<PAGE>
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STATE STREET RESEARCH
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TAX-EXEMPT FUND
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SEMIANNUAL REPORT
June 30, 1999
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WHAT'S INSIDE
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INVESTMENT UPDATE
About the Fund,
economy and markets
FUND INFORMATION
Facts and figures
PLUS, COMPLETE PORTFOLIO HOLDINGS
AND FINANCIAL STATEMENTS
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DALBAR
HONORS COMMITMENT TO:
INVESTORS
1998
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For Excellence
in
Shareholder Service
[LOGO] STATE STREET RESEARCH
<PAGE>
STATE STREET RESEARCH TAX-EXEMPT FUND
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INVESTMENT UPDATE
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INVESTMENT ENVIRONMENT
THE ECONOMY
o The U.S. economy surprised market watchers with an annualized 6.1% growth
rate in the last quarter of 1998. Growth slowed in the first half of 1999,
ending at an annualized 2.3%.
o Inflation remained low, but spiked its first real advance in more than a
year as the price of crude oil rose more than 40% in the first half of the
year.
o Americans earned more -- and spent more. Meanwhile, the nation's savings
rate slipped further into negative territory. It stood at -1.2% at mid-year.
THE MARKETS
o The S&P 500, a broad measure of common stock performance, gained 12.38% for
the six months ended June 30, 1999.(1) The gap between large company growth
stocks and the rest of the market narrowed, the result of growing concern
over their premium valuations plus the Fed's announced predilection for an
interest rate hike -- which it delivered at the end of the period.
o U.S. Treasury bonds lost ground as the yield on the 30-year benchmark rose
above 6.0%. High-yield bonds, which had weakened late in 1998, rebounded in
the first half of 1999.
THE FUND
OVER THE PAST SIX MONTHS
o For the six months ended June 30, 1999, Class A shares of State Street
Research Tax-Exempt Fund returned -1.45% [does not reflect sales charge](2).
The Fund slightly outperformed the Lipper average general municipal debt
fund, which returned -1.82%, but underperformed the Lehman Brothers
Municipal Bond Index, which returned -0.89%.(1)
o Most of the high-yield bonds performed well.
CURRENT STRATEGY
o We reduced the Fund's interest rate sensitivity to be in line with its peer
group.
o The fund is positioned to react neutrally to a changing interest rate
environment, whether the next change will be up or down.
June 30, 1999
(1) The S&P 500 (officially the "Standard and Poor's 500 Stock Price Index") is
an unmanaged index of 500 U.S. stocks. The Lehman Brothers Municipal Bond
Index is comprised of 8,000 fixed-rate investment-grade municipal bonds, all
from issues larger than $50 million and with maturities greater than two
years. The indices do not take transaction charges into consideration. It is
not possible to invest directly in the indices.
(2) -1.82% for Class B(1); -1.82% for Class B shares; -1.81% for Class C shares;
-1.33% for Class S shares.
(3) Keep in mind that past performance is no guarantee of future results. The
Fund's share price, yield and return will fluctuate, and you may have a gain
or loss when you sell your shares. All returns assume reinvestment of
capital gain distributions and income dividends at net asset value.
Performance reflects a maximum 4.50% Class A share front-end sales charge,
or 5% Class B(1) or Class B share or 1% Class C share contingent deferred
sales charge, where applicable.
(4) Class S shares, offered without a sales charge, are available through
certain employee benefit plans and special programs.
(5) The Fund's returns include performance before the creation of share classes.
If this performance reflected the share classes' current 12b-1 fees, the
fund's returns may have been lower.
PLEASE NOTE THAT THE DISCUSSION THROUGHOUT THIS SHAREHOLDER REPORT IS DATED AS
INDICATED AND, BECAUSE OF POSSIBLE CHANGES IN VIEWPOINT, DATA AND TRANSACTIONS,
SHOULD NOT BE RELIED UPON AS BEING CURRENT THEREAFTER.
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FUND INFORMATION (all data are for periods ended June 30, 1999)
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AVERAGE ANNUAL TOTAL RETURN
(at maximum applicable sales charge)(3)(4)(5)
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LIFE OF FUND
(since 8/25/86) 10 YEARS 5 YEARS 1 YEAR
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Class A 6.46% 6.09% 5.38% -2.73%
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Class B(1) 6.46% 6.10% 5.24% -3.62%
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Class B 6.46% 6.10% 5.24% -3.62%
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Class C 6.46% 6.10% 5.57% 0.26%
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Class S 6.95% 6.72% 6.61% 2.12%
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TAXABLE
EQUIVALENT
YIELD
(36% federal
YIELD tax bracket)
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Class A 4.33% 6.77%
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Class B(1) 3.77% 5.89%
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Class B 3.78% 5.91%
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Class C 3.81% 5.95%
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Class S 4.81% 7.52%
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Yield is based on net investment income for the 30 days ended June 30, 1999.
While a substantial portion of income will be exempt from Federal income tax,
investors may be subject to alternative minimum tax, and income may be subject
to state or local tax. Investors should consult their tax adviser.
BOND QUALITY RATINGS*
(by percentage of long-term investments)
AAA 33%
AA 19%
A 5%
BBB 32%
BB 11%
As rated by Standard & Poor's Corporation or Moody's Investors Service, Inc.
*20% of the above bonds were not rated but were included among relevant rating
categories as determined by the Fund's manager.
<PAGE>
STATE STREET RESEARCH TAX-EXEMPT FUND
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INVESTMENT PORTFOLIO
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June 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
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PRINCIPAL MATURITY VALUE
AMOUNT DATE (NOTE 1)
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<S> <C> <C> <C>
MUNICIPAL BONDS 98.7%
ALABAMA 0.4%
Birmingham Airport Authority, Alabama, Airport
Revenue Refunding Bonds, Series 1999, Subject to AMT,
AMBAC Insured, 5.25%+ ............................... $ 1,075,000 7/01/2007 $ 1,091,802
------------
CALIFORNIA 16.9%
Santa Clara County Financing Authority, (VMC Facility
Replacement Project), 1994 Series A Bonds, AMBAC
Insured, 7.75% ...................................... 1,000,000 11/15/2008 1,219,370
Foothill/Eastern Transportation Corridor Agency,
Series 1995A Senior Lien Convertible Capital
Appreciation Bonds, 0.00% ........................... 1,695,000 1/01/2010 1,381,967
Port Hueneme Redevelopment Agency, Central Community
Project, 1993 Tax Allocation Refunding Bonds, AMBAC
Insured, 5.50% ...................................... 1,800,000 5/01/2014 1,877,922
California Pollution Control Financing Authority,
Pollution Control Refunding Revenue Bonds, (San Diego
Gas & Electric Company), 1996 Series A, 5.90% ....... 2,200,000 6/01/2014 2,382,050
Sacramento Power Authority, Cogeneration Project
Revenue Bonds, (Procter & Gamble Project), 1995
Series, 6.50% ....................................... 1,300,000 7/01/2014 1,455,025
California Housing Finance Agency, Home Mortgage
Revenue Bonds, 1994 Series G, 7.20% ................. 1,500,000 8/01/2014 1,595,760
City of Stockton, Revenue Certificates of
Participation, 1995 Series A, (Wastewater Treatment
Plant Expansion), FGIC Insured, 6.70%* .............. 1,000,000 9/01/2014 1,125,860
California Educational Facilities Authority, Series
1994 Revenue Bonds, (Southwestern University
Project), Series 1995, 6.60% ........................ 1,000,000 11/01/2014 1,093,640
County of Madera, California, Certificates of
Participation, (Valley Childrens Hospital Project),
Series 1995, MBIA Insured, 6.50% .................... 1,000,000 3/15/2015 1,139,350
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 699,402
Roseville Joint Union High School District, 1992
General Obligation Bonds, Series B, FGIC Insured,
0.00% ............................................... 1,000,000 8/01/2015 427,420
Foothill/Eastern Transportation Corridor Agency, Toll
Road Revenue Bonds Series 1995 A (Fixed Rate),
Capital Appreciation Bonds, Senior Lien Series A,
0.00% ............................................... 5,000,000 1/01/2019 1,704,400
San Joaquin Hills Transportation Corridor Agency,
Toll Road Refunding Revenue Bonds, Series 1997A,
Convertible Capital Appreciation Bonds, 0.00% ....... 5,000,000 1/15/2019 3,349,550
City of Long Beach, California, Harbor Revenue
Refunding Bonds, Series 1998A, Subject to AMT, FGIC
Insured, 6.00% ...................................... 4,000,000 5/15/2019 4,294,920
Fresno Sewer Revenue Bonds, Series A-1, AMBAC
Insured, 5.25% ...................................... 5,100,000 9/01/2019 5,099,643
County of Sacramento, Laguna Creek Ranch/Elliott
Ranch Community Facilities District No.1, Improvement
Area No. 2 Special Tax Refunding Bonds, (Elliott
Ranch), 6.30% ....................................... 3,000,000 9/01/2021 3,071,970
Anaheim Public Financing Authority, Lease Revenue
Bonds, (Anaheim Public Improvement Project),
Subordinate, 1997 Series C Capital Appreciation
Bonds, FSA Insured, 0.00% ........................... 3,125,000 9/01/2025 735,250
City of Davis, Public Facilities Financing Authority,
Local Agency Revenue Bonds, 1997 Series A, 6.60% .... 1,500,000 9/01/2025 1,541,145
Sacramento, California, City Financing Authority,
Senior Revenue Bonds, (Sacramento Convention Center
Hotel Project), 1999 Series A, 6.25% ................ 5,000,000 1/01/2030 4,906,500
San Joaquin Hills Transportation Corridor Agency,
(Orange County, California), Senior Lien Toll Road
Revenue Bonds, 7.00% ................................ 950,000 1/01/2030 1,051,859
Foothill/Eastern Transportation Corridor Agency, Toll
Road Revenue Bonds Series 1995A Senior Lien, 6.50% .. 6,000,000 1/01/2032 6,603,780
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46,756,783
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COLORADO 4.6%
E-470 Public Highway Authority, Senior Revenue Bonds,
Series 1997B, (Capital Appreciation Bonds), MBIA
Insured, 0.00% ...................................... 5,000,000 9/01/2016 1,981,350
Eaglebend Affordable Housing Corporation, Multifamily
Housing Project Revenue Refunding Bonds, Series
1997A, 6.45% ........................................ 2,000,000 7/01/2021 2,083,620
Colorado Housing and Finance Authority, Single Family
Program, 1997 Series B-2 Senior Bonds (AMT), 7.00% .. 1,165,000 5/01/2026 1,269,803
Arapahoe County, Colorado, Public Highway Authority,
Capital Improvement Trust Fund, Highway Revenue Bonds
(E-470 Project), Pre-Refunded to 8/31/2005
@ 103, 7.00%* ....................................... 5,000,000 8/31/2026 5,749,700
Colorado Housing and Finance Authority, Single Family
Program, 1996 Series B-2 Senior Bonds, 7.45% ........ 1,500,000 11/01/2027 1,627,860
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12,712,333
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CONNECTICUT 5.8%
State of Connecticut, Special Tax Obligation Bonds,
Transportation Infrastructure Purposes, 1991 Series
A, 6.50% ............................................ 1,500,000 10/01/2012 1,707,960
Connecticut Development Authority, Pollution Control
Refunding Bonds, (Pfizer Inc. Project - 1982 Series),
6.55% ............................................... 2,500,000 2/15/2013 2,697,900
State of Connecticut Health and Educational
Facilities Authority, Revenue Bonds, University of
Hartford Issue, Series D, 6.80% ..................... 5,000,000 7/01/2022 5,194,100
State of Connecticut Health and Educational
Facilities Authority, Revenue Bonds, Quinnipiac
