State Street Research New York Tax-Free Fund
Investment Update
Investment Environment
The Economy
(bullet) The economy was stronger than expected in the first half of the
year. This made it less likely that the Federal Reserve would cut
interest rates further, jolted the bond market and pushed rates
significantly higher.
(bullet) Despite stronger economic growth, inflation remained quite low.
Energy and food prices jumped higher but, for the most part,
consumer prices were well contained.
(bullet) Consumer confidence improved, perhaps the result of falling
unemployment and rising average hourly wages.
The Markets
(bullet) Most bond sectors declined over the six months ended June 30, 1996.
Municipal bonds, the type State Street Research New York Tax-Free
Fund invests in, fared somewhat better than U.S. Treasury bonds. The
Lehman Brothers Municipal Bond Index provided a return of -0.45% in
the first half of 1996.1
(bullet) Stocks performed well through the first six months of 1996,
rebounding from several market corrections. The Standard & Poor's
500 Index provided a total return of +10.09% through June 30, 1996.1
The Fund
Over the past six months
(bullet) Class A shares of State Street Research New York Tax-Free Fund
provided a total return of -1.16%2 for the six months ended June 30,
1996, a period marked by rising interest rates and falling bond
prices. The Fund's performance was better than the -1.40% average
return for the Lipper New York Municipal Debt category.1 New York
Tax-Free Fund also outperformed its category over the past 12
months.
(bullet) In view of the weak bond market, we managed the Fund conservatively,
maintaining an average maturity and duration that was slightly
shorter than that of the category.
(bullet) The environment for municipal bonds has improved compared to six
months ago. Demand for tax-free bonds has been quite strong, supply
has been lower than usual, and talk of tax reform has faded.
Current strategy
(bullet) We are focusing more of the portfolio on higher-yielding municipal
bonds, which have benefited from strong investor demand and can help
contribute to the Fund's dividend income.
(bullet) We continue to diversify the Fund in a wide range of industries and
sectors, including education, housing, hospitals, and airports.
(bullet) The Fund remains conservatively positioned, as interest rates may
remain volatile because of the upcoming elections and uncertainty
about the strength of the economy.
(bullet) The Fund holds primarily high-quality bonds, with an average credit
quality of AA.
(1)The Lehman Brothers Municipal Bond Index is a commonly used measure of
municipal bond market performance. The Standard & Poor's 500 Composite Index
(S&P 500) includes 500 widely traded common stocks and is a commonly used
indicator 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. Lipper New York
Municipal Debt category does not reflect sales charges and includes 100
Funds.
(2)-1.53% for Class B shares; -1.04% for Class C shares; -1.41% for Class D
shares. Results do not reflect sales charges.
(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. Performance for a class includes periods
prior to the adoption of class designations. 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. "C" shares, offered without a sales charge, are available only
to certain employee benefit plans and large institutions.
(4)Performance reflects maximum 4.5% "A" share front-end or 5% "B" share or
1% "D" share contingent deferred sales charges.
(5)Cumulative total returns are not annualized and do not reflect sales
charges, which, if reflected, would reduce performance.
Please note that the discussion throughout
this shareholder report is dated as indicated
and, because of possible changes in view-
point, data and transactions, should not be
relied upon as being current thereafter.
SEC Average Annual Compound Rates of Return
(at maximum applicable sales charge)(3,4)
Life of Fund
(since 7/5/89) 5 years 1 year
- -------- ----------------- ----------------- ------------------
Class A +6.05%/+5.50% +6.46%/+6.14% +1.00%/+0.75%
- -------- --------------- --------------- -----------------
Class B +6.40%/+5.86% +6.65%/+6.33% -0.02%/-0.28%
- -------- --------------- --------------- -----------------
Class C +6.88%/+6.34% +7.63%/+7.32% +6.02%/+5.75%
- -------- --------------- --------------- -----------------
Class D +6.42%/+5.87% +6.98%/+6.66% +3.97%/+3.71%
Cumulative Total Returns
(do not reflect sales charge)3,5
Life of Fund
(since
7/5/89) 5 years 1 year
- -------- ------------ ------------ --------------
Class A +57.99%/+52.33% +43.24%/+41.08% +5.76%/+5.50%
- -------- ---------- ---------- ------------
Class B +54.42%/+48.88% +40.00%/+37.89% +4.98%/+4.72%
- -------- ---------- ---------- ------------
Class C +59.36%/+53.73% +44.48%/+42.38% +6.02%/+5.75%
- -------- ---------- ---------- ------------
Class D +54.57%/+49.03% +40.14%/+38.02% +4.97%/+4.71%
SEC Yield
========= ============
Class A 4.76%/4.18%
- --------- ----------
Class B 4.24%/3.74%
- --------- ----------
Class C 5.22%/4.73%
- --------- ----------
Class D 4.23%/3.73%
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, 1996. 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]---------------------------------
Bond Quality Ratings
(by percentage of net assets)
AAA 28%
BBB 25%
A 18%
AA 16%
BB/Not rated 13%
As rated by Standard & Poor's Corporation
or Moody's Investors Service, Inc.
or unrated but equivalent.
-----------------------------------------------------------------------------
<PAGE>
Investment Portfolio
June 30, 1996 (Unaudited)
Principal Maturity Value
Amount Date (Note 1)
- ----------------------------- --------- ---------- ------------
MUNICIPAL BONDS 98.3%
General Obligation 19.6%
The City of New York, General
Obligation Bonds, Fiscal
1992 Series H, 7.00% $1,500,000 2/01/2005 $1,581,180
City of New York, General
Obligation Bonds, Fiscal
1995 Series F, 6.375% 2,000,000 2/15/2006 2,029,220
City of Niagara Falls,
Niagara County, New York,
Water Treatment Plant
Bonds, 1994 (AMT), MBIA
Insured, 8.50% 1,000,000 11/01/2006 1,260,100
County of Onondaga, New York,
General Improvement
(Serial) Bonds, 1992, 5.70% 2,000,000 4/01/2007 2,091,400
City of Syracuse, Onondaga
County, New York, Public
Improvement Refunding
Bonds, Series 1993 A,
5.125% 1,750,000 2/15/2009 1,721,965
State of New York, General
Obligation Bonds, 5.50% 2,000,000 3/01/2011 1,968,220
Town of Brookhaven, Suffolk
County, New York, Public
Improvement Bonds, Serial
1995, FGIC Insured, 5.50% 1,000,000 10/01/2012 984,090
County of Nassau, New York,
General Obligation
Refunding Bonds, Series G,
MBIA Insured, 5.45% 1,140,000 1/15/2015 1,100,032
Commonwealth of Puerto Rico,
General Obligation Public
Improvement Refunding
Bonds, Series 1995A, MBIA
Insured, 5.65% 1,000,000 7/01/2015 1,005,790
----------
13,741,997
----------
Certificates of Participation 1.8%
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 $1,286,614
----------
College & University 4.9%
Dormitory Authority of the
State of New York, Mt.
Sinai School of Medicine,
Series B, MBIA Insured,
5.70% 1,000,000 7/01/2011 1,022,290
Dormitory Authority of the
State of New York, Canisius
College, Revenue Bonds,
Series 1995, CapMAC
Insured, 0.00% 1,550,000 7/01/2013 570,369
Dormitory Authority of the
State of New York, City
University System
Consolidated, Third General
Resolution, Revenue Bonds,
Series 1995 1, AMBAC
Insured, 5.375% 2,000,000 7/01/2025 1,868,100
----------
3,460,759
----------
Escrowed Bonds 1.9%
Dormitory Authority of the
State of New York, Judicial
Facilities Lease Revenue
Bonds, (Suffolk County
Issue) Series 1986, 7.375% 1,110,000 7/01/2016 1,300,720
----------
Hospital/Health Care 2.5%
Dormitory Authority of the
State of New York, Nyack
Hospital Revenue Bonds,
Series 1996, 6.00% 1,500,000 7/01/2006 1,492,200
New York State Medical Care
Facilities Finance Agency,
Mental Health Services
Facilities Improvement
Revenue Bonds, 1990 Series
A, 7.75% 230,000 8/15/2010 252,591
----------
1,744,791
----------
The accompanying notes are an integral part of the financial
statements.
2
<PAGE>
Industrial Development & Pollution Control 7.8%
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 $4,259,760
St. Lawrence County, New
York, Industrial
Development Civic
Facilities Revenue Bonds,
St. Lawrence University,
MBIA Insured, 5.625% 1,200,000 7/01/2013 1,187,700
----------
5,447,460
----------
Lease Revenue 13.6%
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 1,671,945
Dormitory Authority of the
State of New York, State
University Educational
Facilities, Revenue Bonds,
Series A, 6.50% 1,000,000 5/15/2006 1,059,650
Puerto Rico Public Buildings
Authority, Public Education
and Health Facilities
Refunding Bonds, Series M,
5.60% 2,000,000 7/01/2008 2,013,880
Lyons Community Health
Initiatives Corp., Facility
Revenue Bonds, Series 1994,
6.55% 470,000 9/01/2009 489,402
New York State Thruway
Authority, Service Contract
Revenue Bonds, 6.25% 1,000,000 4/01/2014 1,001,420
Dormitory Authority of the
State of New York, State
University Educational
Facilities, Revenue Bonds,
Series 1993 A, 5.50% 2,500,000 5/15/2019 2,316,125
Lease Revenue (cont'd)
Lyons Community Health
Initiatives Corp., (New
York), Facility Revenue
Bonds, Series 1994, 6.80% $940,000 9/01/2024 $981,942
----------
9,534,364
----------
Life Care 5.1%
Orange County Industrial
Development Agency, (The
Glen Arden, Inc. Project),
Life Care Community Revenue
Bonds, Series 1994, 8.25% 2,000,000 1/01/2002 2,084,540
Tompkins County Industrial
Development Agency, Life
Care Community Revenue
Bonds, 1994 (Kendal at
Ithaca, Inc. Project),
7.70% 1,430,000 6/01/2011 1,481,980
----------
3,566,520
----------
Multi-Family Housing 1.5%
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 1,037,400
----------
Power 2.8%
Power Authority of the State
of New York, General
Purpose Bonds, Series W,
6.50% 1,850,000 1/01/2008 2,032,577
----------
Pre-Refunded Bonds 6.8%
City of Syracuse, Onondaga
County, New York, Public
Improvement Bonds, 1991,
Pre-Refunded to 2/15/2001
@ 102, 6.70% 500,000 2/15/2006 546,920
The accompanying notes are an integral part of the financial
statements.
