1.32%/+0.93%
---------- ------------------ ------------------ --------------------
Class B +6.65%/+6.04% +7.15%/+6.68% +0.31%/-0.10%
---------- ------------------ ------------------ --------------------
Class C +7.03%/+6.43% +7.92%/+7.47% +6.35%/+5.95%
---------- ------------------ ------------------ --------------------
Class D +6.66%/+6.06% +7.47%/+7.01% +4.30%/+3.90%
---------- ------------------ ------------------ --------------------
</TABLE>
Cumulative Total Returns
(do not reflect sales charge)(3)
<TABLE>
<CAPTION>
---------- ------------------ ------------------ --------------------
Life of Fund
(since 7/5/89) 5 years 1 year
---------- ------------------ ------------------ --------------------
<S> <C> <C> <C>
Class A +49.38%/+44.29% +45.50%/+42.38% +6.10%/+5.69%
---------- ------------------ ------------------ --------------------
Class B +47.10%/+42.09% +43.28%/+40.20% +5.31%/+4.90%
---------- ------------------ ------------------ --------------------
Class C +50.32%/+45.27% +46.41%/+43.34% +6.35%/+5.95%
---------- ------------------ ------------------ --------------------
Class D +47.25%/+42.24% +43.43%/+40.35% +5.30%/+4.90%
---------- ------------------ ------------------ --------------------
</TABLE>
SEC Yield
<TABLE>
<S> <C>
------------ ------------
Class A 4.78%/4.59%
------------ ------------
Class B 4.24%/4.04%
------------ ------------
Class C 5.25%/5.05%
------------ ------------
Class D 4.24%/4.03%
------------ ------------
</TABLE>
SEC yield is calculated according to Securities and Exchange Commission
requirements and is based on the net investment income produced for the 30
days ended June 30, 1995. A small portion of the Fund's income may be subject
to federal, state and local income tax, and/or alternative minimum tax.
Investors should consult their tax adviser.
Performance results for the Fund are increased by the Distributor's voluntary
reduction of Fund fee's and expenses. The first figure reflects expense
reduction; the second shows what results would have been without
subsidization.
Bond Quality
(by percentage of net assets)
[tabular representation of pie chart]
AAA 40%
AA 19%
A 14%
BBB 18%
Not rated 9%
As rated by Standard & Poor's Corporation or Moody's Investors Service, Inc.,
or unrated but equivalent.
<PAGE>
State Street Research New York Tax-Free Fund
Investment Portfolio
June 30, 1995 (Unaudited)
<TABLE>
<CAPTION>
Principal Maturity Value
Amount Date (Note 1)
------------------------------------------------- ------------ ------------ --------------
<S> <C> <C> <C>
MUNICIPAL BONDS 99.3%
General Obligation 25.1%
The City of New York, General Obligation Bonds,
Fiscal 1992 Series H, 7.00% $ 500,000 2/01/2005 $ 530,475
County of Ontario, New York, General Obligations,
Refunding Serial Bonds, Series 1993, FGIC
Insured, 5.25% 900,000 8/15/2005 903,447
City of New York, General Obligation Bonds,
Fiscal 1995 Series F, 6.375% 2,000,000 2/15/2006 2,022,100
City of Niagara Falls, Niagara County, New York,
Water Treatment Plant Bonds, 1994 (AMT), MBIA
Insured, 8.50% 1,000,000 11/01/2006 1,236,720
County of Onondaga, New York, General Improvement
(Serial) Bonds, 1992, 5.70% 2,000,000 4/01/2007 2,056,720
Riverhead, New York, General Obligation Unlimited
Tax Bonds, Series B, AMBAC Insured, 4.75% 285,000 6/15/2007 268,841
Riverhead, New York, General Obligation Unlimited
Tax Bonds, Series B, AMBAC Insured, 4.75% 280,000 6/15/2008 260,728
City of Syracuse, Onondaga County, New York,
Public Improvement Refunding Bonds, Series 1993
A, 5.125% 1,000,000 2/15/2009 950,550
County of Albany, New York, General Obligation
Serial Bonds, Series 1994, FGIC Insured, 5.75% 1,500,000 6/01/2009 1,519,290
Town of New Castle, Westchester County, New York,
Public Improvement Refunding, 4.75% $ 900,000 6/01/2009 $ 818,613
Town of New Castle, Westchester County, New York,
Public Improvement Refunding, 4.75% 250,000 6/01/2010 225,188
Town of New Castle, Westchester County, New York,
Public Improvement Refunding, 4.75% 250,000 6/01/2011 222,958
The City of New York, General Obligation Bonds,
Fiscal 1991 Series B, 7.75% 990,000 2/01/2012 1,076,061
City of New York, General Obligation Bonds,
Series 1995B Refunding Bonds, 5.70% 1,000,000 8/15/2012 971,230
Puerto Rico Municipal Finance Agency, 1994 Series
A Bonds, FSA Insured, 6.00% 2,000,000 7/01/2014 2,019,180
County of Nassau, New York, General Obligation
Refunding Bonds, Series G, MBIA Insured, 5.45% 1,140,000 1/15/2015 1,084,767
Commonwealth of Puerto Rico, General Obligation
Public Improvement Refunding Bonds, Series 1995A,
MBIA Insured, 5.65% 500,000 7/01/2015 492,345
County of Erie, New York, General Obligation
Bonds, 1995 Series B, FGIC Insured, 5.625% 375,000 6/15/2020 356,910
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
Principal Maturity Value
Amount Date (Note 1)
------------------------------------------------- ------------ ------------ --------------
General Obligation (cont'd)
Town of Mamaroneck Housing Authority, Westchester
County, New York, Hommocks Park Apartment Revenue
Bonds 1993, 5.375% $1,645,000 8/01/2021 $ 1,520,424
--------------
18,536,547
--------------
Airport Revenue 2.2%
Investment Portfolio (cont'd)
Monroe County Airport Authority, Greater
Rochester International Airport Refunding Bonds,
MBIA Insured, Subject to AMT, Series 1993, 5.50% 1,000,000 1/01/2013 952,530
Monroe County Airport Authority, Greater
Rochester International Airport Revenue Bonds,
MBIA Insured, Subject to AMT, Series 1989, 7.25% 600,000 1/01/2019 640,758
--------------
1,593,288
--------------
Certificates of Participation 1.7%
City of Syracuse, New York, (Syracuse Hancock
International Airport), Certificates of
Participation, Series 1992, Subject to AMT, 6.60% 1,185,000 1/01/2006 1,281,412
--------------
College & University 1.4%
Dormitory Authority of the State of New York,
Ithaca College, Revenue Bonds, Series 1991, MBIA
Insured, 6.25% 1,000,000 7/01/2021 1,018,200
--------------
Escrowed Bonds 0.7%
Dormitory Authority of the State of New York,
Judicial Facilities Lease Revenue Bonds, (Suffolk
County Issue) Series 1986, 7.375% $ 450,000 7/01/2016 $ 532,323
--------------
Hospital/Health Care 3.2%
New York State Medical Care Facilities Finance
Agency, Hospital and Nursing Home, FHA-Insured,
Mortgage Revenue Bonds, 1988 Series B, 8.00% 200,000 2/15/2008 220,246
New York State Medical Care Facilities Finance
Agency, Mental Health Services Facilities
Improvement Revenue Bonds, 1990 Series A
Refunding, 7.75% 230,000 8/15/2010 253,683
New York State Medical Cure Facilities Finance
Agency, FHA-Insured Mortgage Project Revenue
Bonds, 1995 Series B, 6.10% 1,000,000 2/15/2015 993,140
New York State Medical Care Facilities Finance
Agency, Mental Health Facilities Revenue Bonds,
1993 Series F, 5.25% 1,000,000 2/15/2019 904,720
--------------
2,371,789
--------------
Industrial Development & Pollution Control 9.3%
Herkimer County Industrial Development Agency,
Industrial Development Revenue Bonds, (Burrows
Paper Corporation Solid Waste Disposal Facility),
Series 1993, Subject to AMT, 8.00% 4,000,000 1/01/2009 4,312,120
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
Principal Maturity Value
Amount Date (Note 1)
------------------------------------------------- ------------ ------------ --------------
Industrial Development & Pollution Control (cont'd)
Puerto Rico Industrial, Medical and Environmental
Pollution, Control Facilities Financing
Authority, Revenue Bonds, Series A, 6.25% $2,000,000 11/15/2013 $2,099,800
New York State Energy Research and Development
Authority, Central Hudson Gas & Electric Company,
FGIC Insured, Series B, 7.375% 400,000 10/01/2014 433,992
--------------
6,845,912
--------------
Lease Revenue 9.1%
Dormitory Authority of the State of New York,
Judicial Facilities Lease Revenue Bonds, (Suffolk
County Issue), Series 1991A, 9.25% 1,500,000 4/15/2006 1,687,860
Puerto Rico Public Buildings Authority, Public
Education and Health Facilities Refunding Bonds,
Series M, 5.60% 1,500,000 7/01/2008 1,476,900
Lyons Community Health Initiatives Corp.,
Facility Revenue Bonds, Series 1994, 6.55% 500,000 9/01/2009 516,730
Dormitory Authority of the State of New York,
Court Facilities Lease Revenue Bonds, (City of
New York Issue), Series 1993A, 5.625% 1,000,000 5/15/2013 917,130
Metropolitan Transportation Authority New York
City, Transit Facilities 1987 Service Contract
Bonds, Series 7, 5.625% 1,150,000 7/01/2016 1,052,802
Lyons Community Health Initiatives Corp., (New
York), Facility Revenue Bonds, Series 1994, 6.80% $1,000,000 9/01/2024 $1,037,080
--------------
6,688,502
--------------
Life Care 3.4%
Orange County Industrial Development Agency, (The
Glen Arden Inc. Project), Life Care Community
Revenue Bonds, Series 1994, 8.25% 1,000,000 1/01/2002 1,024,680
Tompkins County Industrial Development Agency,
Life Care Community Revenue Bonds, 1994 (Kendal
at Ithaca, Inc. Project), 7.70% 1,430,000 6/01/2011 1,454,367
--------------
2,479,047
--------------
Multi-Family Housing 1.4%
New York State Housing Finance Agency,
Multi-Family Housing Revenue Bonds, (Secured
Mortgage Program), 1992 Series F, Subject to AMT,
6.625% 1,000,000 8/15/2012 1,015,870
--------------
Power 2.2%
Power Authority of the State of New York, General
Purpose Bonds, Series W, 6.50% 1,500,000 1/01/2008 1,631,355
--------------
Pre-Refunded Bonds 9.8%
City of Syracuse, Onondaga County, New York,
Public Improvement Bonds, 1991, Pre-Refunded to
2/15/2001 at 102, 6.70% 500,000 2/15/2006 557,785
County of Nassau, New York, Combined Sewer
Districts Bonds, Series J, FGIC Insured,
Pre-Refunded to 10/15/2000 at 103, 7.375% 300,000 10/15/2009 347,187
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
Principal Maturity Value
Amount Date (Note 1)
------------------------------------------------- ------------ ------------ --------------
Pre-Refunded Bonds (cont'd)
Grand Central District Management Association,
Inc., Grand Central Business Improvement
District, Capital Improvement Bonds, Series 1992,
Pre-Refunded to 1/01/2002 at 102, 6.50% $1,000,000 1/01/2010 $1,117,400
New York State Medical Care Facilities Finance
Agency, Mental Health Services Facilities
Improvement Revenue Bonds, 1990 Series A
Pre-Refunded to 2/15/2000 at 102, 7.75% 145,000 8/15/2010 166,765
Dormitory Authority of the State of New York,
State University Educational Facilities, Revenue
Bonds, Series 1990A, Pre-Refunded to 5/15/2000 at
102, 7.70% 600,000 5/15/2012 692,568
Battery Park City Authority, Revenue Bonds,
Series 1990, Pre-Refunded to 5/1/99 at 102, 7.70% 450,000 5/01/2015 509,265
New York City Municipal Water Finance Authority,
Water and Sewer System Revenue Bonds, Fiscal 1991
Series C, FGIC Insured, Pre-Refunded to 6/15/2001
at 101.5, 7.00% 600,000 6/15/2016 680,964
County of Suffolk, New York, General Obligations,
MBIA Insured, 1990 Series B, Pre-Refunded to
4/01/2000 at 102, 7.10% 425,000 4/01/2018 478,503
Commonwealth of Puerto Rico, Public Improvement
Bonds of 1989, Series A, General Obligation
Bonds, Pre-Refunded to 7/1/99 at 100, 6.50% $ 250,000 7/01/2018 $ 269,948
Mount Sinai Union Free School District, Unlimited
Tax, Suffolk County, New York AMBAC Insured,
School District Bonds, 1989, Pre-Refunded to
2/15/2000 at 102, 7.25% 350,000 2/15/2019 395,336
Dormitory Authority of the State of New York,
Bonds, Upstate Community Colleges, 1990A Issue,
Pre-Refunded to 5/15/2000 at 102, 7.60% 250,000 7/01/2020 287,665
Commonwealth of Puerto Rico, Public Improvement
Bonds of 1990, General Obligation Bonds,
Pre-Refunded to 7/1/2000 at 102, 7.70% 300,000 7/01/2020 348,717
Orangetown Housing Authority, (Rockland County,
New York), Housing Facilities Revenue Bonds
(Orangetown Senior Housing Center-1990 Series),
Pre-Refunded to 10/1/2000 at 102, 7.50% 400,000 10/01/2020 460,708
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
Principal Maturity Value
Amount Date (Note 1)
------------------------------------------------- ------------ ------------ --------------
Pre-Refunded Bonds (cont'd)
Town of Clifton Park Water Authority, (New York),
Water System Revenue Bonds, 1991 Series A, FGIC
Insured, Pre-Refunded to 10/1/2001 at 102, 6.375% $ 800,000 10/01/2026 $ 895,368
--------------
7,208,179
--------------
Public Facilities 1.9%
Puerto Rico Public Buildings Authority,
Government Facilities Revenue Bonds, Series A,
5.50% 1,500,000 7/01/2021 1,413,135
--------------
Resource Recovery/Solid Waste 0.7%
New York State Environmental Facilities
Corporation, Resource Recovery Revenue Bonds,
(Huntington Resource Recovery Project-1989 Series
A), Subject to AMT, 7.50% 480,000 10/01/2012 502,776
--------------
Single-Family Housing 4.3%
State of New York Mortgage Agency, Homeowner
Mortgage Revenue Bonds, Series 27, 6.90% 1,000,000 4/01/2015 1,048,600
