[Front cover]
[State Street Research logo]
State Street Research
Government Income Fund
Annual Report
October 31, 1995
[Graphic - fisherman at stream]
What's Inside
From the Chairman:
The markets reward
investors
Portfolio Manager's Review:
Strong returns for this
conservative bond fund
Fund Information:
Facts and figures
Plus, Complete Portfolio Holdings
and Financial Statements
<PAGE>
FROM THE CHAIRMAN
To Our Shareholders:
[photo of Ralph Verni]
The markets continue to reward investors. U.S. stocks, U.S. bonds and
overseas bonds have all enjoyed stellar returns over the past year.
International stocks have been disappointing as a result of weaker overseas
economies.
For the twelve months ended October 31, 1995, the Standard & Poor's 500
Index, a common measure of U.S. stock market performance, provided a total
return of +26.41%.(1) The Merrill Lynch Government Master Index provided a
gain of +15.41% over the same period--a very strong return for bonds.(1)
The benefits of long-term investing
The past 12 months clearly demonstrated the benefits of investing for the
long term. One year ago, your Fund's annual report contained little in the
way of good news. Interest rates had risen and the stock and bond markets had
dropped sharply. Yet investors who remained true to their long- term strategy
remained invested and were able to enjoy the benefits of a much more positive
year in 1995.
Have you reviewed your portfolio?
The new year can be a good time to review your portfolio with your investment
representative--especially after a year of such strong market performance.
Are you fully diversified--invested in stock, bond and international funds?
Diversification can be a successful way to reduce the risk in your investment
portfolio. Did your asset allocation change because of 1995's market
performance? Your investment representative can help you answer these
important questions.
Thank you for investing with State Street Research.
Sincerely,
/s/Ralph F. Verni
Ralph F. Verni
Chairman
November 30, 1995
(1)The Standard & Poor's 500 Composite Index (S&P 500) includes 500 widely
traded common stocks and is a commonly used measure of U.S. stock market
performance. The Merrill Lynch Government Master Index is a commonly used
index of U.S. bond market performance. The indices are unmanaged and do not
take sales charges into consideration. Direct investment in the indices is
not possible; results are for illustrative purposes only.
(2)+14.15% for Class B shares; +15.37% for Class C shares; +14.24% for Class
D shares.
(3)Investment results are based on an assumed $10,000 investment at the "A"
share maximum sales charge of 4.5%; thus, the net amount invested was $9,550.
Also assumes capital gain distributions accepted in shares and income
dividends invested at net asset value. No adjustment has been made for income
taxes payable by shareholders on income dividends or capital gain
distributions.
(4)All returns represent past performance, which is no guarantee of future
results. The investment return and principal value of an investment made in
the Fund will fluctuate and shares, when redeemed, may be worth more or less
than their original cost. All returns assume reinvestment of capital gain
distributions and income dividends. Investments in the Fund are not insured
or guaranteed by the U.S. government or any other entity.
(5)Performance includes periods prior to the adoption of class designations.
Performance reflects up to maximum 4.5% front-end or 5% contingent deferred
sales charges. Performance for "B" and "D" shares prior to class designations
in 1993 reflects annual 12b-1 fees of .25%, and performance thereafter
reflects 12b-1 fees of 1%, which will reduce subsequent performance.
Fund Information (all data are for periods ended October 31, 1995, except
where noted)
Total value of $10,000 invested on
March 23, 1987(3)
(Class A shares, at maximum applicable sales charge)
[Mountain chart]
3/87 9550
10/87 9408
10/88 10328
10/89 11321
10/90 11948
10/91 13890
10/92 15259
10/93 17034
10/94 16424
10/95 18942
SEC Yield (as of October 31, 1995)
===================
Class A 5.58%
- -------------------
Class B 5.10%
- -------------------
Class C 6.10%
- -------------------
Class D 5.10%
===================
SEC yield is calculated according to Securities and Exchange Commission
requirements and is based on the net investment income produced for the 30 days
ended October 31, 1995.
SEC Average Annual Compound Rates of
Return for periods ended 9/30/95
(at maximum applicable sales charge)(4,5)
=================================================
Life of Fund
(since 3/23/87) 5 years 1 year
- -------------------------------------------------
Class A +7.57% +8.62% +8.12%
- -------------------------------------------------
Class B +7.91% +8.93% +7.40%
- -------------------------------------------------
Class C +8.22% +9.75% +13.50%
- -------------------------------------------------
Class D +7.91% +9.21% +11.30%
=================================================
Average Annual Compound Rates of
Return for periods ended 10/31/95
(at maximum applicable sales charge)4,5
=================================================
Life of Fund
(since 3/23/87) 5 years 1 year
- -------------------------------------------------
Class A +7.67% +8.60% +9.89%
- -------------------------------------------------
Class B +7.99% +8.88% +9.15%
- -------------------------------------------------
Class C +8.31% +9.72% +15.37%
- -------------------------------------------------
Class D +8.00% +9.18% +13.24%
=================================================
<PAGE>
PORTFOLIO MANAGER'S REVIEW
[photo of John H. Kallis]
John H. Kallis
Portfolio Manager
Government Income Fund successfully navigated this year's bond market rebound.
For the second consecutive fiscal year (October 31 to October 31), the Fund
outperformed the average for its investment category according to Lipper
Analytical Services. This outperformance occurred in both weak and strong
markets, demonstrating the Fund's adaptability.
For the 12 months ended October 31, 1995, Class A shares of the Fund provided
a total return of +15.07% (does not reflect sales charge).(2) Lipper
Analytical Services' General U.S. Government Funds category provided a total
return of +14.70% over the same time period (does not reflect sales charges).
Bond market returns in the range of 15% are unusual; this has been the best
year for bonds since 1991. The strong performance can be linked to several
things: slowing economies in the U.S. and overseas, low inflation, and the
Federal Reserve's decision to reverse policy and begin lowering interest
rates.
Good adjustments to interest rate changes
One explanation for the Fund's strong performance was our ability to either
anticipate or respond to interest rate changes. In late 1994, after nine
months of rising rates (rising interest rates cause bond prices to fall), we
began to position the Fund for stable or declining rates. We added
longer-duration securities and U.S. Treasury bonds, both of which tend to
enjoy strong performance when rates decline. This decision helped the Fund's
results.
Balancing mortgage securities and U.S. Treasuries
We kept the portfolio balanced between U.S. Treasuries and mortgage
securities. Even though U.S. Treasury bonds outperformed mortgage securities
as interest rates declined, we did not want to commit too much of the
portfolio to Treasuries. First, mortgage securities offered higher interest
rates and better value. Second, interest rates could have reversed course. We
targeted "seasoned" mortgage securities that had survived past rate declines
and were less likely to be refinanced. On October 31, 1995, 41% of the
portfolio was invested in U.S. Treasuries, and 38% in mortgage securities (2%
in non-U.S. Agency mortgages).
Overseas holdings helped
The Fund's position in international government bonds also performed well,
benefiting from a stronger U.S. dollar and falling interest rates overseas.
Our holdings, representing a total of 5% of the portfolio, are invested
primarily in European government bonds--many of which pay higher interest
rates than comparable U.S. bonds. Our foreign holdings are "hedged" to
protect the Fund from changes in foreign currency exchange rates.
Portfolio yield
As you can see in the chart below, interest rates declined over the past
year. Your Fund's yield moved lower as well, primarily because the Fund's net
asset value rose significantly. The Fund's dividend did not change over the
past year, however.
Positive environment for bonds
Even with such strong bond market performance, we believe there is still
potential. Overseas, slowing economies and falling interest rates will help
U.S. rates to stay low. With falling inflation, U.S. interest rates are
actually high by historical standards, so there may be room for rates to
decline further.
Asset Allocation
(as of October 31, 1995, by percentage of net assets)
[Pie chart]
U.S. Treasury securities 41%
Cash 2%
Foreign government bonds 5%
Trust certificates/other 16%
U.S. Agency mortgage
securities 36%
Bond Yields
(October 31, 1994 to October 31, 1995)
[Line graph]
10/94 8.809 7.97 5.142
11/94 8.968 8 5.707
12/94 8.827 7.876 5.682
1/95 8.511 7.696 5.99
2/95 8.097 7.441 5.933
3/95 8.152 7.43 5.849
4/95 7.985 7.334 5.849
5/95 7.462 6.648 5.796
6/95 7.482 6.617 5.563
7/95 7.573 6.844 5.572
8/95 7.492 6.645 5.44
9/95 7.416 6.504 5.406
10/95 7.366 6.332 5.494
30-year Mortgage Securities
30-year U.S. Treasury Securities
90-day U.S. Treasury Securities
Source: Bloomberg
2
<PAGE>
STATE STREET RESEARCH GOVERNMENT INCOME FUND
INVESTMENT PORTFOLIO
October 31, 1995
<TABLE>
<CAPTION>
Principal Maturity Value
Amount Date (Note 1)
- ------------------------------ ---------------------- --------- -------------
<S> <C> <C> <C>
U.S. Government Securities 79.3%
U.S. Treasury 41.0%
U.S. Treasury Bond, 10.75% $14,100,000 8/15/2005 $ 18,894,000
U.S. Treasury Bond, 10.375% 16,000,000 11/15/2012 21,517,440
U.S. Treasury Bond, 12.00% 27,150,000 8/15/2013 40,729,344
U.S. Treasury Bond, 9.25% 30,000,000 2/15/2016 39,693,600
U.S. Treasury Bond, 8.125% 18,225,000 8/15/2021 22,040,768
U.S. Treasury Bond, 6.25% 15,050,000 8/15/2023 14,708,967
U.S. Treasury Bond, 7.50% 28,000,000 11/15/2024 31,990,000
U.S. Treasury Note, 9.375% 37,000,000 4/15/1996 37,612,720
U.S. Treasury Note, 8.50% 35,000,000 5/15/1997 36,465,450
U.S. Treasury Note, 6.875% 13,600,000 3/13/2000 14,156,784
U.S. Treasury Note, 7.50% 13,300,000 11/15/2001 14,382,753
U.S. Treasury Note, 6.25% 1,750,000 2/15/2003 1,780,905
U.S. Treasury Note, 5.75% 18,050,000 8/15/2003 17,804,701
-----------
311,777,432
-----------
U.S. Agency Mortgage 36.1%
Federal Home Loan Mortgage
Corp. Gold, 6.50% 438,522 2/01/2009 435,234
Federal Home Loan Mortgage
Corp. Gold, 6.50% 17,936,952 5/01/2009 17,802,426
Federal Home Loan Mortgage
Corp. FHA- VA, 9.00% 7,615,246 12/01/2009 8,013,600
Federal Home Loan Mortgage
Corp. Gold, 7.50%+ 7,100,000 8/01/2022 7,175,438
Federal Home Loan Mortgage
Corp. Series 29-H PAC, 6.50% 5,525,000 3/25/2023 5,450,744
Federal Home Loan Mortgage
Corp. Gold 7.50% 1,115,638 8/01/2024 1,127,832
Federal Home Loan Mortgage
Corp. Gold, 7.00% 20,866,415 12/01/2024 20,703,240
Federal Home Loan Mortgage
Corp. Gold, 7.50% 17,241,916 1/01/2025 17,430,371
Federal Housing Administration
Court Yard Project, 10.75% 6,507,703 8/01/2032 7,286,594
Federal Housing Administration
East Bay Manor Project,
10.00% 6,784,187 3/01/2033 7,329,043
Federal Housing Administration
Charles River Project,
9.625% $ 9,510,886 12/01/2033 $ 9,995,347
Federal National Mortgage
Association FHA-VA, 8.00% 5,908,309 4/01/2008 6,113,742
Federal National Mortgage
Association FHA-VA, 8.00% 7,501,703 6/01/2008 7,762,538
Federal National Mortgage
Association FHA-VA, 8.50% 10,896,496 2/01/2009 11,591,584
Federal National Mortgage
Association FHA-VA, 9.00% 18,730,215 5/01/2009 19,813,010
Federal National Mortgage
Association FHA-VA, 9.00% 643,074 4/01/2016 680,251
Federal National Mortgage
Association, 7.00% 47,491 2/01/2024 47,090
Government National Mortgage
Association, 10.00% 17,126,253 6/15/2023 18,148,348
Government National Mortgage 9/15/2009-
Association, 9.50% 17,182,471 9/15/2019 18,555,835
Government National Mortgage
Association, 9.00% 2,410,002 4/15/2017 2,556,748
Government National Mortgage
Association, 8.00% 4,312,000 11/15/2017 4,435,970
Government National Mortgage 9/15/2021-
Association, 7.50% 34,316,380 4/15/2024 34,788,996
Government National Mortgage 9/15/2025-
Association, 7.00% 22,540,124 10/15/2025 22,385,048
Government National Mortgage
Association, 6.50% 18,709,570 7/15/2024 18,195,057
Government National Mortgage
Association, 6.00%+ 3,550,000 12/21/2025 3,553,328
Government National Mortgage
Association, 5.50%+ 3,775,000 12/21/2025 3,736,070
-----------
275,113,484
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
STATE STREET RESEARCH GOVERNMENT INCOME FUND
<TABLE>
<CAPTION>
Principal Maturity Value
Amount Date (Note 1)
- ------------------------------ ---------------------- --------- -------------
<S> <C> <C> <C>
U.S. Agency 2.2%
Federal Home Loan Mortgage
Corp., 7.24% $ 7,700,000 5/15/2002 $ 7,857,619
Guaranteed Export Trust Series
95-A, 6.28% 9,000,000 6/15/2004 9,009,720
-----------
16,867,339
-----------
Total U.S. Government Securities (Cost $584,606,408) 603,758,255
-----------
OTHER INVESTMENTS 19.0%
Trust Certificates 10.1%
Cooperative Utility Trust
Certificates, 9.52% 24,525,000 3/15/2019 27,062,357
Government Backed Trust, Class
T-2, 9.40% 511,864 11/15/1996 518,928
Government Backed Trust, Class
T-3, 9.625% 10,000,000 5/15/2002 11,031,600
Government Trust Certificates,
Class 2-D, 9.25% 11,797,197 11/15/1996 11,895,232
Government Trust Certificates,
Class 2-E, 9.40% 24,000,000 5/15/2002 26,513,280
-----------
77,021,397
-----------
Finance/Mortgage 3.9%
Prudential Home Mortgage
Series 93-29 A-6 PAC, 6.75% 12,064,646 8/25/2008 12,109,889
Prudential Home Mortgage
Series 93-54 A-21 PAC, 5.50% 5,700,000 1/25/2024 5,520,051
Residential Funding Corp.
Series 93-S95 A-1 PAC, 6.50% 12,134,107 7/25/2008 12,145,392
-----------
29,775,332
-----------
Foreign Government 5.0% Australian Dollar
Australian Government, 7.50% 10,200,000 7/15/2005 7,125,005
Canadian Dollar
Canadian Government, 7.50% 3,550,000 12/01/2003 2,652,511
Danish Krone
Kingdom of Denmark, 8.00% 54,650,000 3/15/2006 $ 10,061,831
French Franc
Government of France, 8.50% 22,500,000 11/25/2002 4,993,340
Deutsche Mark
Republic of Germany, 6.625% 5,350,000 7/09/2003 3,862,369
Italian Lira
Republic of Italy, 8.50% 3,190,000,000 4/01/1999 1,862,354
Republic of Italy, 10.00% 1,725,000,000 8/01/2003 1,004,588
Spanish Peseta
Government of Spain, 10.90% 302,500,000 8/30/2003 2,491,278
British Pounds
United Kingdom Treasury Stock,
8.00% 2,175,000 6/10/2003 3,474,195
-----------
37,527,471
-----------
Total Other Investments (Cost $140,405,586) 144,324,200
-----------
SHORT-TERM OBLIGATIONS 2.5%
Federal Home Loan Bank, 5.796% $19,220,000 11/01/1995 19,220,000
-----------
Total Short-Term Obligations (Cost $19,220,000) 19,220,000
-----------
Total Investments (Cost $744,231,994)--100.8% 767,302,455
Cash and Other Assets, Less Liabilities--(0.8)% (6,280,916)
-----------
Net Assets--100.0% $761,021,539
===========
Federal Income Tax Information:
At October 31, 1995, the net unrealized appreciation of investments
based on cost for Federal income tax purposes of $744,828,574 was
as follows:
Aggregate gross unrealized appreciation for all investments in which
there is an excess of value over tax cost $ 26,986,132
Aggregate gross unrealized depreciation for all investments in which
there is an excess of tax cost over value (4,512,251)
-----------
$ 22,473,881
===========
</TABLE>
+Represents "TBA" (to be announced) purchase commitment to purchase
securities for a fixed unit price at a future date beyond customary
settlement time. Although the unit price has been established, the principal
value has not been finalized and may vary by no more than 2%.
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
STATE STREET RESEARCH GOVERNMENT INCOME FUND
INVESTMENT PORTFOLIO (cont'd)
Forward currency exchange contracts outstanding at October 31, 1995 are as
follows:
<TABLE>
<CAPTION>
Unrealized
Contract Appreciation
Total Value Price (Depreciation) Delivery Date
- -------------------------------------------- ------------------ ------------ ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Sell Australian dollars, buy U.S. dollars 6,796,676 AUD .73840 AUD $ (154,515) 11/16/95
Sell Australian dollars, buy U.S. dollars 1,881,123 AUD .73790 AUD (43,700) 11/16/95
Sell British pounds, buy U.S. dollars 666,000 GBP 1.57435 GBP (4,040) 11/16/95
Sell British pounds, buy U.S. dollars 2,169,200 GBP 1.53300 GBP (102,854) 11/16/95
Sell Canadian dollars, buy U.S. dollars 2,842,700 CAD .73330 CAD (32,292) 11/16/95
Sell Canadian dollars, buy U.S. dollars 767,477 CAD .73551 CAD (8,285) 11/16/95
Sell Danish krone, buy U.S. dollars 53,141,300 DKK .17960 DKK (183,131) 11/16/95
Sell Danish krone, buy U.S. dollars 2,250,000 DKK .17319 DKK (22,171) 11/16/95
Sell Danish krone, buy U.S. dollars 9,707,000 DKK .18299 DKK (1,255) 1/24/96
Sell U.S. dollars, buy Deutsche marks 3,408,000 DEM .67916 DEM 108,520 11/16/95
Sell Deutsche marks, buy U.S. dollars 10,188,300 DEM .67476 DEM (369,245) 11/16/95
Sell French franc, buy U.S. dollars 10,570,600 FRF .20173 FRF (25,899) 1/24/96
Sell French franc, buy U.S. dollars 18,207,300 FRF .20138 FRF (51,044) 1/24/96
Sell Italian lira, buy U.S. dollars 330,068,280 ITL .00062 ITL (3,035) 11/16/95
Sell Italian lira, buy U.S. dollars 2,826,207,065 ITL .00062 ITL (24,853) 5/16/95
Sell Italian lira, buy U.S. dollars 1,724,000,000 ITL .00061 ITL (22,304) 11/16/95
Sell Spanish peseta, buy U.S. dollars 180,000,000 ESP .00809 ESP (16,225) 11/16/95
Sell Spanish peseta, buy U.S. dollars 21,900,000 ESP .00785 ESP (7,298) 11/16/95
Sell Spanish peseta, buy U.S. dollars 138,900,000 ESP .00789 ESP (40,526) 11/16/95
---------
$(1,004,152)
=========
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
STATE STREET RESEARCH GOVERNMENT INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1995
Assets
Investments, at value (Cost $744,231,994) (Note 1) $767,302,455
Cash 4,205
Receivable for securities sold 17,708,319
Interest receivable 12,253,543
Receivable for fund shares sold 1,382,125
Receivable for open forward contracts 108,520
Other assets 164,502
-----------
798,923,669
Liabilities
Payable for securities purchased 31,718,457
Dividends payable 2,500,882
Payable for fund shares redeemed 1,432,857
Payable for open forward contracts 1,112,672
Accrued management fee (Note 2) 420,266
Accrued transfer agent and shareholder services (Note
2) 338,723
Accrued distribution fee (Note 3) 223,967
Accrued trustees' fees (Note 2) 7,984
Other accrued expenses 146,322
-----------
37,902,130
-----------
Net Assets $761,021,539
Net Assets consist of: ===========
Undistributed net investment income $ 2,696,356
Unrealized appreciation of investments 23,070,461
Unrealized depreciation of forward contracts and
foreign currency (993,266)
Accumulated net realized loss (114,552,578)
Shares of beneficial interest 850,800,566
--------------
$761,021,539
==============
Net Asset Value and redemption price per share of
Class A shares ($655,044,825 / 52,079,516 shares of
beneficial interest) $12.58
==============
Maximum Offering Price per share of Class A shares
($12.58 / .955) $13.17
==============
Net Asset Value and offering price per share of
Class B shares ($87,908,060 / 7,002,674 shares
of beneficial interest)* $12.55
==============
Net Asset Value, offering price and redemption price
per share of Class C shares ($5,036,051 / 400,569
shares of beneficial interest) $12.57
==============
Net Asset Value and offering price per share of
Class D shares ($13,032,603 / 1,037,903 shares
of beneficial interest)* $12.56
==============
*Redemption price per share for Class B and Class D is equal to net asset
value less any applicable contingent deferred sales charge.