College Issue, Series D, 6.00% ...................... 1,465,000 7/01/2023 1,500,424
State of Connecticut Health and Educational
Facilities Authority, Revenue Bonds, Quinnipiac
College Issue, Series D, Pre-Refunded to 7/1/2023 @
98.25, 6.00% ........................................ 3,000,000 7/01/2023 3,218,460
Connecticut Development Authority, Aquarium Project
Revenue Bonds, (Mystic Marinelife Aquarium Project -
1997 Series A), 7.00% ............................... 1,700,000 12/01/2027 1,776,466
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16,095,310
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DISTRICT OF COLUMBIA 1.0%
District of Columbia, (The Howard University Issue),
Revenue Refunding Bonds, Series 1998, MBIA, Insured,
5.50% ............................................... 2,815,000 10/01/2017 2,873,439
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FLORIDA 11.0%
Grand Haven Community Development District (Flagler
County, Florida), Special Assessment Bonds, Series
1997 A, 6.30% ....................................... 2,380,000 5/01/2002 2,415,224
Heritage Harbor Development District, (Hillsborough
County, Florida), Special Assessment Revenue Bonds,
Series 1997B, 6.00% ................................. 1,285,000 5/01/2003 1,282,276
Bayside Improvement Community Development District,
(Lee County, Florida), Capital Improvement, Revenue
Bonds, Series 1998A, 5.95% .......................... 915,000 5/01/2008 911,807
Orlando Utilities Commission, Water and Electric
Subordinated Revenue Bonds, Series D, 6.75% ......... 5,000,000 10/01/2017 5,788,550
Bayside Improvement Community Development District,
(Lee County, Florida), Capital Improvement, Revenue
Bonds, Series 1998A, 6.30% .......................... 980,000 5/01/2018 983,704
Grand Haven Community Development District (Flagler
County, Florida), Special Assessment Bonds, Series
1997 B, 6.90% ....................................... 750,000 5/01/2019 777,907
North Springs Improvement District, (Broward County,
Florida), Special Assessment Bonds, Series 1997,
(Heron Bay Project), 7.00% .......................... 745,000 5/01/2019 771,634
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 1,313,900
Orange County, Florida, Health Facilities Authority,
First Mortgage Revenue Bonds, Series 1996, (Orlando
Lutheran Towers, Inc.), 8.75% ....................... 5,000,000 7/01/2026 5,590,400
Volusia County Educational Facility Authority,
Educational Facilities Revenue Bonds, (Embry-Riddle
Aeronautical University Project), Series 1996A,
6.125% .............................................. 5,000,000 10/15/2026 5,158,200
Northern Palm Beach County, Florida, Improvement
District, Water Control and Improvement Bonds, Unit
of Development No. 9A, Series 1996A, 7.30% .......... 3,000,000 8/01/2027 3,246,900
Housing Authority of Lee County, Florida, Single
Family Mortgage Revenue Bonds, (Multi-County
Program), Series 1996A, Subseries 2, Subject to AMT,
7.50% ............................................... 1,180,000 9/01/2027 1,309,186
Northern Palm Beach County, Florida, Improvement
District, Water Control and Improvement Bonds, Unit
of Development No. 9B, Series 1999, 6.00% ........... 750,000 8/01/2029 751,163
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30,300,851
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GEORGIA 7.4%
George L. Smith ll Georgia World Congress Center
Authority, Refunding Revenue Bonds, (Domed Stadium,
Project), Series 2000, Subject to AMT, MBIA Insured,
6.00%+ .............................................. 1,000,000 7/01/2008 1,035,790
State of Georgia, General Obligation Bonds, Series
1992B, 6.25% ........................................ 4,300,000 3/01/2011 4,770,033
State of Georgia, General Obligation Bonds, Series
1994E, 6.75% ........................................ 1,000,000 12/01/2012 1,165,110
Metropolitan Atlanta Rapid Transit Authority,
Georgia, Sales Tax Revenue Bonds, Refunding Series P,
AMBAC Insured, 6.25% ................................ 4,700,000 7/01/2020 5,223,157
City of Atlanta, Water and Wastewater Revenue Bonds,
Series 1999A, FGIC Insured, 5.50% ................... 2,500,000 11/01/2022 2,569,675
State of Georgia, Local Government Certificates
Participation, Grantor Trust, Series A, MBIA Insured,
4.75% ............................................... 4,000,000 6/01/2028 3,632,360
Private Colleges and Universities Authority, Revenue
and Refunding Bonds, (Mercer University Project),
Tax-Exempt Series 1999A, 5.375% ..................... 2,000,000 10/01/2029 1,914,940
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20,311,065
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ILLINOIS 0.5%
City of Chicago, Collateralized Single Family
Mortgage Revenue Bonds, Series 1997-B, Subject to
AMT, 6.95% .......................................... 1,135,000 9/01/2028 1,229,614
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MAINE 1.6%
Finance Authority of Maine, Revenue Obligation
Securities, (Huntington Common Project), Series
1997A, 7.50% ........................................ 4,000,000 9/01/2027 4,284,200
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MARYLAND 2.7%
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 5,514,750
Frederick County, Maryland, Special Obligation Bonds,
(Urbana Community Development Authority), Series
1998, 6.625% ........................................ 2,000,000 7/01/2025 1,986,480
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7,501,230
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MASSACHUSETTS 4.5%
Massachusetts Industrial Finance Agency, First
Mortgage Revenue Bonds, (Brookhaven Retirement
Community, Lexington - 1994 Issue), Series A,
6.75% ............................................... 4,500,000 1/01/2001 4,619,835
Massachusetts Industrial Finance Agency, First
Mortgage Revenue Bonds, (Berkshire Retirement
Community, Lenox-1994 Issue) Series A, 6.375% ....... 1,500,000 7/01/2005 1,586,505
Massachusetts Bay Transportation Authority, General
Transportation System Bonds, 1994 Series A, Refunding
Bonds, 7.00% ........................................ 3,385,000 3/01/2014 3,976,901
Massachusetts Industrial Finance Agency, (Marina Bay
LLC Project-1997 Issue), 7.50% ...................... 2,000,000 12/01/2027 2,124,340
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12,307,581
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MICHIGAN 1.4%
State Building Authority, State of Michigan, 1997
Revenue Bonds, Series II (Facilities Program), AMBAC
Insured, 0.00% ...................................... 2,000,000 10/15/2011 1,068,860
State Building Authority, State of Michigan, 1997
Revenue Bonds, Series II (Facilities Program), AMBAC
Insured, 0.00% ...................................... 1,940,000 10/15/2012 976,324
Michigan Strategic Fund, Limited Obligation Refunding
Revenue Bonds, (The Detroit Edison Company, Pollution
Control Bonds Project), Collateralized Series 1999A,
Subject to AMT, MBIA Insured, 5.55%+ ................ 2,000,000 9/01/2029 1,931,760
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3,976,944
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MINNESOTA 0.7%
Minnesota Housing Finance Authority, Single Family
Mortgage Bonds, 1994 Series E, 5.90% ................ 1,975,000 7/01/2025 2,014,441
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NEVADA 3.6%
Clark County School District, Nevada, General
Obligation (Limited Tax), Building and Renovation
Bonds, Series 1997B, FGIC Insured, 5.25% ............ 5,045,000 6/15/2017 4,992,835
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 5,002,550
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9,995,385
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NEW HAMPSHIRE 2.2%
New Hampshire Higher Educational and Health
Facilities Authority, Revenue Bonds, Dartmouth
College Issue, Series 1993, 5.375% .................. 5,000,000 6/01/2023 5,023,550
New Hampshire Higher Educational and Health
Facilities Authority, Revenue Bonds, New Hampshire
College Issue, Series 1997, 6.375% .................. 1,000,000 1/01/2027 1,019,570
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6,043,120
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NEW JERSEY 2.1%
New Jersey Transportation Trust Fund Authority,
Transportation System Bonds, 1996 Series B, 5.00% ... 5,000,000 6/15/2017 4,760,800
New Jersey Educational Facilities Authority, Seton
Hall University Project Revenue Bonds, 1991 Series,
Project D, 7.00% .................................... 630,000 7/01/2021 668,903
New Jersey Educational Facilities Authority, Seton
Hall University Project Revenue Bonds, 1991 Series,
Project D, Pre-Refunded to 7/1/2021 @ 99.125, 7.00% . 370,000 7/01/2021 396,721
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5,826,424
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NEW MEXICO 2.0%
Dona Ana County, New Mexico, Gross Receipts Tax
Refunding and Improvement Revenue Bonds, Subordinate,
Series 1998, AMBAC Insured, 5.50% ................... 1,200,000 6/01/2016 1,230,564
City of Farmington, New Mexico, Pollution Control
Revenue Refunding Bonds, 1997 Series D, (Public
Service Company of New Mexico San Juan Project),
6.375% .............................................. 4,000,000 4/01/2022 4,174,880
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5,405,444
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NEW YORK 8.1%
Port Authority of New York and New Jersey, Special
Project Bonds, Series 4, KIAC Partners Project,
Subject to AMT, 6.75% ............................... 5,000,000 10/01/2011 5,386,150
The City of New York, New York, General Obligation
Bonds, Fiscal 1992 Series B, 7.75%* ................. 3,990,000 2/01/2012 4,378,027
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 5,347,150
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 5,091,200
Port Authority of New York and New Jersey, Special
Project Bonds, Series 6, JFK International Air
Terminal LLC Project, Subject to AMT, MBIA Insured,
5.75% ............................................... 2,000,000 12/01/2022 2,050,240
------------
22,252,767
------------
NORTH CAROLINA 1.9%
North Carolina Housing Finance Agency, Multifamily
Revenue Refunding Bonds, (1992 Refunding Bond
Resolution), Series B, 6.90% ........................ 5,000,000 7/01/2024 5,337,400
------------
OHIO 0.9%
County of Miami, Ohio, Hospital Facilities Revenue
Refunding and Improvement Bonds, Series 1996A, (Upper
Valley Medical Center), 6.25% ....................... 2,500,000 5/15/2016 2,583,850
------------
OKLAHOMA 1.0%
Tulsa Industrial Authority, Revenue and Refunding
Bonds, (The University Of Tulsa), Series 1996A, MBIA
Insured, 5.00% ...................................... 3,000,000 10/01/2022 2,819,280
------------
PENNSYLVANIA 6.5%
Montgomery County Industrial Development Authority,
Health Facilities Revenue Bonds, Series of 1993,
(ECRI Project), 6.40% ............................... 480,000 6/01/2003 496,315
Montgomery County Higher Education and Health
Authority, Pennsylvania, Northwestern Corp., 6.50%* . 1,140,000 6/01/2004 1,234,552
Northampton County, Pennsylvania, Higher Education
Authority, University Revenue Bonds, Series A of
1999, (Lehigh University), 5.25%+ ................... 3,335,000 11/15/2008 3,431,648
Pennsylvania Economic Development Financing
Authority, Resource Recovery Revenue Bonds,
(Northampton Generating Project), Series 1994A,
6.40% ............................................... 2,500,000 1/01/2009 2,617,175
Pennsylvania Economic Development Financing
Authority, Resource Recovery Revenue Bonds, (Colver
Project), Series 1994D, Subject to AMT, 7.05% ....... 1,000,000 12/01/2010 1,097,280
Allegheny County, Pennsylvania, Hospital Development
Authority, Health Center Revenue Bonds, Series,
1998A, (UPMC Health System), MBIA Insured, 4.50% .... 2,255,000 8/01/2015 2,034,236
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 1,061,480
Philadelphia Authority for Industrial Development,
Commercial Development Revenue Refunding Bonds,
(Doubletree Guest Suites Project), Series 1997A,
0.00% ............................................... 3,000,000 10/01/2027 3,123,360
Pennsylvania Economic Development Financing
Authority, (Northwestern Human Services, Inc.