State of New York Mortgage Agency, Homeowner
Mortgage Revenue Bonds, Series 45, 7.20% 2,000,000 10/01/2017 2,123,880
--------------
3,172,480
--------------
Special/Sales Tax Revenue 2.1%
Municipal Assistance Corporation for the City of
New York, Series 67 Bonds, 7.625% 500,000 7/01/2008 556,840
New York Local Government Assistance Corp.,
Series 1995A Tax Revenue Bonds, 6.00% 1,000,000 4/01/2024 973,200
--------------
1,530,040
--------------
Toll Roads/Turnpike Authorities 0.6%
Port Authority of New York and New Jersey
Consolidated Bonds, Series 100, 5.75% $ 500,000 12/15/2020 $ 483,770
--------------
Transit/Highway 7.2%
Triborough Bridge & Tunnel Authority, General
Purpose Revenue Bonds,
Series A, 5.00% 1,000,000 1/01/2012 906,910
Government of Guam, Limited Obligation Highway
Bonds, 1992 Series A, Capital Guaranty Insurance
Co. Insured, 6.30% 2,000,000 5/01/2012 2,072,260
New York State Thruway Authority, General Revenue
Bonds, Series C, 6.00% 1,000,000 1/01/2015 1,000,810
Triborough Bridge & Tunnel Authority, General
Purpose Revenue Bonds, Series 1994A, 4.75% 1,610,000 1/01/2019 1,342,305
--------------
5,322,285
--------------
Water & Sewer 11.6%
Buffalo Municipal Water Finance Authority, Water
System Revenue Bonds, Series 1992, FSA Insured,
5.75% 2,000,000 7/01/2006 2,055,020
New York State Environmental Facilities
Corporation, State Water Pollution Control,
Revolving Fund Revenue Bonds, Series 1994 D,
(Pooled Loan Issue), 6.70% 2,000,000 11/15/2009 2,231,980
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
Principal Maturity Value
Amount Date (Note 1)
------------------------------------------------- ------------ ------------ --------------
Water & Sewer (cont'd)
New York State Environmental Facilities
Corporation, State Water Pollution Control,
Revolving Fund Revenue Bonds, Series 1990 B,
(Pooled Loan Issue), 7.50% $ 400,000 3/15/2011 $ 440,808
Albany Municipal Water Finance Authority, Water
and Sewer System Revenue Bonds, Series 1993 A,
FGIC Insured, 5.75% 2,000,000 12/01/2011 1,997,760
Suffolk County Water Authority, New York, Water
System Revenue bonds, Series 1994, MBIA Insured,
5.00% 1,000,000 6/01/2012 909,470
Suffolk County Water Authority, New York, Water
System Revenue Bonds, Series 1994, MBIA Insured,
5.00% 1,000,000 6/01/2015 895,350
--------------
8,530,388
--------------
Other Revenue 1.4%
The Trust for Cultural Resources of the City of
New York, Revenue Refunding Bonds, Series 1991A,
(The Museum of Modern Art), AMBAC Insured, 6.625% 1,000,000 1/01/2011 1,058,780
--------------
Total Municipal Bonds (Cost $70,402,023)--99.5% 73,216,078
--------------
SHORT-TERM OBLIGATIONS 1.1%
New York State Job Development Corp., General
Revenue Bonds, Series B, 3.00% $ 500,000 3/01/2002++ $ 500,000
New York State Energy Research and Development,
Revenue Bonds, 3.95% 300,000 6/01/2029++ 300,000
--------------
Total Short-Term Obligations (Cost $800,000) 800,000
--------------
Total Investments (Cost $71,202,023)--100.4% 74,016,078
Cash and Other Assets, Less Liabilities--(0.4%) (292,030)
--------------
Net Assets--100% $73,724,048
==============
Federal Income Tax Information:
At June 30, 1995, the net unrealized appreciation of investments based on cost
for Federal income tax purposes of $71,202,023 was as follows:
Aggregate gross unrealized appreciation for all investments in which there is an
excess of value over tax cost $ 3,135,939
Aggregate gross unrealized depreciation for all investments in which there is an
excess of tax cost over value (321,884)
--------------
$ 2,814,055
==============
</TABLE>
++Interest rates on these obligations may change daily.
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
State Street Research New York Tax-Free Fund
Statement of Assets and Liabilities
June 30, 1995 (Unaudited)
<TABLE>
<S> <C>
Assets
Investments, at value (Cost $71,202,023) (Note 1) $74,016,078
Cash 29,534
Interest receivable 1,465,883
Receivable from Distributor (Note 3) 12,254
Other assets 1,535
------------
75,525,284
Liabilities
Payable for securities purchased 1,444,768
Payable for fund shares redeemed 117,099
Dividends payable 71,980
Accrued management fee (Note 2) 33,858
Accrued trustees' fees (Note 2) 6,125
Other accrued expenses 127,406
------------
1,801,236
------------
Net Assets $73,724,048
============
Net Assets consist of:
Undistributed net investment income $ 123,998
Unrealized appreciation of investments 2,814,055
Accumulated net realized loss (2,437,825)
Shares of beneficial interest 73,223,820
------------
$73,724,048
============
Net Asset Value and redemption price per share of
Class A shares ($19,754,856 / 2,502,754 shares of
beneficial interest) $7.89
============
Maximum Offering Price per share of Class A shares
($7.89 / .955) $8.26
============
Net Asset Value and offering price per share of
Class B shares ($13,038,344 / 1,651,780 shares of
beneficial interest)* $7.89
============
Net Asset Value, offering price and redemption
price per share of Class C shares ($40,104,112 /
5,075,629 shares of beneficial interest) $7.90
============
Net Asset Value and offering price per share of
Class D shares ($826,736 / 104,675 shares of
beneficial interest)* $7.90
============
</TABLE>
*Redemption price per share for Class B and Class D is equal to net asset
value less any applicable contingent deferred sales charge.
Statement of Operations
For the six months ended June 30, 1995 (Unaudited)
<TABLE>
<S> <C>
Investment Income
Interest $2,319,664
Expenses
Management fee (Note 2) 200,622
Transfer agent and shareholder services (Note 2) 93,998
Custodian fee 49,880
Reports to shareholders 19,297
Audit fee 10,386
Registration fees 7,154
Distribution fee--Class A (Note 5) 23,676
Distribution fee--Class B (Note 5) 62,667
Distribution fee--Class D (Note 5) 4,000
Miscellaneous 8,618
-----------
480,298
Expenses borne by the Distributor (Note 3) (79,906)
-----------
400,392
-----------
Net investment income 1,919,272
-----------
Realized and Unrealized Gain on Investments
Net realized gain on investments (Notes 1 and 4) 725,186
Net unrealized appreciation of investments 2,747,947
-----------
Net gain on investments 3,473,133
-----------
Net increase in net assets resulting from
operations $5,392,405
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
State Street Research New York Tax-Free Fund
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Six months ended
June 30, 1995 Year ended
(Unaudited) December 31, 1994
--------------------------------------- ------------------ --------------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations:
Net investment income $ 1,919,272 $ 3,954,491
Net realized gain (loss) on
investments* 725,186 (3,161,667)
Net unrealized appreciation
(depreciation) of investments 2,747,947 (5,773,470)
------------------ --------------------
Net increase (decrease) resulting from
operations 5,392,405 (4,980,646)
------------------ --------------------
Dividends from net investment income:
Class A (503,722) (895,478)
Class B (283,727) (441,657)
Class C (1,130,603) (2,488,395)
Class D (18,272) (34,740)
------------------ --------------------
(1,936,324) (3,860,270)
------------------ --------------------
Distribution from net realized gains:
Class A -- (19,501)
Class B -- (12,917)
Class C -- (42,991)
Class D -- (854)
------------------ --------------------
-- (76,263)
------------------ --------------------
Net increase (decrease) from fund share
transactions (Note 7) (1,601,673) 709,765
------------------ --------------------
Total increase (decrease) in net assets 1,854,408 (8,207,414)
Net Assets
Beginning of period 71,869,640 80,077,054
------------------ --------------------
End of period (including undistributed
net investment income of $123,998 and
$141,050, respectively) $73,724,048 $71,869,640
================== ====================
*Net realized loss for Federal income
tax purposes (Note 1) $ (300,901) $(2,135,580)
================== ====================
</TABLE>
Notes to Unaudited Financial Statements
June 30, 1995
Note 1
State Street Research New York Tax-Free Fund (the "Fund"), is a series of
State Street Research Tax-Exempt Trust (the "Trust"), formerly MetLife-State
Street Tax-Exempt Trust, which was organized as a Massachusetts business
trust in December, 1985 and is registered under the Investment Company Act of
1940, as amended, as an open-end management investment company. The Fund
commenced operations in July, 1989. Five series of the Trust are publicly
offered: State Street Research New York Tax-Free Fund, State Street Research
Tax-Exempt Fund, State Street Research California Tax-Free Fund, State Street
Research Florida Tax-Free Fund and State Street Research Pennsylvania
Tax-Free Fund.
The Fund offers four classes of shares. Class A shares are subject to an
initial sales charge of up to 4.50% and pay a service fee equal to 0.25% of
average daily net assets. Class B shares are subject to a contingent deferred
sales charge on certain redemptions made within five years of purchase and
pay annual distribution and service fees of 1.00%. Class B shares
automatically convert into Class A shares (which pay lower ongoing expenses)
at the end of eight years after the issuance of the Class B shares. Class C
shares are only offered to certain employee benefit plans and large
institutions. No sales charge is imposed at the time of purchase or
redemption of Class C shares. Class C shares do not pay any distribution or
service fees. Class D shares are subject to a contingent deferred sales
charge of 1.00% on any shares redeemed within one year of their purchase.
Class D shares also pay annual distribution and service fees of 1.00%. The
Fund's expenses are borne pro-rata by each class, except that each class
bears expenses, and has exclusive voting rights with respect to provisions of
the Plan of Distribution, related specifically to that class. The Trustees
declared separate dividends on each class of shares.
The following significant accounting policies are consistently followed by
the Fund in preparing its financial statements, and such policies are in
conformity with generally accepted accounting principles for investment
companies.
A. Investment Valuation
Tax-exempt securities are valued by a pricing service, which utilizes market
transactions, quotations from dealers, and various relationships among
securities in determining value. Short-term obligations are valued at
amortized cost. Other securities, if any, are valued at their fair value as
determined in accordance with established methods consistently applied.
B. Security Transactions
Security transactions are accounted for on the trade date (date the order to
buy or sell is executed). Realized gains or losses are reported on the basis
of identified cost of securities delivered.
C. Net Investment Income
Net investment income is determined daily and consists of interest accrued
and discount earned, less amortization of premium and the estimated daily
expenses of the Fund. Interest income is accrued daily as earned. The Fund is
charged for expenses directly attributable to it, while indirect expenses are
allocated among all funds in the Trust.
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
D. Dividends
Dividends are declared daily by the Fund based upon projected net investment
income and paid or reinvested monthly. Net realized capital gains, if any,
are distributed annually, unless additional distributions are required for
compliance with applicable tax regulations.
Income dividends and capital gain distributions are determined in accordance
with Federal income tax regulations which may differ from generally accepted
accounting principles.
E. Federal Income Taxes
No provision for Federal income taxes is necessary because the Fund has
elected to qualify under Subchapter M of the Internal Revenue Code and its
policy is to distribute all of its taxable income, including net realized
capital gains, within the prescribed time periods. At December 31, 1994, the
Fund had a capital loss carryforward of $2,135,580 available, to the extent
provided in regulations, to offset future capital gains, if any, which
expires on December 31, 2002.
In order to meet certain excise tax distribution requirements under Section
4982 of the Internal Revenue Code, the Fund is required to measure and
distribute annually, if necessary, net capital gains realized during a
twelve-month period ending October 31. In this connection, the Fund is
permitted to defer into its next fiscal year any net capital losses incurred
between each November 1 and the end of its fiscal year. From November 1, 1994
through December 31, 1994 the Fund incurred net capital losses of $1,026,087
and intends to defer and treat such losses as arising in the fiscal year
ending December 31, 1995.