3
<PAGE>
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 @ 102, 6.50% $1,000,000 1/01/2010 $1,094,120
Dormitory Authority of the
State of New York, State
University Educational
Facilities, Revenue Bonds,
Series 1990A, Pre-Refunded
to 5/15/2000 @ 102, 7.70% 600,000 5/15/2012 674,076
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 @ 101.5, 7.00% 600,000 6/15/2016 666,042
County of Suffolk, New York,
General Obligations, MBIA
Insured, 1990 Series B,
Pre-Refunded to
4/01/2000 @ 102, 7.10% 425,000 4/01/2018 467,517
Orangetown Housing Authority,
(Rockland County, New
York), Housing Facilities
Revenue Bonds (Orangetown
Senior Housing Center-1990
Series), Pre-Refunded to
10/1/2000 @ 102, 7.50% 400,000 10/01/2020 449,168
Town of Clifton Park Water
Authority, (New York),
Water System Revenue Bonds,
1991 Series A, FGIC
Insured, Pre-Refunded to
10/1/2001 @ 102, 6.375% 800,000 10/01/2026 876,840
----------
4,774,683
----------
Public Facilities 1.5%
Puerto Rico Public Buildings
Authority, Government
Facilities Revenue Bonds,
Series A, AMBAC Insured,
6.25% $1,000,000 7/01/2010 $1,077,610
----------
Single-Family Housing 5.2%
State of New York Mortgage
Agency, Homeowner Mortgage
Revenue Bonds, Series 55,
5.95% 1,550,000 10/01/2017 1,531,415
State of New York Mortgage
Agency, Homeowner Mortgage
Revenue Bonds, Series 45,
7.20% 2,000,000 10/01/2017 2,117,760
----------
3,649,175
----------
Structured Financings 2.2%
The Port Authority of New
York and New Jersey,
Special Project Bonds,
Series 4, KIAC Partners
Project, Subject to AMT,
6.75% 1,500,000 10/01/2011 1,510,965
----------
Toll Roads/Turnpike Authorities 3.7%
Triborough Bridge and Tunnel
Authority, General Purpose
Revenue Bonds, Series 1994
A, 6.00% 2,500,000 1/01/2010 2,598,600
----------
Transit/Highway 4.0%
New York State Thruway
Authority, General Revenue
Bonds, Series B, MBIA
Insured, 5.00% 2,000,000 1/01/2014 1,821,480
New York State Thruway
Authority, Local Highway
and Bridge Service Contract
Bonds, Series 1994, MBIA
Insured, 5.875% 1,000,000 4/01/2014 956,920
----------
2,778,400
----------
The accompanying notes are an integral part of the financial
statements.
4
<PAGE>
Water & Sewer 13.4%
New York City Municipal Water
Finance Authority, Water
and Sewer System Revenue
Bonds, Fiscal 1993 Series
A, 6.00% $3,000,000 6/15/2009 $3,146,040
New York State Environmental
Facilities Corporation,
State Water Pollution
Control, Revolving Fund
Revenue Bonds, Series 1994
A, (New York City Municipal
Water Finance Authority
Project), (Second
Resolution Bonds), 5.75% 2,000,000 6/15/2009 2,058,900
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 2,195,780
Commonwealth of Puerto Rico,
Aqueduct and Sewer
Authority, General Revenue
Bonds, 6.25% 1,000,000 7/01/2012 1,055,050
Water Authority of Western
Nassau County, New York,
Water System Revenue Bonds,
Series 1996, AMBAC Insured,
5.50% 1,000,000 5/01/2016 967,120
----------
9,422,890
----------
Total Municipal Bonds (Cost $66,833,204) 68,965,525
----------
SHORT-TERM OBLIGATIONS 2.7%
Babylon, New York, Industrial
Development Agency, (Ogden
Martin Systems of Babylon
Project), General Revenue
Bonds, 3.00% $1,900,000 12/01/2024++ $1,900,000
----------
Total Short-Term Obligations (Cost $1,900,000) 1,900,000
----------
Total Investments (Cost $68,733,204)--101.0% 70,865,525
Cash and Other Assets, Less Liabilities--(1.0)% (673,638)
----------
Net Assets--100.0% $70,191,887
==========
Federal Income Tax Information:
At June 30, 1996, the net unrealized
appreciation of investments based
on cost for Federal income tax
purposes of $68,733,204 was as
follows:
Aggregate gross unrealized
appreciation for all investments in
which there is an excess of value
over tax cost $2,239,095
Aggregate gross unrealized
depreciation for all investments in
which there is an excess of
tax cost over value (106,774)
---------
$2,132,321
=========
++Interest rate on this obligation may reset daily.
Futures contracts open at June 30, 1996 are as follows:
Expiration Unrealized
Type Par Value Month Depreciation
- ------------------- ---------- -------------------- -------------
Municipal Bond
Index $10,000,000 September, 1996 $(15,625)
The accompanying notes are an integral part of the financial
statements.
5
<PAGE>
Statement of Assets and Liabilities
June 30, 1996 (Unaudited)
Assets
Investments, at value (Cost $68,733,204) (Note 1) $70,865,525
Cash 61,760
Interest receivable 1,321,138
Receivable for fund shares sold 39,955
Receivable from Distributor (Note 3) 23,042
Other assets 1,493
----------
72,312,913
Liabilities
Payable for securities purchased 1,857,625
Dividends payable 64,190
Accrued transfer agent and shareholder services (Note
2) 43,095
Accrued management fee (Note 2) 31,411
Payable for fund shares redeemed 28,842
Accrued distribution and service fees (Note 5) 16,798
Accrued trustees' fees (Note 2) 4,440
Other accrued expenses 74,625
----------
2,121,026
----------
Net Assets $70,191,887
==========
Net Assets consist of:
Distribution in excess of net investment income $(23,778)
Unrealized appreciation of investments 2,132,321
Unrealized depreciation of futures contracts (15,625)
Accumulated net realized loss (1,136,093)
Shares of beneficial interest 69,235,062
----------
$70,191,887
==========
Net Asset Value and redemption price per share of
Class A shares ($19,364,588 / 2,438,848 shares of
beneficial interest) $7.94
=====
Maximum Offering Price per share of Class A shares
($7.94 / .955) $8.31
=====
Net Asset Value and offering price per share of
Class B shares ($15,279,166 / 1,924,560 shares of
beneficial interest)* $7.94
=====
Net Asset Value, offering price and redemption price
per share of Class C shares ($34,955,002 / 4,398,517
shares of beneficial interest) $7.95
=====
Net Asset Value and offering price per share of
Class D shares ($593,131 / 74,653 shares
of beneficial interest)* $7.95
=====
* 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, 1996 (Unaudited)
Investment Income
Interest $2,050,931
Expenses
Management fee (Note 2) 196,868
Transfer agent and shareholder services (Note 2) 73,734
Custodian fee 52,426
Reports to shareholders 18,580
Audit fee 11,748
Trustees' fees (Note 2) 8,743
Legal fees 8,196
Service fee--Class A (Note 5) 24,279
Distribution and service fees--Class B (Note 5) 75,291
Distribution and service fees--Class D (Note 5) 3,090
Registration fees 1,006
Miscellaneous 7,587
----------
481,548
Expenses borne by the Distributor (Note 3) (71,768)
----------
409,780
----------
Net investment income 1,641,151
----------
Realized and Unrealized Gain (Loss) on
Investments and Futures Contracts
Net realized loss on investments (Notes 1 and 4) (694,346)
Net realized gain on futures contracts (Note 1) 259,446
----------
Total net realized loss (434,900)
----------
Net unrealized depreciation of investments (2,057,322)
Net unrealized depreciation of futures contracts (15,625)
----------
Total net unrealized depreciation (2,072,947)
----------
Net loss on investments and futures contracts (2,507,847)
----------
Net decrease in net assets resulting from
operations $(866,696)
==========
The accompanying notes are an integral part of the financial
statements.
6
<PAGE>
Statement of Changes in Net Assets
Six months
ended
June 30, Year ended
1996 December 31,
(Unaudited) 1995
- ----------------------------- ------------ ----------------
Increase (Decrease) in Net Assets
Operations:
Net investment income $1,641,151 $3,725,102
Net realized gain (loss) on
investments and futures
contracts* (434,900) 2,462,016
Net unrealized appreciation
(depreciation) of
investments and futures
contracts (2,072,947) 4,123,535
---------- --------------
Net increase (decrease)
resulting from operations (866,696) 10,310,653
---------- --------------
Dividends from net investment
income:
Class A (472,054) (1,009,558)
Class B (309,371) (589,598)
Class C (930,295) (2,182,901)
Class D (12,651) (33,292)
---------- --------------
(1,724,371) (3,815,349)
---------- --------------
Net decrease from fund share
transactions (Note 7) (1,751,382) (3,830,608)
---------- --------------
Total increase (decrease) in
net assets (4,342,449) 2,664,696
Net Assets
Beginning of period 74,534,336 71,869,640
---------- --------------
End of period (including
(overdistributed)
undistributed net
investment income of
$(23,778) and $59,442,
respectively) $70,191,887 $74,534,336
========== ==============
* Net realized gain (loss)
for Federal income tax
purposes (Note 1) $(434,900) $1,435,929
========== ==============
Notes to Unaudited Financial Statements
Note 1
State Street Research New York Tax-Free Fund (the "Fund"), is a series of
State Street Research Tax-Exempt Trust (the "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. Two series
of the Trust are publicly offered: State Street Research New York Tax-Free
Fund and State Street Research Tax-Exempt Fund.