Project), Revenue Bonds, 1998 Series A, 5.25% ....... 3,000,000 6/01/2028 2,769,840
------------
17,865,886
------------
PUERTO RICO 1.3%
Commonwealth of Puerto Rico, Public Improvement
Refunding Bonds, Series 1998, (General Obligation
Bonds), MBIA Insured, 0.00% ......................... 2,000,000 7/01/2015 872,100
Commonwealth of Puerto Rico, Electric Power
Authority, Power Revenue Bonds, Series DD, FSA
Insured, 4.50% ...................................... 3,000,000 7/01/2019 2,685,870
------------
3,557,970
------------
TENNESSEE 2.0%
City of Memphis, Tennessee, Electric System Revenue
Refunding Bonds, Series of 1992, 6.00% .............. 2,250,000 1/01/2006 2,419,695
City of Memphis, Tennessee, Water Division Revenue
Refunding Bonds, Series of 1992-A, 6.00% ............ 3,000,000 1/01/2012 3,171,540
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5,591,235
------------
TEXAS 5.6%
Texas Municipal Power Agency, Refunding Revenue
Bonds, Series 1991A, AMBAC Insured, 6.75% ........... 1,000,000 9/01/2012 1,063,130
Cypress-Fairbanks Independent School District, (A
political subdivision of Harris County, Texas),
Unlimited Tax Refunding Bonds, Series 1993A, 0.00% .. 3,500,000 2/15/2013 1,683,780
Texas Public Finance Authority, State of Texas,
General Obligation Refunding Bonds, Series 1998B,
0.00% ............................................... 3,000,000 10/01/2013 1,424,640
Amarillo, Texas, Health Facilities Corporation,
Hospital Revenue Bonds, (Baptist St. Anthony's,
Hospital Corporation Project), Series 1998, FSA
Insured, 5.50% ...................................... 2,830,000 1/01/2014 2,912,721
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 6,154,915
Texas Public Finance Authority, State of Texas
General Obligation Refunding Bonds, Series 1997,
0.00% ............................................... 5,000,000 10/01/2014 2,240,050
------------
15,479,236
------------
UTAH 1.0%
Intermountain Power Agency, Utah, Power Supply
Revenue Refunding Bonds, 1996 Series A, 6.15% ....... 2,500,000 7/01/2014 2,698,550
------------
WISCONSIN 2.0%
Wisconsin Center District, Junior Dedicated Tax
Revenue Refunding Bonds, Series 1999, FSA Insured,
5.25% ............................................... 2,295,000 12/15/2015 2,294,998
Wisconsin Housing and Economic Development Authority,
Home Ownership Revenue Bonds, 1992 Series 2, Subject
to AMT, 6.875% ...................................... 3,030,000 9/01/2024 3,167,926
------------
5,462,924
------------
Total Municipal Bonds (Cost $258,665,438) ................................................ 272,375,064
-----------
SHORT-TERM OBLIGATIONS 2.3%
Lincoln County, Wyoming, Pollution Control Revenue
Bonds, (Exxon Project), Series 1984B, 1.95% ......... 4,400,000 11/01/2014(+) 4,411,731
Lone Star, Airport Improvement Authority, Inc.,
Multiple Mode Demand Revenue Bonds, (American
Airlines, Inc. Project), Series A-2, 3.20% .......... 100,000 12/01/2014(+) 100,000
North Central Texas Health Facility Development
Corporation, Hospital Revenue Bonds, (Presbyterian
Medical Center Project), Series 1985C, 3.60% ........ 700,000 12/01/2015(+) 700,000
Development Authority of Burke County (Georgia),
Pollution Control Revenue Bonds, (Georgia Power Co.
Plant Vogtle Project), Second Series 1994, 3.10% .... 700,000 7/01/2024(+) 701,797
Long Island Power Authority, Electric System General
Revenue Bonds, Series 1998A, 3.40% .................. 400,000 5/01/2033(+) 400,000
------------
Total Short-Term Obligations (Cost $6,313,528) ........................................... 6,313,528
------------
REPURCHASE AGREEMENTS 0.2%
State Street Bank and Trust Co., dated
6/30/99, repurchase proceeds $601,058, collateralized
by, $600,000 U.S. Treasury Note, 7.125%, due 2/29/
2000, market value $621,204 ......................... 601,000 7/01/1999 601,000
------------
Total Repurchase Agreements (Cost $601,000) .............................................. 601,000
------------
Total Investments (Cost $265,579,966) - 101.2% ........................................... 279,289,592
Cash and Other Assets, Less Liabilities - (1.2%) ......................................... (3,301,975)
------------
Net Assets - 100.0% ...................................................................... $275,987,617
============
- -----------------------------------------------------------------------------------------------------------------
Federal Income Tax Information:
At June 30, 1999, the net unrealized appreciation of investments based on cost for Federal
income tax purposes of $265,579,966 was as follows:
Aggregate gross unrealized appreciation for all investments in which there is an excess of
value over tax cost ...................................................................... $ 14,790,932
Aggregate gross unrealized depreciation for all investments in which there is an excess of
tax cost over value ...................................................................... (1,081,306)
------------
$ 13,709,626
============
- -----------------------------------------------------------------------------------------------------------------
(+) Interest rates on these obligations may reset daily.
+ The delivery and payment of this security is beyond the normal settlement time.
The purchase price and interest rate are fixed at the trade date although interest is not earned until settlement date.
* All or a portion of this security is being used to collateralize the delayed delivery purchase noted above.
The total market value of segregated securities is $8,281,217.
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
STATE STREET RESEARCH TAX-EXEMPT FUND
- -------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
June 30, 1999 (Unaudited)
ASSETS
Investments, at value (Cost $265,579,966) (Note 1) ........... $ 279,289,592
Cash ......................................................... 169
Receivable for securities sold ............................... 8,814,333
Interest receivable .......................................... 4,768,403
Receivable for fund shares sold .............................. 1,024,150
Other assets ................................................. 58,495
--------------
293,955,142
LIABILITIES
Payable for securities purchased ............................. 17,347,665
Dividends payable ............................................ 298,751
Accrued management fee (Note 2) .............................. 125,268
Accrued distribution and service fees (Note 4) ............... 95,335
Payable for fund shares redeemed ............................. 45,659
Accrued trustees' fees (Note 2) .............................. 18,094
Other accrued expenses ....................................... 36,753
--------------
17,967,525
--------------
NET ASSETS $ 275,987,617
==============
Net Assets consist of:
Undistributed net investment income ........................ $ 90,734
Unrealized appreciation of investments ..................... 13,709,626
Accumulated net realized loss .............................. (939,575)
Paid-in capital ............................................ 263,126,832
--------------
$ 275,987,617
==============
Net Asset Value and redemption price per share of
Class A shares ($200,382,958 / 24,372,192 shares) .......... $8.22
=====
Maximum Offering Price per share of Class A shares
($8.22 / .955) ............................................. $8.61
=====
Net Asset Value and offering price per share of
Class B(1) shares ($5,852,662 / 712,302 shares)* ........... $8.22
=====
Net Asset Value and offering price per share of
Class B shares ($57,143,394 / 6,952,112 shares)* ........... $8.22
=====
Net Asset Value and offering price per share of
Class C shares ($2,120,914 / 258,048 shares)* .............. $8.22
=====
Net Asset Value, offering price and redemption price
per share of Class S shares
($10,487,689 / 1,278,730 shares) ........................... $8.20
=====
- ------------------------------------------------------------------------------
*Redemption price per share for Class B(1), Class B and Class C is equal to
net asset value less any applicable contingent deferred sales charge.
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATE STREET RESEARCH TAX-EXEMPT FUND
- -------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- -------------------------------------------------------------------------------
For the six months ended June 30, 1999 (Unaudited)
INVESTMENT INCOME
Interest .................................................. $ 8,011,284
EXPENSES
Management fee (Note 2) ................................... 775,831
Transfer agent and shareholder services (Note 2) .......... 230,545
Custodian fee ............................................. 72,480
Registration fees ......................................... 24,856
Trustees' fees (Note 2) ................................... 18,094
Audit fee ................................................. 17,195
Legal fees ................................................ 17,187
Service fee - Class A (Note 4) ............................ 255,421
Distribution and service fees - Class B(1) (Note 4) ....... 14,765
Distribution and service fees - Class B (Note 4) .......... 301,198
Distribution and service fees - Class C (Note 4) .......... 17,349
Reports to shareholders ................................... 10,834
Miscellaneous ............................................. 5,015
-------------
1,760,770
Fees paid indirectly (Note 2) ............................. (15,963)
-------------
1,744,807
-------------
Net investment income ..................................... 6,266,477
-------------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net realized loss on investments (Notes 1 and 3) .......... (645,335)
Net unrealized depreciation of investments ................ (10,008,603)
vNet loss on investments ................................... (10,653,938)
-------------
Net decrease in net assets resulting from operations ...... $ (4,387,461)
=============
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATE STREET RESEARCH TAX-EXEMPT FUND
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30, 1999
DECEMBER 31, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income ............................. $ 12,576,196 $ 6,266,477
Net realized gain (loss) on
investments ..................................... 1,905,433 (645,335)
Net unrealized appreciation
(depreciation) of investments ................... 983,601 (10,008,603)
------------ ------------
Net increase (decrease) resulting from operations . 15,465,230 (4,387,461)
------------ ------------
Dividends from net investment
income:
Class A ......................................... (9,924,767) (4,742,371)
Class B(1) ...................................... -- (57,252)
Class B ......................................... (2,352,161) (1,172,409)
Class C ......................................... (125,835) (68,434)
Class S ......................................... (522,957) (273,217)
------------ ------------
(12,925,720) (6,313,683)
------------ ------------
Distributions from net realized gains:
Class A ......................................... (994,207) (107,548)
Class B(1) ...................................... -- (1,482)
Class B ......................................... (303,093) (31,516)
Class C ......................................... (18,821) (1,853)
Class S ......................................... (51,520) (5,672)
------------ ------------
(1,367,641) (148,071)
------------ ------------
Net increase from fund share
transactions (Note 5) ........................... 7,442,614 2,924,667
------------ ------------
Total increase (decrease) in net assets ........... 8,614,483 (7,924,548)
NET ASSETS
Beginning of period ............................... 275,297,682 283,912,165
------------ ------------
End of period (including undistributed net
investment income of $137,940 and $90,734,
respectively) ................................... $283,912,165 $275,987,617
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATE STREET RESEARCH TAX-EXEMPT FUND
- --------------------------------------------------------------------------------
NOTES TO UNAUDITED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
June 30, 1999
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 Trust consists presently of two separate funds: 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 five classes of shares. Class A shares are subject to an
initial sales charge of up to 4.50% and an annual service fee equal to 0.25%
of average daily net assets. On January 1, 1999, the Fund began offering Class
B(1) shares and continued offering Class B shares but only to current
shareholders through reinvestment of dividends and distributions or through
exchanges from existing Class B accounts of State Street Research funds. Class
B(1) and Class B pay annual distribution and service fees of 1.00% and both
classes automatically convert into Class A shares (which pay lower ongoing
expenses) at the end of eight years. Class B(1) shares are subject to a
contingent deferred sales charge on certain redemptions made within six years
of purchase. Class B shares are subject to a contingent deferred sales charge
on certain redemptions made within five years of purchase. Class C shares are
subject to a contingent deferred sales charge of 1.00% on any shares redeemed
within one year of their purchase. Class C shares also pay annual distribution
and service fees of 1.00%. Class S shares are only offered through certain
retirement accounts, advisory accounts of State Street Research & Management
Company (the "Adviser"), an indirect wholly owned subsidiary of Metropolitan
Life Insurance Company ("Metropolitan"), and special programs. No sales charge
is imposed at the time of purchase or redemption of Class S shares. Class S
shares do not pay any distribution or service fees. 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.
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.
H. SECURITIES LENDING
The Fund may seek additional income by lending portfolio securities to
qualified institutions. The Fund will receive cash or securities as collateral
in an amount equal to at least 100% of the current market value of any loaned
securities plus accrued interest. If the borrower fails to return the
securities and the value of the collateral has declined during the term of the
loan, the Fund will bear the loss. During the six months ended June 30, 1999,
there were no loaned securities.
NOTE 2
The Trust and the Adviser 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, 1999, the fees
pursuant to such agreement amounted to $775,831.
State Street Research Service Center, 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, 1999, the amount of
such expenses was $211,762.
The Fund has entered into an arrangement with its transfer agent whereby
credits realized as a result of invested cash balances were used to reduce a
portion of the Fund's expense. During the six months ended June 30, 1999 the
Fund's transfer agent fees were reduced by $15,963 under this arrangement.
The fees of the Trustees not currently affiliated with the Adviser amounted to
$18,094 during the six months ended June 30, 1999.