STATEMENT OF OPERATIONS
For the year ended October 31, 1995
Investment Income
Interest, net of foreign taxes of $53,645 $56,714,977
Expenses
Management fee (Note 2) 4,651,813
Transfer agent and shareholder services (Note 2) 808,547
Custodian fee 249,313
Reports to shareholders 150,140
Distribution fee--Class A (Note 3) 1,586,840
Distribution fee--Class B (Note 3) 660,554
Distribution fee--Class D (Note 3) 124,193
Legal fees 72,974
Registration fees 69,657
Audit fee 42,757
Trustees' fees (Note 2) 20,305
Miscellaneous 51,654
----------
8,488,747
----------
Net investment income 48,226,230
----------
Realized and Unrealized Gain (Loss) on Investments, Forward
Contracts and
Foreign Currency
Net realized gain on investments (Notes 1 and 4) 2,544,407
Net realized gain on forward contracts and foreign currency
(Note 1) 39,585
---------
Total net realized gain 2,583,992
---------
Net unrealized appreciation of investments (Note 5) 48,343,731
Net unrealized depreciation of forward contracts and
foreign currency (342,460)
---------
Total net unrealized appreciation 48,001,271
---------
Net gain on investments, forward contracts and foreign
currency 50,585,263
---------
Net increase in net assets resulting from operations $98,811,493
=========
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
STATE STREET RESEARCH GOVERNMENT INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
Year ended October 31
-----------------------------
1995 1994
- ------------------------------------ ----------- --------------
Increase (Decrease) in Net Assets
Operations:
Net investment income $ 48,226,230 $ 52,606,976
Net realized gain (loss) on
investments, forward contracts and
foreign currency* 2,583,992 (21,739,334)
Net unrealized appreciation
(depreciation) of investments,
forward contracts and foreign
currency 48,001,271 (61,623,124)
--------- ------------
Net increase (decrease) resulting
from operations 98,811,493 (30,755,482)
--------- ------------
Dividends from net investment
income:
Class A (42,302,801) (48,427,740)
Class B (3,875,565) (2,547,889)
Class C (166,657) (10,996)
Class D (735,022) (791,104)
--------- ------------
(47,080,045) (51,777,729)
--------- ------------
Net increase (decrease) from fund
share transactions (Note 6) 4,925,189 (120,373,081)
--------- ------------
Total increase (decrease) in net
assets 56,656,637 (202,906,292)
Net Assets
Beginning of year 704,364,902 907,271,194
--------- ------------
End of year (including undistributed
(overdistributed) net investment
income of $2,696,356 and
$(2,120,412), respectively) $761,021,539 $704,364,902
========= ============
*Net realized gain (loss) for
Federal income tax purposes (Note
1) $ 2,398,429 $(17,196,293)
========= ============
NOTES TO FINANCIAL STATEMENTS
October 31, 1995
Note 1
State Street Research Government Income Fund (the "Fund") is a series of
MetLife-State Street Financial Trust (the "Trust"), which was organized as a
Massachusetts business trust in November, 1986 and is registered under the
Investment Company Act of 1940, as amended, as an open-end management
investment company. The Fund commenced operations in March, 1987. The Trust
consists presently of four separate funds: State Street Research Government
Income Fund, State Street Research Strategic Portfolios: Moderate, State
Street Research Strategic Portfolios: Conservative and State Street Research
Strategic Portfolios: Aggressive.
The Fund offers four classes of shares. Class A shares are subject to an
initial sales charge of up to 4.50% and annual service fees of 0.25% of
average daily net assets. Class B shares are subject to a contingent deferred
sales charge on certain redemptions made within five years of purchase and
pay annual distribution and service fees of 1.00%. Class B shares
automatically convert into Class A shares (which pay lower ongoing expenses)
at the end of eight years after the issuance of the Class B shares. Class C
shares are only offered to certain employee benefit plans and large
institutions. No sales charge is imposed at the time of purchase or
redemption of Class C shares. Class C shares do not pay any distribution or
service fees. Class D shares are subject to a contingent deferred sales
charge of 1.00% on any shares redeemed within one year of their purchase.
Class D shares also pay annual distribution and service fees of 1.00%. The
Fund's expenses are borne pro-rata by each class, except that each class
bears expenses, and has exclusive voting rights with respect to provisions of
the Plan of Distribution, related specifically to that class. The Trustees
declare separate dividends on each class of shares.
The following significant accounting policies are consistently followed by
the Fund in preparing its financial statements, and such policies are in
conformity with generally accepted accounting principles for investment
companies.
A. Investment Valuation
Securities are valued by a pricing service, which utilizes market
transactions, quotations from dealers, and various relationships among
securities in determining value. Securities for which there is no such
valuation, if any, are valued at their fair value as determined in accordance
with established methods consistently applied. Short-term securities maturing
within sixty days are valued at amortized cost. Securities quoted in foreign
currencies are translated into U.S. dollars at the current exchange rate.
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. Gains and losses that arise from
changes in exchange rates are not segregated from gains and losses that arise
from changes in market prices of investments.
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
STATE STREET RESEARCH GOVERNMENT INCOME FUND
C. Net Investment Income
Net investment income is determined daily and consists of interest accrued
and discount earned, less the estimated daily expenses of the Fund. Interest
income is accrued daily as earned. Accretion of discount is computed under
the effective yield method. The Fund is charged for expenses directly
attributable to it, while indirect expenses are allocated among all funds in
the Trust.
D. Dividends
Dividends are declared daily based upon projected net investment income and
are 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. The difference is primarily due to differing
treatments for foreign currency transactions and paydown gains and losses.
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, if any, within the prescribed time periods. At October 31,
1995, the Fund had a capital loss carryforward of $111,857,131 available, to
the extent provided in regulations, to offset future capital gains, if any,
of which $29,348,263, $46,959,196, $18,353,379 and $17,196,293 expires on
October 31, 1996, 1997, 1998 and 2002, respectively. The Fund had a capital
loss carryforward of $43,841,365 expire on October 31, 1995. In addition, as
part of the transaction described in Note 5, the Fund acquired from
MetLife-State Street Research Government Securities Fund a capital loss
carryforward of $5,158,867, of which $3,074,207 and $2,084,660 expires on
October 31, 2001 and 2002, respectively. The Fund's use of such capital loss
carryforward may be limited under current tax laws.
F. Forward Contracts and Foreign Currencies
The Fund enters into forward foreign currency exchange contracts in order to
hedge its exposure to changes in foreign currency exchange rates on its
foreign portfolio holdings and to hedge certain purchase and sale commitments
denominated in foreign currencies. A forward foreign currency exchange
contract is an obligation by the Fund to purchase or sell a specific currency
at a future date, which may be any fixed number of days from the origination
date of the contract. Forward foreign currency exchange contracts establish
an exchange rate at a future date. These contracts are transferable in the
interbank market conducted directly between currency traders (usually large
commercial banks) and their customers. Risks may arise from the potential
inability of a counterparty to meet the terms of a contract and from
unanticipated movements in the value of foreign currencies relative to the
U.S. dollar. The aggregate principal amount of forward currency exchange
contracts is recorded in the Fund's accounts. All commitments are
marked-to-market at the applicable transaction rates resulting in unrealized
gains or losses. The Fund records realized gains or losses at the time the
forward contracts are extinguished by entry into a closing contract or by
delivery of the currency. Neither spot transactions nor forward currency
exchange contracts eliminate fluctuations in the prices of the Fund's
portfolio securities or in foreign exchange rates, or prevent loss if the
price of these securities should decline.
Note 2
The Trust and State Street Research & Management Company (the "Adviser"), an
indirect wholly owned subsidiary of Metropolitan Life Insurance Company
("Metropolitan"), have entered into an agreement under which the Adviser
earns monthly fees at an annual rate of 0.65% 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 year ended October 31, 1995, the fees pursuant to
such agreement amounted to $4,651,813.
State Street Research Shareholder Services, a division of State Street
Research Investment Services, Inc., the Trust's principal underwriter (the
"Distributor"), an indirect wholly owned subsidiary of Metropolitan, provides
certain shareholder services to the Fund such as responding to inquiries and
instructions from investors with respect to the purchase and redemption of
shares of the Fund. During the year ended October 31, 1995, the amount of
such expenses was $316,733.
The fees of the Trustees not currently affiliated with the Adviser amounted
to $20,305 during the year ended October 31, 1995.
Note 3
The Trust has adopted a Plan of Distribution Pursuant to Rule 12b-1 (the
"Plan") under the Investment Company Act of 1940. Under the Plan, the Fund
pays annual service fees to the Distributor at a rate of 0.25% of average
daily net assets for Class A, Class B and Class D shares. In addition, the
Fund pays annual distribution fees of 0.75% of average daily net assets for
Class B and Class D shares. The Distributor uses such payments for personal
service and/or the maintenance of shareholder accounts, to reimburse
securities dealers for distribution and marketing services, to furnish
ongoing assistance to investors and to defray a portion of its distribution
and marketing expenses. For the year ended October 31, 1995, fees pursuant to
such plan amounted to $1,586,840, $660,554 and $124,193 for Class A, Class B
and Class D 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 $70,689 and $389,958, respectively, on sales of Class A shares of
the Fund during the year ended October 31, 1995, and that MetLife Securities,
Inc. earned commissions aggregating $423,866 on sales of Class B shares, and
that the Distributor collected contingent deferred sales charges aggregating
$180, $262,267 and $1,189 on redemptions of Class A, Class B and Class D
shares, respectively, during the same period.
8
<PAGE>
STATE STREET RESEARCH GOVERNMENT INCOME FUND
NOTES (cont'd)
Note 4
For the year ended October 31, 1995, purchases and sales of securities,
exclusive of short-term obligations, aggregated $742,242,105 and $811,046,971
(including $676,644,494 and $700,199,072 of U.S. Government obligations),
respectively.
Note 5
On May 12, 1995, the Fund acquired the assets and liabilities of
MetLife-State Street Research Government Securities Fund (the "Acquired
Fund") in exchange for shares of each class of the Fund. The transaction was
approved by shareholders at a meeting held on April 21, 1995. The acquisition
was accounted for as a tax-free exchange of 6,442,754 Class A shares,
1,176,814 Class B shares, 17,825 Class C shares and 135,101 Class D shares of
the Fund for the net assets of the Acquired Fund which amounted to
$79,091,815, $14,418,139, $218,555 and $1,655,231 for Class A, Class B, Class
C and Class D shares, respectively. The net assets of the Acquired Fund
included $2,075,111 of unrealized appreciation at the close of business on
May 12, 1995. The net assets of the Fund immediately after the acquisition
were $769,912,156.
Note 6
The Trustees have the authority to issue an unlimited number of shares of
beneficial interest, $.001 par value per share. At October 31, 1995, the
Distributor owned 12,241 Class A shares of the Fund.
Share transactions were as follows:
<TABLE>
<CAPTION>
Year ended October 31
-----------------------------------------------------------
1995 1994
--------------------------- ----------------------------
Class A Shares Amount Shares Amount
- ------------------------------------- ----------- ------------ ----------- -------------
<S> <C> <C> <C> <C>
Shares sold 8,692,870 $ 106,770,703 6,170,905 $ 77,734,621
Issued upon reinvestment of dividends 1,902,247 23,135,012 2,186,349 26,807,047
Shares repurchased (13,184,315) (159,163,704) (20,893,367) (258,154,243)
--------- ---------- --------- -----------
Net decrease (2,589,198) $ (29,257,989) (12,536,113) $(153,612,575)
========= ========== ========= ===========
Class B Shares Amount Shares Amount
- ------------------------------------- --------- ---------- --------- -----------
Shares sold 3,527,941 $ 42,934,470 3,319,858 $ 41,105,768
Issued upon reinvestment of dividends 209,008 2,591,060 132,376 1,596,624
Shares repurchased (1,222,045) (14,751,417) (1,023,504) (12,418,423)
--------- ---------- --------- -----------
Net increase 2,514,904 $ 30,774,113 2,428,730 $ 30,283,969
========= ========== ========= ===========
Class C Shares Amount Shares Amount
- ------------------------------------- --------- ---------- --------- -----------
Shares sold 435,479 $ 5,346,473 21,778 $ 271,759
Issued upon reinvestment of dividends 12,362 153,460 642 7,829
Shares repurchased (64,617) (809,530) (7,886) (96,943)
--------- ---------- --------- -----------
Net increase 383,224 $ 4,690,403 14,534 $ 182,645
========= ========== ========= ===========
Class D Shares Amount Shares Amount
- ------------------------------------- --------- ---------- --------- -----------
Shares sold 433,690 $ 5,281,361 763,127 $ 9,504,246
Issued upon reinvestment of dividends 43,377 526,125 47,389 577,618
Shares repurchased (590,308) (7,088,824) (596,772) (7,308,984)
--------- ---------- --------- -----------
Net increase (decrease) (113,241) $ (1,281,338) 213,744 $ 2,772,880
========= ========== ========= ===========
</TABLE>
9
<PAGE>
STATE STREET RESEARCH GOVERNMENT INCOME FUND
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each year.
<TABLE>
<CAPTION>
Class A Class B
---------------------------------------- -----------------------------------------------
June 1, 1993
(Commencement
Share Class
Year ended October 31 Year ended October 31 Designations)
---------------------------------------- ---------------------------- October 31, 1993
1995* 1994* 1993 1992 1991 1995* 1994*
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 11.68 $ 12.92 $ 12.38 $ 12.14 $ 11.28 $ 11.66 $ 12.91 $ 12.67
Net investment income .83 .81 .84 .90 .93 .73 .72 .30
Net realized and unrealized gain
(loss) on investments, forward
contracts and foreign currency .88 (1.26) .56 .26 .84 .87 (1.27) .24
Dividends from net investment
income (.81) (.79) (.84) (.91) (.91) (.71) (.70) (.30)
Distributions from net realized
gains -- -- (.02) (.01) -- -- -- --
----- ----- ----- ----- ----- ---- ----- --------------
Net asset value, end of year $ 12.58 $ 11.68 $ 12.92 $ 12.38 $ 12.14 $ 12.55 $ 11.66 $ 12.91
===== ===== ===== ===== ===== ==== ===== ==============
Total return 15.07%+ (3.58)%+ 11.63%+ 9.86%+ 16.25%+ 14.15%+ (4.38)%+ 4.32%+++
Net assets at end of year (000s) $655,045 $638,418 $868,556 $798,705 $762,517 $87,908 $52,319 $26,578
Ratio of operating expenses to
average net assets 1.10% 1.07% 1.05% 1.05% 1.05% 1.85% 1.82% 1.81%++
Ratio of net investment income to
average net assets 6.83% 6.54% 6.59% 7.25% 7.98% 6.01% 5.86% 5.67%++
Portfolio turnover rate 105.57% 134.41% 103.49% 97.33% 29.20% 105.57% 134.41% 103.49%
</TABLE>
<TABLE>
<CAPTION>
Class C Class D
-------------------------------------- ------------------------------------------------
June 1, 1993 June 1, 1993
Year ended (Commencement of (Commencement of
October 31 Share Class Year ended October 31 Share Class
----------------- Designations) to --------------------- Designations) to
1995* 1994* October 31, 1993 1995* 1994* October 31, 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $11.67 $12.92 $12.67 $11.66 $12.91 $12.67
Net investment income .90 .84 .19 .74 .72 .30
Net realized and unrealized gain
(loss) on investments, forward
contracts and foreign currency .84 (1.27) .42 .87 (1.27) .24
Dividends from net investment income (.84) (.82) (.36) (.71) (.70) (.30)
---- ----- --------------- ------- ------- -----------------
Net asset value, end of year $12.57 $11.67 $12.92 $12.56 $11.66 $12.91
==== ===== =============== ======= ======= =================
Total return 15.37%+ (3.42)%+ 4.82%+++ 14.24%+ (4.38)%+ 4.32%+++
Net assets at end of year (000s) $5,036 $203 $36 $13,033 $13,425 $12,101
Ratio of operating expenses to average
net assets 0.85% 0.82% 0.80%++ 1.85% 1.82% 1.88%++
Ratio of net investment income to
average net assets 6.79% 8.01% 6.59%++ 6.08% 5.84% 5.59%++
Portfolio turnover rate 105.57% 134.41% 103.49% 105.57% 134.41% 103.49%
</TABLE>
++ Annualized.
+ Total return figures do not reflect any front-end or contingent deferred
sales charges.
+++Represents aggregate return for the period without annualization and does
not reflect any front-end or contingent deferred sales charges.
* Per-share figures have been calculated using the average shares method.