Note 2
The Trust and State Street Research & Management Company (the "Adviser"), an
indirect wholly-owned subsidiary of Metropolitan Life Insurance Company
("Metropolitan"), have entered into an agreement under which the Adviser
earns monthly fees at an annual rate of 0.55% of the Fund's average daily net
assets. In consideration of these fees, the Adviser furnishes the Fund with
management, investment advisory, statistical and research facilities and
services. The Adviser also pays all salaries, rent and certain other expenses
of management. During the six months ended June 30, 1995, the fees pursuant
to such agreement amounted to $200,622.
State Street Research Shareholder Services, a division of State Street
Research Investment Services, Inc., the Trust's principal underwriter (the
"Distributor"), an indirect wholly-owned subsidiary of Metropolitan, provides
certain shareholder services to the Fund such as responding to inquiries and
instructions from investors with respect to the purchase and redemption of
shares of the Fund. During the six months ended June 30, 1995, the amount of
such expenses was $18,372.
Note 3
The Distributor and its affiliates may from time to time and in varying
amounts voluntarily assume some portion of fees or expenses relating to the
Fund. During the six months ended June 30, 1995, the amount of such expenses
assumed by the Distributor and its affiliates was $79,906.
Note 4
For the six months ended June 30, 1995, purchases and sales of securities,
exclusive of short-term obligations, aggregated $28,757,389 and $30,742,660,
respectively.
Note 5
The Trust has adopted a Plan of Distribution Pursuant to Rule 12b-1 (the
"Plan") under the Investment Company Act of 1940, as amended. Under the Plan,
the Fund pays annual service fees to the Distributor at a rate of 0.25% of
average daily net assets for Class A, Class B and Class D shares. In
addition, the Fund pays annual distribution fees of 0.75% of average daily
net assets for Class B and Class D shares. The Distributor uses such payments
for personal services and/or the maintenance of shareholder accounts, to
reimburse securities dealers for distribution and marketing services, to
furnish ongoing assistance to investors and to defray a portion of its
distribution and marketing expenses. For the six months ended June 30, 1995,
fees pursuant to such plan amounted to $23,676, $62,667 and $4,000 for Class
A, Class B and Class D, respectively.
The Fund has been informed that the Distributor and MetLife Securities, Inc.,
a wholly-owned subsidiary of Metropolitan, earned initial sales charges
aggregating $7,003 and $52,576, respectively, on sales of Class A shares of
the Fund during the six months ended June 30, 1995, and that MetLife
Securities, Inc. earned commissions aggregating $31,630 on sales of Class B
shares, and that the Distributor collected contingent deferred sales charges
aggregating $33,639 on redemptions of Class B shares during the same period.
Note 6
Under normal circumstances at least 80% of the Fund's net assets will be
invested in New York Municipal Obligations. New York State and New York City
face potential economic problems due to various financial, social, economic
and political factors which could seriously affect their ability to meet
continuing obligations for principal and interest payments. Also, the Fund is
able to invest up to 25% of total assets in a single industry. Accordingly,
the Fund's investments may be subject to greater risk than those in a fund
with more restrictive concentration limits.
10
<PAGE>
State Street Research New York Tax-Free Fund
Notes (cont'd)
Note 7
The Trustees have the authority to issue an unlimited number of shares of
beneficial interest, $.001 par value per share. At June 30, 1995,
Metropolitan owned 61,186 Class A shares and 61,186 Class D shares and the
Distributor owned one Class C share of the Fund.
Share transactions were as follows:
<TABLE>
<CAPTION>
Six months ended
June 30, 1995 Year ended
(Unaudited) December 31, 1994
----------------------- ----------------------------
Class A Shares Amount Shares Amount
------------------------------------- -------- ----------- ---------- --------------
<S> <C> <C> <C> <C>
Shares sold 319,960 $ 2,506,400 1,289,154 $ 10,313,220
Issued upon reinvestment of:
Distribution from net realized gains -- -- 2,365 17,808
Dividends from net investment income 52,140 410,456 84,420 662,001
Shares repurchased (288,540) (2,255,853) (756,289) (5,929,186)
-------- ----------- ---------- --------------
Net increase 83,560 $ 661,003 619,650 $ 5,063,843
======== =========== ========== ==============
Class B Shares Amount Shares Amount
------------------------------------- -------- ----------- ---------- --------------
Shares sold 145,390 $ 1,140,462 885,313 $ 7,083,969
Issued upon reinvestment of:
Distribution from net realized gains -- -- 1,577 11,857
Dividends from net investment income 29,189 229,282 32,680 258,543
Shares repurchased (134,672) (1,050,281) (204,942) (1,640,186)
-------- ----------- ---------- --------------
Net increase 39,907 $ 319,463 714,628 $ 5,714,183
======== =========== ========== ==============
Class C Shares Amount Shares Amount
------------------------------------- -------- ----------- ---------- --------------
Shares sold 20,864 $ 163,183 44,692 $ 369,145
Issued upon reinvestment of:
Distribution from net realized gains -- -- 5,159 38,844
Dividends from net investment income 110,096 863,676 226,396 1,765,589
Shares repurchased (462,640) (3,624,720) (1,563,955) (12,288,139)
-------- ----------- ---------- --------------
Net decrease (331,680) $(2,597,861) (1,287,708) $(10,114,561)
======== =========== ========== ==============
Class D Shares Amount Shares Amount
------------------------------------- -------- ----------- ---------- --------------
Shares sold 3,427 $ 27,202 14,755 $ 119,504
Issued upon reinvestment of:
Distribution from net realized gains -- -- 99 745
Dividends from net investment income 181 1,426 1,427 11,193
Shares repurchased (1,621) (12,906) (10,858) (85,142)
-------- ----------- ---------- --------------
Net increase 1,987 $ 15,722 5,423 $ 46,300
======== =========== ========== ==============
</TABLE>
11
<PAGE>
Financial Highlights
For a share outstanding throughout each period:
<TABLE>
<CAPTION>
Class A Class B
---------------------------------------- ------------------------------------------
Six months Six months
ended ended
June 30, Year ended June 30, Year ended
1995 December 31, 1995 December 31,
(Unaudited) 1994 1993** (Unaudited) 1994 1993**
------------------ ------------ -------------- ------ ------------ -------------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period $7.53 $8.43 $8.20 $7.53 $8.43 $8.20
Net investment
income* .20 .40 .22 .18 .34 .19
Net realized and
unrealized gain
(loss) on
investments .37 (.90) .25 .36 (.90) .25
Dividends from net
investment income (.21) (.39) (.22) (.18) (.33) (.19)
Distributions from
net realized
gains -- (.01) (.02) -- (.01) (.02)
------------ -------------- ------ ------------ -------------- --------
Net asset value,
end of period $7.89 $7.53 $8.43 $7.89 $7.53 $8.43
============ ============== ====== ============ ============== ========
Total return 7.57%+++ (6.04)%+ 5.79%+++ 7.17%+++ (6.74)%+ 5.35%+++
Net assets at end
of period (000s) $19,755 $18,214 $15,175 $13,038 $12,131 $7,567
Ratio of operating
expenses to
average net
assets* 1.10%++ 1.10% 1.10%++ 1.85%++ 1.85% 1.85%++
Ratio of net
investment income
to average net
assets* 5.25%++ 5.07% 4.68%++ 4.51%++ 4.34% 3.93%++
Portfolio turnover
rate 40.79% 64.80% 33.11% 40.79% 64.80% 33.11%
*Reflects
voluntary
assumption of
fees or expenses
per share in each
period (Note 3). $.01 $.03 $.01 $.01 $.03 $.01
</TABLE>
<TABLE>
<CAPTION>
Class C
--------------------------------------------------------------------------
Six months
ended
June 30, Year ended December 31
1995 -----------------------------------------------------------
(Unaudited) 1994 1993 1992 1991 1990
------------------ ------------ -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period $7.54 $8.44 $7.84 $7.61 $7.11 $7.32
Net investment
income* .22 .42 .42 .44 .45 .45
Net realized and
unrealized gain
(loss) on
investments .36 (.90) .62 .23 .51 (.22)
Dividends from net
investment income (.22) (.41) (.42) (.44) (.46) (.44)
Distributions from
net
realized gains -- (.01) (.02) -- -- --
------------ -------- -------- -------- -------- ----------
Net asset value,
end of period $7.90 $7.54 $8.44 $7.84 $7.61 $7.11
============ ======== ======== ======== ======== ==========
Total return 7.69%+++ (5.79)%+ 13.46%+ 9.08%+ 13.88%+ 3.32%+
Net assets at end
of period (000s) $40,104 $40,750 $56,515 $41,558 $21,512 $12,620
Ratio of operating
expenses to
average net
assets* 0.85%++ 0.85% 0.85% 0.85% 0.85% 0.85%
Ratio of net
investment income
to average net
assets* 5.51%++ 5.29% 5.10% 5.71% 6.21% 6.39%
Portfolio turnover
rate 40.79% 64.80% 33.11% 29.39% 30.24% 35.54%
*Reflects
voluntary
assumption of
fees or expenses
per share in each
period (Note 3). $.01 $.03 $.01 $.02 $.05 $.07
</TABLE>
<TABLE>
<CAPTION>
Class D
--------------------------------------
Six months
ended Year
June 30, ended
1995 December
(Unaudited) 31, 1994 1993**
------------------ ------------ -------- ----------
<S> <C> <C> <C>
Net asset value,
beginning of
period $7.53 $8.44 $8.20
Net investment
income* .17 .34 .19
Net realized and
unrealized gain
(loss) on
investments .38 (.91) .25
Dividends from net
investment income (.18) (.33) (.18)
Distributions from
net realized
gains -- (.01) (.02)
------------ -------- ----------
Net asset value,
end of period $7.90 $7.53 $8.44
============ ======== ==========
Total return 7.31%+++ (6.86)%+ 5.46%+++
Net assets at end
of period (000s) $827 $774 $821
Ratio of operating
expenses to
average net
assets* 1.85%++ 1.85% 1.85%++
Ratio of net
investment income
to average net
assets* 4.51%++ 4.31% 3.94%++
Portfolio turnover
rate 40.79% 64.80% 33.11%
*Reflects
voluntary
assumption of
fees or expenses
per share in each
period (Note 3). $.01 $.03 $.01
</TABLE>
**June 7, 1993 (commencement of share class designations) to December 31,
1993.
++Annualized.
+Total return figures do not reflect any front-end or contingent deferred
sales charges. Total return would be lower if the Distributor and its
affiliates had not voluntarily assumed a portion of the Fund's expenses.
+++Represents aggregate return for the period without annualization and does
not reflect any front-end or contingent deferred sales charges. Total
return would be lower if the Distributor and its affiliates had not
voluntarily assumed a portion of the Fund's expenses.
12
<PAGE>
State Street Research New York Tax-Free Fund
Fund Information, Officers and Trustees of State Street Research Tax-Exempt
Trust
Fund Information
State Street Research
New York Tax-Free Fund
One Financial Center
Boston, MA 02111
Investment Adviser
State Street Research &
Management Company
One Financial Center
Boston, MA 02111
Distributor
State Street Research
Investment Services, Inc.
One Financial Center
Boston, MA 02111
Shareholder Services
State Street Research
Shareholder Services
P.O. Box 8408
Boston, MA 02266-8408
1-800-562-0032
Custodian
State Street Bank and
Trust Company
225 Franklin Street
Boston, MA 02110
Legal Counsel
Goodwin, Procter & Hoar
Exchange Place
Boston, MA 02109
Officers
Ralph F. Verni
Chairman of the Board,
President and
Chief Executive Officer
Paul J. Clifford, Jr.
Vice President
Susan W. Drake
Vice President
John H. Kallis
Vice President
Thomas A. Shively
Vice President
Gerard P. Maus
Treasurer
Joseph W. Canavan
Assistant Treasurer
Douglas A. Romich
Assistant Treasurer
Francis J. McNamara, III
Secretary and General Counsel
Darman A. Wing
Assistant Secretary and
Assistant General Counsel
Trustees
Ralph F. Verni
Chairman of the Board,
President, Chief Executive
Officer and Director,
State Street Research &
Management Company
Edward M. Lamont
Formerly in banking (Morgan
Guaranty Trust Company of
New York); presently engaged in pri-
vate investments and civic affairs
Robert A. Lawrence
Partner, Saltonstall & Co.
Dean O. Morton
Retired; formerly Executive
Vice President, Chief
Operating Officer and Director,
Hewlett-Packard Company
Thomas L. Phillips
Retired; formerly Chairman of
the Board and Chief Executive
Officer, Raytheon Company
Toby Rosenblatt
President,
The Glen Ellen Company
Vice President,
Founders Investments Ltd.
Michael S. Scott Morton
Jay W. Forrester Professor of
Management, Sloan School
of Management, Massachusetts
Institute of Technology
Jeptha H. Wade
Retired; formerly Of Counsel,
Choate, Hall & Stewart
13
<PAGE>
[back cover]
State Street Research New York Tax-Free Fund Bulk Rate
One Financial Center U.S. Postage
Boston, MA 02111 PAID
Brockton, MA
Permit No. 600
Questions? Comments?