NOTE 3
For the six months ended June 30, 1999, purchases and sales of securities,
exclusive of short-term obligations, aggregated $34,901,623 and $44,786,717,
respectively.
NOTE 4
The Trust has adopted plans of distribution pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended. Under the plans, 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(1), Class B and Class C shares. In addition, the
Fund pays annual distribution fees of 0.75% of average daily net assets for
Class B(1), Class B and Class C 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, 1999,
fees pursuant to such plans amounted to $255,421, $14,765, $301,198 and
$17,349 for Class A, Class B(1), Class B and Class C shares, respectively.
The Fund has been informed that the Distributor and MetLife Securities, Inc.,
a wholly owned subsidiary of Metropolitan, earned initial sales charges
aggregating $56,281 and $353,489, respectively, on sales of Class A shares of
the Fund during the six months ended June 30, 1999, and that MetLife
Securities, Inc. earned commissions aggregating $36,518 and $30,270 on sales
of Class B(1), and Class B shares, and the Distributor collected contingent
deferred sales charges aggregating $1,964, $33,281 and $1,220 on redemptions
of Class B(1), Class B and Class C shares, respectively, during the same
period.
NOTE 5
The Trustees have the authority to issue an unlimited number of shares of
beneficial interest, $.001 par value per share. At June 30, 1999,
Metropolitan owned 58,578 Class B(1) shares of the Fund.
<PAGE>
Share transactions were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30, 1999
DECEMBER 31, 1998 (UNAUDITED)
---------------------------------- ---------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ................... 2,384,602 $ 20,322,663 1,968,944 $ 16,755,581
Issued upon reinvestment of:
Dividends from net investment
income .................... 843,691 7,195,609 413,550 3,496,261
Distributions from net
realized gains ............ 98,948 847,986 10,798 91,782
Shares repurchased ............ (3,876,779) (33,042,697) (2,106,362) (17,879,783)
---------- ------------ ---------- -------------
Net increase (decrease) ....... (549,538) $ (4,676,439) 286,930 $ 2,463,841
========== ============ ========== =============
<CAPTION>
CLASS B(1)* SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ................... -- $ -- 721,193 $ 6,108,362
Issued upon reinvestment of:
Dividend from net investment
income .................... -- -- 4,808 40,261
Distribution from net
realized gains ............ -- -- 162 1,378
Shares repurchased ............ -- -- (13,861) (116,942)
---------- ------------ ---------- -------------
Net increase .................. -- $ -- 712,302 $ 6,033,059
========== ============ ========== =============
<CAPTION>
CLASS B SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ................... 1,950,304 $ 16,635,836 150,638 $ 1,281,674
Issued upon reinvestment of:
Dividends from net investment
income .................... 203,518 1,735,440 104,529 880,716
Distributions from net
realized gains ............ 29,605 253,723 3,151 26,778
Shares repurchased ............ (1,115,290) (9,508,658) (734,144) (6,224,850)
---------- ------------ ---------- -------------
Net increase (decrease) ....... 1,068,137 $ 9,116,341 (475,826) $ (4,035,682)
========== ============ ========== =============
<CAPTION>
CLASS C SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ................... 334,346 $ 2,880,497 34,878 $ 296,272
Issued upon reinvestment of:
Dividends from net investment
income .................... 7,520 64,226 4,957 42,012
Distributions from net
realized gains ............ 1,512 12,962 143 1,217
Shares repurchased ............ (210,631) (1,802,314) (248,242) (2,076,531)
---------- ------------ ---------- -------------
Net increase (decrease) ....... 132,747 $ 1,155,371 (208,264) $ (1,737,030)
========== ============ ========== =============
<CAPTION>
CLASS S SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ................... 574,641 $ 4,884,889 418,320 $ 3,559,612
Issued upon reinvestment:
Dividends from net investment
income ........................ 30,944 263,059 15,649 132,020
Distributions from net
realized gains ................ 3,380 28,899 365 3,097
Shares repurchased ............ (390,950) (3,329,506) (412,564) (3,494,250)
---------- ------------ ---------- -------------
Net increase .................. 218,015 $ 1,847,341 21,770 $ 200,479
========== ============ ========== =============
- ------------------------------------------------------------------------------------------------------
*January 1, 1999 (commencement of share class) to June 30, 1999.
</TABLE>
For a share outstanding throughout each period:
<TABLE>
<CAPTION>
CLASS A CLASS B(1)
---------------------------------------------------------------------------------- -----------------
YEARS ENDED DECEMBER 31
SIX MONTHS ENDED SIX MONTHS ENDED
---------------------------------------------------------------- JUNE 30, 1999 JUNE 30, 1999
1994 1995 1996 1997 1998 (UNAUDITED) (UNAUDITED)(b)
- --------------------------------------------------------------------------- ------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD ($) 8.43 7.46 8.26 8.10 8.51 8.54 8.54
---- ---- ---- ---- ---- ---- ----
Net investment
income ($) 0.40 0.39 0.39 0.40 0.40 0.19 0.16
Net realized and
unrealized gain
(loss) on
investments and
futures contracts ($) (0.98) 0.82 (0.16) 0.40 0.08 (0.31) (0.32)
---- ---- ---- ---- ---- ----- ----
TOTAL FROM INVESTMENT
OPERATIONS ($) (0.58) 1.21 0.23 0.80 0.48 (0.12) (0.16)
---- ---- ---- ---- ---- ----- ----
Dividends from net
investment income ($) (0.38) (0.41) (0.39) (0.39) (0.41) (0.20) (0.16)
Distributions from
net realized gains ($) (0.01) -- -- -- (0.04) (0.00) (0.00)
---- ---- ---- ---- ---- ----- ----
TOTAL DISTRIBUTIONS($) (0.39) (0.41) (0.39) (0.39) (0.45) (0.20) (0.16)
---- ---- ---- ---- ---- ----- ----
NET ASSET VALUE, END
OF PERIOD ($) 7.46 8.26 8.10 8.51 8.54 8.22 8.22
==== ==== ==== ==== ==== ==== ====
Total return(a) (%) (6.90) 16.58 2.93 10.17 5.79 (1.45)(c) (1.82)(c)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of
period ($ thousands) 238,097 253,402 223,407 209,552 205,773 200,383 5,853
Ratio of operating
expenses to average
net assets (%) 1.20 1.13 1.04 1.08 1.03 1.08(d) 1.83(d)
Ratio of net
investment income to
average net
assets (%) 5.07 4.95 4.82 4.91 4.69 4.61(d) 3.86(d)
Portfolio turnover
rate (%) 78.63 97.32 125.24 60.48 36.22 12.02 12.02
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31 SIX MONTHS ENDED
---------------------------------------------------------------- JUNE 30, 1999
1994 1995 1996 1997 1998 (UNAUDITED)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD ($) 8.43 7.46 8.26 8.10 8.51 8.54
---- ---- ---- ---- ---- ----
Net investment
income ($) 0.34 0.33 0.32 0.34 0.34 0.16
Net realized and
unrealized gain
(loss) on
investments and
futures contracts ($) (0.97) 0.82 (0.15) 0.40 0.08 (0.32)
---- ---- ---- ---- ---- ----
TOTAL FROM INVESTMENT
OPERATIONS ($) (0.63) 1.15 0.17 0.74 0.42 (0.16)
---- ---- ---- ---- ---- ----
Dividends from net
investment income ($) (0.33) (0.35) (0.33) (0.33) (0.35) (0.16)
Distributions from
net realized gains ($) (0.01) -- -- -- (0.04) (0.00)
---- ---- ---- ---- ---- ----
TOTAL DISTRIBUTIONS ($) (0.34) (0.35) (0.33) (0.33) (0.39) (0.16)
---- ---- ---- ---- ---- ----
NET ASSET VALUE, END
OF PERIOD ($) 7.46 8.26 8.10 8.51 8.54 8.22
==== ==== ==== ==== ==== ====
Total return(a) (%) (7.59) 15.72 2.15 9.35 5.01 (1.82)(c)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of
period ($ thousands) 35,338 51,827 51,710 54,093 63,445 57,143
Ratio of operating
expenses to average
net assets (%) 1.95 1.88 1.79 1.83 1.78 1.83(d)
Ratio of net
investment income to
average net assets (%) 4.35 4.19 4.07 4.15 3.93 3.86(d)
Portfolio turnover
rate (%) 78.63 97.32 125.24 60.48 36.22 12.02
- -----------------------------------------------------------------------------------------------------
(a) Does not reflect any front-end or contingent deferred sales charges.
(b) January 1, 1999 (commencement of shares class) to June 30, 1999.
(c) Not annualized.
(d) Annualized.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CLASS C
-------------------------------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31 SIX MONTHS ENDED
------------------------------------------------------------------------------------ JUNE 30, 1999
1994 1995 1996 1997 1998 (UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD ($) 8.43 7.46 8.25 8.10 8.50 8.54
---- ---- ---- ---- ---- ----
Net investment income ($) 0.34 0.33 0.32 0.34 0.33 0.15
Net realized and
unrealized gain (loss)
on investments and
futures contracts ($) (0.97) 0.81 (0.14) 0.39 0.10 (0.31)
---- ---- ---- ---- ---- ----
TOTAL FROM INVESTMENT
OPERATIONS ($) (0.63) 1.14 0.18 0.73 0.43 (0.16)
---- ---- ---- ---- ---- ----
Dividends from net
investment income ($) (0.33) (0.35) (0.33) (0.33) (0.35) (0.16)
Distributions from net
realized gains ($) (0.01) -- -- -- (0.04) (0.00)
---- ---- ---- ---- ---- ----
TOTAL DISTRIBUTIONS ($) (0.34) (0.35) (0.33) (0.33) (0.39) (0.16)
---- ---- ---- ---- ---- ----
NET ASSET VALUE, END OF
PERIOD ($) 7.46 8.25 8.10 8.50 8.54 8.22
==== ==== ==== ==== ==== ====
Total return(a) (%) (7.59) 15.58 2.28 9.23 5.14 (1.81)(c)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of
period ($ thousands) 958 4,183 2,889 2,836 3,982 2,121
Ratio of operating
expenses to average net
assets (%) 1.95 1.88 1.79 1.83 1.78 1.83(d)
Ratio of net investment
income to average net
assets (%) 4.31 4.13 4.06 4.16 3.86 3.87(d)
Portfolio turnover rate (%) 78.63 97.32 125.24 60.48 36.22 12.02
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CLASS S
-------------------------------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31 SIX MONTHS ENDED
--------------------------------------------------------------------------------- JUNE 30, 1999
1994 1995 1996 1997 1998 (UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD ($) 8.41 7.45 8.24 8.09 8.49 8.52
---- ---- ---- ---- ---- ----
Net investment income ($) 0.42 0.40 0.39 0.42 0.42 0.20
Net realized and
unrealized gain (loss)
on investments and
futures contracts ($) (0.96) 0.81 (0.13) 0.39 0.08 (0.31)
---- ---- ---- ---- ---- ----
TOTAL FROM INVESTMENT
OPERATIONS ($) (0.54) 1.21 0.26 0.81 0.50 (0.11)
---- ---- ---- ---- ---- ----
Dividends from net
investment income ($) (0.41) (0.42) (0.41) (0.41) (0.43) (0.21)
Distributions from net
realized gains ($) (0.01) -- -- -- (0.04) (0.00)
---- ---- ---- ---- ---- ----
TOTAL DISTRIBUTIONS ($) (0.42) (0.42) (0.41) (0.41) (0.47) (0.21)
---- ---- ---- ---- ---- ----
NET ASSET VALUE, END OF
PERIOD ($) 7.45 8.24 8.09 8.49 8.52 8.20
==== ==== ==== ==== ==== ====
Total return(a) (%) (6.56) 16.76 3.30 10.33 6.07 (1.33)(c)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of
period ($ thousands) 334 22,614 8,990 8,817 10,713 10,488
Ratio of operating
expenses to average net
assets (%) 0.95 0.88 0.79 0.83 0.78 0.83(d)
Ratio of net investment
income to average net
assets (%) 5.26 4.85 5.04 5.15 4.93 4.86(d)
Portfolio turnover rate (%) 78.63 97.32 125.24 60.48 36.22 12.02
- ----------------------------------------------------------------------------------------------------------------------------
(a) Does not reflect any front-end or contingent deferred sales charges.