10
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of MetLife-State Street
Financial Trust and the Shareholders of
State Street Research Government Income Fund
In our opinion, the accompanying statement of assets and liabilities,
including the investment portfolio, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in
all material respects, the financial position of State Street Research
Government Income Fund (a series of MetLife-State Street Financial Trust,
hereafter referred to as the "Trust") at October 31, 1995, and the results of
its operations, the changes in its net assets and the financial highlights
for the periods indicated, in conformity with generally accepted accounting
principles. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Trust's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and evaluating
the overall financial statement presentation. We believe that our audits,
which included confirmation of securities at October 31, 1995 by
correspondence with the custodian and brokers and the application of
alternative auditing procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
December 8, 1995
11
<PAGE>
STATE STREET RESEARCH GOVERNMENT INCOME FUND
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
In late 1994, after nine months of rising rates, we began to position the
Fund for stable or declining rates. We added longer-duration securities and
U.S. Treasury bonds, both of which tend to enjoy strong performance when
rates decline. This decision helped provide strong performance for the Fund.
On October 31, 1995, 41% of the portfolio was invested in U.S. Treasuries,
and 38% in mortgage securities (2% in non-U.S. Agency mortgages).
The Fund's position in European government bonds also performed well,
benefiting from a stronger U.S. dollar and falling interest rates overseas.
Our foreign holdings were "hedged" to protect the Fund from changes in
foreign currency exchange rates.
The Merrill Lynch Government Master Index and the Merrill Lynch Blended Index
are indicators of overall U.S. bond market performance. The indices are
unmanaged and do not take sales charges into consideration. Direct investment
in the indices is not possible; results are for illustrative purposes only.
All returns represent past performance, which is no guarantee of future
results. The investment return and principal value of an investment made in
the Fund will fluctuate and shares, when redeemed, may be worth more or less
than their original cost. All returns assume reinvestment of capital gain
distributions and income dividends. Investments in the Fund are not insured
or guaranteed by the U.S. government or any other entity. Performance
includes periods prior to the adoption of class designations. Performance
reflects up to maximum 4.5% front-end or 5% contingent deferred sales
charges. Performance for "B" and "D" shares prior to class designations in
1993 reflects annual 12b-1 fees of .25%, and performance thereafter reflects
12b-1 fees of 1%, which will reduce subsequent performance.
Comparison Of Change In Value Of A $10,000
Investment In Government Income Fund,
The Merrill Lynch Blended Index and
The Merrill Lynch Government Master Index
[Line graph]
Class A Shares
Average Annual Total Return
1 Year 5 Years Life of Fund
+9.89% +8.60% +7.67%
Gov't Income Fund ML Blended Index ML Gov't Master Index
3/23/87 9550 10000 10000
10/31/87 9408 9935 9849
10/31/88 10328 11045 10807
10/31/89 11321 12316 12106
10/31/90 11948 13154 12825
10/31/91 13890 15171 14703
10/31/92 15259 16660 16223
10/31/93 17034 18553 18333
10/31/94 16424 17933 17539
10/31/95 18899 20669 20242
[Line graph]
Class B Shares
Average Annual Total Return
1 Year 5 Years Life of Fund
+9.15% +8.88% +7.99%
Gov't Income Fund ML Blended Index ML Gov't Master Index
3/87 10000 10000 10000
10/87 9852 9935 9849
10/88 10814 11045 10807
10/89 11855 12316 12106
10/90 12511 13154 12825
10/91 14544 15171 14703
10/92 15978 16660 16223
10/93 17770 18553 18333
10/94 16992 17933 17539
10/95 19397 20669 20242
[Line graph]
Class C Shares
Average Annual Total Return
1 Year 5 Years Life of Fund
+15.37% +9.72% +8.31%
Gov't Income Fund ML Blended Index ML Gov't Master Index
3/87 10000 10000 10000
10/87 9852 9935 9849
10/88 10814 11045 10807
10/89 11855 12316 12106
10/90 12511 13154 12825
10/91 14544 15171 14703
10/92 15978 16660 16223
10/93 17855 18553 18333
10/94 17244 17933 17539
10/95 19894 20669 20242
[Line graph]
Class D Shares
Average Annual Total Return
1 Year 5 Years Life of Fund
+13.24% +9.18% +8.00%
Gov't Income Fund ML Blended Index ML Gov't Master Index
3/87 10000 10000 10000
10/87 9852 9935 9849
10/88 10814 11045 10807
10/89 11855 12316 12106
10/90 12511 13154 12825
10/91 14544 15171 14703
10/92 15978 16660 16223
10/93 17770 18553 18333
10/94 16992 17933 17539
10/95 19411 20669 20242
[legend graphic]
Government Income Fund
ML Government Master Index
ML Blended Index
12
<PAGE>
STATE STREET RESEARCH GOVERNMENT INCOME FUND
REPORT ON SPECIAL MEETING OF SHAREHOLDERS
A Special Meeting of Shareholders of the State Street Research Government
Income Fund ("Meeting") was held on April 21, 1995. The results of the
Meeting are set forth below.
Votes (millions)
-------------------------------
For Against Abstain
--- ------ --------
The Agreement and Plan of
Reorganization and
Liquidation providing
for the transfer of the
assets (subject to its
liabilities) of the
MetLife-State Street
Research Government
Securities Fund to the
State Street Research
Government Income Fund
was approved. 26.2 1.6 2.3
13
<PAGE>
STATE STREET RESEARCH GOVERNMENT INCOME FUND
FUND INFORMATION, OFFICERS AND TRUSTEES OF METLIFE-STATE STREET FINANCIAL
TRUST
Fund Information
State Street Research
Government Income Fund
One Financial Center
Boston, MA 02111
Investment Adviser
State Street Research &
Management Company
One Financial Center
Boston, MA 02111
Distributor
State Street Research
Investment Services, Inc.
One Financial Center
Boston, MA 02111
Shareholder Services
State Street Research
Shareholder Services
P.O. Box 8408
Boston, MA 02266-8408
1-800-562-0032
Custodian
State Street Bank and
Trust Company
225 Franklin Street
Boston, MA 02110
Legal Counsel
Goodwin, Procter & Hoar
Exchange Place
Boston, MA 02109
Independent Accountants
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110
Officers
Ralph F. Verni
Chairman of the Board,
President and
Chief Executive Officer
John H. Kallis
Vice President
Thomas A. Shively
Vice President
Michael R. Yogg
Vice President
Gerard P. Maus
Treasurer
Joseph W. Canavan
Assistant Treasurer
Douglas A. Romich
Assistant Treasurer
Francis J. McNamara, III
Secretary and General Counsel
Darman A. Wing
Assistant Secretary and
Assistant General Counsel
Amy L. Simmons
Assistant Secretary
Trustees
Ralph F. Verni
Chairman of the Board,
President, Chief Executive
Officer and Director,
State Street Research &
Management Company
Edward M. Lamont
Formerly in banking (Morgan
Guaranty Trust Company of New
York); presently engaged in
private investments and civic
affairs
Robert A. Lawrence
Partner, Saltonstall & Co.
Dean O. Morton
Retired; formerly Executive
Vice President, Chief
Operating Officer and Director,
Hewlett-Packard Company
Thomas L. Phillips
Retired; formerly Chairman of
the Board and Chief Executive
Officer, Raytheon Company
Toby Rosenblatt
President,
The Glen Ellen Company
Vice President,
Founders Investments Ltd.
Michael S. Scott Morton
Jay W. Forrester Professor of
Management, Sloan School
of Management, Massachusetts
Institute of Technology
Jeptha H. Wade
Retired; formerly Of Counsel,
Choate, Hall & Stewart
14
<PAGE>
[Back cover]
State Street Research Government Income Fund
One Financial Center
Boston, MA 02111
[Indicia]
Bulk Rate
U.S. Postage
PAID
Brockton, MA
Permit No. 600
Questions? Comments?
Call us at 1-800-562-0032,
or write us at:
State Street Research
Shareholder Services
P.O. Box 8408
Boston, MA 02266-8408
[logo-State Street Research]
This report is prepared for the general information of current shareholders
only.
It is not authorized for use as sales material with prospective investors.
CONTROL NUMBER: 2850-951221(0197)SSR-LD
Cover Illustration by Dorothy Cullinan
G1-109E-1295
<PAGE>
[Front cover]
[State Street Research logo]
State Street Research
Strategic Portfolios: Moderate
Annual Report
October 31, 1995
[Graphic - man pointing at stars]
What's Inside
From the Chairman:
The markets reward
investors
Portfolio Manager's Review:
Solid performance from
stocks and bonds
Fund Information:
Facts and figures
Plus, Complete Portfolio Holdings
and Financial Statements
[Back cover]
State Street Research Strategic Portfolios: Moderate
One Financial Center
Boston, MA 02111
[Indecia]
Bulk Rate
U.S. Postage
PAID
Brockton, MA
Permit No. 600
Questions? Comments?
Call us at 1-800-562-0032,
or write us at:
State Street Research
Shareholder Services
P.O. Box 8408
Boston, MA 02266-8408
[logo-State Street Research]
This report is prepared for the general information of current shareholders
only.
It is not authorized for use as sales material with prospective investors.
CONTROL NUMBER: 2848-951221(0197)SSR-LD
Cover Illustration by Dorothy Cullinan
SP-124E-1295
FROM THE CHAIRMAN
[photo: Ralph F. Verni]
To Our Shareholders:
The markets continue to reward investors. U.S. stocks, U.S. bonds and
overseas bonds have all enjoyed stellar returns over the past year.
International stocks have been disappointing, as a result of weaker overseas
economies.
For the twelve months ended October 31, 1995, the Standard & Poor's 500
Index, a common measure of U.S. stock market performance, provided a total
return of +26.41%.(1) The Lehman Brothers Government/Corporate Bond Index
provided a gain of +16.16% over the same time period--a very strong return
for bonds.(1)
The benefits of long-term investing
The past 12 months clearly demonstrated the benefits of investing for the
long term. One year ago, your Fund's annual report contained little in the
way of good news. Interest rates had risen and the stock and bond markets had
dropped sharply. Yet investors who remained true to their long-term strategy
remained invested and were able to enjoy the benefits of a much more positive
year in 1995.
Have you reviewed your portfolio?
The new year can be a good time to review your portfolio--especially after a
year of such strong market performance. Are you fully diversified--invested
in stock, bond and international funds? Diversification can be a successful
way to reduce the risk in your investment portfolio. Did your asset
allocation change because of 1995's market performance? Your investment
representative can help you answer these important questions.
Thank you for investing with State Street Research.
Sincerely,
/s/ Ralph F. Verni
Ralph F. Verni
Chairman
November 30, 1995
(1) The Standard & Poor's 500 Composite Index (S&P 500) includes 500 widely
traded common stocks and is a commonly used measure of U.S. stock market
performance. The Lehman Brothers Government/Corporate Bond Index is a
commonly used index of bond market performance. The indices are unmanaged
and do not take sales charges into consideration. Direct investment in the
indices is not possible; results are for illustrative purposes only.
(2) All returns represent past performance, which is no guarantee of future
results. The investment return and principal value of an investment made in
the Fund will fluctuate, and shares, when redeemed, may be worth more or
less than their original cost. All returns assume reinvestment of capital
gain distributions and income dividends.
(3) "C" shares, offered without a sales charge, are available only to certain
employee benefit plans and institutions.
Fund Information (all data are for periods ended October 31, 1995, except
where noted)
SEC Average Annual Compound Rates
of Return for periods ended 9/30/95
(at maximum applicable sales charge)2,3
Life of Fund
(since
9/28/93) 1 year
Class C +7.08%/+6.54% +17.10%/+16.49%
Average Annual Compound Rates
of Return for periods ended 10/31/95
(at maximum applicable sales charge)2,3)
Life of Fund
(since
9/28/93) 1 year
Class C +6.19%/+5.55% +15.24%/+14.40%
Cumulative Total Returns
for periods ended 10/31/95
(do not reflect sales charge)2
Life of Fund
(since
9/28/93) 1 year
Class C +13.40%/+11.97% +15.24%/+14.40%
(Graphic - Pie Chart)
Asset Allocation
(by percentage of net assets)
Equities 51% Bonds 44% Cash 5%
(End Pie Chart)
Performance results for the Fund are increased by the Distributor's voluntary
reduction of Fund fees and expenses. In the above charts, the first figure
reflects expense reduction; the second shows what results would have been
without subsidization.
<PAGE>
PORTFOLIO MANAGER'S REVIEW
[photo: Michael R. Yogg]
Michael R. Yogg
Portfolio Manager
State Street Research Strategic Portfolios: Moderate came out of the
unfriendly investing environment of 1994 and turned in solid returns for the
year ended October 31, 1995. Still, the Fund underperformed its peer group,
as some areas of the portfolio didn't fulfill management's expectations. For
the 12 months ended October 31, 1995, Class C shares of the Fund provided a
total return of +15.24% (does not reflect sales charge). Lipper Analytical
Services' Balanced Funds category provided an average total return of +17.98%
over the same time period (does not reflect sales charge).
When considering the Fund's returns, you need to remember its investment
objective of capital appreciation, current income, and preservation of
capital, all with reasonable investment risk. We remain widely diversified in
stocks and bonds to achieve this objective, and this can sometimes result in
more moderate returns.
Asset-allocation adjustments
In November 1994, we shifted 6% of the portfolio from stocks to bonds. In
July 1995, after bonds had rallied for several months, we moved approximately
5% of the portfolio from bonds to stocks.
Stock holdings
Overall, the past year proved to be an exceptionally good one for stocks.
Value stocks and large-cap growth stocks made up the largest parts of our
equity holdings. Large-cap growth stocks performed well for us; valuestocks
less so, as growth stocks led the market. International equities, although
not too heavily weighted, came on strong after a slow start at the beginning
of the Fund's year. Small-cap growth stocks underperformed for most of the
period and had a negative, though limited, impact on performance.
Bond holdings
This was also an excellent year for bonds, although the Fund's fixed-income
component could not keep pace with our stock holdings. In 1995, slowing
economies both here and overseas, low inflation, and declining interest rates
helped create a very favorable environment for bond investing. In keeping
with our emphasis on moderate risk, we held our largest position in
high-grade bonds and benefited from their strong performance. Our holdings in
high-yield and international bonds performed below their benchmarks. They
represented a much smaller percentage of the bond portion and did not hurt
overall performance a great deal.
Current strategy
As of October 31, 1995, we held 51% of the Fund's assets in equities, 44% in
fixed-income securities and 5% in cash. Our largest holdings in the equity
portion remained large-cap growth and value stocks. We continued to maintain
smaller positions in small-cap growth and international stocks. High-grade
bonds dominated our fixed-income holdings, with smaller holdings in
high-yield and international bonds. We believe the investment outlook is
generally positive, given an environment of moderate growth with low
inflation and low interest rates.