Call us at 1-800-562-0032,
or write us at:
State Street Research
Shareholder Services
P.O. Box 8408
Boston, MA 02266-8408
[State Street logo] State Streeet Research
This report is prepared for the general information of current shareholders
only. It is not authorized for use as sales material with prospective
investors.
CONTROL NUMBER: 2518-950822(0996)SSR-LD
Cover Illustration by Dorothy Cullinan
NYTF-395D-895
<PAGE>
[cover]
[State Street logo] STATE STREET RESEARCH
STATE STREET RESEARCH
FLORIDA TAX-FREE FUND
SEMIANNUAL REPORT [picture of boy playing with blocks
June 30, 1995 and building a house]
WHAT'S INSIDE
New and Improved:
A new design that's
easier to read
Investment Update:
About the Fund,
economy and markets
Fund Information:
Facts and figures
Plus, Complete Portfolio Holdings
and Financial Statements
<PAGE>
STATE STREET RESEARCH FLORIDA TAX-FREE FUND
Investment Update
Investment Environment
The Economy
(bullet) Most signs point to a slowing economy. Consumer spending has fallen,
home and auto sales are down, and job growth has eased.
(bullet) The Federal Reserve cut interest rates by one-quarter point on July
6, 1995.
(bullet) Inflation remains low, and a slower economy actually reduces the
risk of rising inflation.
The Markets
(bullet) Through June, municipal bonds have had an outstanding 1995, although
they have trailed other bond sectors. The Lehman Brothers Municipal Bond
Index provided a return of 9.65% through the first six months of 1995.(1)
(bullet) So far, 1995 has been the best year for stocks since 1991. The S&P
500 was up 20.19% through the first six months of 1995.(1)
The Fund
Over the past six months
(bullet) Class A shares of the Fund provided a total return of +8.13% (not
including sales charge) for the 6 months ended June 30, 1995.(2) The average
total return for 28 funds in Lipper Analytical Services' Florida intermediate
municipal fund category was +7.61% over the same time period (does not
reflect sales charge).
(bullet) The Fund's duration (a measure of sensitivity to interest rate
changes) was slightly longer than average. As a result, the Fund performed
particularly well when interest rates fell sharply in 1995. Bond prices
typically rise when interest rates fall.
Current strategy
(bullet) We have upgraded the quality of the bonds in the portfolio and
increased the percentage of insured bonds. As of June 30, 1995, the bonds in
the portfolio had an average credit quality of AA.
(bullet) The outlook for municipal bonds is positive. Supply is low, as fewer
new bonds have been issued. Municipal bonds also currently offer attractive
value relative to U.S. Treasury bonds.
1 The Lehman Brothers Municipal Bond index is a commonly used measure of
bond market performance. The Standard & Poor's 500 Composite Index (S&P 500)
includes 500 widely traded common stocks and is a commonly used measure of
U.S. stock market performance. The indices are unmanaged and do not take
sales charges into account. Direct investment in the indices is not possible;
results are for illustrative purposes only.
2 +7.62% for Class B shares; +8.14% for Class C shares; +7.74% for Class D
shares.
3 All returns represent past performance, which is no guarantee of future
results. The investment return and principal value of an investment made in
the Fund will fluctuate, and shares, when redeemed, may be worth more or less
than their original cost. All returns assume reinvestment of capital gain
distributions and income dividends.
4 "A" share returns for each of the periods reflect the maximum 4.5% sales
charge. "B" share returns for the 1-year and Life of Fund periods reflect a 5%
and a 4% contingent deferred sales charge, respectively. "C" shares, offered
without a sales charge, are available only to certain employee benefit plans
and large institutions. "D" share return for the 1-year period reflects a 1%
contingent deferred sales charge.
Fund Information (all data are for periods ended June 30, 1995)
SEC Average Annual Compound Rates
of Return
(at maximum applicable sales charge)3,4
<TABLE>
<CAPTION>
Life of Fund
(since 8/10/93) 1 year
<S> <C> <C>
Class A +1.34%/-0.53% +2.38%/+0.51%
Class B +1.00%/-0.89% +1.30%/-0.64%
Class C +4.09%/+2.06% +7.47%/+5.51%
Class D +3.09%/+1.24% +5.41%/+3.47%
</TABLE>
Cumulative Total Returns
(do not reflect sales charge)3
<TABLE>
<CAPTION>
Life of Fund
(since 8/10/93) 1 year
<S> <C> <C>
Class A +7.38%/+3.67% +7.20%/+5.25%
Class B +5.82%/+2.26% +6.30%/+4.36%
Class C +7.87%/+3.94% +7.47%/+5.51%
Class D +5.93%/+2.36% +6.41%/+4.47%
</TABLE>
SEC Yield
<TABLE>
<S> <C>
Class A 4.47%/1.94%
Class B 3.92%/1.30%
Class C 4.93%/2.29%
Class D 3.92%/1.29%
</TABLE>
SEC yield is calculated according to Securities and Exchange Commission
requirements and is based on the net investment income produced for the 30
days ended June 30, 1995. A small portion of the Fund's income may be subject
to federal, state and local income tax, and/or alternative minimum tax.
Investors should consult their tax adviser.
Performance results for the Fund are increased by the Distributor's voluntary
reduction of Fund fees and expenses. The first figure reflects expense
reduction; the second shows what results would have been without
subsidization.
Bond Quality
(by percentage of net assets)
[representation of pie chart]
AAA-56%; AA-17%; A-9%; BBB-13%; Not rated-5%
As rated by Standard & Poor's Corporation or Moody's Investors Service, Inc.,
or unrated but equivalent.
<PAGE>
STATE STREET RESEARCH FLORIDA TAX-FREE FUND
Investment Portfolio
June 30, 1995 (Unaudited)
<TABLE>
<CAPTION>
Principal Maturity Value
Amount Date (Note 1)
------------------------------- ------- ---------- ------------
<S> <C> <C> <C>
Municipal Bonds 96.3%
General Obligation 11.6%
The School Board of Dade
County, Florida, Certificates
of Participation, Series 1994
A, MBIA Insured, 5.00% $500,000 5/01/2001 $ 502,970
The School District of Dade
County, Florida, General
Obligation School Bonds, Series
1994A, MBIA Insured, 5.15% 500,000 6/01/2001 508,105
Palm Beach County, Florida
General Obligation Bonds,
Series 1994, 7.00% 250,000 12/01/2004 287,128
------------
1,298,203
------------
Airport 4.7%
Dade County, Florida, Aviation
Revenue Refunding Bonds, Series
1994 B (Non-AMT), 6.00% 500,000 10/01/2002 530,000
------------
Certificates of Participation 16.3%
Certificates of Participation,
(School Board of Hillsborough
County, Florida, Master Lease
Program), Series 1994, MBIA
Insured, 5.30% 500,000 7/01/2002 509,040
Certificates of Participation,
Series 1994B, The School Board
of Seminole County, Florida,
MBIA Insured, 6.00% 500,000 7/01/2003 534,620
Certificates of Participation,
Series 1994A, The School Board
of Seminole County, Florida,
MBIA Insured, 5.50% 500,000 7/01/2003 519,625
Certificates of Participation,
Series 1995, The State of
Florida, Department of
Corrections, (Okeechobee
Correctional Institution
Project), AMBAC Insured, 6.25% 250,000 3/01/2015 257,697
------------
1,820,982
------------
Education/Student Loan 4.6%
State of Florida, State Board
of Education, Public Education
Capital Outlay Bonds, 1994
Series B, 5.625% $500,000 6/01/2005 $ 519,000
------------
Lease Revenue 4.4%
Puerto Rico Public Buildings
Authority, Public Education and
Health Facilities Refunding
Bonds, Series M, 5.60% 500,000 7/01/2008 492,300
------------
Life Care 8.9%
St. Johns County Industrial
Development Authority,
Industrial Development Revenue
Bonds, Series 1993A, (Vicar's
Landing Project), 6.20% 500,000 2/15/2003 501,460
Collier County Health
Facilities Authority, Health
Facility Refunding Revenue
Bonds, (The Moorings Inc.
Project), Series 1994, 6.00% 500,000 12/01/2005 498,055
------------
999,515
------------
Public Facilities 4.8%
Puerto Rico Public Buildings
Authority, Government
Facilities Revenue Bonds,
Series A, 6.25% 500,000 7/01/2010 533,185
------------
Single-Family Housing 4.7%
Florida Housing Finance Agency,
Single Family Mortgage Revenue
Refunding Bonds, 1994 Series A
(Non-AMT), 5.75% 525,000 1/01/2005 528,040
------------
Special/Sales Tax Revenue 13.8%
Dade County, Florida, Special
Obligation Bonds, (Courthouse
Center Project), Series 1994,
5.75% 500,000 4/01/2003 511,215
Hillsborough County, Florida,
Capital Improvement Bonds, FGIC
Insured, 6.00% 500,000 8/01/2005 528,215
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
STATE STREET RESEARCH FLORIDA TAX-FREE FUND
Investment Portfolio (cont'd)
Special/Sales Tax Revenue (cont'd)
Orange County, Florida, Public
Service Tax Revenue Bonds
Series 1995, FGIC Insured,
5.90% $500,000 10/01/2012 $ 504,720
------------
1,544,150
------------
Toll Roads/Turnpike Authorities 4.4%
Escambia County, Florida, Road
Improvement Revenue Bonds,
Series 1993A, 5.00% 500,000 1/01/2000 492,900
------------
Water & Sewer 18.1%
East County Water Control
District, Water Management
Consolidated Refunding Bonds,
Series 1994, (Lee and Hendry
Counties, Florida), AGIC
Insured, 5.375% 500,000 11/01/2001 511,915
City of Titusville, Florida,
Water and Sewer Revenue Bonds,
Series 1994, MBIA Insured,
5.20% 500,000 10/01/2002 511,755
Charlotte County, Florida,
Utility System Revenue Bonds,
Series 1994, FGIC Insured,
6.00% 500,000 10/01/2003 534,065
City of Miami Beach, Florida,
Water and Sewer Revenue Bonds,
Series 1995, FSA Insured,
5.375% 500,000 9/01/2015 468,130
------------
2,025,865
------------
Total Municipal Bonds (Cost $10,497,594) 10,784,140
------------
SHORT-TERM OBLIGATIONS 1.8%
The State of Massachusetts,
General Obligation Bonds,
Series B, 3.20% 200,000 12/01/1997++ 200,000
------------
Total Short-Term Obligations (Cost $200,000) 200,000
------------
Total Investments (Cost $10,697,594)--98.1% 10,984,140
Cash and Other Assets, Less Liabilities--1.9% 210,158
------------
Net Assets--100.0% $11,194,298
============
++Interest rate on this obligation may change daily.
</TABLE>
<TABLE>
<S> <C>
Federal Income Tax Information:
At June 30, 1995, the net unrealized appreciation of
investments based on cost for Federal income tax
purposes of $10,697,594 was as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of value
over tax cost $304,581
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax cost
over value (18,035)
---------
$286,546
=========
------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
STATE STREET RESEARCH FLORIDA TAX-FREE FUND
Statement of Assets and Liabilities
June 30, 1995 (Unaudited)
<TABLE>
<S> <C>
Assets
Investments, at value (Cost $10,697,594) (Note 1) $10,984,140
Cash 71,733
Receivable for securities sold 516,347
Interest receivable 199,788
Receivable from Distributor (Note 3) 24,218
Receivable for fund shares sold 2,133
Deferred organization costs and other assets (Note
1) 22,065
------------
11,820,424
Liabilities
Payable for securities purchased 542,423
Dividends payable 36,025
Accrued trustees' fees (Note 2) 6,701
Accrued management fee (Note 2) 5,088
Accrued distribution fee (Note 5) 4,309
Other accrued expenses 31,580
------------
626,126
------------
$11,194,298
============
Net Assets
Net Assets consist of:
Undistributed net investment income $ 38,342
Unrealized appreciation of investments 286,546
Accumulated net realized loss (566,379)
Shares of beneficial interest 11,435,789
------------
$11,194,298
============
Net Asset Value and redemption price per share of
Class A shares ($3,325,108 / 353,718 shares of
beneficial interest) $9.40
=====
Maximum Offering Price per share of Class A shares
($9.40 / .955) $9.84
=====
Net Asset Value and offering price per share of
Class B shares ($3,104,897 / 330,494 shares of
beneficial interest)* $9.39
=====
Net Asset Value, offering price and redemption
price per share of Class C shares ($3,461,967 /
368,120 shares of beneficial interest) $9.40
=====
Net Asset Value and offering price per share of
Class D shares ($1,302,326 / 138,585 shares of
beneficial interest)* $9.40
=====
</TABLE>
*Redemption price per share for Class B and Class D is equal to net asset
value less any applicable contingent deferred sales charge.