(b) January 1, 1999 (commencement of share class) to June 30, 1999.
(c) Not annualized.
(d) Annualized.
</TABLE>
<PAGE>
STATE STREET RESEARCH TAX-EXEMPT TRUST
- --------------------------------------------------------------------------------
REPORT OF SPECIAL MEETING OF SHAREHOLDERS
- --------------------------------------------------------------------------------
A Special Meeting of Shareholders of State Street Research Tax-Exempt Fund
("Fund"), a series of State Street Research Tax-Exempt Trust ("Trust"),
together with another series of the Trust, was convened on April 6, 1999
("Meeting"). The results of the Meeting are set forth below.
VOTES (MILLIONS OF SHARES)
(COMBINED FOR ALL SERIES
OF THE TRUST)
---------------------------------
ACTION ON PROPOSAL FOR WITHHELD
- --------------------------------------------------------------------------------
The following persons were elected as Trustees:
Bruce R. Bond ................................ 21.1 0.5
Steve A. Garban .............................. 21.1 0.5
Malcolm T. Hopkins ........................... 21.1 0.5
Susan M. Phillips ............................ 21.1 0.5
<PAGE>
<TABLE>
<CAPTION>
STATE STREET RESEARCH TAX-EXEMPT TRUST
- ----------------------------------------------------------------------------------------------------------------
FUND INFORMATION, OFFICERS AND TRUSTEES OF STATE STREET RESEARCH TAX-EXEMPT TRUST
- ----------------------------------------------------------------------------------------------------------------
FUND INFORMATION OFFICERS TRUSTEES
<S> <C> <C>
STATE STREET RESEARCH RALPH F. VERNI RALPH F. VERNI
TAX-EXEMPT FUND Chairman of the Board, Chairman of the Board,
One Financial Center President and President, Chief Executive
Boston, MA 02111 Chief Executive Officer Officer and Director,
State Street Research &
INVESTMENT ADVISER PAUL J. CLIFFORD, JR. Management Company
State Street Research & Vice President
Management Company BRUCE R. BOND
One Financial Center JOHN H. KALLIS Chairman of the Board,
Boston, MA 02111 Vice President Chief Executive Officer and
President, PictureTel Corporation
DISTRIBUTOR THOMAS A. SHIVELY
State Street Research Vice President STEVE A. GARBAN
Investment Services, Inc. Former Senior Vice President
One Financial Center GERARD P. MAUS for Finance and Operations
Boston, MA 02111 Treasurer and Treasurer, The Pennsylvania
State University
SHAREHOLDER SERVICES JOSEPH W. CANAVAN
State Street Research Assistant Treasurer MALCOLM T. HOPKINS
Service Center Former Vice Chairman of the
P.O. Box 8408 DOUGLAS A. ROMICH Board and Chief Financial
Boston, MA 02266-8408 Assistant Treasurer Officer, St. Regis Corp.
1-800-562-0032
FRANCIS J. MCNAMARA, III DEAN O. MORTON
CUSTODIAN Secretary and General Counsel Former Executive Vice President,
State Street Bank and Chief Operating Officer and
Trust Company DARMAN A. WING Director, Hewlett-Packard Company
225 Franklin Street Assistant Secretary and
Boston, MA 02110 Assistant General Counsel SUSAN M. PHILLIPS
Dean, School of Business and
LEGAL COUNSEL AMY L. SIMMONS Public Management, George
Goodwin, Procter & Hoar LLP Assistant Secretary Washington University; former
Exchange Place Member of the Board of Governors
Boston, MA 02109 of the Federal Reserve System and
Chairman and Commissioner of
the Commodity Futures Trading
Commission
TOBY ROSENBLATT
President,
Founders Investments Ltd.
President,
The Glen Ellen Company
MICHAEL S. SCOTT MORTON
Jay W. Forrester Professor of
Management, Sloan School of
Management, Massachusetts
Institute of Technology
</TABLE>
<PAGE>
STATE STREET RESEARCH TAX-EXEMPT FUND ----------------
One Financial Center Bulk Rate
Boston, MA 02111 U.S. Postage
PAID
Permit #6
Hartford, CT
----------------
STATE STREET RESEARCH
[logo]
LASTING VALUES
- -------------
LEADING IDEAS
QUESTIONS? COMMENTS?
CALL us at 1-800-562-0032
[hearing impaired 1-800-676-7876]
[Chinese and Spanish-speaking 1-888-638-3193]
WRITE us at:
State Street Research
Service Center
P.O. Box 8408
Boston, MA 02266-8408
E-MAIL us at:
[email protected]
INTERNET site:
www.ssrfunds.com
[LOGO] STATE STREET RESEARCH
This report is prepared for the general information of current shareholders.
When used in the general solicitation of investors, this report must be
accompanied or preceded by a current State Street Research Growth Fund
prospectus. When used after September 30, 1999, this report must be accompanied
by a current Quarterly Performance Update.
Portfolio changes should not be considered recommendations for action by
individual 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: (exp0800)SSR-LD TE-018G-0899
<PAGE>
- -------------------------------------------------------------------------------
STATE STREET RESEARCH
- -------------------------------------------------------------------------------
NEW YORK TAX-FREE FUND
----------------------
SEMIANNUAL REPORT
June 30, 1999
--------------------
WHAT'S INSIDE
--------------------
INVESTMENT UPDATE
About the Fund,
economy and markets
FUND INFORMATION
Facts and figures
PLUS, COMPLETE PORTFOLIO HOLDINGS
AND FINANCIAL STATEMENTS
----------------------
DALBAR
HONORS COMMITMENT TO:
INVESTORS
1998
----------------------
For Excellence
in
Shareholder Service
[LOGO] STATE STREET RESEARCH
<PAGE>
STATE STREET RESEARCH NEW YORK TAX-FREE FUND
- -------------------------------------------------------------------------------
INVESTMENT UPDATE
- -------------------------------------------------------------------------------
INVESTMENT ENVIRONMENT
THE ECONOMY
o The U.S. economy surprised market watchers with an annualized 6.1% growth
rate in the last quarter of 1999. Growth slowed in the first half of 1999,
ending at an annualized 2.3%.
o Inflation remained low, but spiked its first real advance in more than a
year as the price of crude oil rose more than 40% in the first half of the
year.
o Americans earned more -- and spent more. Meanwhile, the nation's savings
rate slipped further into negative territory. It stood at -1.2% at mid-year.
THE MARKETS
o The S&P 500, a broad measure of common stock performance, gained 12.38% for
the six months ended June 30, 1999.(1) The gap between large company growth
stocks and the rest of the market narrowed, the result of growing concern
over their premium valuations plus the Fed's announced predilection for an
interest rate hike -- which it delivered at the end of the period.
o U.S. Treasury bonds lost ground as the yield on the 30-year benchmark rose
above 6.0%. High-yield bonds, which had weakened late in 1998, rebounded in
the first half of 1999.
THE FUND
OVER THE PAST SIX MONTHS
o For the six months ended June 30, 1999, Class A shares of State Street
Research New York Tax-Free Fund returned -2.23% [does not reflect sales
charge].(2) The Fund underperformed the Lipper average New York municipal
debt fund, which returned -1.80%.(1)
o The Fund's emphasis on bonds more sensitive to interest rates than its peer
group hurt performance.
o Most of New York State's high-yield sector performed well.
CURRENT STRATEGY
o We reduced the Fund's interest rate sensitivity to be in line with its peer
group.
o The fund is positioned to react neutrally to a changing interest rate
environment, whether the next change will be up or down.
June 30, 1999
(1) The S&P 500 (officially the "Standard and Poor's 500 Stock Price Index") is
an unmanaged index of 500 U.S. stocks. The Lipper New York Municipal Debt
category does not reflect sales charges and includes 96 Fund classes.
(2) -2.71% for Class B(1) shares; -2.59% for Class B shares; -2.59% for Class C
shares; -2.10% for Class S shares.
(3) Keep in mind that past performance is no guarantee of future results. The
Fund's share price, yield and return will fluctuate, and you may have a gain
or loss when you sell your shares. All returns assume reinvestment of
capital gain distributions and income dividends at net asset value. Perfor-
mance reflects maximum 4.50% Class A share front-end sales charge or 5%
Class B(1) or B shares or 1% Class C share contingent deferred sales
charges, where applicable.
(4) Class S shares, offered without a sales charge, are available through
certain employee benefit plans and special programs.
(5) The Fund's returns include performance before the creation of share classes.
If this performance reflected the share classes' current 12b-1 fees, the
fund's returns may have been lower.
PLEASE NOTE THAT THE DISCUSSION THROUGHOUT THIS SHAREHOLDER REPORT IS DATED AS
INDICATED AND, BECAUSE OF POSSIBLE CHANGES IN VIEWPOINT, DATA AND TRANSACTIONS,
SHOULD NOT BE RELIED UPON AS BEING CURRENT THEREAFTER.
- --------------------------------------------------------------------------------
FUND INFORMATION (all data are for periods ended June 30, 1999)
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN (at maximum applicable sales charge)(3)(4)(5)
LIFE OF FUND 5 YEARS 1 YEAR
(since 7/5/89)
- --------------------------------------------------------------------------------
Class A 6.00% 4.92% -3.51%
- --------------------------------------------------------------------------------
Class B(1) 5.99% 4.75% -4.62%
- --------------------------------------------------------------------------------
Class B 6.00% 4.78% -4.50%
- --------------------------------------------------------------------------------
Class C 6.00% 5.07% -0.79%
- --------------------------------------------------------------------------------
Class S 6.65% 6.15% 1.29%
- --------------------------------------------------------------------------------
Performance results for the Fund are increased by the voluntary reduction of
Fund fees and expenses; without subsidization, performance would have been
lower.
TAXABLE
EQUIVALENT
YIELD
(36% federal
YIELD tax bracket)
- --------------------------------------------------------------------------------
Class A 4.14% 6.47%
- --------------------------------------------------------------------------------
Class B(1) 3.54% 5.53%
- --------------------------------------------------------------------------------
Class B 3.57% 5.58%
- --------------------------------------------------------------------------------
Class C 3.57% 5.58%
- --------------------------------------------------------------------------------
Class S 4.58% 7.16%
- --------------------------------------------------------------------------------
Yield is based on net investment income for the 30 days ended June 30, 1999.
While a substantial portion of income will be exempt from federal income tax,
investors may be subject to alternative minimum tax and income may be subject to
state or local tax. Investors should consult their tax adviser.
BOND QUALITY RATINGS*
(by percentage of long-term investments)
AAA 39%
AA 16%
A 20%
BBB 16%
BB 9%
As rated by Standard & Poor's Corporation or Moody's Investors Service, Inc.
*13% of the above bonds were not rated but were included among relevant rating
categories as determined by the Fund's manager.