Top 5 Equity Industries
(by percentage of net assets)
Oil 3.4%
Computer software and service 3.2%
Chemical 3.2%
Retail 3.1%
Electronic equipment 3.1%
Total net assets: 16.0%
Best and Worst Contributors to Performance
(November 1, 1994 through October 31, 1995)
Best [arrow up]
Computervision
Strong profit gains for software company
Boeing
Benefited from airlines' plans to increase capital spending
Lear Seating
Strong performance for this automotive supplier
Worst [arrow down]
Penn Traffic
Grocery retailer hurt by price wars
Syncronys Softcorp
Software developer had disappointing new product performance
Kalon Group
Slowing world economy hurt chemical company's performance
2
<PAGE>
State Street Research Strategic Portfolios: Moderate
Investment Portfolio
October 31, 1995
<TABLE>
<CAPTION>
Value
Shares (Note 1)
- ----------------------------------------- --------- ----------------
<S> <C> <C>
EQUITY SECURITIES 51.0%
Basic Industries 9.1%
Chemical 3.2%
Atlantic Richfield Co. 6,200 $ 138,725
Cambrex Corp. 800 30,500
Ciba-Geigy AG ADR* 2,900 125,570
Cytec Industries, Inc. 3,500 191,625
FMC Corp.* 2,000 143,250
L'Air Liquide* 500 83,843
Mallinckrodt Group, Inc. 700 24,325
Monsanto Co. 1,500 157,125
Potash Corp. of Saskatchewan Inc. 1,500 104,437
Rohm & Haas Co. 4,900 270,725
--------------
1,270,125
--------------
Diversified 1.0%
Cardo AB* 10,100 156,658
Johnson Controls, Inc. 1,300 75,725
Mark IV Industries, Inc. 3,545 69,127
Nippon Electric Glass Co. Ltd.* 4,000 73,904
U.S. Industries, Inc.* 125 1,875
--------------
377,289
--------------
Electrical Equipment 0.5%
General Electric Co. 1,900 120,175
Philips Electronic NV 2,400 92,700
--------------
212,875
--------------
Forest Product 0.6%
Aracruz Celulose ADR 8,500 76,500
Champion International Corp. 1,800 96,300
Crown Vantage, Inc.* 110 2,186
Nippon Paper Industries Co.* 10,000 68,723
--------------
243,709
--------------
Machinery 2.1%
Cincinnati Milacron, Inc. 4,100 105,575
Elsag Bailey Process Automation NV* 3,100 84,475
Fluor Corp. 1,400 79,100
Harnischfeger Industries, Inc. 500 15,750
Kajima Corp.* 7,000 64,597
Linde AG* 255 156,703
Millipore Corp. 1,800 63,675
Minebea Co. Ltd.* 10,000 81,138
Pall Corp. 3,800 92,625
Sundstrand Corp. 1,500 91,875
Terex Corp. Rts. 150 45
--------------
835,558
--------------
Metal & Mining 1.7%
Alumax, Inc.* 4,100 $ 120,950
Bohler Uddeholm* 1,400 98,692
Cyprus Amax Minerals Co. 2,900 75,763
RTZ Corp. PLC* 8,500 117,723
Reynolds Metals Co. 1,900 95,712
SGL Carbon AG* 2,600 170,489
--------------
679,329
--------------
Total Basic Industries 3,618,885
--------------
Consumer Cyclical 8.5%
Airline 0.1%
Midwest Express Holdings, Inc.* 800 20,100
--------------
Automotive 2.1%
Cooper Tire & Rubber Co. 1,700 39,313
Douglas & Lomason Co. 1,100 12,100
Exide Corp. 4,100 179,887
Federal-Mogul Corp. 7,100 126,913
Ford Motor Co. 3,800 109,250
Lear Seating Corp.* 10,600 294,150
Michelin Cl. B* 1,500 60,581
--------------
822,194
--------------
Building 0.5%
Fleetwood Enterprises, Inc. 2,300 47,150
Lafarge Corp. 2,700 47,250
Owens-Corning Fiberglas Corp.* 2,300 97,463
--------------
191,863
--------------
Hotel & Restaurant 0.9%
Au Bon Pain Co., Inc.* 1,100 8,388
Circus Circus Enterprises, Inc.* 2,500 66,562
Darden Restaurants, Inc.* 2,700 30,713
Harrah's Entertainment, Inc.* 4,350 107,662
Main Street and Main, Inc.* 2,400 9,000
Mirage Resorts, Inc.* 2,300 75,325
Motels of America, Inc.*++ 75 5,625
Outback Steakhouse, Inc.* 700 21,963
Primadonna Resorts, Inc.* 900 14,062
Station Casinos, Inc.* 2,500 32,500
Studio Plus Hotels, Inc.* 300 5,850
--------------
377,650
--------------
Recreation 1.5%
Argyle Television, Inc. Series A* 800 13,600
Boomtown, Inc. Wts.* 85 34
Capital Cities/ABC, Inc. 400 47,450
Comcast Corp. Cl. A 2,400 42,600
Comcast Corp. Cl. A Special 1,000 17,875
Walt Disney Co. 1,800 103,725
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
State Street Research Strategic Portfolios: Moderate
<TABLE>
<CAPTION>
Value
Shares (Note 1)
- ----------------------------------------- --------- ----------------
<S> <C> <C>
Recreation (cont'd)
Emmis Broadcasting Corp. Cl. A * 500 $ 13,250
Gaylord Entertainment Co. Cl. A 1,260 32,445
Infinity Broadcasting Corp. Cl. A* 1,900 61,750
Mattel Inc. 2,550 73,312
Renaissance Communications Corp.* 1,650 36,919
Sodak Gaming, Inc.* 300 5,475
Time Warner, Inc. 1,700 62,050
Time Warner Financing Trust 2,000 64,000
Viacom, Inc. Cl. B* 700 35,000
--------------
609,485
--------------
Retail Trade 3.1%
Department 56, Inc.* 1,000 45,375
Federated Department Stores, Inc.* 8,600 218,225
Grand Union Co.* 1,326 14,255
Gymboree Corp.* 1,900 42,987
Home Depot, Inc. 3,300 122,925
Intimate Brands, Inc. Cl. A* 700 11,725
May Department Stores Co. 1,400 54,950
Office Depot, Inc.* 2,500 71,563
J.C. Penney, Inc. 1,000 42,125
Tandy Corp. 2,700 133,312
Toys 'R Us, Inc.* 3,300 72,188
Viking Office Products, Inc.* 900 40,050
Vons Cos., Inc.* 300 7,612
Wal-Mart Stores, Inc. 6,000 129,750
Woolworth Corp. 15,400 225,225
--------------
1,232,267
--------------
Textile & Apparel 0.3%
Authentic Fitness Corp. 2,200 45,100
Norton McNaughton, Inc.* 1,500 29,625
Warnaco Group, Inc. Cl. A 1,700 39,525
--------------
114,250
--------------
Total Consumer Cyclical 3,367,809
--------------
Consumer Staple 8.6%
Business Service 1.3%
ADT Ltd.* 11,000 154,000
American Oncology Resources, Inc.* 200 6,950
Computer Horizons Corp.* 1,100 28,600
Eltron International Inc.* 800 26,000
First Data Corp. 2,000 132,250
Global DirectMail Corp.* 2,200 59,950
Integrated System, Inc.* 600 21,000
Personnel Group of America, Inc.* 2,600 33,800
Premenos Technologies, Corp.* 800 31,400
Syncronys Softcorp* 700 5,600
--------------
499,550
--------------
Container 0.1%
Owens-Illinois Inc. 2,400 $ 30,300
--------------
Drug 1.4%
Arris Pharmaceutical Corp.* 2,000 23,500
Cyto Therapeutics, Inc.* 1,600 16,400
Eli Lilly & Co. 730 70,536
Merck & Company, Inc. 4,300 247,250
Pfizer, Inc. 2,800 160,650
Schering AG* 400 27,906
--------------
546,242
--------------
Food & Beverage 2.5%
Anheuser-Busch, Inc. 1,900 125,400
Arnotts Ltd. Ord.* 20,000 134,065
Campbell Soup Co. 1,800 94,275
Coca-Cola Co. 1,200 86,250
Coca-Cola Enterprises, Inc. 7,000 186,375
LVMH Moet Hennessy Louis Vuitton ADR* 600 119,384
PepsiCo., Inc. 1,900 100,225
Whitman Corp. 7,200 153,000
--------------
998,974
--------------
Hospital Supply 2.1%
Abbott Laboratories 3,900 155,025
American Homepatient, Inc.* 1,700 41,225
American Medical Response, Inc.* 900 25,988
Columbia/HCA Healthcare Corp.* 700 34,387
Community Care of America, Inc.* 3,000 40,500
Community Health Systems, Inc.* 1,500 47,625
Healthcare Compare Corp.* 100 3,700
I Stat Corp.* 800 24,800
Johnson & Johnson 1,200 97,800
Lincare Holdings, Inc.* 1,700 42,288
Maxicare Health Plans, Inc.* 1,500 26,062
Medtronic, Inc. 1,000 57,750
Multicare Companies, Inc.* 300 5,625
Orthologic Corp.* 1,700 16,362
Roche Holding AG* 10 72,668
Rotech Medical Corp.* 1,600 36,400
United Healthcare Corp. 2,200 116,875
--------------
845,080
--------------
Personal Care 0.5%
Procter & Gamble Co. 2,300 186,300
U.S.A. Detergents, Inc.* 500 12,750
--------------
199,050
--------------
Printing & Publishing 0.2%
American Greeting Cl. A 3,100 97,650
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
State Street Research Strategic Portfolios: Moderate
Investment Portfolio (cont'd)
<TABLE>
<CAPTION>
Value
Shares (Note 1)
- ----------------------------------------- --------- ----------------
<S> <C> <C>
Tobacco 0.5%
Philip Morris Cos., Inc. 2,400 $ 202,800
--------------
Total Consumer Staple 3,419,646
--------------
Energy 4.0%
Oil 3.4%
Abacan Resource Corp.* 6,500 16,010
Amerada Hess Corp. 1,200 54,150
Ashland, Inc. 1,000 31,625
Tom Brown, Inc.* 400 4,450
Exxon Corp. 1,600 122,200
Global Natural Resources, Inc.* 2,000 20,000
Imperial Oil Ltd. 2,700 98,550
Louisiana Land & Exploration Co. 5,500 194,563
Lyondell Petrochemical Co. 500 4,275
Nuevo Energy Co.* 1,500 33,187
Phillips Petroleum Co. 2,700 87,075
Plains Resources, Inc.* 2,200 14,987
Ranger Oil Ltd.* 3,000 17,250
Repsol S.A.* 3,500 104,523
Swift Energy Co.* 5,400 47,925
Tosco Corp. 4,200 144,900
Total S.A. Cl. B* 2,049 126,625
Total S.A. ADR 2,057 63,510
Ultramar Corp. 300 7,312
Union Pacific Resources Group, Inc.* 2,900 65,975
Woodside Petroleum Ltd. ADR* 25,000 119,782
--------------
1,378,874
--------------
Oil Service 0.6%
Coflexip* 3,022 85,591
Landmark Graphics Corp.* 1,800 39,150
Schlumberger Ltd. 1,800 112,050
--------------
236,791
--------------
Total Energy 1,615,665
--------------
Finance 6.4%
Bank 2.5%
Banco Industrial Colombiano S.A. ADR 13,500 183,938
Bank of New York Co., Inc. 900 37,800
BankAmerica Corp. 2,100 120,750
Chase Manhattan Corp. 2,100 119,700
Citicorp 3,600 233,550
Mellon Bank Corp. 700 35,087
Sparbanken Sverige AB*++ 12,500 131,765
West One Bancorp 2,900 123,250
--------------
985,840
--------------
Financial Service 1.6%
Amoy Properties Ltd.* 39,000 $ 37,579
Bear Stearns Cos., Inc. 2,600 51,675
Federal Home Loan Mortgage Corp. 4,800 332,400
Federal National Mortgage Association 1,800 188,775
Money Store, Inc. 550 22,000
United Companies Financial Corp. 80 2,260
--------------
634,689
--------------
Insurance 2.3%
Ace Ltd. 4,800 163,200
Ambac, Inc. 1,800 75,825
American Re Corp.* 4,900 187,425
Equitable Companies, Inc. 3,200 68,000
Mid Ocean Ltd.* 4,600 162,725
Mutual Risk Management Ltd. 600 22,125
NAC Re Corp. 900 31,613
National Re Corp. 800 26,900
Progressive Corp. 500 20,750
SAFECO Corp. 2,400 154,050
--------------
912,613
--------------
Total Finance 2,533,142
--------------
Science & Technology 11.8%
Aerospace 1.6%
Boeing Co. 5,800 380,625
Raytheon Co. 3,200 139,600
Sequa Corp. Cl. A* 3,400 87,550
Honeywell, Inc. 900 37,800
--------------
645,575
--------------
Computer Software & Service 3.2%
Cheyenne Software, Inc.* 2,500 52,188
Cisco Systems, Inc.* 1,600 124,000
Computervision Corp. 26,800 314,900
Cooper & Chyan Technology, Inc.* 100 1,100
Datastream Systems, Inc.* 1,500 33,375
ESS Technology, Inc.* 1,110 33,000
General Motors Corp. Cl. E 2,000 94,250
Hyperion Software Corp.* 1,100 54,175
Intersolv, Inc.* 3,200 50,400
Mattson Technologies, Inc.* 600 13,200
Microsoft Corp.* 1,300 130,000
OnTechnologies Corp.* 2,200 26,400
Parametric Technology Corp.* 500 33,500
SAP AG ADR*++ 3,200 163,200
Softkey International, Inc.* 1,500 47,250
Teltrend, Inc.* 100 2,987
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
State Street Research Strategic Portfolios: Moderate
<TABLE>
<CAPTION>
Value
Shares (Note 1)
- ----------------------------------------- --------- ----------------
<S> <C> <C>
Computer Software & Service (cont'd)
3Com Corp.* 700 $ 32,900
Western Digital Corp.* 4,600 71,300
Wonderware Corp.* 100 3,175
--------------
1,281,300
--------------
Electronic Components 1.5%
AMP, Inc. 4,100 160,925
BBC Brown Boveri AG* 65 75,403
Cyrix Corp.* 1,000 32,000
Intel Corp.* 1,200 83,850
Kyocera Corp.* 1,000 81,920
Thomas & Betts Corp. 1,000 64,625
Trident Microsystems, Inc.* 1,600 48,400
U.S. Order, Inc.* 1,600 24,000
VLSI Technology, Inc.* 2,000 47,000
--------------
618,123
--------------
Electronic Equipment 3.1%
Applied Materials, Inc.* 600 30,075
Electroglas, Inc.* 400 28,100
L.M. Ericsson Telephone Co. Cl. B ADR* 5,170 110,428
L.M. Ericsson Telephone Co. Cl. B* 8,769 186,192
General Motors Corp. Cl. H 1,800 75,600
Itron, Inc.* 1,200 34,800
Motorola, Inc. 900 59,063
Nokia Corp. Cl. A* 3,360 192,221
Perkin-Elmer Corp. 7,600 266,950
Tekelec, Inc.* 2,600 37,700
Tektronix, Inc. 1,300 77,025
Tencor Instruments Inc.* 1,100 46,887
Tokyo Electronics Ltd.* 2,000 86,808
--------------
1,231,849
--------------
Office Equipment 2.4%
Broadway & Seymour, Inc.* 1,200 19,500
Diebold, Inc. 300 15,900
Digital Equipment Corp.* 1,500 81,188
FileNet Corp.* 1,200 54,450
Fujitsu Ltd.* 18,000 214,673
Hewlett Packard Co. 1,400 129,675
International Business Machines Corp. 2,000 194,500
SCI Systems, Inc.* 1,200 42,150
Sequent Computer Systems, Inc.* 1,200 20,850
Xerox Corp. 1,200 155,700
--------------
928,586
--------------
Total Science & Technology 4,705,433
--------------
Utility 2.6%
Natural Gas 1.1%
Coastal Corp. 4,800 $ 155,400
ENSERCH Corp. 9,700 140,650
Tenneco, Inc. 1,300 57,038
TransTexas Gas Corp.* 5,600 89,600
--------------
442,688
--------------
Telephone 1.5%
AT&T Corp. 1,800 115,200
Airtouch Communications, Inc.* 3,800 108,300
Allen Group Inc. 800 19,600
Korea Mobile Telecom GDR* 2,300 84,525
Southern New England Telecom Corp. 2,100 75,863
Sprint Corp.* 2,100 76,650
Telecom Italia Mobile SpA 82,500 91,609
Tel-Save Holdings, Inc.* 1,400 19,425
--------------
591,172
--------------
Total Utility 1,033,860
--------------
Total Equity Securities (Cost
$17,984,595) 20,294,440
--------------
</TABLE>
<TABLE>
<CAPTION>
Principal Maturity
Amount Date
- --------------------------------- -------------- --------- ------------
<S> <C> <C> <C>
Fixed Income Securities 44.2%
U.S. Treasury 16.4%
U.S. Treasury Bond, 12.00% $550,000 8/15/2013 825,088
U.S. Treasury Bond, 8.125% 775,000 8/15/2021 937,262
U.S. Treasury Bond, 6.25% 575,000 8/15/2023 561,971
U.S. Treasury Note, 6.75% 750,000 5/31/1999 773,437
U.S. Treasury Note, 7.125% 700,000 9/30/1999 732,263
U.S. Treasury Note, 6.875% 650,000 3/31/2000 676,611
U.S. Treasury Note, 7.50% 825,000 11/15/2001 892,163
U.S. Treasury Note, 6.375% 225,000 8/15/2002 230,801
U.S. Treasury Note, 6.25% 575,000 2/15/2003 585,154
U.S. Treasury Note, 5.75% 325,000 8/15/2003 320,583
----------
6,535,333
----------
U.S. Agency Mortgage 9.0%
Federal Home Loan Mortgage Corp.
Gold, 6.50% 197,335 2/01/2009 195,855
Federal Home Loan Mortgage Corp.
Gold, 6.50% 137,792 7/01/2009 136,759
Federal Home Loan Mortgage Corp.
Gold, 7.50%+ 225,000 8/01/2022 227,391
Federal Home Loan Mortgage Corp.,
29-H PAC, 6.50% 100,000 3/25/2023 98,656
</TABLE>
6
<PAGE>
State Street Research Strategic Portfolios: Moderate
Investment Portfolio (cont'd)
<TABLE>
<CAPTION>
Principal Maturity Value
Amount Date (Note 1)
- --------------------------------- -------------- --------- ------------
<S> <C> <C> <C>
U.S. Agency Mortgage (cont'd)
Federal Home Loan Mortgage Corp.
Gold, 7.50% $ 74,326 8/01/2024 $ 75,139
Federal Home Loan Mortgage Corp.
Gold, 7.00% 352,976 12/01/2024 350,216
Federal Home Loan Mortgage Corp.
Gold, 7.50% 164,165 1/01/2025 165,960
Federal Home Loan Mortgage Corp.
Gold, 8.00% 68,938 6/01/2025 70,661
Federal Home Loan Mortgage Corp.
Gold, 7.50% 97,409 7/01/2025 98,200
Federal National Mortgage
Association FHA-VA, 7.00% 219,851 12/01/2007 231,457
Federal National Mortgage
Association FHA-VA, 8.00% 259,252 4/01/2008 268,266
Government National Mortgage
Association, 8.00% 247,215 10/15/2017 258,726
Government National Mortgage
Association, 8.00% 73,500 11/15/2017 75,613
Government National Mortgage
Association, 9.00% 150,981 2/15/2022 158,766
Government National Mortgage
Association, 6.50% 96,259 12/15/2023 93,612
Government National Mortgage
Association, 6.50% 318,356 7/15/2024 309,602
Government National Mortgage
Association, 7.00% 212,328 1/15/2025 210,868
Government National Mortgage
Association, 7.00% 277,522 8/15/2025 275,612
Government National Mortgage
Association, 7.00% 175,000 10/15/2025 173,796
Government National Mortgage
Association, 5.50%+ 50,000 12/21/2025 49,485
Government National Mortgage
Association, 6.00%+ 75,000 12/21/2025 75,070
----------
3,599,710
----------
Trust Certificates 0.4%
Cooperative Utility Trust
Certificates, 10.70% 125,000 9/15/2017 140,635
----------
Corporate 6.1%
Anacomp Inc. Sr. Sub. Note,
15.00% 100,000 11/01/2000 73,000
Chevron Corp. Note, 8.11% 100,000 12/01/2004 108,728
Columbia/HCA Healthcare Corp.
Master Trust Note, 6.87% 125,000 9/15/2003 125,465
Corporate (cont'd)
Crown Packaging, Inc. Sr. Notes
Series B, 10.75% $ 75,000 11/01/2000 $ 71,625
Finlay Enterprises Sr. Disc.
Deb., 8.00% to 4/30/98, 12.00%
from 5/1/98 to maturity 210,000 5/01/2005 144,900
Grand Union Co. Sr. Sub. Notes,
12.00% ** 75,000 9/01/2004 72,375
Haynes International Inc. Sr.
Sec. Notes, 11.25% 100,000 6/15/1998 96,800
Horsehead Industries, Inc. Sub.
Note, 14.00% 150,000 6/01/1999 153,000
K & F Industries, Inc. Sr. Sub.
Deb. 13.75% 30,000 8/01/2001 31,125
K & F Industries, Inc. Sr. Sec.
Notes, 11.875% 175,000 12/01/2003 185,500
Loews Corp. Sr. Notes, 7.00% 100,000 10/15/2023 93,345
Magna International Inc., Cvt.
Sub. Deb., 5.00% 43,000 10/12/2002 43,860
Marcus Cable Capital Co. Sr.
Disc. Note, 0.00% to
7/31/99, 13.50% from 8/1/99 to
maturity 150,000 8/01/2004 104,063
Mobile Telecommunications, Inc.
Sr. Sub. Disc. Note, 13.50% 165,000 12/15/2002 187,687
Motels of America, Inc. Sr. Sub.
Notes, 12.00% 75,000 4/15/2004 75,187
Presidio Oil Co. Sr. Sec. Notes
Series B, 11.50% 100,000 9/15/2000 97,500
Ralphs Grocery Co. Sr. Note,
10.45% 170,000 6/15/2004 170,425
Sappi BVI Finance Ltd. Cvt. Note,
7.50%++ 330,000 8/12/2002 338,663
Thermoscan, Inc. Floating Rate
Sr. Sub. Note, 11.50% 85,000 8/15/2001 87,656
U.S.A. Mobile Communications,
Inc. Sr. Note, 9.50% 35,000 2/01/2004 33,250
United Meridian Corp. Sr. Sub.
Note, 10.375% 120,000 10/15/2005 122,400
----------
2,416,554
----------
Finance/Mortgage 6.2%
ASFS Corp. Series 94-C2, 8.00% 60,312 8/25/2010 61,631
Allmerica Financial Corp. Sr.
Note, 7.625% 150,000 10/15/2025 150,367
American General Finance Corp.
Notes, 8.00% 100,000 2/15/2000 106,026
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
State Street Research Strategic Portfolios: Moderate
<TABLE>
<CAPTION>
Principal Maturity Value
Amount Date (Note 1)
- --------------------------------- -------------- --------- ------------
<S> <C> <C> <C>
Finance/Mortgage (cont'd)
Beneficial Corp. Master Trust
Note, 8.17% $ 150,000 11/9/1999 $ 159,585
Caterpillar Financial Services
Co. Master Trust Note, 6.03% 150,000 11/16/1995 150,005
Countrywide MBS Inc. Series 94-2
A-7 PAC, 6.50% 150,000 4/25/2008 149,765
Discover Credit Card Trust Series
1993-A, 6.25% 125,000 8/16/2000 125,546
First Chicago Credit Card Trust
Series 91-D, 8.40% 100,000 6/15/1998 101,250
Ford Credit Auto Loan Master
Trust Series 95-1, 6.50% 200,000 8/15/2000 202,000
General Electric Capital Corp.