The investment objective of the Fund is to seek a high level of interest
income exempt from federal income taxes and New York State and New York City
personal income taxes. To achieve its investment objective, the Fund intends
to invest primarily in securities which are issued by or on behalf of New
York State or its political subdivisions and by other governmental entities.
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. Investments of $1 million or more in Class A
shares, which are not subject to any initial sales charge, are subject to a
1.00% contingent deferred sales charge if redeemed within one year of
purchase. 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.
The accompanying notes are an integral part of the financial
statements.
7
<PAGE>
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 between both 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, 1995, the
Fund had a capital loss carryforward of $701,193 available, to the extent
provided in regulations, to offset future capital gains, if any, which
expires on December 31, 2002.
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 differences between the value of the
contract at the time it was opened and the value at the time it was closed.
G. Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period.
Actual results could differ from those estimates.
Note 2
The Trust and State Street Research & Management Company (the "Adviser"), an
indirect wholly owned subsidiary of Metropolitan Life Insurance Company
("Metropolitan"), have entered into an agreement under which the Adviser
earns monthly fees at an annual rate of 0.55% 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, 1996, the fees pursuant
to such agreement amounted to $196,868.
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, 1996 the amount of
such expenses was $15,630.
The fees of the Trustees not currently affiliated with the Adviser amounted
to $8,743 during the six months ended June 30, 1996.
Note 3
The Distributor and its affiliates may from time to time and in varying
amounts voluntarily assume some portion of fees or expenses relating to the
Fund. During the six months ended June 30, 1996, the amount of such expenses
assumed by the Distributor and its affiliates was $71,768.
Note 4
For the six months ended June 30, 1996, purchases and sales of securities,
exclusive of short-term obligations, aggregated $47,237,124 and $50,836,444,
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 or servicing 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,
1996, fees pursuant to such plan amounted to $24,279, $75,291 and $3,090 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 $8,878 and $62,786, respectively, on sales of Class A shares of
the Fund during the six months ended June 30, 1996, and that MetLife
Securities, Inc. earned commissions aggregating $61,174 on sales of Class B
shares, and that the Distributor collected contingent deferred sales charges
aggregating $21,069 on redemptions of Class B shares during the same period.
8
<PAGE>
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.
At June 30, 1996, investments totalling 12.6% of the Fund's net assets were
insured as to the timely payment of principal and interest by Municipal Bond
Investors Assurance Corp. (MBIA).
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, 1996,
Metropolitan owned 61,186 Class D shares and the Distributor owned one Class
C share of the Fund.
Share transactions were as follows:
Six months ended
June 30, 1996 Year ended
(Unaudited) December 31, 1995
----------------------- -------------------------
Class A Shares Amount Shares Amount
----------------- -------- ----------- -------- -------------
Shares sold 332,139 $2,663,023 659,418 $5,224,381
Issued upon
reinvestment of
dividends 47,174 377,996 102,754 817,666
Shares
repurchased (376,786) (3,033,641) (745,045) (5,906,953)
------ --------- ------ -----------
Net increase 2,527 $7,378 17,127 $135,094
====== ========= ====== ===========
Class B Shares Amount Shares Amount
----------------- ------ --------- ------ -----------
Shares sold 253,944 $2,033,665 412,260 $2,896,528
Issued upon
reinvestment of
dividends 30,189 241,917 58,893 434,274
Shares
repurchased (192,947) (1,537,816) (249,652) (1,557,767)
------ --------- ------ -----------
Net increase 91,186 $737,766 221,501 $1,773,035
====== ========= ====== ===========
Class C Shares Amount Shares Amount
----------------- ------ --------- ------ -----------
Shares sold 2,606 $21,155 24,846 $199,861
Issued upon
reinvestment of
dividends 87,711 708,058 208,442 1,655,838
Shares
repurchased (397,772) (3,190,854) (934,625) (7,406,811)
------ --------- ------ -----------
Net decrease (307,455) $(2,461,641) (701,337) $(5,551,112)
====== ========= ====== ===========
Class D Shares Amount Shares Amount
----------------- ------ --------- ------ -----------
Shares sold 629 $5,120 4,415 $35,225
Issued upon
reinvestment of
dividends 321 2,575 880 6,996
Shares
repurchased (5,330) (42,580) (28,950) (229,846)
------ --------- ------ -----------
Net decrease (4,380) $(34,885) (23,655) $(187,625)
====== ========= ====== ===========
9
<PAGE>
For a share outstanding throughout each period:
Class A
---------------------------------------------
Year ended December 31
-----------------------------
Six months
ended
June 30,
1996
(Unaudited) 1995 1994 1993**
-------------------- ------------ ------ ------- --------
Net asset value,
beginning of
period $8.23 $7.53 $8.43 $8.20
Net investment
income* .18 .40 .40 .22
Net realized and
unrealized gain
(loss)
on investments (.28) .71 (.90) .25
Dividends from net
investment income (.19) (.41) (.39) (.22)
Distributions from
net realized gains -- -- (.01) (.02)
---------- ---- ----- ------
Net asset value, end
of period $7.94 $8.23 $7.53 $8.43
========== ==== ===== ======
Total return (1.16)%+++ 15.11%+ (6.04)%+ 5.79%+++
Net assets at end of
period (000s) $19,365 $20,043 $18,214 $15,175
Ratio of operating
expenses to
average net
assets* 1.10%++ 1.10% 1.10% 1.10%++
Ratio of net
investment income
to average net
assets* 4.62%++ 5.07% 5.07% 4.68%++
Portfolio turnover
rate 66.55% 109.74% 64.80% 33.11%
*Reflects voluntary
assumption of fees
or expenses per
share in each
period (Note 3). $.01 $.02 $.03 $.01
Class B
---------------------------------------------
Year ended December 31
------------ -----------------------------
Six months
ended
June 30,
1996
(Unaudited) 1995 1994 1993**
- ------------------------ ------------ ------ ------- --------
Net asset value,
beginning of period $8.23 $7.53 $8.43 $8.20
Net investment income* .15 .34 .34 .19
Net realized and
unrealized gain (loss)
on investments (.28) .71 (.90) .25
Dividends from net
investment income (.16) (.35) (.33) (.19)
Distributions from net
realized gains -- -- (.01) (.02)
---------- ---- ----- ------
Net asset value, end of
period $7.94 $8.23 $7.53 $8.43
========== ==== ===== ======
Total return (1.53)%+++ 14.26%+ (6.74)%+ 5.35%+++
Net assets at end of
period (000s) $15,279 $15,084 $12,131 $7,567
Ratio of operating
expenses to average
net assets* 1.85%++ 1.85% 1.85% 1.85%++
Ratio of net investment
income to average net
assets* 3.87%++ 4.32% 4.34% 3.93%++
Portfolio turnover rate 66.55% 109.74% 64.80% 33.11%
*Reflects voluntary
assumption of fees or
expenses per share in
each period (Note 3). $.01 $.02 $.03 $.01
<TABLE>
<CAPTION>
Class C
-----------------------------------------------------------------
Year ended December 31
-------------------------------------------------
Six months
ended
June 30,
1996
(Unaudited) 1995 1994 1993 1992 1991
- ----------------------------- ------------ ------ ------- ------ ------ --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $8.24 $7.54 $8.44 $7.84 $7.61 $7.11
Net investment income* .20 .42 .42 .42 .44 .45
Net realized and unrealized
gain (loss) on investments (.29) .71 (.90) .62 .23 .51
Dividends from net investment
income (.20) (.43) (.41) (.42) (.44) (.46)
Distributions from net
realized gains -- -- (.01) (.02) -- --
---------- ---- ----- ---- ---- ------
Net asset value, end of
period $7.95 $8.24 $7.54 $8.44 $7.84 $7.61
========== ==== ===== ==== ==== ======
Total return (1.04)%+++ 15.37%+ (5.79)%+ 13.46%+ 9.08%+ 13.88%+
Net assets at end of period
(000s) $34,955 $38,757 $40,750 $56,515 $41,558 $21,512
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* 4.87%++ 5.33% 5.29% 5.10% 5.71% 6.21%
Portfolio turnover rate 66.55% 109.74% 64.80% 33.11% 29.39% 30.24%
*Reflects voluntary
assumption of fees or
expenses per share in each
period (Note 3). $.01 $.02 $.03 $.01 $.02 $.05
</TABLE>
Class D
---------------------------------------------
Year ended December 31
------------ -----------------------------
Six months
ended
June 30,
1996
(Unaudited) 1995 1994 1993**
- ---------------------- ------------ ------ ------- --------
Net asset value,
beginning of period $8.23 $7.53 $8.44 $8.20
Net investment income* .15 .35 .34 .19
Net realized and
unrealized gain
(loss) on
investments (.27) .70 (.91) .25
Dividends from net
investment income (.16) (.35) (.33) (.18)
Distributions from net
realized gains -- -- (.01) (.02)
---------- ---- ----- ------
Net asset value, end
of period $7.95 $8.23 $7.53 $8.44
========== ==== ===== ======
Total return (1.41)%+++ 14.25%+ (6.86)%+ 5.46%+++
Net assets at end of
period (000s) $593 $651 $774 $821
Ratio of operating
expenses to average
net assets* 1.85%++ 1.85% 1.85% 1.85%++
Ratio of net
investment income to
average net assets* 3.87%++ 4.35% 4.31% 3.94%++
Portfolio turnover
rate 66.55% 109.74% 64.80% 33.11%
*Reflects voluntary
assumption of fees or
expenses per share in
each period (Note 3). $.01 $.02 $.03 $.01
**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>
Report on Special Meeting of Shareholders
A Special Meeting of Shareholders of the State Street Research New York
Tax-Free Fund ("Fund"), along with shareholders of other series of State
Street Research Tax-Exempt Trust ("Meeting"), was convened on April 19, 1996.