Statement of Operations
For the six months ended June 30, 1995 (Unaudited)
<TABLE>
<S> <C>
Investment Income
Interest $ 315,440
Expenses
Custodian fee 49,800
Transfer agent and shareholder services (Note 2) 31,651
Management fee (Note 2) 31,034
Reports to shareholders 8,344
Audit fee 7,861
Trustees' fees (Note 2) 6,860
Legal fees 4,983
Distribution fee--Class A (Note 5) 4,372
Distribution fee--Class B (Note 5) 15,362
Distribution fee--Class D (Note 5) 6,649
Amortization of organization costs (Note 1) 3,133
Miscellaneous 1,935
----------
171,984
Expenses borne by the Distributor (Note 3) (131,495)
----------
40,489
----------
Net investment income 274,951
----------
Realized and Unrealized Gain on Investments
Net realized gain on investments (Notes 1 and 4) 29,561
Net unrealized appreciation of investments 573,648
----------
Net gain on investments 603,209
----------
Net increase in net assets resulting from
operations $ 878,160
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
STATE STREET RESEARCH FLORIDA TAX-FREE FUND
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Six months
ended
June 30, Year ended
1995 December 31,
(Unaudited) 1994
------------------------------------ ------------ ----------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations:
Net investment income $ 274,951 $ 521,943
Net realized gain (loss) on
investments* 29,561 (595,926)
Net unrealized appreciation
(depreciation) of investments 573,648 (385,696)
------------ ----------------
Net increase (decrease) resulting
from operations 878,160 (459,679)
------------ ----------------
Dividends from net investment
income:
Class A (91,516) (177,518)
Class B (63,209) (97,739)
Class C (92,580) (161,153)
Class D (29,814) (49,113)
------------ ----------------
(277,119) (485,523)
------------ ----------------
Distribution from net realized
gains:
Class A -- (7,179)
Class B -- (5,693)
Class C -- (6,498)
Class D -- (2,648)
------------ ----------------
-- (22,018)
------------ ----------------
Net increase (decrease) from fund
share transactions (Note 7) (523,539) 1,975,558
------------ ----------------
Total increase in net assets 77,502 1,008,338
Net Assets
Beginning of period 11,116,796 10,108,458
------------ ----------------
End of period (including
undistributed net investment income
of $38,342 and $40,510,
respectively) $11,194,298 $11,116,796
============ ================
*Net realized loss for Federal
income tax purposes
(Note 1) $ (73,892) $ (492,473)
============ ================
</TABLE>
The accompanying notes are an integral part of the financial statements.
Notes to Unaudited Financial Statements
June 30, 1995
Note 1
State Street Research Florida Tax-Free Fund (the "Fund"), is a series of
State Street Research Tax-Exempt Trust (the "Trust"), formerly MetLife-State
Street Tax-Exempt Trust, which was organized as a Massachusetts business
trust in December, 1985 and is registered under the Investment Company Act of
1940, as amended, as an open-end management investment company. The Fund
commenced operations in August, 1993. Five series of the Trust are publicly
offered: State Street Research Florida Tax-Free Fund, State Street Research
California Tax-Free Fund, State Street Research Tax-Exempt Fund, State Street
Research New York Tax-Free Fund and State Street Research Pennsylvania
Tax-Free Fund.
The Fund offers four classes of shares. Class A shares are subject to an
initial sales charge of up to 4.50% and pay a service fee equal to 0.25% of
average daily net assets. Class B shares are subject to a contingent deferred
sales charge on certain redemptions made within five years of purchase and
pay annual distribution and service fees of 1.00%. Class B shares
automatically convert into Class A shares (which pay lower ongoing expenses)
at the end of eight years after the issuance of the Class B shares. Class C
shares are only offered to certain employee benefit plans and large
institutions. No sales charge is imposed at the time of purchase or
redemption of Class C shares. Class C shares do not pay any distribution or
service fees. Class D shares are subject to a contingent deferred sales
charge of 1.00% on any shares redeemed within one year of their purchase.
Class D shares also pay annual distribution and service fees of 1.00%. The
Fund's expenses are borne pro rata by each class, except that each class
bears expenses, and has exclusive voting rights with respect to provisions of
the Plan of Distribution, related specifically to that class. The Trustees
declare separate dividends on each class of shares.
The following significant accounting policies are consistently followed by
the Fund in preparing its financial statements, and such policies are in
conformity with generally accepted accounting principles for investment
companies.
A. Investment Valuation
Tax-exempt securities are valued by a pricing service, which utilizes market
transactions, quotations from dealers, and various relationships among
securities in determining value. Short-term obligations are valued at
amortized cost. Other securities, if any, are valued at their fair value as
determined in accordance with established methods consistently applied.
B. Security Transactions
Security transactions are accounted for on the trade date (date the order to
buy or sell is executed). Realized gains or losses are reported on the basis
of identified cost of securities delivered.
C. Net Investment Income
Net investment income is determined daily and consists of interest accrued
and discount earned, less amortization of premium and the estimated daily
expenses of the Fund. Interest income is accrued daily as earned. The Fund is
charged for expenses directly attributable to it, while indirect expenses are
allocated among all funds in the Trust.
5
<PAGE>
STATE STREET RESEARCH FLORIDA TAX-FREE FUND
D. Dividends
Dividends are declared daily by the Fund based upon projected net investment
income and paid or reinvested monthly. Net realized capital gains, if any,
are distributed annually, unless additional distributions are required for
compliance with applicable tax regulations.
Income dividends and capital gain distributions are determined in
accordance with Federal income tax regulations which may differ from
generally accepted accounting principles.
E. Federal Income Taxes
No provision for Federal income taxes is necessary because the Fund intends
to qualify under Subchapter M of the Internal Revenue Code and its policy is
to distribute all of its taxable income, including net realized capital
gains, within the prescribed time periods. At December 31, 1994, the Fund had
a capital loss carryforward of $492,473 available, to the extent provided in
regulations, to offset future capital gains, if any, which expires on
December 31, 2002.
In order to meet certain excise tax distribution requirements under Section
4982 of the Internal Revenue Code, the Fund is required to measure and
distribute annually, if necessary, net capital gains realized during a
twelve-month period ending October 31. In this connection, the Fund is
permitted to defer into its next fiscal year any net capital losses incurred
between each November 1 and the end of its fiscal year. From November 1, 1994
through December 31, 1994 the Fund incurred net capital losses of $103,453
and intends to defer and treat such losses as arising in the fiscal year
ending December 31, 1995.
F. Deferred Organization Costs
Certain costs incurred in the organization and registration of the Fund were
capitalized and are being amortized under the straight-line method over a
period of five years.
Note 2
The Trust and State Street Research & Management Company (the "Adviser"), an
indirect wholly-owned subsidiary of Metropolitan Life Insurance Company
("Metropolitan"), have entered into an agreement under which the Adviser
earns monthly fees at an annual rate of 0.55% of the Fund's average daily net
assets. In consideration of these fees, the Adviser furnishes the Fund with
management, investment advisory, statistical and research facilities and
services. The Adviser also pays all salaries, rent and certain other expenses
of management. During the six months ended June 30, 1995, the fees pursuant
to such agreement amounted to $31,034.
State Street Research Shareholder Services, a division of State Street
Research Investment Services, Inc., the Trust's principal underwriter (the
"Distributor"), an indirect wholly-owned subsidiary of Metropolitan, provides
certain shareholder services to the Fund such as responding to inquiries and
instructions from investors with respect to the purchase and redemption of
shares of the Fund. During the six months ended June 30, 1995, the amount of
such expenses was $7,192.
The fees of the Trustees not currently affiliated with the Adviser amounted
to $6,860 during the six months ended June 30, 1995.
Note 3
The Distributor and its affiliates may from time to time and in varying
amounts voluntarily assume some portion of fees or expenses relating to the
Fund. During the six months ended April 30, 1995, the amount of such expenses
assumed by the Distributor and its affiliates was $131,495.
Note 4
For the six months ended June 30, 1995, purchases and sales of securities,
exclusive of short-term obligations, aggregated $2,753,030 and $3,356,932,
respectively.
Note 5
The Trust has adopted a Plan of Distribution Pursuant to Rule 12b-1 (the
"Plan") under the Investment Company Act of 1940, as amended. Under the Plan,
the Fund pays annual service fees to the Distributor at a rate of 0.25% of
average daily net assets for Class A, Class B and Class D shares. In
addition, the Fund pays annual distribution fees of 0.75% of average daily
net assets for Class B and Class D shares. The Distributor uses such payments
for personal services and/or the maintenance of shareholder accounts, to
reimburse securities dealers for distribution and marketing services, to
furnish ongoing assistance to investors and to defray a portion of its
distribution and marketing expenses. For the six months ended June 30, 1995,
fees pursuant to such plan amounted to $4,372, $15,362 and $6,649 for Class
A, Class B and Class D, respectively.
The Fund has been informed that the Distributor and MetLife Securities, Inc.,
a wholly-owned subsidiary of Metropolitan, earned initial sales charges
aggregating $215 and $273, respectively, on sales of Class A shares of the
Fund during the six months ended June 30, 1995, and that MetLife Securities,
Inc. earned commissions aggregating $3,016 on sales of Class B shares and
that the Distributor collected contingent deferred sales charges of $11,075
and $996 on redemptions of Class B and Class D shares, respectively, during
the same period.
Note 6
Under normal circumstances at least 80% of the Fund's net assets will be
invested in Florida Municipal Obligations. Certain proposed Florida
constitutional amendments, legislative measures, executive orders,
administrative regulations and voter initiatives could result in adverse
consequences affecting Florida Municipal Obligations. Also, the Fund is able
to invest up to 25% of total assets in a single industry. Accordingly, the
Fund's investments may be subject to greater risk than those in a fund with
more restrictive concentration limits.
At June 30, 1995, investments totalling 27.6% and 14.0% of the Fund's net
assets were insured as to the timely payment of principal and interest by
Municipal Bond Investors Assurance Corp. (MBIA) and Financial Guaranty
Insurance Co. (FGIC), respectively.
6
<PAGE>
STATE STREET RESEARCH FLORIDA TAX-FREE FUND
Notes (cont'd)
Note 7
The Trustees have the authority to issue an unlimited number of shares of
beneficial interest, $.001 par value per share. At June 30, 1995,
Metropolitan owned 52,486 Class A shares, 52,486 Class B shares, 367,407
Class C shares and 52,486 Class D shares of the Fund and the Adviser owned
one share of each of Class A, Class B, Class C and Class D of the Fund.
Share transactions were as follows:
<TABLE>
<CAPTION>
Six months ended
June 30, 1995 Year ended
(Unaudited) December 31, 1994
-------------------- ------------------------
Class A Shares Amount Shares Amount
------------------------------------- ------- --------- -------- ------------
<S> <C> <C> <C> <C>
Shares sold 11,229 $ 105,358 189,827 $ 1,764,291
Issued upon reinvestment of:
Distribution from net realized gains -- -- 170 1,513
Dividends from net investment income 3,488 31,441 9,370 86,293
Shares repurchased (66,523) (617,909) (158,734) (1,446,156)
------- --------- -------- ------------
Net increase (decrease) (51,806) $(481,110) 40,633 $ 405,941
======= ========= ======== ============
Class B Shares Amount Shares Amount
------------------------------------- ------- --------- -------- ------------
Shares sold 35,784 $ 325,567 197,912 $ 1,841,260
Issued upon reinvestment of:
Distribution from net realized gains -- -- 236 2,104
Dividends from net investment income 2,699 24,126 5,265 48,194
Shares repurchased (30,794) (288,816) (54,070) (493,819)
------- --------- -------- ------------
Net increase 7,689 $ 60,877 149,343 $ 1,397,739
======= ========= ======== ============
Class C Shares Amount Shares Amount
------------------------------------- ------- --------- -------- ------------
Shares sold 274 $ 2,549 393 $ 3,651
Issued upon reinvestment of:
Distribution from net realized gains -- -- 728 6,490
Dividends from net investment income 12 109 11 96
------- --------- -------- ------------
Net increase 286 $ 2,658 1,132 $ 10,237
======= ========= ======== ============
Class D Shares Amount Shares Amount
------------------------------------- ------- --------- -------- ------------
Shares sold 113 $ 1,032 31,855 $ 293,877
Issued upon reinvestment of:
Distribution from net realized gains -- -- 174 1,547
Dividends from net investment income 681 6,322 1,169 10,741
Shares repurchased (12,171) (113,318) (15,874) (144,524)
------- --------- -------- ------------
Net increase (decrease) (11,377) $(105,964) 17,324 $ 161,641
======= ========= ======== ============
</TABLE>
7
<PAGE>
STATE STREET RESEARCH FLORIDA TAX-FREE FUND
Financial Highlights
For a share outstanding throughout each period.