Master Trust Note, 7.625% 150,000 7/24/1996 151,920
General Motors Acceptance Corp.
Note, 8.375% 200,000 5/01/1997 206,522
General Motors Acceptance Corp.
Master Trust Note, 7.85% 50,000 11/17/1997 51,642
Nations Bank Master Trust Series
1995-I, 6.45% 150,000 4/15/2003 151,875
Prudential Home Mortgage Series
93-29 A-6 PAC, 6.75% 84,632 8/25/2008 84,949
Prudential Home Mortgage Series
93-57 A-1 PAC, 6.50% 271,727 12/25/2023 271,049
Prudential Home Mortgage Series
93-54 A-21 PAC, 5.50% 125,000 1/25/2024 121,054
Sears Credit Account Master Trust
II 95-2, 8.10% 100,000 1/15/2004 106,750
Standard Credit Card Master Trust
Series 93-3A, 5.50% 100,000 1/07/1999 98,342
----------
2,450,278
----------
Canadian-Yankee 1.6%
British Columbia Hydroelectric
Authority Series FH, 15.50% 130,000 7/15/2011 146,524
Carter Holt Harvey Deb., 9.50% 50,000 12/01/2024 62,748
Hydro-Quebec Deb. Series HS,
9.40% 150,000 2/01/2021 179,590
Laidlaw Inc. Deb., 8.75% 50,000 4/15/2025 56,893
Province of Quebec Global Notes,
7.50% 75,000 7/15/2023 74,332
Talisman Energy Deb., 7.125% 125,000 6/01/2007 126,595
----------
646,682
----------
Australian
Foreign Government 4.5% Dollar
Government of Australia, 7.50% 550,000 7/15/2005 $ 384,191
Canadian
Dollar
Government of Canada, 9.75% 100,000 12/01/2001 83,637
Government of Canada, 7.50% 50,000 12/01/2003 37,359
Danish Krone
Kingdom of Denmark, 8.00% 2,100,000 3/15/2006 386,640
French Franc
Government of France, 7.75% 400,000 4/12/2000 85,528
Government of France, 7.50% 200,000 4/25/2005 41,484
Deutsche
Mark
Republic of Germany, 6.625% 500,000 7/09/2003 360,969
Italian Lira
Republic of Italy, 8.50% 130,000,000 4/01/1999 75,896
Republic of Italy, 10.00% 175,000,000 8/01/2003 101,915
Spanish
Peseta
Government of Spain, 10.90% 20,000,000 8/30/2003 164,713
British
Pound
United Kingdom Treasury Stock,
8.00% 50,000 6/10/2003 79,867
----------
1,802,199
----------
Total Fixed Income Securities (Cost $17,152,562) 17,591,391
----------
SHORT-TERM OBLIGATIONS 5.5%
American Express Credit Corp.,
5.55% $1,059,000 11/01/1995 1,059,000
Ford Motor Credit Co., 5.76% 853,000 11/06/1995 853,000
Ford Motor Credit Co., 5.74% 285,000 11/13/1995 285,000
----------
Total Short-Term Obligations (Cost $2,197,000) 2,197,000
----------
Total Investments (Cost $37,334,157)--100.7% 40,082,831
Cash and Other Assets, Less Liabilities--(0.7)% (261,922)
----------
Net Assets--100.0% $39,820,909
==========
Federal Income Tax Information: At October 31, 1995, the net
unrealized appreciation of investments based on cost for
Federal income tax purposes of $37,453,950 was as follows:
Aggregate gross unrealized appreciation for all investments in
which there is an excess of value over tax cost $ 3,543,445
Aggregate gross unrealized depreciation for all investments in
which there is an excess of tax cost over value (914,564)
----------
$ 2,628,881
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
State Street Research Strategic Portfolios: Moderate
Investment Portfolio (cont'd)
ADR and GDR stand for American Depositary Receipt and Global Depositary
Receipt, respectively, representing ownership of foreign securities.
* Nonincome-producing securities.
+ Represents "TBA" (to be announced) purchase commitment to purchase
securities for a fixed unit price at a future date beyond customary
settlement time. Although the unit price has been established, the
principal value has not been finalized and may vary by no more than 2%.
++ Security restricted in accordance with Rule 144A under the Securities Act
of 1933, which allows for the resale of such securities among certain
qualified buyers. The total cost and market value of Rule 144A securities
owned at October 31, 1995 were $587,101 and $639,253 (1.61% of net
assets), respectively.
[ ] Security is in default.
Forward currency exchange contracts outstanding at October 31, 1995 are as
follows:
<TABLE>
<CAPTION>
Unrealized
Contract Appreciation Delivery
Total Value Price (Depreciation) Date
----------------------- ------------ ---------- ----------- ---------
<S> <C> <C> <C> <C>
Sell Australian
dollars, buy U.S.
dollars 206,788 AUD .73840 AUD $ (4,701) 11/16/95
Sell Australian
dollars, buy U.S.
dollars 53,007 AUD .73790 AUD (1,231) 11/16/95
Sell Australian
dollars, buy U.S.
dollars 157,000 AUD .75600 AUD (453) 1/24/96
Sell Canadian dollars,
buy U.S. dollars 91,000 CAD .73333 CAD (1,181) 11/16/95
Sell Canadian dollars,
buy U.S. dollars 47,743 CAD .74173 CAD (205) 1/24/96
Sell Danish krone, buy
U.S. dollars 614,000 DKK .17319 DKK (6,050) 11/16/95
Sell Danish krone, buy
U.S. dollars 1,345,000 DKK .18302 DKK (138) 1/24/96
Sell Deutsche mark, buy
U.S. dollars 768,900 DEM .67476 DEM (27,867) 11/16/95
Sell U.S. dollars, buy
Deutsche mark 292,000 DEM .67916 DEM 9,298 11/16/95
Sell Deutsche mark, buy
U.S. dollars 390,000 DEM .69832 DEM (5,564) 1/05/96
Sell French francs, buy
U.S. dollars 2,570,000 FRF .20145 FRF (7,259) 1/05/96
Sell U.S. dollars, buy
French francs 434,149 FRF .20416 FRF 50 1/05/96
Sell French francs, buy
U.S. dollars 295,100 FRF .20138 FRF (827) 1/24/96
Sell French francs, buy
U.S. dollars 302,000 FRF .20173 FRF (740) 1/24/96
Sell Italian lira, buy
U.S. dollars 107,271,790 ITL .00062 ITL (986) 11/16/95
Sell Italian lira, buy
U.S. dollars 149,000,000 ITL .00061 ITL (1,928) 11/16/95
Sell Japanese yen, buy
U.S. dollars 46,620,000 JPY .01002 JPY 6,348 1/05/96
Sell Pound sterling,
buy U.S. dollars 47,700 GBP 1.53300 GBP (2,262) 11/16/95
Sell Spanish peseta,
buy U.S. dollars 6,560,000 ESP .00810 ESP (540) 11/16/95
Sell Spanish peseta,
buy U.S. dollars 739,000 ESP .00785 ESP (246) 11/16/95
Sell Spanish peseta,
buy U.S. dollars 11,200,000 ESP .00789 ESP (3,268) 11/16/95
---------
$(49,750)
=========
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
State Street Research Strategic Portfolios: Moderate
Statement of Assets and Liabilities
October 31, 1995
<TABLE>
<CAPTION>
<S> <C>
Assets
Investments, at value (Cost $37,334,157) (Note 1) $40,082,831
Cash 22,642
Receivable for securities sold 960,684
Interest and dividends receivable 310,849
Receivable from Distributor (Note 3) 29,599
Receivable for open forward contracts 15,696
Receivable for fund shares sold 1,979
Deferred organization costs and other assets
(Note 1) 48,924
----------
41,473,204
Liabilities
Payable for securities purchased 1,462,998
Payable for open forward contracts 65,446
Accrued transfer agent and shareholder services
(Note 2) 26,382
Accrued management fee (Note 2) 21,956
Accrued trustees' fees (Note 2) 3,381
Payable for fund shares redeemed 1,245
Other accrued expenses 70,887
----------
1,652,295
----------
Net Assets $39,820,909
==========
Net Assets consist of:
Undistributed net investment income $ 551,744
Unrealized appreciation of investments 2,748,674
Unrealized depreciation of forward contracts and
foreign currency (49,330)
Accumulated net realized loss (386,058)
Shares of beneficial interest 36,955,879
----------
$39,820,909
==========
Net Asset Value, offering price and redemption price
per share of Class C shares ($39,820,909 /
3,880,114 shares of beneficial interest) $10.26
==========
</TABLE>
Statement of Operations
For the year ended October 31, 1995
<TABLE>
<CAPTION>
<S> <C>
Investment Income
Interest, net of foreign taxes of $2,023 $1,301,028
Dividends, net of foreign taxes of $6,765 260,067
---------
1,561,095
Expenses
Management fee (Note 2) 216,199
Custodian fee 144,986
Transfer agent and shareholder services (Note 2) 83,015
Registration fees 40,332
Amortization of organization costs (Note 1) 27,706
Audit fee 25,797
Reports to shareholders 19,833
Trustees' fees (Note 2) 13,820
Legal fees 4,192
Miscellaneous 5,816
---------
581,696
Expenses borne by the Distributor (Note 3) (244,843)
---------
336,853
---------
Net investment income 1,224,242
---------
Realized and Unrealized Gain
(Loss) on Investments, Foreign
Currency and Forward Contracts
Net realized gain on investments (Note 1 and 4) 483,129
Net realized gain on forward contracts and foreign
currency (Note 1) 96,780
---------
Total net realized gain 579,909
---------
Net unrealized appreciation of investments 2,976,344
Net unrealized depreciation of forward contracts and
foreign currency (21,967)
---------
Total net unrealized appreciation 2,954,377
---------
Net gain on investments, foreign currency and
forward contracts 3,534,286
---------
Net increase in net assets resulting from operations $4,758,528
=========
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
State Street Research Strategic Portfolios: Moderate
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Year ended October 31
--------------------------
1995 1994
- ----------------------------- ---------- ------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations:
Net investment income $ 1,224,242 $ 814,856
Net realized gain (loss) on
investments, foreign
currency and forward
contracts 579,909 (970,753)
Net unrealized appreciation
(depreciation) of
investments, foreign
currency and forward
contracts 2,954,377 (241,253)
-------- ----------
Net increase (decrease)
resulting from operations 4,758,528 (397,150)
-------- ----------
Dividends from net investment
income--Class C (996,013) (614,662)
-------- ----------
Class C share transactions
(Note 6):
Proceeds from sale of
shares 10,791,980 5,768,409
Net asset value of shares
issued in payment of
dividends 236,847 51,835
Cost of shares repurchased (3,464,385) (1,354,827)
-------- ----------
Net increase from fund share
transactions 7,564,442 4,465,417
-------- ----------
Total increase in net assets 11,326,957 3,453,605
Net Assets
Beginning of year 28,493,952 25,040,347
-------- ----------
End of year (including
undistributed net
investment income of
$551,744 and $193,820,
respectively) $39,820,909 $28,493,952
======== ==========
Number of Class C shares:
Sold 1,120,799 630,344
Issued upon reinvestment
of dividends 24,757 5,730
Repurchased (371,031) (148,286)
-------- ----------
Net increase in fund shares 774,525 487,788
======== ==========
* Net realized gain (loss)
for Federal income tax
purposes
(Note 1) $ 522,329 $ (824,458)
======== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
Notes to Financial Statements
October 31, 1995
Note 1
State Street Research Strategic Portfolios: Moderate (the "Fund"), is a
series of MetLife-State Street Financial Trust (the "Trust"), which was
organized as a Massachusetts business trust in November, 1986 and is
registered under the Investment Company Act of 1940, as amended, as an
open-end management investment company. The Fund commenced operations in
September, 1993. The Trust consists presently of four separate funds: State
Street Research Strategic Portfolios: Moderate, State Street Research
Government Income Fund, State Street Research Strategic Portfolios:
Conservative and State Street Research Strategic Portfolios: Aggressive.
The Fund is authorized to issue four classes of shares. Only Class C shares
are presently available for purchase. Class A, Class B and Class D shares are
not being offered at this time. Class A shares will be subject to an initial
sales charge of up to 4.50% and annual service fees of 0.25% of average daily
net assets. Class B shares will be subject to a contingent deferred sales
charge on certain redemptions made within five years of purchase and pay
annual distribution and service fees of 1.00%. Class B shares automatically
convert into Class A shares (which pay lower ongoing expenses) at the end of
eight years after the issuance of the Class B shares. Class C shares are only
offered to certain employee benefit plans and large institutions. No sales
charge is imposed at the time of purchase or redemption of Class C shares.
Class C shares do not pay any distribution or service fees. Class D shares
are subject to a contingent deferred sales charge of 1.00% on any shares
redeemed within one year of their purchase. Class D shares also pay annual
distribution and service fees of 1.00%. The Fund's expenses are borne
pro-rata by each class, except that each class bears expenses, and has
exclusive voting rights with respect to provisions of the Plan of
Distribution, related specifically to that class. The Trustees declare
separate dividends on each class of shares.
The following significant accounting policies are consistently followed by
the Fund in preparing its financial statements, and such policies are in
conformity with generally accepted accounting principles for investment
companies.
A. Investment Valuation
Values for listed equity securities reflect final sales on national
securities exchanges quoted prior to the close of the New York Stock
Exchange. Over-the-counter securities quoted on the National Association of
Securities Dealers Automated Quotation ("NASDAQ") system are valued at
closing prices supplied through such system. If not quoted on the NASDAQ
system, such securities are valued at prices obtained from brokers. In the
absence of recorded sales, valuations are at the mean of the closing bid and
asked quotations. Fixed income securities are valued by a pricing service,
which utilizes market transactions, quotations from dealers, and various
relationships among securities in determining value. Short-term securities
maturing within sixty days are valued at amortized cost. Securities quoted in
foreign currencies are translated into U.S. dollars at the current exchange
rate.
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. Gains and losses that arise from
changes in exchange rates are not segregated from gains and losses that arise
from changes in market prices of investments.
11
<PAGE>
State Street Research Strategic Portfolios: Moderate
C. Net Investment Income
Net investment income is determined daily and consists of interest and
dividends accrued and discount earned, less the estimated daily
expenses of the Fund. Interest income is accrued daily as earned.
Dividend income is accrued on the ex-dividend date. Discount on debt obligations
is amortized under the effective yield method. The Fund is charged for expenses
directly attributable to it, while indirect expenses are allocated among all
funds in the Trust.
D. Dividends
Dividends from net investment income are declared and paid or reinvested
quarterly. Net realized capital gains, if any, are distributed annually,
unless additional distributions are required for compliance with applicable
tax regulations.
Income dividends and capital gain distributions are determined in accordance
with Federal income tax regulations which may differ from generally accepted
accounting principles.
E. Federal Income Taxes
No provision for Federal income taxes is necessary because the Fund intends
to qualify under Subchapter M of the Internal Revenue Code and its policy is
to distribute all of its taxable income, including net realized capital
gains, within the prescribed time periods. At October 31, 1995, the Fund had
a capital loss carryforward of $309,737 available, to the extent provided in
regulations, to offset future capital gains, if any, which expires on October
31, 2002.
F. Deferred Organization Costs
Certain costs incurred in the organization and registration of the Fund were
capitalized and are being amortized under the straight- line method over a
period of five years.
G. Forward Contracts and Foreign Currencies
The Fund enters into forward foreign currency exchange contracts in order to
hedge its exposure to changes in foreign currency exchange rates on its
foreign portfolio holdings and to hedge certain purchase and sale commitments
denominated in foreign currency. A forward foreign currency exchange contract
is an obligation by the Fund to purchase or sell a specific currency at a
future date, which may be any fixed number of days from the origination date
of the contract. Forward foreign currency exchange contracts establish an
exchange rate at a future date. These contracts are transferable in the
interbank market conducted directly between currency traders (usually large
commercial banks) and their customers. Risks may arise from the potential
inability of a counterparty to meet the terms of a contract and from
unanticipated movements in the value of foreign currencies relative to the
U.S. dollar. The aggregate principal amount of forward currency exchange
contracts is recorded in the Fund's accounts. All commitments are
marked-to-market at the applicable transaction rates resulting in unrealized
gains or losses. The Fund records realized gains or losses at the time the
forward contracts are extinguished by entry into a closing contract or by
delivery of the currency. Neither spot transactions nor forward currency
exchange contracts eliminate fluctuations in the prices of the Fund's
portfolio securities or in foreign exchange rates, or prevent loss if the
price of these securities should decline.
Note 2
The Trust and State Street Research & Management Company (the "Adviser"), an
indirect wholly owned subsidiary of Metropolitan Life Insurance Company
("Metropolitan"), have entered into an agreement under which the Adviser
earns monthly fees at an annual rate of 0.65% 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 year ended October 31, 1995, the fees pursuant to
such agreement amounted to $216,199.
State Street Research Shareholder Services, a division of State Street
Research Investment Services, Inc., the Trust's principal underwriter (the
"Distributor"), an indirect wholly owned subsidiary of Metropolitan, provides
certain shareholder services to the Fund such as responding to inquiries and
instructions from investors with respect to the purchase and redemption of
shares of the Fund. In addition, Metropolitan receives a fee for maintenance
of the accounts of certain shareholders who are participants in sponsored
arrangements, employee benefit plans and similar programs or plans, through
or under which shares of the Fund may be purchased. During the year ended
October 31, 1995, the amount of such expenses was $63,038.
The fees of the Trustees not currently affiliated with the Adviser amounted
to $13,820 during the year ended October 31, 1995.
Note 3
The Distributor and its affiliates may from time to time and in varying
amounts voluntarily assume some portion of fees or expenses relating to the
Fund. During the year ended October 31, 1995, the amount of such expenses
assumed by the Distributor and its affiliates was $244,843.
Note 4
For the year ended October 31, 1995, purchases and sales of securities,
exclusive of short-term obligations, aggregated $45,760,595 and $37,521,737
(including $19,626,654 and $16,832,434 of U.S. Government securities),
respectively.
Note 5
The Trust has adopted a Plan of Distribution Pursuant to Rule 12b-1 (the
"Plan") under the Investment Company Act of 1940. Under the Plan, the Fund
will pay annual service fees to the Distributor at a rate of 0.25% of average
daily net assets for Class A, Class B and Class D shares. In addition, the
Fund will pay annual distribution fees of 0.75% of average daily net assets
for Class B and Class D shares. The Distributor uses such payments for
personal service and/or the maintenance of shareholder accounts, to reimburse
securities dealers for distribution and marketing services, to furnish
ongoing assistance to investors and to defray a portion of its distribution
and marketing expenses.
Note 6
The Trustees have the authority to issue an unlimited number of shares of
beneficial interest, $.001 par value per share.
At October 31, 1995, Metropolitan owned 2,617,801 Class C shares of the Fund
and the Adviser owned one Class C share of the Fund.