The results of the Meeting are set forth below.
Votes (millions
of shares)
----------------
For Withheld
--- ---------
1. The following persons were elected as Trustees:
Edward M. Lamont 25.9 1.0
Robert A. Lawrence 25.9 1.0
Dean O. Morton 25.9 1.0
Thomas L. Phillips 25.9 1.0
Toby Rosenblatt 25.9 1.0
Michael S. Scott Morton 25.9 1.0
Ralph F. Verni 25.8 1.1
Jeptha H. Wade 25.9 1.0
Votes (millions of
shares)
-------------------
For Against Abstain
- ---- ------
2. The Fund's following investment policies were
reclassified from fundamental to nonfundamental:
a. The policy regarding investments in securities
of companies with less than three (3) years'
continuous operation 3.8 0.5 0.5
b. The policy regarding investments in illiquid
securities. 3.8 0.5 0.6
3. The Fund's fundamental policy regarding
investments in commodities and commodity contracts
was amended. 3.8 0.5 0.6
4. The Fund's fundamental policies regarding
diversification of investments were amended 4.0 0.4 0.5
5. The Master Trust Agreement was amended to permit
the Trustees to reorganize, merge or liquidate a
fund without prior shareholder approval. 20.0 3.7 3.3
6. The Master Trust Agreement was amended to
eliminate specified time permitted between the
record date and any shareholders meeting. 21.2 2.5 3.2
11
<PAGE>
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 LLP
Exchange Place
Boston, MA 02109
Officers
Ralph F. Verni
Chairman of the Board,
President and Chief
Executive Officer
Paul J. Clifford, Jr.
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
Amy L. Simmons
Assistant Secretary
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
12
<PAGE>
[Back Cover]
State Street Research
New York 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 Research logo]
This report is prepared for the general information of current shareholders
only. It is not authorized for use as sales material with prospective
investors.
The Dalbar awards recognize quality shareholder service and should not be
considered a rating of fund performance. The survey included mutual fund
complexes that volunteered or were otherwise selected to participate and was
not industry-wide.
CONTROL NUMBER: 3324-960821 (0997)SSR-LD
Cover Illustration by Dorothy Cullinan NYTF-395D-896
<PAGE>
[Front Cover]
[State Street Research logo]
State Street Research
New York Tax-Free Fund
Semiannual Report
June 30, 1996
What's Inside
Investment Update:
About the Fund,
economy and markets
Fund Information:
Facts and figures
Plus, Complete Portfolio Holdings
and Financial Statements
----------------------------[Dalbar Award seal] ----------------------------
Quality
Tested Service
1995
Dalbar
Honors Commitment To:
Investors
For Excellence
in
Shareholder Service
-----------------------------------------------------------------------------
<PAGE>
State Street Research
Tax-Exempt Fund
Investment Update
Investment Environment
The Economy
(bullet) The economy was stronger than expected in the first half of the
year. This made it less likely that the Federal Reserve would cut
interest rates further, jolted the bond market and pushed rates
significantly higher.
(bullet) Despite stronger economic growth, inflation remained quite low.
Energy and food prices jumped higher but, for the most part,
consumer prices were well contained.
(bullet) Consumer confidence improved, perhaps the result of falling
unemployment and rising average hourly wages.
The Markets
(bullet) Most bond sectors declined over the six months ended June 30, 1996.
Municipal bonds, the type State Street Research Tax-Exempt Fund
invests in, fared somewhat better than U.S. Treasury bonds. The
Lehman Brothers Municipal Bond Index provided a return of -0.45% in
the first half of 1996.1
(bullet) Stocks performed well through the first six months of 1996,
rebounding from several market corrections. The Standard & Poor's
500 Index provided a total return of +10.09% through June 30, 1996.1
The Fund
Over the past six months
(bullet) Class A shares of State Street Research Tax-Exempt Fund provided a
total return of -2.23%2 for the six months ended June 30, 1996, a
period marked by rising interest rates and falling bond prices. The
Fund's performance was behind the -1.38% average return for the
Lipper General Municipal Debt category.1 Over the past 12 months,
Tax-Exempt Fund slightly outperformed the category.
(bullet) In view of the weak bond market, we managed the Fund conservatively,
maintaining an average maturity and duration that was slightly
shorter than that of the category.
(bullet) The environment for municipal bonds has improved compared to six
months ago. Demand for tax-free bonds has been quite strong, supply
has been lower than usual, and talk of tax reform has faded.
Current strategy
(bullet) We are focusing more of the portfolio on higher-yielding municipal
bonds, which have benefited from strong investor demand and help
contribute to the Fund's dividend income.
(bullet) We continue to diversify the Fund in a wide range of industries and
sectors, including education, housing, hospitals, and airports.
(bullet) The Fund remains conservatively positioned, as interest rates may
remain volatile because of the upcoming elections and uncertainty
about the strength of the economy.
(bullet) The Fund holds primarily high-quality bonds, with an average credit
quality of AA.
(1)The Lehman Brothers Municipal Bond Index is a commonly used measure of
municipal bond market performance. The Standard & Poor's 500 Composite Index
(S&P 500) includes 500 widely traded common stocks and is a commonly used
indicator 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. Lipper General
Municipal Debt category does not reflect sales charges and includes 239
funds.
(2)-2.61% for Class B shares; -2.13% for Class C shares; -2.61% for Class D
shares. Results do not reflect sales charges.
(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. In March 1992, the Fund changed its
investment objective to eliminate requirements that specify that a percentage
of the Fund be invested in certain rating categories. Previously, it was
required to invest 80% in securities rated A, BBB, BB, or better, Past
performance, therefore, may not be indicative of future results. Performance
for a class includes periods prior to the adoption of class designations.
Performance for "B" and "D" shares prior to class designations in 1993
reflects annual 12b-1 fees of .25% and thereafter performance reflects annual
12b-1 fees of 1%, which will reduce subsequent performance. "C" shares,
offered without a sales charge, are available only to certain employee
benefit plans and large institutions.
(4)Performance reflects maximum 4.5% "A" share front-end or 5% "B" share or
1% "D" share contingent deferred sales charges.
(5)Cumulative total returns are not annualized and do not reflect sales
charges, which, if reflected, would reduce performance.
Please note that the discussion throughout
this shareholder report is dated as indicated
and, because of possible changes in view-
point, data and transactions, should not be relied upon as being current
thereafter.
Fund Information (all data are for periods ended June 30, 1996)
SEC Average Annual Compound Rates of Return
(at maximum applicable sales charge)(3,4)
Life of Fund
(since 5
8/25/86) years 1 year
- -------- ------------ ------ -------
Class A +6.43% +6.02% +1.16%
- -------- ---------- ---- -----
Class B +6.68% +6.20% +0.26%
- -------- ---------- ---- -----
Class C +6.99% +7.11% +6.19%
- -------- ---------- ---- -----
Class D +6.67% +6.48% +4.13%
Cumulative Total Returns
(do not reflect sales charge)3,5
Life of Fund
(since 5
8/25/86) years 1 year
- -------- ------------ ------ -------
Class A +93.64% +40.29% +5.93%
- -------- ---------- ---- -----
Class B +89.26% +37.12% +5.26%
- -------- ---------- ---- -----
Class C +94.66% +41.03% +6.19%
- -------- ---------- ---- -----
Class D +89.00% +36.93% +5.13%
SEC Yield
Class A 4.76%
- -------- ----
Class B 4.25%
- -------- ----
Class C 5.25%
- -------- ----
Class D 4.26%
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, 1996. A small portion of the Fund's income may be subject
to state and local tax, and/or alternative minimum tax. Investors should
consult their tax adviser.