<TABLE>
<CAPTION>
Class A Class B
---------------------------------------- ------------------------------------------
Six months Six months
ended ended
June 30, Year ended June 30, Year ended
1995 December 31, 1995 December 31,
(Unaudited) 1994 1993** (Unaudited) 1994 1993**
-------------------- ------------ -------------- ------ ------------ -------------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $8.92 $9.74 $9.55 $8.92 $9.74 $9.55
Net investment
income* .24 .45 .13 .21 .37 .11
Net realized and
unrealized gain
(loss) on
investments .48 (.83) .20 .47 (.82) .20
Dividends from net
investment income (.24) (.42) (.13) (.21) (.35) (.11)
Distribution from
net realized gains -- (.02) (.01) -- (.02) (.01)
------------ -------------- ------ ------------ -------------- --------
Net asset value, end
of period $9.40 $8.92 $9.74 $9.39 $8.92 $9.74
============ ============== ====== ============ ============== ========
Total return 8.13%+++ (4.02)%+ 3.46%+++ 7.62%+++ (4.73)%+ 3.21%+++
Net assets at end of
period (000s) $3,325 $3,618 $3,554 $3,105 $2,879 $1,689
Ratio of operating
expenses to average
net assets* 0.50%++ 0.50% 0.50%++ 1.25%++ 1.25% 1.25%++
Ratio of net
investment income to
average net assets* 5.09%++ 4.81% 3.98%++ 4.33%++ 4.11% 3.14%++
Portfolio turnover
rate 25.14% 119.46% 49.38% 25.14% 119.46% 49.38%
*Reflects voluntary
assumption of fees
or expenses per
share in each period
(Note 3). $.11 $ .17 $ .08 $ .11 $ .17 $ .09
</TABLE>
<TABLE>
<CAPTION>
Class C Class D
---------------------------------------- ------------------------------------------
Six months Six months
ended ended
June 30, Year ended June 30, Year ended
1995 December 31, 1995 December 31,
(Unaudited) 1994 1993** (Unaudited) 1994 1993**
-------------------- ------------ -------------- ------ ------------ -------------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $8.93 $9.74 $9.55 $8.92 $9.74 $9.55
Net investment
income* .25 .47 .15 .20 .37 .11
Net realized and
unrealized gain
(loss) on
investments .47 (.82) .19 .49 (.82) .20
Dividends from net
investment income (.25) (.44) (.14) (.21) (.35) (.11)
Distribution from
net realized gains -- (.02) (.01) -- (.02) (.01)
------------ -------------- ------ ------------ -------------- --------
Net asset value, end
of period $9.40 $8.93 $9.74 $9.40 $8.92 $9.74
============ ============== ====== ============ ============== ========
Total return 8.14%+++ (3.67)%+ 3.55%+++ 7.74%+++ (4.73)%+ 3.21%+++
Net assets at end of
period (000s) $3,462 $3,283 $3,573 $1,302 $1,337 $1,292
Ratio of operating
expenses to average
net assets* 0.25%++ 0.25% 0.25%++ 1.25%++ 1.25% 1.25%++
Ratio of net
investment income to
average net assets* 5.34%++ 5.05% 3.97%++ 4.35%++ 4.06% 3.12%++
Portfolio turnover
rate 25.14% 119.46% 49.38% 25.14% 119.46% 49.38%
*Reflects voluntary
assumption of fees
or expenses per
share in each period
(Note 3). $.11 $.17 $.10 $.11 $.17 $.09
</TABLE>
** August 10, 1993 (commencement of operations) to December 31, 1993.
++ Annualized.
+ Total return figures do not reflect any front-end or contingent deferred
sales charges. Total return would be lower if the Distributor and its
affiliates had not voluntarily assumed a portion of the Fund's expenses.
+++ Represents aggregate return for the period without annualization and
does not reflect any front-end or contingent deferred sales charges. Total
return would be lower if the Distributor and its affiliates had not
voluntarily assumed a portion of the Fund's expenses.
8
<PAGE>
STATE STREET RESEARCH FLORIDA TAX-FREE FUND
Fund Information, Officers and Trustees of State Street Research Tax-Exempt
Trust
Fund Information
State Street Research
Florida Tax-Free Fund
One Financial Center
Boston, MA 02111
Investment Adviser
State Street Research &
Management Company
One Financial Center
Boston, MA 02111
Distributor
State Street Research
Investment Services, Inc.
One Financial Center
Boston, MA 02111
Shareholder Services
State Street Research
Shareholder Services
P.O. Box 8408
Boston, MA 02266-8408
1-800-562-0032
Custodian
State Street Bank and
Trust Company
225 Franklin Street
Boston, MA 02110
Legal Counsel
Goodwin, Procter & Hoar
Exchange Place
Boston, MA 02109
Officers
Ralph F. Verni
Chairman of the Board,
President and
Chief Executive Officer
Paul J. Clifford, Jr.
Vice President
Susan W. Drake
Vice President
John H. Kallis
Vice President
Thomas A. Shively
Vice President
Gerard P. Maus
Treasurer
Joseph W. Canavan
Assistant Treasurer
Douglas A. Romich
Assistant Treasurer
Francis J. McNamara, III
Secretary and General Counsel
Darman A. Wing
Assistant Secretary and
Assistant General Counsel
Trustees
Ralph F. Verni
Chairman of the Board,
President, Chief Executive
Officer and Director,
State Street Research &
Management Company
Edward M. Lamont
Formerly in banking (Morgan Guaranty Trust Company of New York); presently
engaged in private investments and civic affairs
Robert A. Lawrence
Partner, Saltonstall & Co.
Dean O. Morton
Retired; formerly Executive
Vice President, Chief
Operating Officer and Director,
Hewlett-Packard Company
Thomas L. Phillips
Retired; formerly Chairman of the Board and Chief Executive Officer, Raytheon
Company
Toby Rosenblatt
President,
The Glen Ellen Company
Vice President,
Founders Investments Ltd.
Michael S. Scott Morton
Jay W. Forrester Professor of
Management, Sloan School
of Management, Massachusetts
Institute of Technology
Jeptha H. Wade
Retired; formerly Of Counsel, Choate, Hall & Stewart
9
<PAGE>
[back cover]
State Street Research Florida Tax-Free Fund Bulk Rate
One Financial Center U.S. Postage
Boston, MA 02111 PAID
Brockton, MA
Permit No. 600
Questions? Comments?
Call us at 1-800-562-0032,
or write us at:
State Street Research
Shareholder Services
P.O. Box 8408
Boston, MA 02266-8408
[State Street logo] State Street Research
This report is prepared for the general information of current shareholders
only. It is not authorized for use as sales material with prospective
investors.
CONTROL NUMBER: 2519-950822(0996)SSR-LD
Cover illustration by Dorothy Cullinan
FTF-046E-895
<PAGE>
COVER
[STATE STREET RESEARCH LOGO] State Street Research
STATE STREET RESEARCH
PENNSYLVANIA TAX-FREE FUND
SEMIANNUAL REPORT
June 30, 1995
[Picture of person building house with blocks]
WHAT'S INSIDE
New and Improved:
A new design that's easier to read
Investment Update:
About the Fund, economy and markets
Fund Information:
Facts and figures
Plus, Complete Portfolio Holdings and Financial Statements
<PAGE>
State Street Research Pennsylvania Tax-Free Fund
Investment Update
Investment Environment
The Economy
(bullet) Most signs point to a slowing economy. Consumer spending has fallen,
home and auto sales are down, and job growth has eased.
(bullet) The Federal Reserve cut interest rates by one-quarter point on July
6, 1995.
(bullet) Inflation remains low, and a slower economy actually reduces the
risk of rising inflation.
The Markets
(bullet) Through June, municipal bonds have had an outstanding 1995, although
they have trailed other bond sectors. The Lehman Brothers Municipal Bond
Index provided a return of 9.65% through the first six months of 1995.(1)
(bullet) So far, 1995 has been the best year for stocks since 1991. The S&P
500 was up 20.19% through the first six months of 1995.(1)
The Fund
Over the past six months
(bullet) Class A shares of the Fund provided a total return of +7.37% (not
including sales charge) for the 6 months ended June 30, 1995.(2) The average
total return for 14 funds in Lipper Analytical Services' Pennsylvania
intermediate municipal fund category was +7.17% over the same time period
(does not reflect sales charge).
(bullet) The Fund's duration (a measure of sensitivity to interest rate
changes) was slightly longer than average. As a result, the Fund performed
particularly well when interest rates fell sharply in 1995. Bond prices
typcially rise when interest rates fall.
Current strategy
(bullet) We have upgraded the quality of the bonds in the portfolio and
increased the percentage of insured bonds. As of June 30, 1995, the bonds in
the portfolio had an average credit quality of AA-.
(bullet) The outlook for municipal bonds is positive. Supply is low, as fewer
new bonds have been issued. Municipal bonds also currently offer attractive
value relative to U.S. Treasury bonds.
(1) The Lehman Brothers Municipal Bond index is a commonly used measure of bond
market performance. The Standard & Poor's 500 Composite Index (S&P 500)
includes 500 widely traded common stocks and is a commonly used measure of
U.S. stock market performance. The indices are unmanaged and do not take
sales charges into account. Direct investment in the indices is not possible;
results are for illustrative purposes only.
(2) +7.10% for Class B shares; +7.62% for Class C shares; +6.98% for Class D
shares.
(3) All returns represent past performance, which is no guarantee of future
results. The investment return and principal value of an investment made in
the Fund will fluctuate, and shares, when redeemed, may be worth more or less
than their original cost. All returns assume reinvestment of capital gain
distributions and income dividends.
(4) "A" share returns for each of the periods reflect the maximum 4.5% sales
charge. "B" share returns for the 1-year and Life of Fund periods reflect a
5% and 4% contingent deferred sales charge, respectively. "C" shares, offered
without a sales charge, are available only to certain employee benefit plans
and large institutions. "D" share return for the 1-year period reflects a 1%
contingent deferred sales charge.
Fund Information (all data are for periods ended June 30, 1995)
SEC Average Annual Compound Rates of Return
(at maximum applicable sales charge)(3),(4)
<TABLE>
<CAPTION>
Life of Fund
(since 8/10/93) 1 year
<S> <C> <C>
Class A +1.22%/-0.53% +2.30%/+0.65%
Class B +0.93%/-1.05% +1.33%/-0.61%
Class C +4.02%/+2.12% +7.38%/+5.65%
Class D +2.97%/+1.14% +5.33%/+3.61%
</TABLE>
Cumulative Total Returns
(do not reflect sales charge)(3)
<TABLE>
<CAPTION>
Life of Fund
(since 8/10/93) 1 year
<S> <C> <C>
Class A +7.14%/+3.67% +7.12%/+5.40%
Class B +5.69%/+1.95% +6.33%/+4.39%
Class C +7.74%/+4.04% +7.38%/+5.65%
Class D +5.68%/+2.16% +6.33%/+4.61%
</TABLE>
SEC Yield
<TABLE>
<CAPTION>
<S> <C>
Class A 4.80%/3.00%
Class B 4.26%/2.39%
Class C 5.27%/3.33%
Class D 4.27%/2.38%
</TABLE>
SEC yield is calculated according to Securities and Exchange Commission
requirements and is based on the net investment income produced for the 30
days ended June 30, 1995. A small portion of the Fund's income may be subject
to federal, state and local income tax, and/or alternative minimum tax.
Investors should consult their tax adviser.
Performance results for the Fund are increased by the Distributor's voluntary
reduction of Fund fees and expenses. The first figure reflects expense
reduction; the second shows what results would have been without
subsidization.
[PIE CHART GOES HERE]
Bond Quality
(by percentage of net assets)
A 5%
AA 14%
AAA 48%
BBB 22%
Not rated 11%
As rated by Standard & Poor's Corporation or Moody's Investors Service, Inc.,
or unrated but equivalent.