12
<PAGE>
State Street Research Strategic Portfolios: Moderate
Financial Highlights
For a Class C share outstanding throughout each year:
<TABLE>
<CAPTION>
September 28, 1993
Year ended (Commencement of
October 31 Operations)
-----------------
1995** 1994 to October 31, 1993
- ------------------------------------------------------------------ ------ ------- -------------------------
<S> <C> <C> <C>
Net asset value, beginning of year $ 9.18 $9.57 $9.55
Net investment income* .36 .28 .02
Net realized and unrealized gain (loss) on investments, foreign
currency and forward contracts 1.01 (.45) --
Dividends from net investment income (.29) (.22) --
---- ----- -----------------------
Net asset value, end of year $10.26 $9.18 $9.57
==== ===== =======================
Total return 15.24%+ (1.81)%+ 0.21%+++
Net assets at end of year (000s) $39,821 $28,494 $25,040
Ratio of operating expenses to average net assets* 1.00% 1.00% 1.00%++
Ratio of net investment income to average net assets* 3.68% 3.05% 2.32%++
Portfolio turnover rate 120.62% 142.86% 0.00%
*Reflects voluntary assumption of fees or expenses per share in
each year (Note 3) $.07 $.05 $.00
</TABLE>
++ Annualized
+ Total return figures do not reflect any front-end or contingent deferred
sales charges. Total return would be lower if the Distributor and its
affiliates had not voluntarily assumed a portion of the Fund's expenses
+++ Represents aggregate return for the period without annualization and does
not reflect any front-end or contingent deferred sales charges. Total
return would be lower if the Distributor and its affiliates had not
voluntarily assumed a portion of the Fund's expenses.
** Per-share figures have been calculated using the average shares method.
13
<PAGE>
Report of Independent Accountants
To the Trustees of MetLife-State Street
Financial Trust and the Shareholders of
State Street Research Strategic Portfolios: Moderate
In our opinion, the accompanying statement of assets and liabilities,
including the investment portfolio, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in
all material respects, the financial position of State Street Research
Strategic Portfolios: Moderate (a series of MetLife-State Street Financial
Trust, hereafter referred to as the "Trust") at October 31, 1995, and the
results of its operations, the changes in its net assets and the financial
highlights for the periods indicated, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of
the Trust's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at October 31, 1995 by
correspondence with the custodian and brokers and the application of
alternative auditing procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
December 8, 1995
14
<PAGE>
State Street Research Strategic Portfolios: Moderate
Management's Discussion of Fund Performance
As of October 31, 1995, State Street Research Strategic Portfolios: Moderate
held 51% of its assets in equities, 44% in fixed income securities and 5% in
cash.
Stocks
Positive stock returns helped the portfolio's performance. Large-cap and
value stocks made up the largest equity holdings. Large-cap growth stocks
performed strongly, value stocks less so. International equities, which only
comprised a small portion of the portfolio, demonstrated improved performance
after a slow start at the beginning of the Fund's year. Small-cap growth
stocks underperformed for most of the period, but also had a limited position
in the portfolio.
Bonds
The Fund's fixed-income component performed well, but did not keep pace with
its stock holdings. The largest position was in high-grade bonds, which
provided strong performance. High-yield and international bonds performed
below expectations, but weren't heavily weighted in the portfolio.
All returns represent past performance, which is no guarantee of future
results. The investment return and principal value of an investment made in
the Fund will fluctuate, and shares, when redeemed, may be worth more or less
than their original cost. All returns assume reinvestment of capital gain
distributions and income dividends. "C" shares, offered without a sales
charge, are available only to certain employee benefit plans and
institutions. The Standard & Poor's 500 Composite Index (S&P 500) includes
500 widely traded common stocks and is a commonly used measure of U.S. stock
market performance. The Lehman Brothers Government/Corporate Bond Index is a
commonly used index of bond market performance. The indices are unmanaged and
do not take sales charges into consideration. Direct investment in the
indices is not possible; results are for illustrative purposes only.
Performance results for the Fund are increased by the Distributor's voluntary
reduction of Fund fees and expenses. In the box in the chart at the right,
the first figure reflects expense reduction; the second shows what results
would have been without subsidization.
Comparison Of Change In Value Of A $10,000
Investment In Strategic Portfolios: Moderate,
The S&P 500 And The Lehman Brothers Government/
Corporate Bond Index
Class C Shares
Strategic Portfolios: Moderate S&P 500 LB Gov't/Corp Index
9/28/93 10000 10000 10000
10/31/93 10021 10207 10041
10/31/94 9840 10600 9575
10/31/95 11340 13400 11123
Average Annual Total Return
1 Year Life of Fund
+15.24%/+14.40% +6.19%/+5.55%
15
<PAGE>
State Street Research Strategic Portfolios: Moderate
Fund Information, Officers and Trustees of MetLife-State Street Financial
Trust
Fund Information
State Street Research
Strategic Portfolios: Moderate
One Financial Center
Boston, MA 02111
Investment Adviser
State Street Research &
Management Company
One Financial Center
Boston, MA 02111
Distributor
State Street Research
Investment Services, Inc.
One Financial Center
Boston, MA 02111
Shareholder Services
State Street Research
Shareholder Services
P.O. Box 8408
Boston, MA 02266-8408
1-800-562-0032
Custodian
State Street Bank and
Trust Company
225 Franklin Street
Boston, MA 02110
Legal Counsel
Goodwin, Procter & Hoar
Exchange Place
Boston, MA 02109
Independent Accountants
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110
Officers
Ralph F. Verni
Chairman of the Board,
President and
Chief Executive Officer
John H. Kallis
Vice President
Thomas A. Shively
Vice President
Michael R. Yogg
Vice President
Gerard P. Maus
Treasurer
Joseph W. Canavan
Assistant Treasurer
Douglas A. Romich
Assistant Treasurer
Francis J. McNamara, III
Secretary and General Counsel
Darman A. Wing
Assistant Secretary and
Assistant General Counsel
Amy L. Simmons
Assistant Secretary
Trustees
Ralph F. Verni
Chairman of the Board,
President, Chief Executive
Officer and Director,
State Street Research &
Management Company
Edward M. Lamont
Formerly in banking
(Morgan Guaranty Trust
Company of New York);
presently engaged in private
investments and civic affairs
Robert A. Lawrence
Partner, Saltonstall & Co.
Dean O. Morton
Retired; formerly Executive
Vice President, Chief
Operating Officer and Director,
Hewlett-Packard Company
Thomas L. Phillips
Retired; formerly Chairman of
the Board and Chief Executive
Officer, Raytheon Company
Toby Rosenblatt
President,
The Glen Ellen Company
Vice President,
Founders Investments Ltd.
Michael S. Scott Morton
Jay W. Forrester Professor of
Management, Sloan School
of Management, Massachusetts
Institute of Technology
Jeptha H. Wade
Retired; formerly Of Counsel,
Choate, Hall & Stewart
16
<PAGE>
FROM THE CHAIRMAN
[GRAPHIC-PICTURE OF RALPH F. VERNI, CHAIRMAN]
To Our Shareholders:
The markets continue to reward investors. U.S. stocks, U.S. bonds and
overseas bonds have all enjoyed stellar returns over the past year.
International stocks have been disappointing, as a result of weaker overseas
economies.
For the twelve months ended October 31, 1995, the Standard & Poor's 500
Index, a common measure of U.S. stock market performance, provided a total
return of +26.41%.(1) The Lehman Brothers Government/Corporate Bond Index
provided a gain of +16.16% over the same time period--a very strong return
for bonds.(1)
The benefits of long-term investing
The past 12 months clearly demonstrated the benefits of investing for the
long term. One year ago, your Fund's annual report contained little in the
way of good news. Interest rates had risen and the stock and bond markets had
dropped sharply. Yet investors who remained true to their long-term strategy
remained invested and were able to enjoy the benefits of a much more positive
year in 1995.
Have you reviewed your portfolio?
The new year can be a good time to review your portfolio--especially after a
year of such strong market performance. Are you fully diversified--invested
in stock, bond and international funds? Diversification can be a successful
way to reduce the risk in your investment portfolio. Did your asset
allocation change because of 1995's market performance? Your investment
representative can help you answer these important questions.
Thank you again for investing with State Street Research.
Sincerely,
[SIGNATURE OF RALPH F. VERNI]
Ralph F. Verni
Chairman
November 30, 1995
=============================================================================
Fund Information (all data are for periods ended October 31, 1995, except
where noted)
=============================================================================
SEC Average Annual Compound Rates of Return for periods ended 9/30/95
(at maximum applicable sales charge)(3),(4)
=============================================================================
Life of Fund
(since 5/16/94) 1 year
- ----------------------------------------------------------------------------
Class A +10.71%/+10.63% +12.57%/+12.55%
- ----------------------------------------------------------------------------
Class C +14.80%/+14.72% +18.24%/+18.22%
============================================================================
Average Annual Compound Rates of Return for periods ended 10/31/95
(at maximum applicable sales charge)(3),(4)
=============================================================================
Life of Fund
(since 5/16/94) 1 year
- ----------------------------------------------------------------------------
Class A +8.04%/+7.82% +9.34%/+9.13%
- ----------------------------------------------------------------------------
Class C +11.80%/+11.57% +14.85%/+14.62%
============================================================================
Cumulative Total Returns for periods
ended 10/31/95
(do not reflect sales charge)(3)
=============================================================================
Life of Fund
(since 5/16/94) 1 year
- ----------------------------------------------------------------------------
Class A +17.25%/+16.90% +14.49%/+14.27%
- ----------------------------------------------------------------------------
Class C +17.72%/+17.37% +14.85%/+14.62%
============================================================================
- ---------------------------- [GRAPHIC-PIE CHART] -------------------------------
Asset Allocation
(by percentage of net assets)
Equities 76%
Cash 3%
Bonds 21%
- --------------------------------------------------------------------------------
Performance results for the Fund are increased by the Distributor's voluntary
reduction of Fund fees and expenses. In the above charts, this first figure
reflects expense reduction; the second shows what results would have been
without subsidization.
(1) The Standard & Poor's 500 Composite Index (S&P 500) includes 500 widely
traded common stocks and is a commonly used measure of U.S. stock market
performance. The Lehman Brothers Government/Corporate Bond Index is a
commonly used index of bond market performance. The indices are unmanaged and
do not take sales charges into consideration. Direct investment in the
indices is not possible; results are for illustrative purposes only.
(2) +14.85% for class C shares.
(3) All returns represent past performance, which is no guarantee of future
results. The investment return and principal value of an investment made in
the Fund will fluctuate, and shares, when redeemed, may be worth more or less
than their original cost. All returns assume reinvestment of capital gain
distributions and income dividends.
(4) "A" share returns reflect the maximum 4.5% sales charge. "C" shares,
offered without a sales charge, are available only to certain employee
benefit plans and institutions.
<PAGE>
PORTFOLIO MANAGER'S REVIEW
[GRAPHIC-PICTURE OF MICHAEL R. YOGG]
Michael R. Yogg
Portfolio Manager
State Street Research Strategic Portfolios: Aggressive came out of the
unfriendly investing environment of 1994 and turned in favorable returns for
the year ended October 31, 1995. Still, the Fund underperformed its peer
group, as some areas of the portfolio didn't fulfill management's
expectations. For the 12 months ended October 31, 1995, Class A shares of the
Fund provided a total return of +14.49% (does not reflect sales charge).(2)
Lipper Analytical Services' Flexible Portfolio Funds category provided an
average total return of +17.93% over the same time period (does not reflect
sales charge).
When considering the Fund's returns, you need to remember its investment
objective of high total return from, primarily, growth of capital and,
secondarily, current income, with reasonable investment risk. We remain more
heavily weighted in stocks, but we also invest in bonds to help achieve this
objective. This can sometimes result in more moderate returns.
Asset-allocation adjustments
In November 1994, we shifted 6% of the portfolio from stocks to bonds. In
July, after bonds had rallied for several months, we moved approximately 5%
of the portfolio from bonds to stocks.
Stock holdings
Overall, the past year proved to be an exceptionally good one for stocks. So
far, 1995 has been the best year for stocks since 1991, which benefited the
portfolio's performance. Value stocks and large-cap growth stocks made up the
largest parts of our equity holdings. Large-cap growth stocks performed well
for us; value stocks less so, as growth stocks led the market. International
equities, although not too heavily weighted, came on strong after a slow
start at the beginning of the Fund's year. Small-cap growth stocks
underperformed for most of the period and negatively affected overall equity
performance somewhat.
Bond holdings
This was also an excellent year for bonds. In 1995, slowing economies both
here and overseas, low inflation, and declining interest rates helped create
a very favorable environment for bond investing. In keeping with our emphasis
on reasonable investment risk, we held our largest position in high-grade
bonds and benefited from their stronger performance. Our holdings in
high-yield and international bonds performed slightly below their benchmark.
They represented a smaller percentage of the bond portion however.
Current strategy
As of October 31, 1995, we held 76% of the Fund's assets in equities, 21% in
fixed-income securities and 3% in cash. Our largest holdings in the equity
portion remained large-cap growth and value stocks. We continued to maintain
smaller positions in small-cap growth and international stocks. High-grade
bonds represented our largest fixed-income holdings, with smaller holdings in
high-yield and international bonds. We believe the investment outlook is
generally positive, given an environment of moderate growth with low
inflation and low interest rates.
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Top 5 Equity Industries
(by percentage of net assets)
- ------------------------- [GRAPHIC-BAR CHART] --------------------------------
Computer software and services 5.6%
Oil 5.1%
Electronic equipment 4.8%
Retail 4.5%
Chemical 4.1%
Total net assets: 24.1%
- --------------------------------------------------------------------------------
Best and Worst Contributors to Performance
(November 1, 1994 through October 31, 1995)
Best (bullet-triangle pointing up)
=============================================================================
Computervision
Strong profit gains for software company
The Money Store
Lower interest rates benefited this loan provider
Boeing
Benefited from airlines' plans to increase capital spending
Worst (bullet-triangle pointing down)
=============================================================================
Penn Traffic
Grocery retailer hurt by price wars
Syncronys Softcorp
Software developer had disappointing new product performance
Primadonna Resorts
1995 has been a difficult year for gaming firms
2
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: AGGRESSIVE
- -----------------------------------------------------------------------------
INVESTMENT PORTFOLIO
- -----------------------------------------------------------------------------
October 31, 1995
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
Value
Shares (Note 1)
- --------------------------------------------------------------------
<S> <C> <C>
Equity Securities 75.8%
Basic Industries 12.4%
Chemical 4.1%
Atlantic Richfield Co. 13,000 $ 290,875
Cambrex Corp. 2,100 80,062
Ciba-Geigy AG ADR* 5,800 251,140
Cytec Industries, Inc. 6,700 366,825
FMC Corp.* 3,900 279,338
L'Air Liquide* 1,100 184,454
Mallinckrodt Group, Inc. 1,200 41,700
Monsanto Co. 2,700 282,825
Potash Corp. of Saskatchewan Inc. 3,000 208,875
Rohm & Haas Co. 9,500 524,875
----------
2,510,969
----------
Diversified 1.3%
Cardo AB* 20,000 310,213
Johnson Controls, Inc. 2,500 145,625
Mark IV Industries, Inc. 6,715 130,942
Nippon Electric Glass Co. Ltd.* 10,000 184,760
U.S. Industries, Inc.* 275 4,125
----------
775,665
----------
Electrical Equipment 0.8%
General Electric Co. 3,800 240,350
Philips Electronics NV 5,700 220,162
----------
460,512
----------
Forest Product 0.9%
Aracruz Celulose ADR* 20,000 180,000
Champion International Corp. 3,800 203,300
Crown Vantage, Inc.* 210 4,174
Nippon Paper Industries Co.* 25,000 171,807
----------
559,281
----------
Machinery 3.0%
Cincinnati Milacron, Inc. 7,400 190,550
Elsag Bailey Process Automation NV 6,900 188,025
Fluor Corp. 3,700 209,050
Harnischfeger Industries, Inc. 1,000 31,500
Kajima Corp.* 18,000 166,108