- ---------------------------------[Pie Chart]---------------------------------
Bond Quality Ratings
(by percentage of net assets)
AA 33%
AAA 24%
BBB 17%
BB/Not rated 14%
A 12%
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, 1996 (Unaudited)
Principal Maturity Value
Amount Date (Note 1)
- ----------------------------- --------- ---------- -------------
Municipal Bonds 100.3%
Arizona 2.3%
City of Phoenix, Arizona,
General Obligation
Refunding Bonds, Series
1996A, 4.90% $2,495,000 7/01/2010 $2,322,495
Salt River Project
Agricultural Improvement
and Power District,
Arizona, Salt River Project
Electric System Refunding
Revenue Bonds, 1993 Series
C, 5.00% 5,000,000 1/01/2016 4,514,900
-----------
6,837,395
-----------
California 12.2%
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 1,057,170
South Orange County Public
Financing Authority,
Special Tax Revenue Bonds,
1994 Series B (Junior Lien
Bonds), 7.00% 500,000 9/01/2007 502,070
City of Duarte, California,
Certificates of
Participation, (Hope
National Medical Center),
6.00% 500,000 4/01/2008 490,870
State Public Works Board of
the State of California,
Lease Revenue Refunding
Bonds, (The Regents of the
University of California),
1993 Series A, (Various
University of California
Projects), 5.40% 2,000,000 6/01/2008 1,977,420
Santa Clara County Financing
Authority, (VMC Facility
Replacement Project), 1994
Series A Bonds, AMBAC
Insured, 7.75% 1,000,000 11/15/2008 1,208,900
California (cont'd)
South Orange County Public
Financing Authority,
Special Tax Revenue Bonds,
1994 Series B (Junior Lien
Bonds), 7.00% $1,000,000 9/01/2009 $1,000,580
Foothill/Eastern
Transportation Corridor
Agency, Series 1995A Senior
Lien Convertible Capital
Appreciation Bonds, 0.00% 1,695,000 1/01/2010 1,008,474
California Housing Finance
Agency, Home Mortgage
Revenue Bonds, 1991 Series
G, Subject to AMT, 6.95% 260,000 8/01/2011 274,362
California Pollution Control
Financing Authority,
Pollution Control Refunding
Revenue Bonds, (San Diego
Gas & Electric Company),
1996 Series A, 5.90% 2,000,000 6/01/2014 2,017,080
Sacramento Power Authority,
Cogeneration Project
Revenue Bonds, 1995 Series,
6.50% 1,300,000 7/01/2014 1,321,424
California Housing Finance
Agency, Home Mortgage
Revenue Bonds, 1994 Series
G, 7.20% 1,500,000 8/01/2014 1,575,495
Rancho California Water
District Financing
Authority, Revenue
Refunding Bonds, AMBAC
Insured, Series 1994, 5.00% 4,000,000 8/15/2014 3,639,640
City of Stockton,
Revenue Certificates of
Participation, 1995 Series
A, (Wastewater Treatment
Plant Expansion), FGIC
Insured, 6.70% 1,000,000 9/01/2014 1,083,220
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
California (cont'd)
California Educational
Facilities Authority,
Series 1994 Revenue Bonds
(Southwestern University
Project), 6.60% $1,000,000 11/01/2014 $1,052,660
County of Madera,
California, Certificates
of Participation, (Valley
Children's Hospital
Project), Series 1995, MBIA
Insured, 6.50% 1,000,000 3/15/2015 1,083,930
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 655,950
Roseville Joint Union High
School District, 1992
General Obligation Bonds,
Series B, FGIC Insured,
0.00% 1,000,000 8/01/2015 320,150
California Educational
Facilities Authority,
Revenue Bonds (University
of Redlands), Series 1995,
5.875% 1,815,000 10/01/2015 1,787,067
Fresno Sewer Revenue Bonds,
Series A-1, AMBAC Insured,
5.25% 5,100,000 9/01/2019 4,756,872
State of California
Department of Water
Resources, Central Valley
Project Water System
Revenue Bonds, Series H,
6.90% 2,500,000 12/01/2025 2,734,925
San Joaquin Hills
Transportation Corridor
Agency, (Orange County,
California), Senior Lien
Toll Road Revenue Bonds,
7.00% 1,000,000 1/01/2030 1,035,530
California (cont'd)
Foothill/Eastern
Transportation Corridor
Agency, Toll Road Revenue
Bonds Series 1995A Senior
Lien, 6.50% $6,000,000 1/01/2032 $5,999,940
-----------
36,583,729
-----------
Colorado 2.8%
City and County of Denver,
Colorado, Department of
Aviation, Airport System
Revenue Bonds, Series
1996B, MBIA Insured,
Subject to AMT, 5.75% 3,500,000 11/15/2015 3,412,010
City of Colorado Springs,
Colorado, Hospital Revenue
and Refunding Bonds, Series
1995, MBIA Insured, 6.00% 3,250,000 12/15/2015 3,292,835
Colorado Housing and Finance
Authority, Single Family
Program Senior and
Subordinate Bonds, 1996
Series B, 7.45% 1,500,000 11/01/2027 1,638,000
-----------
8,342,845
-----------
Connecticut 3.2%
State of Connecticut, Clean
Water Fund Revenue Bonds,
1991 Series, 7.00% 1,000,000 1/01/2011 1,096,900
State of Connecticut, Special
Tax Obligation Bonds,
Transportation
Infrastructure Purposes,
1991 Series A, 6.50% 1,500,000 10/01/2012 1,637,565
Connecticut Development
Authority, Pollution
Control Refunding Bonds,
(Pfizer Inc. Project--1982
Series), 6.55% 2,500,000 2/15/2013 2,690,575
State of Connecticut Health
and Educational Facilities
Authority, Revenue Bonds,
Quinnipiac College Issue,
Series D, 6.00% 5,000,000 7/01/2013 4,139,948
-----------
9,564,988
-----------
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
Florida 6.8%
St. Johns County Industrial
Development Authority,
Industrial Development
Revenue Bonds, Series
1993A, (Vicar's Landing
Project), 6.20% $500,000 2/15/2003 $507,255
Collier County Health
Facilities Authority,
Health Facility Refunding
Revenue Bonds, (The
Moorings Inc. Project),
Series 1994, 6.00% 500,000 12/01/2005 503,535
Orlando Utilities Commission,
Water and Electric
Subordinated Revenue Bonds,
Series C, 6.75% 8,950,000 10/01/2017 10,230,477
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 1,365,363
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 1,095,080
Volusia County Educational
Facilities Authority,
Educational Facilities
Revenue Bonds, (Embry-
Riddle Aeronautical
University Project), Series
1996A, 6.125% 5,000,000 10/15/2026 4,914,900
Housing Authority of Lee
County, Florida, Single
Family Mortgage Revenue
Bonds, (Multi-County
Program), Series 1996A,
Subseries 2, Subject to
AMT, 7.50% 1,500,000 9/01/2027 1,641,000
-----------
20,257,610
-----------
Georgia 3.8%
State of Georgia, General
Obligation Bonds, Series
1994D, 6.70% 5,000,000 8/01/2009 5,638,900
Georgia (cont'd)
State of Georgia, General
Obligation Bonds, Series
1992B, 6.25% $4,300,000 3/01/2011 $4,630,283
State of Georgia, General
Obligation Bonds, Series
1994E, 6.75% 1,000,000 12/01/2012 1,130,420
-----------
11,399,603
-----------
Hawaii 3.1%
State of Hawaii, General
Obligation Bonds of 1991,
Series BT, 6.125%* 2,000,000 2/01/2010 2,127,980
State of Hawaii, Airports
System Revenue Bonds,
Second Series of 1991, MBIA
Insured, Subject to AMT,
7.00% 5,000,000 7/01/2018 5,325,000
Department of Budget and
Finance of the State of
Hawaii, Special Purpose
Revenue Bonds, (The Queen's
Health Systems), 1996
Series A, 5.75% 2,000,000 7/01/2026 1,893,640
-----------
9,346,620
-----------
Illinois 1.3%
City of Chicago, Illinois,
Gas Supply Revenue Bonds,
1985 Series B (The Peoples
Gas Light and Coke Company
Project), 7.50% 3,500,000 3/01/2015 3,837,610
-----------
Iowa 1.0%
City of Eddyville, Iowa,
Pollution Control Revenue
Refunding Bonds, (Cargill,
Incorporated Project),
Series 1996, 5.40% 3,000,000 7/01/2006 3,027,930
-----------
Kansas 0.3%
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 1,090,790
-----------
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
Maryland 2.4%
Baltimore, Maryland,
Pollution Control and
Industrial Development
Revenue Bonds, (General
Motors Corporation
Projects), Series 1984,
5.35% $2,000,000 4/01/2008 $1,974,100
Howard County, Maryland,
Multifamily Mortgage
Refunding Bonds, Series
1994, (Chase Glen Project),
Mandatory Put 7/1/2004 @
100, 7.00% 5,000,000 7/01/2024 5,372,850
-----------
7,346,950
-----------
Massachusetts 9.4%
Massachusetts Industrial
Finance Agency, First
Mortgage Refunding Bonds,
(Brookhaven Retirement
Community, Lexington--1994
Issue), Series A, 6.75% 4,500,000 1/01/2001 4,625,865
Massachusetts Industrial
Finance Agency, First
Mortgage Revenue Bonds,
(Berkshire Retirement
Community, Lenox--1994
Issue), Series A, 6.375% 1,500,000 7/01/2005 1,494,420
The Commonwealth of
Massachusetts, General
Obligation Bonds,
Consolidated Loan of 1995,
Series B, AMBAC Insured,
5.00% 4,000,000 7/01/2011 3,697,440
Massachusetts State Water
Resource Authority, General
Revenue Bonds, 1993 Series
C, 6.00% 6,155,000 12/01/2011 6,413,018
Massachusetts Health and
Educational Facilities
Authority, Refunding Bonds,
Massachusetts General
Hospital Issue, Series F,
AMBAC Insured, 6.25% 3,000,000 7/01/2012 3,191,130
Massachusetts (cont'd)
Massachusetts Bay
Transportation Authority,
General Transportation
System Bonds, 1994 Series A
Refunding Bonds, 7.00% $3,385,000 3/01/2014 $3,858,257
Massachusetts Water Pollution
Abatement Trust, Water
Pollution Abatement Revenue
Bonds, (New Bedford Loan
Program), 1996 Series A,
5.70% 3,000,000 2/01/2015 2,952,600
Massachusetts Housing Finance
Agency, Single Family
Housing Revenue Bonds,
Series 34, MBIA Insured,
Subject to AMT, 6.25% 2,000,000 12/01/2015 2,003,180
-----------
28,235,910
-----------
Michigan 0.8%
St. Johns Public Schools,
Counties of Clinton and
Gratiot, State of Michigan,
1995 School Building and
Site Bonds, (General
Obligation--Unlimited Tax),
FGIC Insured, 5.625% 2,500,000 5/01/2020 2,412,375
-----------
Minnesota 1.3%
Spring Lake Park, Minnesota,
Independent School District
No. 16, General Obligation
School Building Bonds,
Series 1995, MBIA Insured,
5.25% 1,820,000 2/01/2012 1,745,143
Minnesota Housing Finance
Authority, Single Family
Mortgage Bonds, 1994 Series
E, 5.90% 2,100,000 7/01/2025 2,054,346
-----------
3,799,489
-----------
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
Mississippi 1.8%
Claiborne County,
Mississippi, Pollution
Control Revenue Bonds,
(Middle South Energy, Inc.