<PAGE>
STATE STREET RESEARCH NEW YORK TAX-FREE FUND
- -------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
- -------------------------------------------------------------------------------
June 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
PRINCIPAL MATURITY VALUE
AMOUNT DATE (NOTE 1)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
MUNICIPAL BONDS 98.9%
GENERAL OBLIGATION 17.3%
City of New York, General Obligation Bonds, Fiscal
1992 Series H, 7.00% ................................ $ 180,000 2/01/2005 $ 193,023
City of New York, General Obligation Bonds, Fiscal
1995 Series F, 6.375% ............................... 815,000 2/15/2006 884,079
County of Onondaga, New York, General Improvement
(Serial) Bonds, 1992, 5.70% ......................... 2,000,000 4/01/2007 2,125,640
County of Nassau, New York, General Obligation
Refunding Bonds, Series G, MBIA Insured, 5.45% ...... 1,000,000 1/15/2015 1,025,320
Commonwealth of Puerto Rico, General Obligation
Public Improvement Refunding Bonds, Series 1995A,
MBIA Insured, 5.65% ................................. 1,000,000 7/01/2015 1,061,880
Commonwealth of Puerto Rico, Public Improvement
Refunding Bonds, Series 1998, (General Obligation
Bonds), MBIA Insured, 0.00% ......................... 1,000,000 7/01/2015 436,050
County of Monroe, New York, Public Improvement
Refunding Bonds, Series A, 6.00% .................... 1,535,000 3/01/2017 1,677,479
Commonwealth of Puerto Rico Public Improvement
Refunding Bonds, Series 1999 (General Obligation
Bonds), 5.25% ....................................... 2,000,000 7/01/2017 1,995,360
City of New York, General Obligation Refunding Bonds,
Series H, 6.00% ..................................... 1,500,000 8/01/2017 1,571,940
County of Orange, New York, Various Purposes Serial
Bonds-1997, 5.125% .................................. 1,000,000 9/01/2019 968,790
-----------
11,939,561
-----------
AIRPORT 1.5%
Port Authority of New York and New Jersey, Special
Project Bonds, Series 6, JFK International Air
Terminal LLC Project, MBIA Insured, Subject to AMT,
5.75% ............................................... 1,000,000 12/01/2022 1,025,120
-----------
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 1,258,352
-----------
COLLEGE & UNIVERSITY 15.1%
Dormitory Authority of the State of New York, New
York University, Revenue Bonds, Series 2001A, AMBAC
Insured, 5.50%+ ..................................... 2,000,000 7/01/2010 2,004,880
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 1,051,470
Dormitory Authority of the State of New York,
Canisius College, Revenue Bonds, Series 1995, CapMAC
Insured, 0.00% ...................................... 1,550,000 7/01/2013 745,751
Dormitory Authority of the State of New York,
Montefiore Medical Center, FHA-Insured Mortgage
Hospital Revenue Bonds, Series 1996, AMBAC Insured,
5.25% ............................................... 2,000,000 2/01/2015 1,985,220
Dormitory Authority of the State of New York, City
University System Consolidated, Series A, AMBAC
Insured, 5.625% ..................................... 1,000,000 7/01/2016 1,047,550
Dormitory Authority of the State of New York, State
University Athletic Facility, Revenue Bonds, 1998
Issue, MBIA Insured, 4.50% .......................... 1,000,000 7/01/2021 876,800
St. Lawrence County, New York, Industrial Development
Agency, Civic Facility Revenue Bonds, (Clarkson
University Project), Series 1999A, 5.50% ............ 1,000,000 7/01/2029 975,610
Dormitory Authority of the State of New York,
Rockefeller University, Revenue Bonds, Series 1998,
4.75% ............................................... 2,000,000 7/01/2037 1,742,080
-----------
10,429,361
-----------
HOSPITAL/HEALTH CARE 5.1%
Dormitory Authority of the State of New York, Nyack
Hospital Revenue Bonds, Series 1996, 6.00% .......... 1,500,000 7/01/2006 1,549,140
Dormitory Authority of the State of New York, Mental
Health Services Facilities Improvement Revenue Bonds,
Series 1997B, 5.50% ................................. 1,000,000 8/15/2017 1,002,900
Oswego County Industrial Development Agency, (Oswego
New York), Civic Facility Revenue Bonds, Series
1997A, (FHA Insured Mortgage-Seneca Hill Manor Inc.
Project), 5.65% ..................................... 1,000,000 8/01/2037 987,620
-----------
3,539,660
-----------
INDUSTRIAL DEVELOPMENT & POLLUTION CONTROL 3.1%
City of New York, Industrial Development Agency,
Special Facility Revenue Bonds, 1997 Northwest
Airlines, Inc. Project, 6.00% ....................... 1,245,000 6/01/2027 1,236,571
County of Monroe, New York, Industrial Development
Agency, Student Housing Revenue Bonds, (Collegiate
Housing Foundation-Rochester Institute of Technology
Project) Series 1999A, 5.375% ....................... 1,000,000 4/01/2029 935,990
-----------
2,172,561
-----------
LEASE 8.7%
Lyons Community Health Initatives Corp., Facility
Revenue Bonds, Series 1994, 6.55% ................... 470,000 9/01/2009 499,601
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 2,545,350
Lyons Community Health Initiatives Corp., (New York),
Facility Revenue Bonds, Series 1994, 6.80% .......... 940,000 9/01/2024 1,011,383
State of New York, Urban Development Corporation,
Correctional Capital Facilities, Series 6, FSA
Insured, 5.375% ..................................... 2,000,000 1/01/2025 1,979,440
-----------
6,035,774
-----------
LIFE CARE 6.6%
Tompkins County Industrial Development Agency, Life
Care Community Revenue Bonds, 1994 (Kendal at Ithaca
Inc., Project), 7.70% ............................... 1,430,000 6/01/2011 1,510,466
Tompkins County Industrial Development Agency, Life
Care Community Revenue Bonds, 1994 (Kendal at Ithaca
Inc., Project), 7.875% .............................. 1,000,000 6/01/2024 1,062,220
Orange County Industrial Development Agency, Life
Care Community Revenue Bonds, (The Glen Arden, Inc.
Project), Series 1998, 5.70% ........................ 1,000,000 1/01/2028 952,730
City of Mount Vernon, New York, Industrial
Development Agency, Civic Facility Revenue Bonds,
Series 1999, (Wartburg Senior Housing, Incorporated/
Meadowview at the Wartburg Civic Facility), 6.20% ... 1,000,000 6/01/2029 1,004,940
-----------
4,530,356
-----------
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 1,056,210
-----------
POWER 7.3%
Power Authority of the State of New York, General
Purpose Bonds, Series W, 6.50% . 1,150,000 1/01/2008 1,271,866
Long Island Power Authority, Electric System General
Revenue Bonds, Series 1998A, FSA Insured, 0.00% ..... 2,000,000 12/01/2014 888,180
Puerto Rico Electric Power Authority, Power Revenue
Bonds, Series DD, FSA Insured, 4.50% ................ 1,000,000 7/01/2019 895,290
Long Island Power Authority, (New York), Electric
System General Revenue Bonds, Series 1998A, 5.25% ... 2,075,000 12/01/2026 1,973,740
-----------
5,029,076
-----------
PRE-REFUNDED BONDS 6.1%
City of New York, General Obligation Bonds, Fiscal
1995 Series F, Pre-Refunded to 2/15/2005 @ 101,
6.375% .............................................. 1,095,000 2/15/2006 1,198,543
Grand Central District Management Association, Inc.,
Grand Central Business Improvement District, Capital
Improvement Bonds, Series 1992, Pre-Refunded to
1/1/2002 @ 102, 6.50%* .............................. 1,000,000 1/01/2010 1,071,300
New York State Thruway Authority, Service Contract
Revenue Bonds, Pre-Refunded to 4/1/2005 @ 102, 6.25% 1,000,000 4/01/2014 1,095,030
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 865,552
-----------
4,230,425
-----------
RESOURCE RECOVERY/SOLID WASTE 1.4%
Dutchess County Resource Recovery Agency, (New York),
Solid Waste System Revenue Bonds, Tax Exempt Forward
Series 1999 A, MBIA Insured, 5.35%+ ................. 1,000,000 1/01/2012 993,700
-----------
SINGLE-FAMILY HOUSING 5.4%
State of New York Mortgage Agency, Homeowner Mortgage
Revenue Bonds, Series 45, 7.20%* .................... 2,000,000 10/01/2017 2,135,940
State of New York Mortgage Agency, Homeowner Mortgage
Revenue Bonds, Series 55, 5.95% ..................... 1,550,000 10/01/2017 1,596,640
-----------
3,732,580
-----------
STRUCTURED FINANCINGS 6.1%
Port Authority of New York and New Jersey, Special
Project Bonds, Series 4, KIAC Partners Project,
Subject to AMT, 6.75% ............................... 3,000,000 10/01/2011 3,231,690
Suffolk County Industrial Development Agency, 1998
Industrial Development Revenue Bonds, (Nissequogue
Cogen Partners Facility), Subject to AMT, 5.50% . 1,000,000 1/01/2023 951,930
-----------
4,183,620
-----------
TOLL ROADS/TURNPIKE AUTHORITIES 1.4%
New York State Thruway Authority, Local Highway and
Bridge Service Contract Bonds, Series 1997, 5.00% ... 1,000,000 4/01/2017 941,570
-----------
TRANSIT/HIGHWAY 3.9%
Triborough Bridge and Tunnel Authority, General
Purpose Revenue Bonds, Series 1994 A, 6.00% ......... 2,500,000 1/01/2010 2,691,500
-----------
WATER & SEWER 6.6%
City of Niagara Falls, Niagara County, New York,
Water Treatment Plant Bonds, 1994 (AMT), MBIA
Insured, 8.50% ...................................... 1,000,000 11/01/2006 1,225,300
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 2,222,600
Commonwealth of Puerto Rico, Aqueduct and Sewer
Authority, General Revenue Bonds, 6.25% ............. 1,000,000 7/01/2012 1,117,320
-----------
4,565,220
-----------
Total Municipal Bonds (Cost $65,677,148) ....................................................... 68,354,646
-----------
SHORT-TERM OBLIGATIONS 3.3%
New York State Energy Research and Development
Authority, Pollution Control Refunding Revenue Bonds,
(New York Electric & Gas Corporation Project), 1994
Series D, 4.00% ..................................... 2,000,000 10/01/2029(+) 2,000,000
Long Island Power Authority, New York, Electric
System Subordinated Revenue Bonds, Series 6, 4.25% .. 300,000 5/01/2033(+) 300,000
-----------
Total Short-Term Obligations (Cost $2,300,000) ................................................. 2,300,000
-----------
REPURCHASE AGREEMENTS 3.6%
State Street Bank and Trust Co., dated
6/30/99, repurchase proceeds $2,510,244,
collateralized by, $2,500,000 U.S. Treasury Note,
7.125%, due 2/29/2000, market value $2,588,350 ...... 2,510,000 7/01/1999 2,510,000
-----------
Total Repurchase Agreements (Cost $2,510,000) .................................................. 2,510,000
-----------
Total Investments (Cost $70,487,148) - 105.8% .................................................. 73,164,646
Cash and Other Assets, Less Liabilities - (5.8%) ............................................... (4,025,653)
-----------
Net Assets - 100.0% ............................................................................ $69,138,993
===========
Federal Income Tax Information:
At June 30, 1999, the net unrealized appreciation of investments based
on cost for Federal income tax purposes of $70,487,148 was as
follows:
Aggregate gross unrealized appreciation for all investments in which
there is an excess of value over tax cost .................................................... $ 3,241,605
Aggregate gross unrealized depreciation for all investments in which
there is an excess of tax cost over value .................................................... (564,107)
-----------
$ 2,677,498
===========
- -----------------------------------------------------------------------------------------------------------------
(+) Interest rates on these obligations may reset daily.
+ The delivery and payment of this security is beyond the normal settlement time. 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 $3,207,240.
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATE STREET RESEARCH NEW YORK TAX-FREE FUND
- ---------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- ---------------------------------------------------------------------------
June 30, 1999 (Unaudited)
ASSETS
Investments, at value (Cost $70,487,148) (Note 1) ....... $73,164,646
Cash .................................................... 515
Interest receivable ..................................... 1,230,078
Receivable for fund shares sold ......................... 65,180
Receivable from Distributor (Note 3) .................... 9,661
Other assets ............................................ 5,861
-----------
74,475,941
LIABILITIES
Payable for securities purchased ........................ 5,091,455
Accrued management fee (Note 2) ......................... 64,624
Dividends payable ....................................... 59,603
Payable for fund shares redeemed ........................ 51,965
Accrued transfer agent and shareholder services
(Note 2) .............................................. 30,774
Accrued distribution and service fees (Note 5) .......... 21,060
Accrued trustees' fees (Note 2) ......................... 9,231
Other accrued expenses .................................. 8,236
-----------
5,336,948
-----------
NET ASSETS $69,138,993
===========
Net Assets consist of:
Undistributed net investment income ................... $ 31,454
Unrealized appreciation of investments ................ 2,677,498
Accumulated net realized loss ......................... (228,739)
Paid-in capital ....................................... 66,658,780
-----------
$69,138,993
===========
Net Asset Value and redemption price per share
of Class A shares ($21,539,647 / 2,653,433 shares) .... $8.12
=====
Maximum Offering Price per share of Class A shares
($8.12 / .955) ......................................... $8.50
=====
Net Asset Value and offering price per share of
Class B(1) shares ($2,276,325 / 280,599 shares)* ...... $8.11
=====
Net Asset Value and offering price per share of
Class B shares ($16,989,786 / 2,093,099 shares)* ...... $8.12
=====
Net Asset Value and offering price per share of
Class C shares ($789,791 / 97,221 shares)* ............ $8.12
=====
Net Asset Value, offering price and redemption price
per share of Class S shares
($27,543,444 / 3,389,319 shares) ...................... $8.13
=====
- ---------------------------------------------------------------------------
* Redemption price per share for Class B(1), Class B and Class C is equal to
net asset value less any applicable contingent deferred sales charge.