Linde AG* 546 335,528
Millipore Corp. 4,200 148,575
Minebea Co. Ltd.* 22,000 178,503
Pall Corp. 7,300 177,938
Sundstrand Corp. 2,900 177,625
Terex Corp. Rts.* 300 90
----------
1,803,492
----------
Metal & Mining 2.3%
Alumax, Inc.* 7,900 $ 233,050
Bohler Uddeholm* 3,100 218,533
Cyprus Amax Minerals Co. 5,700 148,912
Reynolds Metals 3,700 186,388
RTZ Corp. PLC 17,500 242,371
SGL Carbon AG* 5,700 373,764
----------
1,403,018
----------
Total Basic Industries 7,512,937
----------
Consumer Cyclical 13.0%
Airline 0.1%
Midwest Express Holdings, Inc.* 2,700 67,837
----------
Automotive 3.2%
Cooper Tire & Rubber Co. 3,800 87,875
Douglas & Lomason Co. 2,200 24,200
Exide Corp. 9,500 416,813
Federal-Mogul Corp. 15,000 268,125
Ford Motor Co. 3,600 103,500
Ford Motor Co. Series A Cv. Pfd. 2,500 235,000
Lear Seating Corp.* 23,000 638,250
Michelin Cl. B 3,900 157,512
----------
1,931,275
----------
Building 0.6%
Fleetwood Enterprises, Inc. 4,300 88,150
La Farge Corp. 5,100 89,250
Owens-Corning Fiberglas Corp. 4,600 194,925
----------
372,325
----------
Hotel & Restaurant 1.5%
Au Bon Pain Company, Inc.* 4,500 34,313
Circus Circus Enterprises, Inc.* 6,100 162,412
Darden Restaurants, Inc.* 5,000 56,875
Harrah's Entertainment, Inc.* 8,000 198,000
Main Street and Main, Inc.* 8,600 32,250
Mirage Resorts, Inc.* 4,500 147,375
Motel of America, Inc.*# 175 13,125
Outback Steakhouse, Inc.* 3,000 94,125
Primadonna Resorts, Inc.* 3,200 50,000
Station Casinos, Inc.* 9,300 120,900
Studio Plus Hotels, Inc.* 900 17,550
----------
926,925
----------
Recreation 2.3%
Argyle Television, Inc. Series A* 3,400 57,800
Boomtown, Inc. Wts.* 165 66
Capital Cities/ABC, Inc. 800 94,900
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
STATE STREET RESEARCH PORTFOLIOS: AGGRESSIVE
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
Value
Shares (Note 1)
- --------------------------------------------------------------------
<S> <C> <C>
Recreation (cont'd)
Comcast Corp. Cl. A 6,800 $ 120,700
Emmis Broadcasting Corp.* 1,800 47,700
Infinity Broadcasting Corp. Cl. A* 5,350 173,875
Mattel Inc. 5,625 161,719
Renaissance Communications Corp.* 6,700 149,912
Sodak Gaming, Inc.* 2,200 40,150
Time Warner, Inc. 4,000 146,000
Time Warner Financing Trust 3,800 121,600
Viacom, Inc. Cl. B* 1,500 75,000
Walt Disney Co. 3,700 213,213
----------
1,402,635
----------
Retail Trade 4.5%
Department 56, Inc.* 4,100 186,038
Federated Department Stores, Inc.* 16,500 418,687
Grand Union Co.* 3,093 33,250
Gymboree Corp.* 7,400 167,425
Home Depot, Inc. 6,600 245,850
Intimate Brands, Inc. Cl. A* 2,000 33,500
May Department Stores Co. 2,800 109,900
Office Depot, Inc.* 5,300 151,712
J.C. Penney, Inc. 1,900 80,037
Tandy Corp.* 5,200 256,750
Toys 'R Us, Inc. 6,600 144,375
Viking Office Products, Inc.* 3,500 155,750
Vons Companies, Inc.* 700 17,762
Wal-Mart Stores, Inc. 13,000 281,125
Woolworth Corp. 29,800 435,825
----------
2,717,986
----------
Textile & Apparel 0.8%
Authentic Fitness Corp.* 8,700 178,350
Norton McNaughton, Inc.* 5,800 114,550
Warnaco Group, Inc. Cl. A* 6,900 160,425
----------
453,325
----------
Total Consumer Cyclical 7,872,308
----------
Consumer Staple 13.6%
Business Service 2.5%
ADT Ltd.* 21,000 294,000
American Oncology Resources, Inc.* 800 21,700
Computer Horizons Corp.* 5,500 143,000
Eltron International, Inc.* 3,200 104,000
First Data Corp. 5,000 330,625
Global Direct Mail Corp.* 8,600 234,350
Integrated System, Inc.* 2,300 80,500
Personnel Group of America, Inc.* 9,500 123,500
Premenos Technologies Corp.* 3,400 133,450
Syncronys Softcorp 2,000 16,000
----------
1,481,125
----------
Container 0.1%
Owens-Illinois Inc. 4,700 $ 59,337
----------
Drug 2.0%
Arris Pharmaceutical Corp.* 5,600 65,800
CytoTherapeutics, Inc.* 4,300 44,075
Eli Lilly & Co. 1,394 134,695
Merck & Company, Inc. 9,600 552,000
Pfizer, Inc. 6,200 355,725
Schering AG 1,000 69,764
----------
1,222,059
----------
Food & Beverage 3.2%
Anheuser-Busch, Inc. 3,800 250,800
Arnotts Ltd.* 38,000 254,723
Campbell Soup Co. 3,300 172,838
Coca-Cola Co. 1,900 136,562
Coca-Cola Enterprises, Inc. 12,200 324,825
LVMH Moet Hennessy Louis Vuitton ADR* 1,500 298,460
PepsiCo, Inc. 3,700 195,175
Whitman Corp. 13,800 293,250
----------
1,926,633
----------
Hospital Supply 4.1%
Abbott Laboratories 9,300 369,675
American Home Patient, Inc.* 6,600 160,050
American Medical Response, Inc.* 4,500 129,937
Columbia/HCA Healthcare Corp.* 1,800 88,425
Community Care of America, Inc.* 8,200 110,700
Community Health Systems, Inc.* 5,800 184,150
HealthCare Compare Corp.* 100 3,700
I Stat Corp.* 3,300 102,300
Johnson & Johnson 2,800 228,200
Lincare Holdings, Inc.* 6,200 154,225
Maxicare Health Plans, Inc.* 6,900 119,888
Medtronic, Inc. 2,200 127,050
Multicare Cos., Inc.* 1,400 26,250
Orthologic Corp. 6,800 65,450
Roche Holdings AG 30 218,004
Rotech Medical Corp.* 6,500 147,875
United Healthcare Corp. 4,200 223,125
----------
2,459,004
----------
Personal Care 0.7%
Procter & Gamble Co. 5,000 405,000
U.S.A. Detergents, Inc.* 1,900 48,450
----------
453,450
----------
Printing & Publishing 0.3%
American Greetings Corp. 5,400 170,100
----------
Tobacco 0.7%
Philip Morris Cos., Inc. 5,400 456,300
----------
Total Consumer Staple 8,228,008
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: AGGRESSIVE
- -----------------------------------------------------------------------------
INVESTMENT PORTFOLIO (cont'd)
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
Value
Shares (Note 1)
- --------------------------------------------------------------------
<S> <C> <C>
Energy 6.0%
Oil 5.1%
Abacan Resource Corp. 17,600 $ 43,351
Amerada Hess Corp. 2,300 103,788
Ashland Oil, Inc. 1,800 56,925
Tom Brown, Inc.* 4,800 53,400
Exxon Corp. 3,800 290,225
Global Natural Resources, Inc.* 5,300 53,000
Imperial Oil Ltd. 5,700 208,050
Louisiana Land & Exploration Co. 10,600 374,975
Nuevo Energy Co.* 5,400 119,475
Phillips Petroleum Co. 5,000 161,250
Plains Resources, Inc.* 5,900 40,194
Ranger Oil Ltd.* 17,200 98,900
Repsol S.A.* 7,000 209,045
Swift Energy Co.* 16,400 145,550
Tosco Corp. 8,800 303,600
Total S.A.* 4,610 284,890
Total S.A. Cl. B ADR 4,732 146,100
Ultramar Corp. 600 14,625
Union Pacific Resources Group, Inc.* 5,000 113,750
Woodside Petroleum Ltd. ADR* 51,300 245,793
----------
3,066,886
----------
Oil Service 0.9%
Coflexip* 6,043 171,153
Landmark Graphics Corp.* 6,500 141,375
Schlumberger Ltd. 3,600 224,100
----------
536,628
----------
Total Energy 3,603,514
----------
Finance 8.2%
Bank 2.9%
Banco Industrial Colombiano ADR 25,500 347,438
BankAmerica Corp. 3,500 201,250
Bank of New York Company, Inc. 1,700 71,400
Chase Manhattan Corp. 4,000 228,000
Citicorp 7,300 473,587
Mellon Bank Corp. 1,200 60,150
Sparbanken Sverige AB++ 11,800 124,386
West One Bancorp 5,500 233,750
----------
1,739,961
----------
Financial Service 2.2%
Amoy Properties Ltd.* 100,000 96,356
Bear Stearns Companies, Inc. 5,000 99,375
Federal Home Loan Mortgage Corp. 9,800 678,650
Federal National Mortgage Association 3,500 367,063
Money Store, Inc. 1,600 64,000
United Cos. Financial Corp. 820 23,165
----------
1,328,609
----------
Insurance 3.1%
Ace Ltd. 9,200 $ 312,800
Ambac, Inc. 3,400 143,225
American Re Corp.* 6,100 233,325
Equitable Companies, Inc. 6,400 136,000
Mid Ocean Ltd.* 8,900 314,838
Mutual Risk Management Ltd. 3,400 125,375
NAC Re Corp. 4,100 144,013
National Re Corp. 3,700 124,412
Progressive Corp. Ohio 1,000 41,500
Safeco Corp. 4,400 282,425
----------
1,857,913
----------
Total Finance 4,926,483
----------
Science & Technology 18.9%
Aerospace 2.1%
Boeing Co. 10,500 689,062
Honeywell, Inc. 1,700 71,400
Raytheon Co. 7,000 305,375
Sequa Corp. Cl. A 8,000 206,000
----------
1,271,837
----------
Computer Software & Service 5.6%
Cheyenne Software, Inc.* 9,800 204,575
Cisco Systems, Inc.* 3,300 255,750
Computervision Corp. 68,600 806,050
Cooper & Chyan Technology, Inc.* 500 5,500
Datastream Systems, Inc.* 6,000 133,500
ESS Technology, Inc.* 4,100 123,000
General Motors Corp. Cl. E 3,400 160,225
Hyperion Software Corp. 3,100 152,675
Intersolv, Inc. 12,900 203,175
Mattson Technologies, Inc. 4,000 88,000
Microsoft Corp. 2,600 260,000
On Technologies Corp.* 6,800 81,600
Parametric Technology Corp. 1,000 67,000
SAP AG ADR++ 7,300 372,300
Softkey Software Products, Inc. 6,200 195,300
Teltrend, Inc.* 500 14,938
3Com Corp.* 1,400 65,800
Western Digital Corp.* 8,800 136,400
Wonderware Corp. 500 15,875
----------
3,341,663
----------
Electronic Components 2.6%
AMP, Inc. 8,200 321,850
BBC Brown Boveri AG* 165 191,408
Cyrix Corp.* 3,700 118,400
Intel Corp.* 2,400 167,700
Kyocera Corp.* 3,000 245,760
Thomas & Betts Corp. 1,900 122,787
Trident Microsystems, Inc.* 6,200 187,550
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: AGGRESSIVE
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------
Value
Shares (Note 1)
- --------------------------------------------------------------------
<S> <C> <C>
Electronic Components (cont'd)
US Order, Inc.* 7,100 $ 106,500
VLSI Technology, Inc.* 3,900 91,650
----------
1,553,605
----------
Electronic Equipment 4.8%
Applied Materials, Inc.* 1,200 60,150
Electroglas, Inc.* 2,400 168,600
L.M. Ericsson Telephone Co. Cl. B ADR* 10,230 218,506
L.M. Ericsson Telephone Co. Cl. B 21,920 465,428
General Motors Corp. Cl. H 3,600 151,200
Itron, Inc.* 4,300 124,700
Motorola, Inc. 1,700 111,563
Nokia Corp.* 7,800 446,228
Perkin-Elmer Corp. 15,300 537,413
Tekelec, Inc.* 6,900 100,050
Tektronix, Inc. 2,600 154,050
Tencor Instruments, Inc.* 3,800 161,975
Tokyo Electronics Ltd.* 5,000 217,019
----------
2,916,882
----------
Office Equipment 3.8%
Broadway & Seymour, Inc.* 5,500 89,375
Diebold, Inc. 700 37,100
Digital Equipment Corp.* 3,000 162,375
FileNet Corp.* 4,600 208,725
Fujitsu Ltd.* 40,000 477,052
Hewlett-Packard Co. 2,700 250,088
International Business Machines Corp. 4,000 389,000
SCI Systems, Inc.* 4,700 165,087
Sequent Computer Systems, Inc.* 5,000 86,875
Xerox Corp. 3,300 428,175
----------
2,293,852
----------
Total Science & Technology 11,377,839
----------
Utility 3.7%
Natural Gas 1.4%
Coastal Corp. 9,000 291,375
ENSERCH Corp. 18,700 271,150
Tenneco, Inc. 2,600 114,075
TransTexas Gas Corp.* 10,700 171,200
----------
847,800
----------
Telephone 2.3%
AT&T Corp. 3,900 249,600
AirTouch Communications, Inc.* 9,000 256,500
Allen Group 3,700 90,650
Korea Mobile Telecom GDR* 5,200 191,100
Southern New England Telecom Corp. 3,900 140,888
Sprint Corp.* 3,800 138,700
Telephone (cont'd)
Telecom Italia Mobile SPA* 195,000 $ 216,530
Tel-Save Holdings, Inc.* 6,000 83,250
----------
1,367,218
----------
Total Utility 2,215,018
----------
Total Equity Securities (Cost $40,071,390) 45,736,107
----------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Principal Maturity
Amount Date
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fixed Income Securities 20.8%
U.S. Treasury 4.0%
U.S. Treasury Bond, 12.00% $250,000 8/15/2013 375,040
U.S. Treasury Bond, 8.125% 275,000 8/15/2021 332,577
U.S. Treasury Bond, 6.25% 225,000 8/15/2023 219,901
U.S. Treasury Note, 8.50% 200,000 5/15/1997 208,374
U.S. Treasury Note, 6.75% 375,000 5/31/1999 386,719
U.S. Treasury Note, 7.125% 100,000 9/30/1999 104,609
U.S. Treasury Note, 6.875% 75,000 3/31/2000 78,070
U.S. Treasury Note, 7.50% 175,000 11/15/2001 189,247
U.S. Treasury Note, 6.375% 150,000 8/15/2002 153,867
U.S. Treasury Note, 6.25% 350,000 2/15/2003 356,181
----------
2,404,585
----------
U.S. Agency Mortgage 3.0%
Federal Home Loan Mortgage Corp. Gold, 6.50% 131,657 7/01/2008 130,670
Federal Home Loan Mortgage Corp. Series 1547-PJ PAC,
6.50% 50,000 3/25/2023 49,328
Federal Home Loan Mortgage Corp. Gold, 7.00% 170,274 6/01/2024 168,943
Federal Home Loan Mortgage Corp. Gold, 7.00% 193,740 12/01/2024 192,225
Federal Home Loan Mortgage Corp. Gold, 7.50% 167,901 1/01/2025 169,737
Federal Home Loan Mortgage Corp. Gold, 8.00%+ 100,000 11/13/2025 101,063
Government National Mortgage Association, 8.00% 127,088 8/15/2008 130,742
Government National Mortgage Association, 8.00% 271,936 10/15/2017 284,598
Government National Mortgage Association, 8.00% 49,000 11/15/2017 50,409
Government National Mortgage Association, 6.50% 242,950 7/15/2024 236,269
Government National Mortgage Association, 7.00% 141,552 1/15/2025 140,579
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: AGGRESSIVE
- -----------------------------------------------------------------------------
INVESTMENT PORTFOLIO (cont'd)
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Principal Maturity Value
Amount Date (Note 1)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Agency Mortgage (cont'd)
Government National Mortgage Association, 7.00% $ 25,226 9/15/2025 $ 25,053
Government National Mortgage Association, 7.00% 25,000 10/15/2025 24,828
Government National Mortgage Association, 6.00%+ 50,000 12/21/2025 50,047
Government National Mortgage Association, 5.50%+ 50,000 12/21/2025 49,484
----------
1,803,975
----------
Canadian-Yankee 0.5%
British Columbia Hydroelectric Authority Series FH,
15.50% 50,000 7/15/2011 56,356
Carter Holt Harvey Deb., 9.50% 75,000 12/01/2024 94,121
Hydro-Quebec Deb. Series HS, 9.40% 75,000 2/01/2021 89,795
Laidlaw Inc., Deb., 8.75% 50,000 4/15/2025 56,893
----------
297,165
----------
Trust Certificates 0.3%
Cooperative Utility Trust Certificates, 10.70% 75,000 9/15/2007 84,381
Deseret Generation Cooperative Trust Certificates,
10.11% 75,000 12/15/2017 83,689
----------
168,070
----------
Foreign Government 6.1% Australian Dollar
Government of Australia, 7.50% 1,375,000 7/15/2005 960,479
Canadian Dollar
Government of Canada, 9.75% 100,000 12/01/2001 83,637
Government of Canada, 7.50% 100,000 12/01/2003 74,719
Danish Krone
Kingdom of Denmark, 8.00% 4,050,000 3/15/2006 745,662
French Franc
Government of France, 7.75% 950,000 4/12/2000 203,129
Government of France, 7.50% 500,000 4/25/2005 103,710
Deutsche Mark
Republic of Germany, 6.625% 950,000 7/09/2003 685,841
Italian Lira
Republic of Italy, 8.50% 245,000,000 4/01/1999 143,034
Republic of Italy, 10.00% 275,000,000 8/01/2003 160,152
Spanish Peseta
Government of Spain, 11.30% 37,500,000 8/30/2003 308,836
British Pound
United Kingdom Treasury Stock, 8.00% 125,000 6/10/2003 199,666
----------
3,668,865
----------
Finance/Mortgage 1.4%
ASFS Corp. Series 94-C2 SR A-1, 8.00% $ 40,208 8/25/2010 $ 41,088
American General Finance Corp. Notes, 8.00% 75,000 2/15/2000 79,519
Beneficial Corp. Mortgage Note, 8.17% 75,000 11/09/1999 79,792
Discover Credit Card Trust Series 1993-A, 6.25% 75,000 8/15/2000 75,328
First Chicago Credit Trust Series 91-D, 8.40% 50,000 6/15/1998 50,625
Ford Credit Auto Loan Master Trust Series 95-1, 6.50% 125,000 8/15/2002 126,250
General Electric Capital Corp. Note, 7.625% 100,000 7/24/1996 101,280
General Motors Acceptance Corp. Note, 7.85% 100,000 11/17/1997 103,284
General Motors Acceptance Corp. Deb., 8.625% 75,000 6/15/1999 80,491
Household Affinity Master Trust Series 94-1A, 6.275% 50,000 5/15/2001 49,906
Standard Credit Card Master Trust Series 93-3A, 5.50% 75,000 1/07/1999 73,757
Tandy Master Trust Series 1991-A, 8.25% 9,675 4/15/1999 9,700
----------
871,020
----------
Corporate 5.5%
Anacomp Inc. Sr. Sub. Note, 15.00% [box] 100,000 11/01/2000 73,000
Chevron Corp. Profit Sharing Note, 8.11% 75,000 12/01/2004 81,546
Columbia/HCA Healthcare Corp. Note, 6.87% 50,000 9/15/2003 50,186
Crown Packaging, Inc. Sr. Note Series B, 10.75% 175,000 11/01/2000 167,125
Finlay Enterprises, Inc. Sr. Disc. Deb., 0.00% to
4/30/98, 12.00% from 5/1/98 to maturity 40,000 5/01/2005 27,600
Grand Union Co. Sr. Sub. Notes, 12.25% [box] 175,000 7/15/2002 168,875
Haynes International Inc. Sr. Sec. Notes, 11.25% 200,000 6/15/1998 193,600
Horsehead Industries, Inc. Sub. Note, 14.00% 250,000 6/01/1999 255,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: AGGRESSIVE
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
Principal Maturity Value
Amount Date (Note 1)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Corporate (cont'd)
K & F Industries, Inc. Sr. Sub. Deb., 13.75% $ 250,000 8/01/2001 $ 259,375
K & F Industries, Inc. Sr. Sec. Notes, 11.875% 30,000 12/01/2003 31,800
Loews Corp. Sr. Notes, 7.00% 50,000 10/15/2023 46,673
Magna International Inc. Cv. Sub. Deb., 5.00% 83,000 10/12/2002 84,660
Marcus Cable Capital Co.
Sr. Disc. Note, 0.00% to
7/31/99, 13.50% from
8/1/99 to maturity 250,000 8/01/2004 173,438
Mobile Telecommunications Tech. Sr. Notes, 13.50% 85,000 2/15/2000 96,687
Motels of America, Inc. Sr. Sub. Notes, 12.00% 175,000 4/15/2004 175,438
Presidio Oil Co. Sr. Sec. Notes Series B, 11.50% 200,000 9/15/2000 195,000
Ralphs Grocery Co. Sr. Note, 10.45% 330,000 6/15/2004 330,825
Thermoscan, Inc. Floating Rate Sr. Sub. Note, 11.50% 165,000 8/15/2001 170,156
United Meridian Corp. Sr. Sub. Note, 10.375% 130,000 10/15/2005 132,600
Sappi BVI Finance Ltd. Co. Note, 7.50%# 585,000 8/12/2002 600,356
U.S.A. Mobile Communications, Inc. Sr. Notes, 9.50% 65,000 2/01/2004 61,750
----------
3,375,690
----------
Total Fixed Income Securities (Cost $12,215,718) 12,589,370
----------
Short-Term Obligations 4.0%
American Express Credit Corp., 5.75% $ 559,000 11/2/1995 $ 559,000
Ford Motor Credit Co., 5.76% 1,842,000 11/6/1995 1,842,000
----------
Total Short-Term Obligations (Cost $2,401,000) 2,401,000
----------
Total Investments (Cost $54,688,108)--100.6% 60,726,477
Cash and Other Assets, Less Liabilities--(0.6)% (362,476)
----------
Net Assets--100.0% $60,364,001
==========
Federal Income Tax Information:
At October 31, 1995, the net unrealized appreciation of investments based on cost for
Federal income tax purposes of $54,819,672 was as follows:
Aggregate gross unrealized appreciation for all investments in which there is an
excess of value over tax cost $ 7,618,498
Aggregate gross unrealized depreciation for all investments in which there is an
excess of tax cost over value (1,711,693)
----------
$ 5,906,805
==========
</TABLE>
- -----------------------------------------------------------------------------
ADR and GDR stand for American Depositary Receipt and Global Depositary
Receipt, respectively, representing ownership of foreign securities.