Project), Series B, 8.25% $1,750,000 6/01/2014 $1,894,848
Claiborne County,
Mississippi, Pollution
Control Revenue Bonds,
(Middle South Energy, Inc.
Project), Series C, 9.875% 3,000,000 12/01/2014 3,360,390
-----------
5,255,238
-----------
Nebraska 1.7%
Omaha Public Power District
(Nebraska), Electric System
Revenue Bonds, 1992, Series
B, 6.20% 4,700,000 2/01/2017 4,976,407
-----------
Nevada 2.4%
North Las Vegas, Nevada,
Local Special Improvements
District No. 707, 7.10% 2,500,000 7/01/2016 2,500,000
State of Nevada, General
Obligation (Limited Tax)
Bonds, Nevada Municipal
Bond Bank Project Nos. 49
and 50, Series November 1,
1995A, FGIC Insured, 5.50% 5,000,000 11/01/2025 4,708,900
-----------
7,208,900
-----------
New Hampshire 4.0%
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 7,204,330
New Hampshire Higher
Educational and Health
Facilities Authority
Revenue Bonds, Dartmouth
College Issue, Series 1993,
5.375% 5,000,000 6/01/2023 4,635,150
-----------
11,839,480
-----------
New Jersey 1.7%
New Jersey Economic
Development Authority,
Market Transition Facility
Senior Lien Revenue Bonds,
Series 1994A, MBIA Insured,
5.80% $4,000,000 7/01/2009 $4,030,120
New Jersey Educational
Facilities Authority, Seton
Hall University Project
Revenue Bonds, 1991 Series
D, 7.00% 1,000,000 7/01/2021 1,034,540
-----------
5,064,660
-----------
New York 7.8%
The City of New York, General
Obligation Bonds, Series I,
6.50% 3,300,000 3/15/2006 3,402,498
The Port Authority of New
York and New Jersey,
Special Project Bonds,
Series 4, KIAC Partners
Project, Subject to AMT,
6.75% 3,500,000 10/01/2011 3,525,585
The City of New York, General
Obligation Refunding Bonds,
Fiscal 1991 Series B, 7.75% 3,990,000 2/01/2012 4,367,534
New York Local Government
Assistance Corp., (A Public
Benefit Corporation of the
State of New York), Series
1993E Refunding Bonds,
6.00% 5,000,000 4/01/2014 5,176,850
Metropolitan Transportation
Authority, Transit
Facilities Revenue Bonds,
Series K, 6.625% 2,000,000 7/01/2014 2,205,240
Dormitory Authority of the
State of New York,
Department of Health of the
State of New York, Revenue
Bonds, Series 1996, 5.75% 5,000,000 7/01/2017 4,720,950
-----------
23,398,657
-----------
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
North Carolina 5.1%
North Carolina Municipal
Power Agency Number 1,
Catawba Electric Revenue
Bonds, Series 1992, MBIA
Insured, 7.25% $5,000,000 1/01/2007 $5,759,650
County of Durham, North
Carolina, Certificates of
Participation, (1991 Jail
Facilities and Computer
Equipment Financing
Project), 6.625% 2,065,000 5/01/2014 2,184,708
North Carolina Housing
Finance Agency, Multifamily
Revenue Refunding Bonds,
(1992 Refunding Bond
Resolution), Series B,
6.90% 6,990,000 7/01/2024 7,344,113
-----------
15,288,471
-----------
Ohio 5.0%
State of Ohio, (Ohio Public
Facilities Commission),
Higher Education Capital
Facilities Bonds, Series
II-1996A, MBIA Insured,
4.50% 2,600,000 11/01/2009 2,309,008
City of Akron, Ohio,
Waterworks System Mortgage
Revenue Improvement
Refunding Bonds, Series
1996, MBIA Insured, 4.875% 2,250,000 3/01/2012 2,065,770
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 2,205,340
City of Cleveland, Ohio,
Waterworks Improvement and
Refunding First Mortgage
Revenue Bonds, Series H
1996, MBIA Insured, 5.70% 1,000,000 1/01/2014 997,800
Ohio (cont'd)
City of Cleveland, Ohio,
Public Power System
Improvement First Mortgage
Revenue Refunding Bonds,
Series 1991 B, 7.00% $7,000,000 11/15/2017 $7,501,760
-----------
15,079,678
-----------
Oregon 0.3%
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 1,103,810
-----------
Pennsylvania 3.3%
Scranton-Lackawanna Health
and Welfare Authority,
Revenue Bonds, Series A of
1994, (Allied Services
Rehabilitation Hospitals
Project), 6.60% 500,000 7/15/2000 506,350
Montgomery County Industrial
Development Authority,
Health Facilities Revenue
Bonds, Series of 1993,
(ECRI Project), 6.40% 770,000 6/01/2003 779,355
Delaware County Industrial
Development Authority,
Revenue Bonds, Series of
1994, (Martins Run), 5.75% 500,000 12/15/2003 487,875
Montgomery County Higher
Education and Health
Authority, Pennsylvania,
Northwestern Corp., 6.50% 1,140,000 6/01/2004 1,194,389
Monroeville, Pennsylvania,
Hospital Authority,
Hospital Refunding Bonds,
Forbes Health System, 5.75% 500,000 10/01/2005 489,095
Pennsylvania Economic
Development Financing
Authority, Resource
Recovery Revenue Bonds,
(Northampton Generating
Project), Series 1994A,
6.40% 2,500,000 1/01/2009 2,387,500
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
Pennsylvania (cont'd)
Pennsylvania Economic
Development Financing
Authority, Resource
Recovery Revenue Bonds,
(Colver Project), Series
1994D, 7.05% $1,000,000 12/01/2010 $1,022,090
Pennsylvania
Intergovernmental
Corporation Authority,
Special Tax Revenue
Refunding Bonds, (City of
Philadelphia Funding
Program), Series 1996, FGIC
Insured, 5.50% 2,200,000 6/15/2016 2,114,948
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 1,066,510
-----------
10,048,112
-----------
Tennessee 2.4%
City of Memphis, Tennessee,
Electric System Revenue
Refunding Bonds, Series of
1992, 6.00% 2,250,000 1/01/2006 2,383,515
City of Memphis, Tennessee,
Water Division Revenue
Refunding Bonds, Series of
1992-A, 6.00% 3,000,000 1/01/2012 3,104,670
The Metropolitan Government
of Nashville and Davidson
County (Tennessee),
Electrical System Revenue
Bonds, 1994 Series A, MBIA
Insured, 5.625% 1,750,000 5/15/2014 1,723,715
-----------
7,211,900
-----------
Texas 9.6%
City of Austin, Texas,
Combined Utility Systems
Revenue Refunding Bonds,
Series 1993, 5.80% 2,000,000 11/15/2006 2,103,260
Texas (cont'd)
Texas Turnpike Authority,
Dallas North Tollway System
Revenue Refunding Bonds,
Series 1996, FGIC Insured,
6.50%+ $5,100,000 1/01/2009 $5,340,210
Texas Municipal Power
Agency, Refunding Revenue
Bonds, Series 1991A, AMBAC
Insured, 6.75% 1,000,000 9/01/2012 1,070,990
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 6,218,165
Matagorda County, Navigation
District Number One
(Texas), Collateralized
Pollution Control Revenue
Bonds, (Houston Lighting &
Power Company Project),
Series 1989A, MBIA Insured,
7.875% 3,000,000 2/01/2019 3,181,290
Dallas-Forth Worth
International Airport,
Facility Improvement
Corporation, American
Airlines, Inc. Revenue
Bonds, Series 1990, 7.50% 5,250,000 11/01/2025 5,577,285
AllianceAirport Authority,
Inc., Special Facilities
Revenue Bonds, Series 1990,
(American Airlines, Inc.
Project), 7.50% 5,000,000 12/01/2029 5,297,650
-----------
28,788,850
-----------
Utah 0.9%
Intermountain Power Agency,
Utah, Power Supply Revenue
Refunding Bonds, 1996
Series A, MBIA Insured,
6.15% 2,500,000 7/01/2014 2,568,325
-----------
Vermont 0.5%
Vermont Educational and
Health Buildings Financing
Agency, Revenue Bonds,
(Middlebury College
Project), Series 1996,
5.375% 1,500,000 11/01/2026 1,381,365
-----------
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
Virginia 1.0%
City of Norfolk, Virginia,
General Obligation Capital
Improvement Bonds, Series
1996, 5.25% $3,000,000 6/01/2011 $2,939,130
-----------
Washington 0.6%
Clark County, Washington,
Sewer Revenue Bonds, 1996,
MBIA Insured, 5.70% 1,750,000 12/01/2016 1,704,623
-----------
Wisconsin 1.5%
Wisconsin Housing and
Economic Development
Authority, Home Ownership
Revenue Bonds, 1992 Series
2, Subject to AMT, 6.875% 4,250,000 9/01/2024 4,415,112
-----------
Total Municipal Bonds (Cost $294,095,151) 300,356,562
-----------
REPURCHASE AGREEMENTS 2.3%
State Street Bank and Trust
Company, dated 6/28/96,
repurchase proceeds
$6,807,694, collateralized
by $7,340,000 U.S. Treasury
Bill, 4.75%, due 6/26/97,
market value $6,941,812 6,805,000 7/01/1996 6,805,000
-----------
Total Repurchase Agreements (Cost $6,805,000) 6,805,000
-----------
SHORT-TERM OBLIGATIONS 1.7%
The Metropolitan Nashville
Airport Authority, Special
Facility Revenue Bonds,
(American Airlines, Inc.