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATE STREET RESEARCH NEW YORK TAX-FREE FUND
- -------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- -------------------------------------------------------------------------------
For the six months ended June 30, 1999 (Unaudited)
INVESTMENT INCOME
Interest ................................................ $ 1,956,019
EXPENSES
Management fee (Note 2) ................................. 193,605
Transfer agent and shareholder services (Note 2) ........ 72,551
Custodian fee ........................................... 49,956
Legal fees .............................................. 12,308
Audit fee ............................................... 10,317
Trustees' fees (Note 2) ................................. 9,231
Service fee-Class A (Note 5) ............................ 26,772
Distribution and service fees-Class B(1) (Note 5) ....... 6,327
Distribution and service fees-Class B (Note 5) .......... 91,034
Distribution and service fees-Class C (Note 5) .......... 4,997
Registration fees ....................................... 5,430
Reports to shareholders ................................. 4,706
Miscellaneous ........................................... 1,629
------------
488,863
Expenses borne by the Distributor (Note 3) .............. (55,849)
Fees paid indirectly (Note 2) ........................... (4,676)
------------
428,338
------------
Net investment income ................................... 1,527,681
------------
REALIZED AND UNREALIZED LOSS ON
INVESTMENTS AND FUTURES CONTRACTS
Net realized loss on investments (Notes 1 and 4) ........ (176,066)
Net realized loss on futures contracts (Note 1) ......... (1,943)
------------
Total net realized loss ............................... (178,009)
Net unrealized depreciation of investments .............. (2,958,540)
------------
Net loss on investments and futures contracts ........... (3,136,549)
------------
Net decrease in net assets resulting from operations .... $ (1,608,868)
============
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATE STREET RESEARCH NEW YORK TAX-FREE FUND
- -------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30, 1999
DECEMBER 31, 1998 (UNAUDITED)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income .......................................... $ 3,132,461 $ 1,527,681
Net realized gain (loss) on investments and futures contracts .. 698,887 (178,009)
Net unrealized appreciation (depreciation) of investments ...... 38,972 (2,958,540)
----------- -----------
Net increase (decrease) resulting from
operations ................................................... 3,870,320 (1,608,868)
----------- -----------
Dividends from net investment income:
Class A ...................................................... (979,607) (470,163)
Class B(1) ................................................... -- (23,420)
Class B ...................................................... (713,178) (331,512)
Class C ...................................................... (35,961) (17,499)
Class S ...................................................... (1,490,835) (661,276)
----------- -----------
(3,219,581) (1,503,870)
----------- -----------
Distributions from net realized gains:
Class A ...................................................... (106,242) (81,525)
Class B(1) ................................................... -- (3,858)
Class B ...................................................... (93,678) (68,596)
Class C ...................................................... (5,564) (4,565)
Class S ...................................................... (144,500) (108,103)
----------- -----------
(349,984) (266,647)
----------- -----------
Net increase from fund share transactions (Note 8) ............. 1,246,461 787,464
----------- -----------
Total increase (decrease) in net assets 1,547,216 (2,591,921)
NET ASSETS
Beginning of period ............................................ 70,183,698 71,730,914
----------- -----------
End of period (including undistributed net investment income
of $7,643 and $31,454, respectively) .......................... $71,730,914 $69,138,993
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATE STREET RESEARCH NEW YORK TAX-FREE FUND
- -------------------------------------------------------------------------------
NOTES TO UNAUDITED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
June 30, 1999
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 Trust consists presently of two separate funds: 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 five classes of shares. Class A shares are subject to an
initial sales charge of up to 4.50% and an annual service fee equal to 0.25%
of average daily net assets. On January 1, 1999, the Fund began offering Class
B(1) shares and continued offering Class B shares but only to current
shareholders through reinvestment of dividends and distributions or through
exchanges from existing Class B accounts of State Street Research funds. Class
B(1) and Class B pay annual distribution and service fees of 1.00% and both
classes automatically convert into Class A shares (which pay lower ongoing
expenses) at the end of eight years. Class B(1) shares are subject to a
contingent deferred sales charge on certain redemptions made within six years
of purchase. Class B shares are subject to a contingent deferred sales charge
on certain redemptions made within five years of purchase. Class C shares are
subject to a contingent deferred sales charge of 1.00% on any shares redeemed
within one year of their purchase. Class C shares also pay annual distribution
and service fees of 1.00%. Class S shares are only offered through certain
retirement accounts, advisory accounts of State Street Research & Management
Company (the "Adviser"), an indirect wholly owned subsidiary of Metropolitan
Life Insurance Company ("Metropolitan"), and special programs. No sales charge
is imposed at the time of purchase or redemption of Class S shares. Class S
shares do not pay any distribution or service fees. 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.
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 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.
H. SECURITIES LENDING
The Fund may seek additional income by lending portfolio securities to
qualified institutions. The Fund will receive cash or securities as collateral
in an amount equal to at least 100% of the current market value of any loaned
securities plus accrued interest. If the borrower fails to return the
securities and the value of the collateral has declined during the term of the
loan, the Fund will bear the loss. During the six months ended June 30, 1999,
there were no loaned securities.
NOTE 2
The Trust and the Adviser 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, 1999, the fees
pursuant to such agreement amounted to $193,605.
State Street Research Service Center, 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, 1999, the amount of
such expenses was $24,063.
The Fund has entered into an agreement with its transfer agent whereby credits
realized as a result of uninvested cash balances were used to reduce a portion
of the Fund's expense. During the six months ended June 30, 1999 the Fund's
transfer agent fees were reduced by $4,676 under this agreement.
The fees of the Trustees not currently affiliated with the Adviser amounted to
$9,231 during the six months ended June 30, 1999.
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, 1999, the amount of such expenses
assumed by the Distributor and its affiliates was $55,849.
NOTE 4
For the six months ended June 30, 1999, purchases and sales of securities,
exclusive of short-term obligations, aggregated $12,919,650 and $14,033,521,
respectively.
NOTE 5
The Trust has adopted plans of distribution pursuant to Rule 12b-1
under the Investment Company Act of 1940, as amended. Under the plans, 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(1), Class B and Class C shares. In
addition, the Fund pays annual distribution fees of 0.75% of average daily net
assets for Class B(1), Class B and Class C 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, 1999, fees pursuant to such plans amounted to $26,772, $6,327,
$91,034 and $4,997 for Class A, Class B(1), Class B and Class C shares,
respectively.
The Fund has been informed that the Distributor and MetLife Securities, Inc.,
a wholly owned subsidiary of Metropolitan, earned initial sales charges
aggregating $7,791 and $54,067, respectively, on sales of Class A shares of
the Fund during the six months ended June 30, 1999, and that MetLife
Securities, Inc. earned commissions aggregating $14,823 and $9,965 on sales of
Class B(1) and Class B shares, and that the Distributor collected contingent
deferred sales charges aggregating $32, $23,856 and $98 on redemptions of
Class B(1), Class B and Class C shares, respectively, during the same period.
NOTE 6
Under normal circumstances at least 80% of the Fund's net assets will be
invested in New York Municipal Obligations. New York State and New York City
face potential economic problems due to various financial, social, economic
and political factors which could seriously affect their ability to meet
continuing obligations for principal and interest payments. Also, the Fund is
able to invest up to 25% of total assets in a single industry. Accordingly,
the Fund's investments may be subject to greater risk than those in a fund
with more restrictive concentration limits.
NOTE 7
At June 30, 1999, investments totalling 11.1% 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 8
The Trustees have the authority to issue an unlimited number of shares of
beneficial interest, $.001 par value per share. At June 30, 1999, the Adviser
owned 59,032 Class C shares and Metropolitan owned 58,907 Class B(1) shares of
the Fund.
<PAGE>
STATE STREET RESEARCH NEW YORK TAX-FREE FUND
- -------------------------------------------------------------------------------
Share transactions were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30, 1999
DECEMBER 31, 1998 (UNAUDITED)
---------------------------------- ----------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ......................... 657,773 $ 5,590,343 331,819 $ 2,775,846
Issued upon reinvestment of:
Dividends from net investment
income ......................... 89,437 761,215 42,516 356,933
Distributions from net realized
gains .......................... 11,045 94,432 8,418 71,053
Shares repurchased .................. (576,644) (4,906,505) (291,999) (2,464,820)
--------- ------------ --------- ------------
Net increase ........................ 181,611 $ 1,539,485 90,754 $ 739,012
========= ============ ========= ============
<CAPTION>
CLASS B(1)* SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ......................... -- -- 279,471 $ 2,352,636
Issued upon reinvestment of:
Dividend from net investment
income ......................... -- -- 1,428 11,824
Distribution from net realized
gains .......................... -- -- 405 3,418
Shares repurchased .................. -- -- (705) (5,872)
--------- ------------ --------- ------------
Net increase ........................ -- -- 280,599 $ 2,362,006
========= ============ ========= ============
<CAPTION>
CLASS B SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ......................... 565,686 $ 4,819,374 39,313 $ 330,035
Issued upon reinvestment of:
Dividends from net investment
income ......................... 56,661 482,197 30,030 252,260
Distributions from net realized
gains .......................... 10,549 90,200 7,405 62,502
Shares repurchased .................. (425,334) (3,613,742) (246,243) (2,066,010)
--------- ------------ --------- ------------
Net increase (decrease) ............. 207,562 $ 1,778,029 (169,495) $ (1,421,213)
========= ============ ========= ============
<CAPTION>
CLASS C SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ......................... 45,289 $ 387,831 30,587 $ 259,958
Issued upon reinvestment of:
Dividends from net investment
income ......................... 751 6,390 503 4,230
Distributions from net realized
gains .......................... 480 4,110 207 1,749
Shares repurchased .................. (9,778) (83,337) (65,711) (556,596)
--------- ------------ --------- ------------
Net increase (decrease) ............. 36,742 $ 314,994 (34,414) $ (290,659)
========= ============ ========= ============
<CAPTION>
CLASS S SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ......................... 68,935 $ 586,385 16,567 $ 138,898
Issued upon reinvestment of:
Dividends from net investment
income ......................... 118,453 1,008,891 57,232 481,176
Distributions from net realized
gains .......................... 14,819 126,851 11,241 94,986
Shares repurchased .................. (483,714) (4,108,174) (155,696) (1,316,742)
--------- ------------ --------- ------------
Net decrease ........................ (281,507) $ (2,386,047) (70,656) $ (601,682)
========= ============ ========= ============
- ------------------------------------------------------------------------------------------------------
* January 1, 1999 (commencement of share class) to June 30, 1999.