<PAGE>
State Street Research Pennsylvania Tax-Free Fund
Investment Portfolio
June 30, 1995 (Unaudited)
<TABLE>
<CAPTION>
Principal Maturity Value
Amount Date (Note 1)
-------- --------- --------------
<S> <C> <C> <C>
MUNICIPAL BONDS 95.3%
General Obligation 27.8%
City of Bethlehem, Lehigh and Northampton Counties,
Pennsylvania, General Obligation Bonds, Series A of
1992, MBIA Insured, 6.00% $ 600,000 6/01/2001 $ 632,184
Commonwealth of Pennsylvania, General Obligation
Bonds, Second Series of 1994, (Refunding and
Projects), MBIA Insured, 5.00% 500,000 6/15/2002 501,725
Puerto Rico Municipal Finance Agency, 1994 Series A
Bonds, FSA Insured, 5.30% 500,000 7/01/2002 513,790
Bradford Area School District, McKean County,
Pennsylvania, General Obligation Bonds, Series of
1994, FGIC Insured, 6.00% 500,000 10/01/2004 523,730
County of Bucks, Pennsylvania, General Obligation
Bonds, Series of 1995, 7.00% 500,000 5/01/2005 565,595
Bradford Area School District, McKean County,
Pennsylvania, General Obligation Bonds, Series of
1995, FGIC Insured, 5.00% 500,000 10/01/2005 492,095
County of Cambria, Pennsylvania, General Obligation
Bonds, Series of 1994, FGIC Insured, 5.875% 500,000 8/15/2008 512,885
County of Allegheny, Pennsylvania, General Obligation
Bonds, Series C-44, FGIC Insured, 5.30% 435,000 6/01/2010 419,349
Fox Chapel Area School District, Allegheny County,
Pennsylvania, General Obligation Bonds, Refunding
Series of 1993, 5.50% 500,000 8/15/2010 482,565
--------------
4,643,918
--------------
College & University 4.4%
Delaware County Authority, (Commonwealth of
Pennsylvania), (Villanova University), Revenue Bonds,
Series of 1995, AMBAC Insured, 5.25% 500,000 8/01/2006 494,610
Pennsylvania Higher Educational Facilities Authority,
(Commonwealth of Pennsylvania), (University of
Pennsylvania), Revenue Bonds, Series A, 5.60% 250,000 9/01/2010 244,983
--------------
739,593
--------------
Highway & Transportation Revenue 4.5%
Southeastern Pennsylvania Transportation Authority,
Special Revenue Bonds, Series of 1995A, 6.50% 200,000 3/01/2005 217,776
Puerto Rico Highway and Transportation Authority,
Highway Revenue Refunding Bonds, Series V, 6.375% 500,000 7/01/2008 535,935
--------------
753,711
--------------
Hospital/Health Care 12.1%
Scranton-Lackawanna Health and Welfare Authority,
Revenue Bonds, Series A of 1994, (Allied Services
Rehabilitation Hospitals Project), 6.60% 500,000 7/15/2000 504,055
Montgomery County Higher Education and Health
Authority, Pennsylvania, Northwestern Corp., 6.50% 1,140,000 6/01/2004 1,184,357
The Lebanon County Good Samaritan Hospital Authority,
Lebanon County, Pennsylvania, Hospital Revenue Bonds,
Series of 1993, (The Good Samaritan Hospital
Project), 5.55% 350,000 11/15/2004 336,396
--------------
2,024,808
--------------
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
State Street Research Pennsylvania Tax-Free Fund
Investment Portfolio (cont'd)
Principal Maturity Value
Amount Date (Note 1)
-------- --------- --------------
Industrial Development 5.2%
Montgomery County Industrial Development Authority,
Health Facilities Revenue Bonds, Series of 1993,
(ECRI Project), 6.40% $ 855,000 6/01/2003 $ 872,433
--------------
Lease Revenue 6.2%
Pennsylvania Convention Center Authority, Refunding
Revenue Bonds, 1994 Series A, 6.25% 1,000,000 9/01/2004 1,037,980
--------------
Life Care 2.9%
Delaware County Industrial Development Authority,
Revenue Bonds, Series of 1994, (Martins Run), 5.75% 500,000 12/15/2003 487,920
--------------
Public Facilities 3.2%
Puerto Rico Public Facilities, Government Facilities
Revenue Bonds, Series A, 6.25% 500,000 7/01/2010 533,185
--------------
Single-Family Housing 8.9%
Pennsylvania Housing Finance Agency, Single Family
Mortgage Revenue Bonds, Series 1994-41B (AMT), 5.50% 410,000 4/01/2001 409,561
Pennsylvania Housing Finance Agency, Single Family
Mortgage Revenue Bonds, Series 1994-39B (AMT), 6.00% 360,000 4/01/2003 366,192
Pennsylvania Housing Finance Agency, Single Family
Mortgage Revenue Bonds, Series 1994-39B (AMT), 6.00% 375,000 10/01/2003 381,780
Pennsylvania Housing Finance Agency, Single Family
Mortgage Revenue Bonds, Series 1994-38 (Non-AMT),
5.50% 330,000 4/01/2005 321,483
--------------
1,479,016
--------------
Special/Sales Tax Revenue 5.0%
Allegheny County, Pennsylvania, Redevelopment
Authority Refunding Bonds, Home Improvement Loan,
5.20% 270,000 8/01/2003 263,563
Pennsylvania Intergovernmental Cooperation Authority,
Special Tax Revenue Refunding Bonds, (City of
Philadelphia Funding Program), Series of 1994, MBIA
Insured, 7.00% 500,000 6/15/2004 563,685
--------------
827,248
--------------
Structured Financings 6.3%
Pennsylvania Economic Development Financing
Authority, Resource Recovery Revenue Bonds, (Colver
Project), Series 1994D, 7.05% 1,000,000 12/01/2010 1,051,950
--------------
Water & Sewer 8.8%
Allegheny County Sanitary Authority, Allegheny
County, Pennsylvania, Sewer Revenue Bonds, Series B
of 1994, MBIA Insured, 5.25% 500,000 12/01/2001 511,695
Wyoming Valley Sanitary Authority, (Luzerne County,
Pennsylvania), Sewer Revenue Bonds, Series of 1993,
FSA Insured, 4.40% 500,000 11/15/2002 474,890
Bucks County Water and Sewer Authority, Bucks County,
Pennsylvania, Collection Sewer System Sewer Revenue
Bonds, Series of 1994, FGIC Insured, 6.15% 455,000 12/01/2005 478,683
--------------
1,465,268
--------------
Total Municipal Bonds (Cost $15,633,549) 15,917,030
--------------
The accompanying notes are an integral part of the financial statements.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
State Street Research Pennsylvania Tax-Free Fund
Principal Maturity Value
Amount Date (Note 1)
------- ---------- ------------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS 3.0%
Delaware State Economic Development Authority, (Delmarva Power
and Light Company Project), Revenue Bonds, 3.65% $100,000 10/01/2017++ $ 100,000
California Pollution Control Financing Authority, (Burney
Forest Products Project), Revenue Bonds, 3.65% 100,000 9/01/2020++ 100,000
Los Angeles, California, Regional Airports, Corporate Lease
Revenue Bonds, Series E, 4.25% 300,000 12/01/2024++ 300,000
------------
Total Short-Term Obligations (Cost $500,000) 500,000
------------
Total Investments (Cost $16,133,549)--98.3% 16,417,030
Cash and Other Assets, Less Liabilities--1.7% 275,968
------------
Net Assets--100.0% $16,692,998
============
Federal Income Tax Information:
At June 30, 1995, the net unrealized appreciation of investments based on cost for
Federal income tax purposes of $16,133,549 was as follows:
Aggregate gross unrealized appreciation for all investments in which there is an excess
of value over tax cost $ 364,230
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax
cost over value (80,749)
------------
$ 283,481
============
</TABLE>
++Interest rates on these obligations may change daily.
Statement of Assets and Liabilities
June 30,1995 (Unaudited)
<TABLE>
<CAPTION>
<S> <C>
Assets
Investments, at value (Cost $16,133,549) (Note 1) $16,417,030
Cash 32,395
Receivable for securities sold 1,130,507
Interest receivable 217,566
Receivable from Distributor (Note 3) 24,871
Receivable for fund shares sold 2,961
Deferred organization costs and other assets (Note 1) 15,673
------------
17,841,003
Liabilities
Payable for securities purchased 1,039,569
Dividends payable 33,677
Payable for fund shares redeemed 10,068
Accrued management fee (Note 2) 7,583
Accrued distribution fee (Note 5) 6,478
Accrued trustees' fees (Note 2) 6,275
Accrued transfer agent and shareholder services (Note 2) 978
Other accrued expenses 43,377
------------
1,148,005
------------
$16,692,998
============
Net Assets
Net Assets consist of:
Undistributed net investment income $ 60,642
Unrealized appreciation of investments 283,481
Accumulated net realized loss (696,820)
Shares of beneficial interest 17,045,695
------------
$16,692,998
============
Net Asset Value and redemption price per share of Class A shares ($7,149,719 / 762,257
shares of beneficial interest) $9.38
============
Maximum Offering Price per share of Class A shares ($9.38 / .955) $9.82
============
Net Asset Value and offering price per share of Class B shares ($4,951,222 / 528,091
shares of beneficial interest)* $9.38
============
Net Asset Value, offering price and redemption price per share of Class C shares
($3,456,392 / 368,283 shares of beneficial interest) $9.39
============
Net Asset Value and offering price per share of Class D shares ($1,135,665 / 121,100
shares of beneficial interest)* $9.38
============
</TABLE>
*Redemption price per share for Class B and Class D is equal to net asset
value less any applicable contingent deferred sales charge.
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
State Street Research Pennsylvania Tax-Free Fund
<TABLE>
<CAPTION>
<S> <C>
Statement of Operations
For the six months ended June 30, 1995 (Unaudited)
Investment Income
Interest $ 479,701
Expenses
Custodian fee 49,024
Management fee (Note 2) 44,959
Transfer agent and shareholder services (Note 2) 31,004
Reports to shareholders 9,560
Audit fee 7,414
Trustees' fees (Note 2) 6,649
Distribution fee--Class A (Note 5) 8,896
Distribution fee--Class B (Note 5) 23,672
Distribution fee--Class D (Note 5) 5,555
Legal fees 4,690
Amortization of organization costs (Note 1) 2,702
Registration fees 2,095
Miscellaneous 4,599
----------
200,819
Expenses borne by the Distributor (Note 3) (141,299)
----------
59,520
----------
Net investment income 420,181
----------
Realized and Unrealized Gain (Loss) on Investments
Net realized loss on investments (Notes 1 and 4) (213,952)
Net unrealized appreciation of investments 956,231
----------
Net gain on investments 742,279
----------
Net increase in net assets resulting from operations $1,162,460
==========
</TABLE>
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Six months
ended
June 30, 1995 Year ended
(Unaudited) December 31, 1994
--------------- --------------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations:
Net investment income $ 420,181 $ 709,149
Net realized loss on investments* (213,952) (482,830)
Net unrealized appreciation (depreciation) of
investments 956,231 (783,954)
--------------- --------------------
Net increase (decrease) resulting from operations 1,162,460 (557,635)
--------------- --------------------
Dividends from net investment income:
Class A (190,574) (289,886)
Class B (109,239) (167,608)
Class C (94,872) (163,900)
Class D (25,857) (40,841)
--------------- --------------------
(420,542) (662,235)
--------------- --------------------
Net increase (decrease) from fund share transactions
(Note 7) (379,967) 5,961,498
--------------- --------------------
Total increase in net assets 361,951 4,741,628
Net Assets
Beginning of period 16,331,047 11,589,419
--------------- --------------------
End of period (including undistributed net investment
income of $60,642 and $61,003 respectively) $16,692,998 $16,331,047
=============== ====================
*Net realized loss for Federal income tax purposes
(Note 1) $ (329,022) $ (367,760)
=============== ====================
The accompanying notes are an integral part of the financial statements.
</TABLE>
5
<PAGE>
State Street Research Pennsylvania Tax-Free Fund
Notes to Unaudited Financial Statements
June 30, 1995
Note 1
State Street Research Pennsylvania Tax-Free Fund (the "Fund"), is a series of
State Street Research Tax-Exempt Trust (the "Trust), formerly MetLife-State
Street Tax-Exempt Trust, which was organized as a Massachusetts business
trust in December, 1985 and is registered under the Investment Company Act of
1940, as amended, as an open-end management investment company. The Fund
commenced operations in August, 1993. Five series of the Trust are publicly
offered: State Street Research Pennsylvania Tax-Free Fund, State Street
Research California Tax-Free Fund, State Street Research Tax-Exempt Fund,
State Street Research New York Tax-Free Fund and State Street Research
Florida Tax-Free Fund.
The Fund offers four classes of shares. Class A shares are subject to an
initial sales charge of up to 4.50% and pay a service fee equal to 0.25% of
average daily net assets. Class B shares are subject to a contingent deferred
sales charge on certain redemptions made within five years of purchase and
pay annual distribution and service fees of 1.00%. Class B shares
automatically convert into Class A shares (which pay lower ongoing expenses)
at the end of eight years after the issuance of the Class B shares. Class C
shares are only offered to certain employee benefit plans and large
institutions. No sales charge is imposed at the time of purchase or
redemption of Class C shares. Class C shares do not pay any distribution or
service fees. Class D shares are subject to a contingent deferred sales
charge of 1.00% on any shares redeemed within one year of their purchase.
Class D shares also pay annual distribution and service fees of 1.00%. The
Fund's expenses are borne pro rata by each class, except that each class
bears expenses, and has exclusive voting rights with respect to provisions of
the Plan of Distribution, relating specifically to that class. The Trustees
declare separate dividends on each class of shares.
The following significant policies are consistently followed by the Fund in
preparing its financial statements, and such policies are in conformity with
generallly accepted accounting principles for investment companies.
A. Investment Valuation
Tax-exempt securities are valued by a pricing service, which utilizes market
transactions, quotations from dealers, and various relationships among
securities in determining value. Short-term obligations are valued at
amortized cost. Other securities, if any, are valued at their fair value as
determined in accordance with established methods consistently applied.
B. Security Transactions
Security transactions are accounted for on the trade date (date the order to
buy or sell is executed). Realized gains or losses are reported on the basis
of identified cost of securities delivered.
C. Net Investment Income
Net investment income is determined daily and consists of interest accrued
and discount earned, less amortization of premium and the estimated daily
expenses of the Fund. Interest income is accrued daily as earned. The Fund is
charged for expenses directly attributable to it, while indirect expenses are
allocated among all funds in the Trust.
D. Dividends
Dividends are declared daily by the Fund based upon projected net investment
income and paid or reinvested monthly. Net realized capital gains, if any,
are distributed annually, unless additional distributions are required for
compliance with applicable tax regulations.
Income dividends and capital gain distributions are determined in accordance
with Federal income tax regulations which may differ from generally accepted
accounting principles.
E. Federal Income Taxes
No provision for Federal income taxes is necessary because the Fund intends
to qualify under Subchapter M of the Internal Revenue Code and its policy is
to distribute all of its taxable income, including net realized capital
gains, within the prescribed time periods. At December 31, 1994, the Fund had
a capital loss carryforward of $367,760 available, to the extent provided in
regulations, to offset future capital gains, if any, which expires on
December 31, 2002.