Project), 4.30% 500,000 10/01/2012++ 500,000
The Industrial Development
Board of the County of
Sullivan, Tennessee,
Pollution Control Revenue
Refunding Bonds, Series
1986, (The Mead Corporation
Project), 5.75% 400,000 10/01/2016++ 400,000
-----------
The Delaware Economic
Development Authority,
Variable Rate Demand Gas
Facilities Revenue Bonds,
(Delmarva Power & Light
Company Project), Series
1994, 3.55% $200,000 10/01/2017++ $200,000
Development Authority of
Burke County (Georgia),
Pollution Control Revenue
Bonds, (Georgia Power
Company Plant Vogtle
Project), Series 1994,
3.30% 200,000 7/01/2024++ 200,000
Industrial Development
Corporation of Grapevine,
Texas, Refunding Revenue
Bonds, (American Airlines
Project), Series B3, 6.00% 500,000 12/01/2024++ 500,000
Industrial Development
Corporation of Grapevine,
Texas, Refunding Revenue
Bonds, (American Airlines
Project), Series A-1, 5.60% 200,000 12/01/2024++ 200,000
Industrial Development
Corporation of Grapevine,
Texas, Refunding Revenue
Bonds, (American Airlines
Project), Series A3, 4.75% 100,000 12/01/2024++ 100,000
Industrial Development
Corporation of Grapevine,
Texas, Refunding Revenue
Bonds, (American Airlines
Project), Series B2, 4.75% 100,000 12/01/2024++ 100,000
The Delaware Economic
Development Authority,
Variable Rate Demand Gas
Facilities Revenue Bonds,
(Delmarva Power & Light
Company Project), Series
1994, 2.70% 2,900,000 10/01/2029++ 2,900,000
Total Short-Term Obligations (Cost $5,100,000) 5,100,000
-----------
Total Investments (Cost $306,000,151)--104.3% 312,261,562
Cash and Other Assets, Less Liabilities--(4.3)% (12,832,982)
-----------
Net Assets--100.0% $299,428,580
===========
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Federal Income Tax Information:
At June 30, 1996, the net unrealized
appreciation of investments based on
cost for Federal income tax purposes of
$306,000,151 was as follows:
Aggregate gross unrealized appreciation
for all investments in which there is
an excess of value over tax cost $7,478,775
Aggregate gross unrealized depreciation
for all investments in which there is
an excess of tax cost over value (1,217,364)
----------
$6,261,411
==========
++ Interest rates on these obligations may reset daily.
+ The delivery and payment of this security is beyond the normal settlement
time of three business days after the trade date. The purchase price and
interest rate are fixed at the trade date although interest is not earned
until settlement date.
* This security is being used to collateralize the delayed delivery purchase
noted above. The total market value of segregated securities is
$6,532,210.
Futures contracts open at June 30, 1996 are as follows:
Expiration Unrealized
Type Par Value Month Depreciation
- ------------------- ---------- ----------------- -------------
Municipal Bond
Index $25,000,000 September, 1996 $(39,063)
Statement of Assets and Liabilities
June 30, 1996 (Unaudited)
Assets
Investments, at value (Cost $306,000,151) (Note 1) $312,261,562
Cash 4,874
Receivable for securities sold 12,065,764
Interest receivable 5,979,916
Receivable for fund shares sold 194,493
Other assets 27,790
-----------
330,534,399
Liabilities
Payable for securities purchased 30,009,692
Dividends payable 345,072
Payable for fund shares redeemed 231,948
Accrued transfer agent and shareholder services
(Note 2) 157,545
Accrued management fee (Note 2) 133,682
Accrued distribution and service fees (Note 4) 90,665
Accrued trustees' fees (Note 2) 4,486
Other accrued expenses 132,729
-----------
31,105,819
-----------
Net Assets $299,428,580
===========
Net Assets consist of:
Distribution in excess of net investment income $(5,114)
Unrealized appreciation of investments 6,261,411
Unrealized depreciation of futures contracts (39,063)
Accumulated net realized loss (4,989,095)
Shares of beneficial interest 298,200,441
-----------
$299,428,580
===========
Net Asset Value and redemption price per share of
Class A shares ($230,846,350 / 29,294,136 shares of
beneficial interest) $7.88
======
Maximum Offering Price per share of Class A shares
($7.88 / .955) $8.25
======
Net Asset Value and offering price per share of
Class B shares ($52,125,521 / 6,615,054 shares of
beneficial interest)* $7.88
======
Net Asset Value, offering price and redemption price
per share of Class C shares ($14,478,409 / 1,841,555
shares of beneficial interest) $7.86
======
Net Asset Value and offering price per share of
Class D shares ($1,978,300 / 251,241 shares of
beneficial interest)* $7.87
======
* 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.
10
<PAGE>
Statement of Operations
For the six months ended June 30, 1996 (Unaudited)
Investment Income
Interest $8,956,557
Expenses
Management fee (Note 2) 851,806
Transfer agent and shareholder services (Note 2) 179,722
Custodian fee 58,624
Reports to shareholders 36,476
Registration fees 21,203
Trustees' fees (Note 2) 15,498
Service fee--Class A (Note 4) 297,106
Distribution and service fees--Class B (Note 4) 256,319
Distribution and service fees--Class D (Note 4) 13,458
Legal fees 11,739
Audit fee 10,119
Miscellaneous 21,319
-----------
1,773,389
-----------
Net investment income 7,183,168
-----------
Realized and Unrealized Gain (Loss) on
Investments and Futures Contracts
Net realized loss on investments (Notes 1 and 3) (2,747,978)
Net realized gain on futures contracts (Note 1) 394,565
-----------
Total net realized loss (2,353,413)
Net unrealized depreciation of investments (12,419,207)
Net unrealized depreciation of futures contracts (39,063)
-----------
Total net unrealized depreciation (12,458,270)
-----------
Net loss on investments and futures contracts (14,811,683)
-----------
Net decrease in net assets resulting from
operations $(7,628,515)
===========
Statement of Changes in Net Assets
Six months
ended
June 30, Year ended
1996 December 31,
(Unaudited) 1995
- ------------------------------------ ------------ ----------------
Increase (Decrease) in Net Assets
Operations:
Net investment income $7,183,168 $13,418,946
Net realized gain (loss) on
investments and futures contracts* (2,353,413) 8,383,796
Net unrealized appreciation
(depreciation) of investments and
futures contracts (12,458,270) 20,715,649
---------- --------------
Net increase (decrease) resulting
from operations (7,628,515) 42,518,391
---------- --------------
Dividends from net investment
income:
Class A (5,873,873) (12,265,000)
Class B (1,068,797) (1,664,544)
Class C (474,825) (63,631)
Class D (57,460) (52,929)
---------- --------------
(7,474,955) (14,046,104)
---------- --------------
Net increase (decrease) from fund
share transactions (Note 6) (17,494,153) 28,826,529
---------- --------------
Total increase (decrease) in net
assets (32,597,623) 57,298,816
Net Assets
Beginning of period 332,026,203 274,727,387
---------- --------------
End of period (including
(overdistributed) undistributed
net investment income of $(5,114)
and $286,673, respectively) $299,428,580 $332,026,203
========== ==============
*Net realized gain (loss) for
Federal income tax
purposes (Note 1) $(2,353,413) $7,274,722
========== ==============
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
Notes to Unaudited Financial Statements
June 30, 1996
Note 1
State Street Research Tax-Exempt Fund (the "Fund"), is a series of State
Street Research Tax-Exempt Trust (the "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. Two series
of the Trust are publicly offered: State Street Research Tax-Exempt Fund and
State Street Research New York Tax-Free Fund.
The investment objective of the Fund is to seek a high level of interest
income exempt from federal income taxes. In seeking to achieve its investment
objective, the Fund invests primarily in tax-exempt debt obligations which
the investment manager believes will not involve undue risk.
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 between both 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, 1995, the
Fund had a capital loss carryforward of $1,155,195 available, to the extent
provided in regulations, to offset future capital gains, if any, which
expires on December 31, 2002. In addition, as part of a merger that occurred
on December 15, 1995, the Fund acquired from State Street Research California
Tax-Free Fund, State Street Research Florida Tax-Free Fund and State Street
Research Pennsylvania Tax-Free Fund a capital loss carryforward of
$1,246,007, of which $937,929 and $308,078 expires on December 31, 2001 and
2002, respectively. The Fund's use of such capital loss carryforward may be
limited under current tax laws.
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.
G. Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period.
Actual results could differ from those estimates.
12
<PAGE>
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, 1996, the fees pursuant
to such agreement amounted to $851,806.
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, 1996, the amount of
such expenses was $33,595.
The fees of the Trustees not currently affiliated with the Adviser amounted
to $15,498 during the six months ended June 30, 1996.
Note 3
For the six months ended June 30, 1996, purchases and sales of securities,
exclusive of short-term obligations, aggregated $286,067,279 and
$303,053,497, 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 or servicing 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,
1996, fees pursuant to such plan amounted to $297,106, $256,319 and $13,458
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 $46,736 and $313,339, respectively, on sales of Class A shares of
the Fund during the six months ended June 30, 1996, and that MetLife
Securities, Inc. earned commissions aggregating $229,956 on sales of Class B
shares, and the Distributor collected contingent deferred sales charges
aggregating $79,158 and $91 on redemptions of Class B and Class D shares,
respectively, during the same period.
Note 5
At June 30, 1996, investments totalling 14.6% of the Fund's net assets were
insured as to the timely payment of principal and interest by Municipal Bond
Investors Assurance Corp. (MBIA).
13
<PAGE>
Note 6
The Trustees have the authority to issue an unlimited number of shares of
beneficial interest, $.001 par value per share. At June 30, 1996,
Metropolitan owned 407,468 Class C shares and the Distributor owned 13,825
Class A shares and one Class C share of the Fund.