</TABLE>
<PAGE>
STATE STREET RESEARCH NEW YORK TAX-FREE FUND
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
For a share outstanding throughout each period:
<TABLE>
<CAPTION>
CLASS A CLASS B(1)
------------------------------------------------------------------- ---------------
YEARS ENDED DECEMBER 31 SIX MONTHS ENDED SIX MONTHS ENDED
---------------------------------------------------- JUNE 30, 1999 JUNE 30, 1999
1994 1995 1996 1997 1998 (UNAUDITED) (UNAUDITED)(b)
------------------------------------------------------------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ($) 8.43 7.53 8.23 8.13 8.48 8.52 8.52
------ ------ ------ --------- --------- --------- ---------
Net investment income ($)* 0.40 0.40 0.38 0.39 0.39 0.19 0.15
Net realized and unrealized gain (loss)
on investments and futures contracts ($) (0.90) 0.71 (0.09) 0.35 0.09 (0.38) (0.38)
------ ------ ------ --------- --------- --------- ---------
TOTAL FROM INVESTMENT OPERATIONS ($) (0.50) 1.11 0.29 0.74 0.48 (0.19) (0.23)
------ ------ ------ --------- --------- --------- ---------
Dividends from net investment income ($) (0.39) (0.41) (0.39) (0.39) (0.40) (0.18) (0.15)
Distributions from net realized gains ($) (0.01) -- -- -- (0.04) (0.03) (0.03)
------ ------ ------ --------- --------- --------- ---------
TOTAL DISTRIBUTIONS ($) (0.40) (0.41) (0.39) (0.39) (0.44) (0.21) (0.18)
------ ------ ------ --------- --------- --------- ---------
NET ASSET VALUE, END OF PERIOD ($) 7.53 8.23 8.13 8.48 8.52 8.12 8.11
====== ====== ====== ========= ========= ========= =========
Total return (a) (%) (6.04) 15.11 3.68 9.22 5.92 (2.23)(c) (2.71)(c)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period ($ thousands) 18,214 20,043 19,636 20,193 21,831 21,540 2,276
Ratio of operating expenses to average
net assets (%)* 1.10 1.10 1.10 1.10 1.12 1.11(d) 1.86(d)
Ratio of net investment income to
average net assets (%)* 5.07 5.07 4.76 4.88 4.55 4.46(d) 3.78(d)
Portfolio turnover rate (%) 64.80 109.74 89.14 50.92 32.86 17.91 17.91
*Reflects voluntary reduction of expenses per
share of these amounts (Note 3) ($) 0.03 0.02 0.01 0.01 0.01 0.01 0.01
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------------------------
YEARS ENDED DECEMBER 31 SIX MONTHS ENDED
---------------------------------------------- JUNE 30, 1999
1994 1995 1996 1997 1998 (UNAUDITED)
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ($) 8.43 7.53 8.23 8.13 8.48 8.52
------ ------ ------ ------ ------ ------
Net investment income ($)* 0.34 0.34 0.32 0.33 0.32 0.15
Net realized and unrealized gain (loss) on
investments and futures contracts ($) (0.90) 0.71 (0.09) 0.35 0.10 (0.37)
------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS ($) (0.56) 1.05 0.23 0.68 0.42 (0.22)
------ ------ ------ ------ ------ ------
Dividends from net investment income ($) (0.33) (0.35) (0.33) (0.33) (0.34) (0.15)
Distributions from net realized gains ($) (0.01) -- -- -- (0.04) (0.03)
------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS ($) (0.34) (0.35) (0.33) (0.33) (0.38) (0.18)
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD ($) 7.53 8.23 8.13 8.48 8.52 8.12
====== ====== ====== ====== ====== ======
Total return (a) (%) (6.74) 14.26 2.91 8.41 5.14 (2.59)(c)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period ($ thousands) 12,131 15,084 16,824 17,426 19,273 16,990
Ratio of operating expenses to average net assets (%)* 1.85 1.85 1.85 1.85 1.87 1.86(d)
Ratio of net investment income to average net assets (%)* 4.34 4.32 4.01 4.12 3.81 3.70(d)
Portfolio turnover rate (%) 64.80 109.74 89.14 50.92 32.86 17.91
*Reflects voluntary reduction of expenses per share of
these amounts (Note 3) ($) 0.03 0.02 0.01 0.01 0.01 0.01
- -------------------------------------------------------------------------------------------------------------------------------
(a) Does not reflect any front-end or contingent deferred sales charges. Total return would be lower if the Distributor and its
affiliates had not voluntarily assumed a portion of the Fund's expenses.
(b) January 1, 1999 (commencement of share class) to June 30, 1999.
(c) Not annualized.
(d) Annualized.
</TABLE>
<PAGE>
STATE STREET RESEARCH NEW YORK TAX-FREE FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS C
---------------------------------------------------------------
YEARS ENDED DECEMBER 31 SIX MONTHS ENDED
---------------------------------------------- JUNE 30, 1999
1994 1995 1996 1997 1998 (UNAUDITED)
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ($) 8.44 7.53 8.23 8.13 8.49 8.52
------ ------ ------ ------ ------ ------
Net investment income ($)* 0.34 0.35 0.32 0.34 0.32 0.16
Net realized and unrealized gain (loss)
on investments and futures contracts ($) (0.91) 0.70 (0.09) 0.35 0.09 (0.38)
------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS ($) (0.57) 1.05 0.23 0.69 0.41 (0.22)
------ ------ ------ ------ ------ ------
Dividends from net investment income ($) (0.33) (0.35) (0.33) (0.33) (0.34) (0.15)
Distributions from net realized gains ($) (0.01) -- -- -- (0.04) (0.03)
------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS ($) (0.34) (0.35) (0.33) (0.33) (0.38) (0.18)
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD ($) 7.53 8.23 8.13 8.49 8.52 8.12
====== ====== ====== ====== ====== ======
Total return(a) (%) (6.86) 14.25 2.90 8.53 5.01 (2.59)(c)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period ($ thousands) 774 651 622 805 1,122 790
Ratio of operating expenses to average
net assets (%)* 1.85 1.85 1.85 1.85 1.87 1.86(d)
Ratio of net investment income
to average net assets (%)* 4.31 4.35 4.03 4.11 3.80 3.70(d)
Portfolio turnover rate (%) 64.80 109.74 89.14 50.92 32.86 17.91
*Reflects voluntary reduction of expenses
per share of these amounts (Note 3) ($) 0.03 0.02 0.01 0.01 0.01 0.01
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CLASS S
----------------------------------------------------------------------------
YEARS ENDED DECEMBER 31 SIX MONTHS ENDED
---------------------------------------------------------- JUNE 30, 1999
1994 1995 1996 1997 1998 (UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ($) 8.44 7.54 8.24 8.14 8.49 8.53
------ ------ ------ ------ ------ ------
Net investment income ($)* 0.42 0.42 0.40 0.43 0.41 0.20
Net realized and unrealized gain (loss)
on investments and futures contracts ($) (0.90) 0.71 (0.09) 0.33 0.09 (0.38)
------ ------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS ($) (0.48) 1.13 0.31 0.76 0.50 (0.18)
------ ------ ------ ------ ------ ------
Dividends from net investment income ($) (0.41) (0.43) (0.41) (0.41) (0.42) (0.19)
Distributions from net realized gains ($) (0.01) -- -- -- (0.04) (0.03)
------ ------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS ($) (0.42) (0.43) (0.41) (0.41) (0.46) (0.22)
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD ($) 7.54 8.24 8.14 8.49 8.53 8.13
====== ====== ====== ====== ====== ======
Total return(a) (%) (5.79) 15.37 3.93 9.48 6.18 (2.10)(c)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period ($ thousands) 40,750 38,757 34,050 31,759 29,505 27,543
Ratio of operating expenses to average
net assets (%)* 0.85 0.85 0.85 0.85 0.87 0.86(d)
Ratio of net investment income
to average net assets (%)* 5.29 5.33 5.01 5.13 4.81 4.70(d)
Portfolio turnover rate (%) 64.80 109.74 89.14 50.92 32.86 17.91
*Reflects voluntary reduction of
expenses per share of these
amounts (Note 3) ($) 0.03 0.02 0.01 0.01 0.01 0.01
- ----------------------------------------------------------------------------------------------------------------------------------
(a) 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.
(b) January 1, 1999 (commencement of share class) to June 30, 1999.
(c) Not annualized.
(d) Annualized.
</TABLE>
<PAGE>
STATE STREET RESEARCH NEW YORK TAX-FREE FUND
- --------------------------------------------------------------------------------
REPORT ON SPECIAL MEETING OF SHAREHOLDERS
- --------------------------------------------------------------------------------
A Special Meeting of Shaeholders of State Street Research New York Tax-Free Fund
("Fund"), a series of State Street Research Tax-Exempt Trust ("Trust"), together
with another series of the Trust, was convened on April 6, 1999 ("Meeting"). The
results of the Meeting are set forth below.
VOTES (MILLIONS OF SHARES)
(COMBINED FOR ALL SERIES OF THE TRUST)
--------------------------------------
FOR WITHHELD
- --------------------------------------------------------------------------------
The following persons were elected as Trustees:
Bruce R. Bond .................................. 21.1 0.5
Steve A. Garban ................................ 21.1 0.5
Malcolm T. Hopkins ............................. 21.1 0.5
Susan M. Phillips .............................. 21.1 0.5
<PAGE>
STATE STREET RESEARCH NEW YORK TAX-FREE FUND
<TABLE>
<CAPTION>
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FUND INFORMATION, OFFICERS AND TRUSTEES OF STATE STREET RESEARCH TAX-EXEMPT TRUST
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FUND INFORMATION OFFICERS TRUSTEES
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STATE STREET RESEARCH RALPH F. VERNI RALPH F. VERNI
NEW YORK TAX-FREE FUND Chairman of the Board, Chairman of the Board,
One Financial Center President and President, Chief Executive
Boston, MA 02111 Chief Executive Officer Officer and Director,
State Street Research &
INVESTMENT ADVISER PAUL J. CLIFFORD, JR. Management Company
State Street Research & Vice President
Management Company BRUCE R. BOND
One Financial Center JOHN H. KALLIS Chairman of the Board,
Boston, MA 02111 Vice President Chief Executive Officer and
President, PictureTel Corporation
DISTRIBUTOR THOMAS A. SHIVELY
State Street Research Vice President STEVE A. GARBAN
Investment Services, Inc. Former Senior Vice President
One Financial Center GERARD P. MAUS for Finance and Operations and
Boston, MA 02111 Treasurer Treasurer, The Pennsylvania
State University
SHAREHOLDER SERVICES JOSEPH W. CANAVAN
State Street Research Assistant Treasurer MALCOLM T. HOPKINS
Service Center Former Vice Chairman of the
P.O. Box 8408 DOUGLAS A. ROMICH Board and Chief Financial
Boston, MA 02266-8408 Assistant Treasurer Officer, St. Regis Corp.
1-800-562-0032
FRANCIS J. MCNAMARA, III DEAN O. MORTON
CUSTODIAN Secretary and General Counsel Former Executive Vice President,
State Street Bank and Chief Operating Officer
Trust Company DARMAN A. WING and Director, Hewlett-Packard
225 Franklin Street Assistant Secretary and Company
Boston, MA 02110 Assistant General Counsel
SUSAN M. PHILLIPS
LEGAL COUNSEL AMY L. SIMMONS Dean, School of Business and
Goodwin, Procter & Hoar LLP Assistant Secretary Public Management, George
Exchange Place Washington University; former
Boston, MA 02109 Member of the Board of Governors
of the Federal Reserve System and
Chairman and Commissioner of
the Commodity Futures Trading
Commission
TOBY ROSENBLATT
President,
Founders Investments Ltd.
President,
The Glen Ellen Company
MICHAEL S. SCOTT MORTON
Jay W. Forrester Professor of
Management, Sloan School of
Management, Massachusetts
Institute of Technology
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STATE STREET RESEARCH NEW YORK TAX-FREE FUND ----------------
One Financial Center Bulk Rate
Boston, MA 02111 U.S. Postage
PAID
Permit #6
Hartford, CT
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STATE STREET RESEARCH
[logo]
LASTING VALUES
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LEADING IDEAS
QUESTIONS? COMMENTS?
CALL us at 1-800-562-0032
[hearing impaired 1-800-676-7876]
[Chinese and Spanish-speaking 1-888-638-3193]
WRITE us at:
State Street Research
Service Center
P.O. Box 8408
Boston, MA 02266-8408
E-MAIL us at:
[email protected]
INTERNET site:
www.ssrfunds.com
[LOGO] STATE STREET RESEARCH
This report is prepared for the general information of current shareholders.
When used in the general solicitation of investors, this report must be
accompanied or preceded by a current State Street Research Growth Fund
prospectus. When used after September 30, 1999, this report must be accompanied
by a current Quarterly Performance Update.
Portfolio changes should not be considered recommendations for action by
individual 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: (exp0800)SSR-LD NYTF-019G-0899