In order to meet certain excise tax distribution requirements under Section
4982 of the Internal Revenue Code, the Fund is required to measure and
distribute annually, if necessary, net capital gains realized during a
twelve-month period ending October 31. In this connection, the Fund is
permitted to defer into its next fiscal year any net capital losses incurred
between each November 1 and the end of its fiscal year. From November 1, 1994
through December 31, 1994 the Fund incurred net capital losses of $115,070
and intends to defer and treat such losses as arising in the fiscal year
ending December 31, 1995.
F. Deferred Organization Costs
Certain costs incurred in the organization and registration of the Fund were
capitalized and are being amortized under the straight-line method over a
period of five years.
Note 2
The Trust and State Street Research & Management Company (the "Adviser"), an
indirect wholly-owned subsidiary of Metropolitan Life Insurance Company
("Metropolitan"), have entered into an agreement under which the Adviser 7
earns monthly fees at an annual rate of 0.55% of the Fund's average daily net
assets. In consideration of these fees, the Adviser furnishes the Fund with
management, investment advisory, statistical and research facilities and
services. The Adviser also pays all salaries, rent and certain other expenses
of management. During the six months ended June 30, 1995, the fees pursuant
to such agreement amounted to $44,959.
State Street Research Shareholder Services, a division of State Street
Research Investment Services, Inc., the Trust's principal underwriter (the
"Distributor"), an indirect wholly-owned subsidiary of Metropolitan, provides
certain shareholder services to the Fund such as responding to inquiries and
instructions from investors with respect to the purchase and redemption of
shares of the Fund. During the six months ended June 30, 1995, the amount of
such expenses was $7,149.
The fees of the Trustees not currently affiliated with the Adviser amounted
to $6,649 during the six months ended June 30, 1995.
6
<PAGE>
State Street Research Pennsylvania Tax-Free Fund
Notes (cont'd)
Note 3
The Distributor and its affiliates may from time to time and in varying
amounts voluntarily assume some portion of fees or expenses relating to the
Fund. During the six months ended June 30, 1995, the amount of such expenses
assumed by the Distributor and its affiliates was $141,299.
Note 4
For the six months ended June 30, 1995, purchases and sales of securities,
exclusive of short-term obligations, aggregated $5,961,118 and $6,705,323,
respectively.
Note 5
The Trust has adopted a Plan of Distribution Pursuant to Rule 12b-1 (the
"Plan") under the Investment Company Act of 1940, as amended. Under the Plan,
the Fund pays annual service fees to the Distributor at a rate of 0.25% of
average daily net assets for Class A, Class B and Class D shares. In
addition, the Fund pays annual distribution fees of 0.75% of average-daily
net assets for Class B and Class D shares. The Distributor uses such payments
for personal services and/or the maintenance of shareholder accounts, to
reimburse securities dealers for distribution and marketing services, to
furnish ongoing assistance to investors and to defray a portion of its
distribution and marketing expenses. For the six months ended June 30, 1995,
fees pursuant to such plan amounted to $8,896, $23,672 and $5,555, for Class
A, Class B and Class D, respectively.
The Fund has been informed that the Distributor and MetLife Securities, Inc.,
a wholly-owned subsidiary of Metropolitan, earned initial sales charges
aggregating $2,452 and $17,160, respectively, on sales of Class A shares of
the Fund during the six months ended June 30, 1995, and that MetLife
Securities, Inc. earned commissions aggregating $11,780 on sales of Class B
shares and that the Distributor collected contingent deferred sales charges
aggregating $12,505 and $101 on redemptions of Class B and Class D shares,
respectively, during the same period.
Note 6
Under normal circumstances at least 80% of the Fund's net assets will be
invested in Pennsylvania Municipal Obligations. Certain proposed Pennsylvania
constitutional amendments, legislative measures, executive orders,
administrative regulations and voter initiatives could result in adverse
consequences affecting Pennsylvania Municipal Obligations. Also, the Fund is
able to invest up to 25% of total assets in a single industry. Accordingly,
the Fund's investments may be subject to greater risk than those in a fund
with more restrictive concentration limits.
At June 30, 1995, investments totalling 14.5% and 13.2% of the Fund's net
assets were insured as to the timely payment of principal and interest by
Financial Guaranty Insurance Co. (FGIC) and Municipal Bond Investors
Assurance Corp. (MBIA), respectively.
7
<PAGE>
State Street Research Pennsylvania Tax-Free Fund
Note 7
The Trustees have the authority to issue an unlimited number of shares of
beneficial interest, $.001 par value per share. At June 30, 1995,
Metropolitan owned 52,405 Class A shares, 52,405 Class B shares, 366,838
Class C shares and 52,405 Class D shares of the Fund and the Adviser owned
one share of each of Class A, Class B, Class C and Class D of the Fund.
Share transactions were as follows:
<TABLE>
<CAPTION>
Six months ended
June 30, 1995 Year ended
(Unaudited) December 31, 1994
---------------------- ------------------------
Class A Shares Amount Shares Amount
------------------------------------- -------- ---------- -------- ------------
<S> <C> <C> <C> <C>
Shares sold 96,398 $ 856,161 587,081 $ 5,508,772
Issued upon reinvestment of dividends 9,891 92,290 20,093 184,678
Shares repurchased (161,591) (1,454,409) (159,050) (1,460,714)
-------- ---------- -------- ------------
Net increase (decrease) (55,302) $ (505,958) 448,124 $ 4,232,736
======== ========== ======== ============
Class B Shares Amount Shares Amount
------------------------------------- -------- ---------- -------- ------------
Shares sold 47,104 $ 437,179 209,557 $ 1,964,524
Issued upon reinvestment of dividends 5,991 55,832 12,037 110,843
Shares repurchased (38,556) (358,217) (68,255) (631,498)
-------- ---------- -------- ------------
Net increase 14,539 $ 134,794 153,339 $ 1,443,869
======== ========== ======== ============
Class C Shares Amount Shares Amount
------------------------------------- -------- ---------- -------- ------------
Shares sold 227 $ 2,086 -- $ --
Issued upon reinvestment of dividends 29 271 279 2,581
Shares repurchased (217) (2,067) -- --
-------- ---------- -------- ------------
Net increase 39 $ 290 279 $ 2,581
======== ========== ======== ============
Class D Shares Amount Shares Amount
------------------------------------- -------- ---------- -------- ------------
Shares sold 85 $ 754 43,441 $ 409,646
Issued upon reinvestment of dividends 1,264 11,548 2,057 18,919
Shares repurchased (2,319) (21,395) (15,770) (146,253)
-------- ---------- -------- ------------
Net increase (decrease) (970) $ (9,093) 29,728 $ 282,312
======== ========== ======== ============
</TABLE>
8
<PAGE>
State Street Research Pennsylvania Tax-Free Fund
Financial Highlights
For a share outstanding throughout each period:
<TABLE>
<CAPTION>
Class A Class B
---------------------------------- ------------------------------------
Six
months Six months
ended ended
June 30, Year ended June 30, Year ended
1995 December 31, 1995 December
(Unaudited) 1994 1993** (Unaudited) 31, 1994 1993**
-------- ------------- ----- ----------- ----------- ------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $8.97 $9.74 $9.55 $8.96 $9.73 $9.55
Net investment income* .25 .44 .14 .21 .38 .11
Net realized and unrealized
gain (loss) on investments .41 (.79) .20 .42 (.80) .19
Dividends from net investment
income (.25) (.42) (.14) (.21) (.35) (.11)
Distribution from net realized
gains -- -- (.01) -- -- (.01)
-------- ------------- ----- ----------- ----------- ------
Net asset value, end of period $9.38 $8.97 $9.74 $9.38 $8.96 $9.73
======== ============= ===== =========== =========== ======
Total return 7.37%+++ (3.60)%+ 3.52%+++ 7.10%+++ (4.36)%+ 3.19%+++
Net assets at end of period
(000s) $7,150 $7,330 $3,598 $4,951 $4,603 $3,506
Ratio of operating expenses to
average net assets* 0.50%++ 0.50% 0.50%++ 1.25%++ 1.25% 1.25%++
Ratio of net investment income
to average net assets* 5.36%++ 4.93% 4.21%++ 4.61%++ 4.14% 3.45%++
Portfolio turnover rate 37.02% 80.90% 26.18% 37.02% 80.90% 26.18%
*Reflects voluntary assumption
of fees or expenses per share
in each period (Note 3). $.08 $.15 $.09 $.08 $.15 $.09
</TABLE>
<TABLE>
<CAPTION>
Class C Class D
---------------------------------- ------------------------------------
Six
months Six months
ended ended
June 30, Year ended June 30, Year ended
1995 December 31, 1995 December
(Unaudited) 1994 1993** (Unaudited) 31, 1994 1993**
------------------------------ -------- ------------- ----- ----------- ----------- ------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $8.97 $9.74 $9.55 $8.97 $9.74 $9.55
Net investment income* .26 .47 .17 .21 .38 .12
Net realized and unrealized
gain (loss) on investments .42 (.79) .17 .41 (.80) .19
Dividends from net investment
income (.26) (.45) (.14) (.21) (.35) (.11)
Distribution from net realized
gains -- -- (.01) -- -- (.01)
-------- ------------- ----- ----------- ----------- ------
Net asset value, end of period $9.39 $8.97 $9.74 $9.38 $8.97 $9.74
======== ============= ===== =========== =========== ======
Total return 7.62%+++ (3.37)%+ 3.60%+++ 6.98%+++ (4.33)%+ 3.26%+++
Net assets at end of period
(000s) $3,456 $3,304 $3,585 $1,136 $1,095 $899
Ratio of operating expenses to
average net assets* 0.25%++ 0.25% 0.25%++ 1.25%++ 1.25% 1.25%++
Ratio of net investment income
to average net assets* 5.60%++ 5.10% 4.52%++ 4.61%++ 4.13% 3.49%++
Portfolio turnover rate 37.02% 80.90% 26.18% 37.02% 80.90% 26.18%
*Reflects voluntary assumption
of fees or expenses per share
in each period (Note 3). $.08 $.15 $.11 $.08 $.15 $.10
</TABLE>
** August 10, 1993 (commencement of operations) to December 31, 1993.
++ Annualized.
+ Total return figures do not reflect any front-end or contingent deferred
sales charges. Total return would be lower if the Distributor and its
affiliates had not voluntarily assumed a portion of the Fund's expenses.
+++ Represents aggregate return for the period without annualization and does
not reflect any front-end or contingent deferred sales charges. Total
return would be lower if the Distributor and its affiliates had not
voluntarily assumed a portion of the Fund's expenses.
9
<PAGE>
State Street Research Pennsylvania Tax-Free Fund
Fund Information, Officers and Trustees of State Street Research Tax-Exempt
Trust
Fund Information
State Street Research Pennsylvania Tax-Free Fund
One Financial Center
Boston, MA 02111
Investment Adviser
State Street Research & Management Company
One Financial Center
Boston, MA 02111
Distributor
State Street Research Investment Services, Inc.
One Financial Center
Boston, MA 02111
Shareholder Services
State Street Research Shareholder Services
P.O. Box 8408
Boston, MA 02266-8408
1-800-562-0032
Custodian
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
Legal Counsel
Goodwin, Procter & Hoar
Exchange Place
Boston, MA 02109
Officers
Ralph F. Verni
Chairman of the Board,
President and Chief Executive Officer
Paul J. Clifford, Jr.
Vice President
Susan W. Drake
Vice President
John H. Kallis
Vice President
Thomas A. Shively
Vice President
Gerard P. Maus
Treasurer
Joseph W. Canavan
Assistant Treasurer
Douglas A. Romich
Assistant Treasurer
Francis J. McNamara, III
Secretary and General Counsel
Darman A. Wing
Assistant Secretary and
Assistant General Counsel
Trustees
Ralph F. Verni
Chairman of the Board, President, Chief Executive Officer and Director,
State Street Research & Management Company
Edward M. Lamont
Formerly in banking (Morgan Guaranty Trust Company of New York); presently
engaged in private investments and civic affairs
Robert A. Lawrence
Partner, Saltonstall & Co.
Dean O. Morton
Retired; formerly Executive Vice President,
Chief Operating Officer and Director,
Hewlett-Packard Company
Thomas L. Phillips
Retired; formerly Chairman of the Board and
Chief Executive Officer, Raytheon Company
Toby Rosenblatt
President,
The Glen Ellen Company
Vice President,
Founders Investments Ltd.
Michael S. Scott Morton
Jay W. Forrester Professor of Management, Sloan School of Management,
Massachusetts Institute of Technology
Jeptha H. Wade
Retired; formerly Of Counsel, Choate, Hall & Stewart
10
<PAGE>
BACK COVER
State Street Research Pennsylvania Tax-Free Fund
One Financial Center
Boston, MA 02111
Bulk Rate
U.S. Postage
PAID
Brockton, MA
Permit No. 600
Questions? Comments?
Call us at 1-800-562-0032, or write us at:
State Street Research
Shareholder Services
P.O. Box 8408
Boston, MA 02266-8408
[STATE STREET LOGO] State Street Research
This report is prepared for the general information of current shareholders
only. It is not authorized for use as sales material with prospective
investors.
CONTROL NUMBER: 2517-950822(0995) SSR-LD
Cover Illustration by Doroty Cullinan
PTF-047E-895