Share transactions were as follows:
Six months ended
June 30, 1996 Year ended
(Unaudited) December 31, 1995
------------------------ --------------------------
Class A Shares Amount Shares Amount
----------------- --------- ----------- --------- -------------
Shares sold 2,128,253 $16,943,684 4,674,154 $37,484,244
Issued upon
reinvestment of
dividends 528,781 4,217,859 1,134,792 8,963,324
Shares
repurchased (4,052,837) (32,353,078) (7,024,141) (55,275,274)
------- --------- ------- -----------
Net decrease (1,395,803) $(11,191,535) (1,215,195) $(8,827,706)
======= ========= ======= ===========
Class B Shares Amount Shares Amount
----------------- ------- --------- ------- -----------
Shares sold 1,004,248 $7,997,648 2,374,570 $19,127,552
Issued upon
reinvestment of
dividends 84,127 670,492 164,613 1,301,099
Shares
repurchased (751,232) (5,979,741) (999,139) (7,870,018)
------- --------- ------- -----------
Net increase 337,143 $2,688,399 1,540,044 $12,558,633
======= ========= ======= ===========
Class C Shares Amount Shares Amount
----------------- ------- --------- ------- -----------
Shares sold 560,151 $4,553,767 2,740,046 $22,327,564
Issued upon
reinvestment of
dividends 26,400 210,179 4,806 38,781
Shares
repurchased (1,490,652) (11,674,563) (43,984) (354,433)
------- --------- ------- -----------
Net increase
(decrease) (904,101) $(6,910,617) 2,700,868 $22,011,912
======= ========= ======= ===========
Class D Shares Amount Shares Amount
----------------- ------- --------- ------- -----------
Shares sold 44,234 $350,906 417,377 $3,395,688
Issued upon
reinvestment of
dividends 1,770 14,111 2,759 21,771
Shares
repurchased (301,828) (2,445,417) (41,573) (333,769)
------- --------- ------- -----------
Net increase
(decrease) (255,824) $(2,080,400) 378,563 $3,083,690
======= ========= ======= ===========
14
<PAGE>
For a share outstanding throughout each period:
<TABLE>
<CAPTION>
Class A
----------------------------------------------------------------
Year ended December 31
-----------------------------------------------------
Six
months
ended
June
30,
1996
(Unaudited) 1995 1994 1993 1992 1991
- -------------------------- ------- ------- ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $8.26 $7.46 $8.43 $7.94 $7.69 $7.30
Net investment income .19 .39 .40 .40 .43 .44
Net realized and
unrealized gain (loss)
on investments (.37) .82 (.98) .54 .27 .39
Dividends from net
investment income (.20) (.41) (.38) (.39) (.43) (.44)
Distributions from net
realized gains -- -- (.01) (.06) (.02) --
------ ------ ------ ------ ------ -------
Net asset value, end of
period $7.88 $8.26 $7.46 $8.43 $7.94 $7.69
====== ====== ====== ====== ====== =======
Total return (2.23)%+++ 16.58%+ (6.90)%+ 12.11%+ 9.34%+ 11.81%+
Net assets at end of
period (000s) $230,846 $253,402 $238,097 $302,845 $203,312 $118,157
Ratio of operating
expenses to average net
assets 1.03%++ 1.13% 1.20% 1.20% 1.20% 1.25%
Ratio of net investment
income to average net
assets** 4.76%++ 4.95% 5.07% 4.85% 5.48% 6.00%
Portfolio turnover rate 92.29% 97.32% 78.63% 36.16% 27.44% 81.75%
</TABLE>
Class B
---------------------------------------
Year ended December 31
------------ -----------------------
Six months
ended
June 30,
1996
(Unaudited) 1995 1994 1993*
- ------------------------ ------------ ---- ----- ------
Net asset value,
beginning of period $8.26 $7.46 $8.43 $8.25
Net investment income .16 .33 .34 .19
Net realized and
unrealized gain (loss)
on investments (.38) .82 (.97) .24
Dividends from net
investment income (.16) (.35) (.33) (.19)
Distributions from net
realized gains -- -- (.01) (.06)
---------- -- --- ----
Net asset value, end of
period $7.88 $8.26 $7.46 $8.43
========== == === ====
Total return (2.61)%+++ 15.72%+ (7.59)%+ 5.20%+++
Net assets at end of
period (000s) $52,126 $51,827 $35,338 $27,695
Ratio of operating
expenses to average
net assets 1.78%++ 1.88% 1.95% 1.95%++
Ratio of net investment
income to average net
assets** 4.01%++ 4.19% 4.35% 3.93%++
Portfolio turnover rate 92.29% 97.32% 78.63% 36.16%
Class C
---------------------------------------------
Year ended December 31
-----------------------------
Six months
ended
June 30,
1996
(Unaudited) 1995 1994 1993*
- ------------------------ ------------ ------ ------- --------
Net asset value,
beginning of period $8.24 $7.45 $8.41 $8.25
Net investment income .19 .40 .42 .23
Net realized and
unrealized gain (loss)
on investments (.37) .81 (.96) .22
Dividends from net
investment income (.20) (.42) (.41) (.23)
Distributions from net
realized gains -- -- (.01) (.06)
---------- ---- ----- ------
Net asset value, end of
period $7.86 $8.24 $7.45 $8.41
========== ==== ===== ======
Total return (2.13)%+++ 16.76%+ (6.56)%+ 5.54%+++
Net assets at end of
period (000s) $14,478 $22,614 $334 $477
Ratio of operating
expenses to average
net assets 0.78%++ 0.88% 0.95% 0.96%++
Ratio of net investment
income to average net
assets** 5.01%++ 4.85% 5.26% 4.92%++
Portfolio turnover rate 92.29% 97.32% 78.63% 36.16%
Class D
---------------------------------------------
Year ended December 31
------------ -----------------------------
Six months
ended
June 30,
1996
(Unaudited) 1995 1994 1993*
- ------------------------ ------------ ------ ------- --------
Net asset value,
beginning of period $8.25 $7.46 $8.43 $8.25
Net investment income .15 .33 .34 .19
Net realized and
unrealized gain (loss)
on investments (.37) .81 (.97) .23
Dividends from net
investment income (.16) (.35) (.33) (.18)
Distributions from net
realized gains -- -- (.01) (.06)
---------- ---- ----- ------
Net asset value, end of
period $7.87 $8.25 $7.46 $8.43
========== ==== ===== ======
Total return (2.61)%+++ 15.58%+ (7.59)%+ 5.19%+++
Net assets at end of
period (000s) $1,978 $4,183 $958 $1,115
Ratio of operating
expenses to average
net assets 1.78%++ 1.88% 1.95% 1.99%++
Ratio of net investment
income to average net
assets** 4.01%++ 4.13% 4.31% 3.92%++
Portfolio turnover rate 92.29% 97.32% 78.63% 36.16%
*June 7, 1993 (commencement of share class designations) to December 31,
1993.
**The ratio of net investment income to average net assets differs among
classes by amounts other than the difference in expense ratios because of
fluctuations during the year in relative levels of assets in each class
and in interest income earned.
++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.
15
<PAGE>
Report on Special Meeting of Shareholders
A Special Meeting of Shareholders of the State Street Research Tax-Exempt
Fund ("Fund"), along with shareholders of other series of State Street
Research Tax-Exempt Trust ("Meeting"), was convened on April 19, 1996. The
results of the Meeting are set forth below.
Votes (millions
of shares)
----------------
For Withheld
--- ---------
1. The following persons were elected as
Trustees:
Edward M. Lamont 25.9 1.0
Robert A. Lawrence 25.9 1.0
Dean O. Morton 25.9 1.0
Thomas L. Phillips 25.9 1.0
Toby Rosenblatt 25.9 1.0
Michael S. Scott Morton 25.9 1.0
Ralph F. Verni 25.8 1.1
Jeptha H. Wade 25.9 1.0
Votes (millions of
shares)
-------------------
For Against Abstain
--- ------ ------
2. The Fund's following investment policies were
reclassified from fundamental to nonfundamental:
a. The policy regarding investments in securities
of companies with less than three (3) years'
continuous operation 17.5 1.6 2.9
b. The policy regarding investments in illiquid
securities. 17.4 1.7 3.0
3. The Fund's fundamental policy regarding
investments in commodities and commodity contracts
was amended. 17.5 1.6 3.0
4. The Fund's fundamental policy on lending was
amended to clarify the permissibility of
securities lending. 17.3 1.8 2.9
5. The Fund's fundamental policies regarding
diversification of investments were amended 17.9 1.3 2.8
6. The Master Trust Agreement was amended to permit
the Trustees to reorganize, merge or liquidate a
fund without prior shareholder approval. 20.0 3.7 3.3
7. The Master Trust Agreement was amended to
eliminate specified time permitted between the
record date and any shareholders meeting. 21.2 2.5 3.2
16
<PAGE>
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 LLP
Exchange Place
Boston, MA 02109
Officers
Ralph F. Verni
Chairman of the Board,
President and Chief
Executive Officer
Paul J. Clifford, Jr.
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
Amy L. Simmons
Assistant Secretary
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
17
<PAGE>
[Back Cover]
State Street Research Tax-Exempt 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 Research logo]
This report is prepared for the general information of current shareholders
only. It is not authorized for use as sales material with prospective
investors.
The Dalbar awards recognize quality shareholder service and should not be
considered a rating of fund performance. The survey included mutual fund
complexes that volunteered or were otherwise selected to participate and was
not industry-wide.
CONTROL NUMBER: 3323-960821 (0997)SSR-LD
Cover Illustration by Dorothy Cullinan TE-393D-896
<PAGE>
[Front Cover]
[State Street Research logo]
State Street Research
Tax-Exempt Fund
Semiannual Report
June 30, 1996
What's Inside
Investment Update:
About the Fund,
economy and markets
Fund Information:
Facts and figures
Plus, Complete Portfolio Holdings
and Financial Statements
----------------------------[Dalbar Award seal] ----------------------------
Quality
Tested Service
1995
Dalbar
Honors Commitment To:
Investors
For Excellence
in
Shareholder Service
-----------------------------------------------------------------------------