* Nonincome-producing securities.
+ Represents "TBA" (to be announced) purchase commitment to purchase
securities for a fixed unit price at a future date beyond customary
settlement time. Although the unit price has been established, the
principal value has not been finalized and may vary by no more than 2%.
# Security restricted in accordance with Rule 144A under the Securities Act
of 1933, which allows for the resale of such securities among certain
qualified buyers. The total cost and market value of Rule 144A securities
owned at October 31, 1995 were $1,037,780 and $1,110,167 (1.84% of net
assets), respectively.
[box] Security is in default.
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: AGGRESSIVE
- -----------------------------------------------------------------------------
INVESTMENT PORTFOLIO (cont'd)
- -----------------------------------------------------------------------------
Forward currency exchange contracts outstanding at October 31, 1995 are as
follows:
<TABLE>
<CAPTION>
Unrealized
Contract Appreciation Delivery
Total Value Price (Depreciation) Date
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sell Australian dollars, buy U.S. dollars 413,223 AUD .73840 AUD $ (9,393) 11/16/95
Sell Australian dollars, buy U.S. dollars 112,014 AUD .73790 AUD (2,602) 11/16/95
Sell Australian dollars, buy U.S. dollars 516,000 AUD .75600 AUD (1,491) 1/24/96
Sell Canadian dollars, buy U.S. dollars 168,000 CAD .73333 CAD (2,181) 11/16/95
Sell Canadian dollars, buy U.S. dollars 12,813 CAD .73551 CAD (138) 11/16/95
Sell Danish krone, buy U.S. dollars 1,178,000 DKK .17319 DKK (11,608) 11/16/95
Sell Danish krone, buy U.S. dollars 1,441,000 DKK .18299 DKK (186) 1/24/96
Sell Danish krone, buy U.S. dollars 1,173,000 DKK .18116 DKK (2,298) 1/24/96
Sell Deutsche mark, buy U.S. dollars 1,393,700 DEM .67476 DEM (50,511) 11/16/95
Sell U.S. dollars, buy Deutsche mark 486,800 DEM .67916 DEM 15,501 11/16/95
Sell Deutsche mark, buy U.S. dollars 840,000 DEM .69832 DEM (11,984) 1/05/96
Sell French francs, buy U.S. dollars 5,830,000 FRF .20145 FRF (16,466) 1/05/96
Sell U.S. dollars, buy French francs 984,860 FRF .20416 FRF 112 1/05/96
Sell French francs, buy U.S. dollars 654,400 FRF .20173 FRF (1,603) 1/24/96
Sell French francs, buy U.S. dollars 787,900 FRF .20138 FRF (2,209) 1/24/96
Sell Italian lira, buy U.S. dollars 234,000,000 ITL .00061 ITL (3,027) 11/16/95
Sell Italian lira, buy U.S. dollars 202,166,759 ITL .00062 ITL (1,859) 11/16/95
Sell Japanese yen, buy U.S. dollars 95,940,000 JPY .01002 JPY 13,063 1/05/96
Sell Pound sterling, buy U.S. dollars 119,100 GBP 1.53300 GBP (5,647) 11/16/95
Sell Spanish peseta, buy U.S. dollars 11,040,000 ESP .00810 ESP (908) 11/16/95
Sell Spanish peseta, buy U.S.dollars 1,125,000 ESP .00785 ESP (375) 11/16/95
Sell Spanish peseta, buy U.S. dollars 22,400,000 ESP .00789 ESP (6,536) 11/16/95
---------
$(102,346)
=========
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: AGGRESSIVE
- -----------------------------------------------------------------------------
Statement of Assets and Liabilities
- -----------------------------------------------------------------------------
October 31, 1995
<TABLE>
<CAPTION>
<S> <C>
Assets
Investments, at value (Cost $54,688,108) (Note 1) $60,726,477
Cash 405
Receivable for securities sold 1,950,917
Interest and dividends receivable 302,961
Receivable from Distributor (Note 3) 32,791
Receivable for open forward contracts 28,676
Receivable for fund shares sold 1,218
Deferred organization costs and other assets (Note 1) 43,787
----------
63,087,232
Liabilities
Payable for securities purchased 2,484,461
Payable for open forward contracts 131,022
Accrued management fee (Note 2) 38,846
Accrued transfer agent and shareholder services (Note 2) 12,510
Accrued distribution fee (Note 5) 8,495
Accrued trustees' fees (Note 2) 4,126
Payable for fund shares redeemed 1,495
Other accrued expenses 42,276
----------
2,723,231
----------
Net Assets $60,364,001
==========
Net Assets consist of:
Undistributed net investment income $ 464,967
Unrealized appreciation of investments 6,038,369
Unrealized depreciation of forward contracts and
foreign currency (104,271)
Accumulated net realized gain 1,190,810
Shares of beneficial interest 52,774,126
----------
$60,364,001
==========
Net Asset Value and redemption price per share of Class
A shares ($39,555,477 / 3,619,245 shares of beneficial
interest) $10.93
==========
Maximum Offering Price per share of Class A shares
($10.93 / .955) $11.45
==========
Net Asset Value, offering price and redemption price per
share of Class C shares ($20,808,524 / 1,902,293
shares of beneficial interest) $10.94
==========
</TABLE>
- -----------------------------------------------------------------------------
Statement of Operations
- -----------------------------------------------------------------------------
For the year ended October 31, 1995
<TABLE>
<CAPTION>
<S> <C>
Investment Income
Interest, net of foreign taxes of $4,498 $1,206,837
Dividends, net of foreign taxes of $13,183 618,228
----------
1,825,065
----------
Expenses
Management fee (Note 2) 414,353
Custodian fee 211,434
Distribution fee--Class A (Note 5) 98,009
Audit fee 32,490
Transfer agent and shareholder services (Note 2) 19,152
Reports to shareholders 16,585
Trustees' fees (Note 2) 14,219
Amortization of organization costs (Note 1) 7,482
Legal fees 742
Registration fees 4,255
Miscellaneous 6,579
----------
825,300
Expenses borne by the Distributor (Note 3) (119,174)
----------
706,126
----------
Net investment income 1,118,939
----------
Realized and Unrealized Gain
(Loss) on Investments, Foreign
Currency and Forward Contracts
Net realized gain on investments (Note 1 and 4) 1,620,123
Net realized gain on forward contracts and foreign
currency (Note 1) 257,026
----------
Total net realized gain 1,877,149
----------
Net unrealized appreciation of investments 4,740,960
Net unrealized depreciation of forward contracts and
foreign currency (43,664)
----------
Total net unrealized appreciation 4,697,296
----------
Net gain on investments, foreign currency and forward
contracts 6,574,445
----------
Net increase in net assets resulting from operations $7,693,384
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: AGGRESSIVE
- -----------------------------------------------------------------------------
Statement of Changes in Net Assets
- -----------------------------------------------------------------------------
October 31, 1995
<TABLE>
<CAPTION>
May 16, 1994
Year ended (Commencement of
October 31, Operations) to
1995 October 31, 1994
- -----------------------------------------------------------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations:
Net investment income $ 1,118,939 $ 466,725
Net realized gain (loss) on
investments, foreign
currency and forward
contracts 1,877,149 (492,265)
Net unrealized appreciation
of investments, foreign
currency and forward
contracts 4,697,296 1,236,802
---------- -----------
Net increase resulting from
operations 7,693,384 1,211,262
---------- -----------
Dividends from net investment
income:
Class A (853,158) (209,424)
Class C (262,218) (513)
---------- -----------
(1,115,376) (209,937)
---------- -----------
Net increase from fund share
transactions (Note 6) 2,684,658 50,100,010
---------- -----------
Total increase in net assets 9,262,666 51,101,335
Net Assets
Beginning of year 51,101,335 --
---------- -----------
End of year (including
undistributed net
investment income of
$464,967, and $198,630,
respectively) $60,364,001 $51,101,335
========== ===========
* Net realized gain (loss)
for Federal income tax
purposes
(Note 1) $1,314,496 $ (356,785)
========== ===========
</TABLE>
- -----------------------------------------------------------------------------
Notes to Financial Statements
- -----------------------------------------------------------------------------
October 31, 1995
Note 1
State Street Research Strategic Portfolios: Aggressive (the "Fund"), is a
series of MetLife-State Street Financial Trust (the "Trust"), which was
organized as a Massachusetts business trust in November, 1986 and is
registered under the Investment Company Act of 1940, as amended, as an
open-end management investment company. The Fund commenced operations in May,
1994. The Trust consists presently of four separate funds: State Street
Research Strategic Portfolios: Aggressive, State Street Research Government
Income Fund, State Street Research Strategic Portfolios: Moderate and State
Street Research Strategic Portfolios: Conservative.
The Fund is authorized to issue four classes of shares. Only Class A and
Class C shares are presently available for purchase. Class B and Class D
shares are not being offered at this time. Class A shares are subject to an
initial sales charge of up to 4.50% and annual service fees of 0.25% of
average daily net assets. Class B shares will be subject to a contingent
deferred sales charge on certain redemptions made within five years of
purchase and pay annual distribution and service fees of 1.00%. Class B
shares automatically convert into Class A shares (which pay lower ongoing
expenses) at the end of eight years after the issuance of the Class B shares.
Class C shares are only offered to certain employee benefit plans and large
institutions. No sales charge is imposed at the time of purchase or
redemption of Class C shares. Class C shares do not pay any distribution or
service fees. Class D shares are subject to a contingent deferred sales
charge of 1.00% on any shares redeemed within one year of their purchase.
Class D shares also pay annual distribution and service fees of 1.00%. The
Fund's expenses are borne pro-rata by each class, except that each class
bears expenses, and has exclusive voting rights with respect to provisions of
the Plan of Distribution, related specifically to that class. The Trustees
declare separate dividends on each class of shares.
The following significant accounting policies are consistently followed by
the Fund in preparing its financial statements, and such policies are in
conformity with generally accepted accounting principles for investment
companies.
A. Investment Valuation
Values for listed equity securities reflect final sales on national
securities exchanges quoted prior to the close of the New York Stock
Exchange. Over-the-counter securities quoted on the National Association of
Securities Dealers Automated Quotation ("NASDAQ") system are valued at
closing prices supplied through such system. If not quoted on the NASDAQ
system, such securities are valued at prices obtained from brokers. In the
absence of recorded sales, valuations are at the mean of the closing bid and
asked quotations. Fixed income securities are valued by a pricing service,
which utilizes market transactions, quotations from dealers, and various
relationships among securities in determining value. Short-term securities
maturing within sixty days are valued at amortized cost. Securities quoted in
foreign currencies are translated into U.S. dollars at the current exchange
rate.
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: AGGRESSIVE
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
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. Gains and losses that arise from
changes in exchange rates are not segregated from gains and losses that arise
from changes in market prices of investments.
C. Net Investment Income
Net investment income is determined daily and consists of interest and
dividends accrued and discount earned, less the estimated daily expenses of
the Fund. Interest income is accrued daily as earned. Dividend income is
accrued on the ex-dividend date. Discount on debt obligations is amortized
under the effective yield method. The Fund is charged for expenses directly
attributable to it, while indirect expenses are allocated among all funds in
the Trust.
D. Dividends
Dividends from net investment income are declared and paid or reinvested
quarterly. Net realized capital gains, if any, are distributed annually,
unless additional distributions are required for compliance with applicable
tax regulations.
Income dividends and capital gain distributions are determined in accordance
with Federal income tax regulations which may differ from generally accepted
accounting principles.
E. Federal Income Taxes
No provision for Federal income taxes is necessary because the Fund intends
to qualify under Subchapter M of the Internal Revenue Code and its policy is
to distribute all of its taxable income, including net realized capital
gains, within the prescribed time periods.
F. Deferred Organization Costs
Certain costs incurred in the organization and registration of the Fund were
capitalized and are being amortized under the straight-line method over a
period of five years.
G. Forward Contracts and Foreign Currencies
The Fund enters into forward foreign currency exchange contracts in order to
hedge its exposure to changes in foreign currency exchange rates on its
foreign portfolio holdings and to hedge certain purchase and sale commitments
denominated in foreign currencies. A forward foreign currency exchange
contract is an obligation by the Fund to purchase or sell a specific currency
at a future date, which may be any fixed number of days from the origination
date of the contract. Forward foreign currency exchange contracts establish
an exchange rate at a future date. These contracts are transferable in the
interbank market conducted directly between currency traders (usually large
commercial banks) and their customers. Risks may arise from the potential
inability of a counterparty to meet the terms of a contract and from
unanticipated movements in the value of foreign currencies relative to the
U.S. dollar. The aggregate principal amount of forward currency exchange
contracts is recorded in the Fund's accounts. All commitments are
marked-to-market at the applicable transaction rates resulting in unrealized
gains or losses. The Fund records realized gains or losses at the time the
forward contracts are extinguished by entry into a closing contract or by
delivery of the currency. Neither spot transactions nor forward currency
exchange contracts eliminate fluctuations in the prices of the Fund's
portfolio securities or in foreign exchange rates, or prevent loss if the
price of these securities should decline.
Note 2
The Trust and State Street Research & Management Company (the "Adviser"), an
indirect wholly owned subsidiary of Metropolitan Life
Insurance Company ("Metropolitan"), have entered into an agreement under
which the Adviser earns monthly fees at an annual rate of 0.75% 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 year ended October 31,
1995, the fees pursuant to such agreement amounted to $414,353.
State Street Research Shareholder Services, a division of State Street
Research Investment Services, Inc., the Trust's principal underwriter (the
"Distributor"), an indirect wholly owned subsidiary of Metropolitan, provides
certain shareholder services to the Fund such as responding to inquiries and
instructions from investors with respect to the purchase and redemption of
shares of the Fund. In addition, Metropolitan receives a fee for maintenance
of the accounts of certain shareholders who are participants in sponsored
arrangements, employee benefit plans and similar programs or plans, through
or under which shares of the Fund may be purchased. During the year ended
October 31, 1995, the amount of such expenses was $12,176.
The fees of the Trustees not currently affiliated with the Adviser amounted
to $14,219 during the year ended October 31, 1995.
Note 3
The Distributor and its affiliates may from time to time and in varying
amounts voluntarily assume some portion of fees or expenses relating to the
Fund. During the year ended October 31, 1995, the amount of such expenses
assumed by the Distributor and its affiliates was $119,174.
Note 4
For the year ended October 31, 1995, purchases and sales of securities,
exclusive of short-term obligations, aggregated $68,892,104 and $65,158,426
(including $14,122,358 and $13,764,530 of U.S.
Government securities), respectively.
Note 5
The Trust has adopted a Plan of Distribution Pursuant to Rule 12b-1 (the
"Plan") under the Investment Company Act of 1940. Under the Plan, the Fund
will pay annual service fees to the Distributor at a rate of 0.25% of average
daily net assets for Class A, Class B and Class D shares. In addition, the
Fund will pay annual distribution fees of 0.75% of average daily net assets
for Class B and Class D shares. The Distributor uses such payments for
personal service and/or the maintenance of shareholder accounts, to reimburse
securities dealers for distribution and marketing services, to furnish
ongoing assistance to investors and to defray a portion of its distribution
and marketing expenses. For the year ended October 31, 1995, fees pursuant to
such plan amounted to $98,009 for Class A shares.
12
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: AGGRESSIVE
- -----------------------------------------------------------------------------
Notes (cont'd)
- -----------------------------------------------------------------------------
Note 6
The Trustees have the authority to issue an unlimited number of shares of
beneficial interest, $.001 par value per share. At October 31, 1995,
Metropolitan owned 3,619,222 Class A shares and 1,625,110 Class C shares of
the Fund and the Adviser owned one Class A share of the Fund.
Share transactions were as follows:
<TABLE>
<CAPTION>
May 16, 1994
(Commencement of
Year ended Operations) to
October 31, 1995 October 31, 1994
-------------------------- ------------------------
Class A Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 21 $ 191 5,235,603 $50,000,010
Shares repurchased (1,616,379) (15,000,000) -- --
--------- ---------- --------- -----------
Net increase (decrease) (1,616,358) $(14,999,809) 5,235,603 $50,000,010
========= ========== ========= ===========
Class C Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------
Shares sold 1,924,849 $ 18,026,952 10,471 $ 100,000
Issued upon reinvestment of
dividends 3,000 31,088 -- --
Shares repurchased (36,027) (373,573) -- --
--------- ---------- ------ -----------
Net increase 1,891,822 $ 17,684,467 10,471 $ 100,000
========= ========== ====== ===========
</TABLE>
13
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: AGGRESSIVE
- -----------------------------------------------------------------------------
Financial Highlights
- -----------------------------------------------------------------------------
For a share outstanding throughout each year.
<TABLE>
<CAPTION>
Class A Class C
-------------------------------- ----------------------------------
May 16, 1994
(Commencement May 16, 1994
of (Commencement
Operations) of
Year ended to Year ended Operations) to
October 31, October 31, October 31, October 31,
1995** 1994 1995** 1994
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of year $ 9.74 $ 9.55 $ 9.74 $ 9.55
Net investment income* .20 .09 .22 .10
Net realized and unrealized gain on investments, foreign
currency and forward contracts 1.19 .14 1.20 .14
Dividends from net investment income (.20) (.04) (.22) (.05)
------- ------- ------- ------
Net asset value, end of year $ 10.93 $ 9.74 $ 10.94 $ 9.74
======= ======= ======= ======
Total return 14.49%+ 2.41%++ 14.85%+ 2.50%++
Net assets at end of year (000s) $39,555 $50,999 $20,809 $ 102
Ratio of operating expenses to average net assets* 1.35% 1.35%# 1.10% 1.10%#
Ratio of net investment income to average net assets* 1.98% 2.01%# 2.13% 2.26%#
Portfolio turnover rate 127.44% 37.75% 127.44% 37.75%
*Reflects voluntary assumption of fees or expenses per
share in each year (Note 3) $.02 $.01 $.02 $ .01
</TABLE>
- -----------------------------------------------------------------------------
# Annualized
+ Total return figures do not reflect any front-end or contingent deferred
sales charges. Total return would be lower if the Distributor and its
affiliates had not voluntarily assumed a portion of the Fund's expenses.
++ Represents aggregate return for the period without annualization and does
not reflect any front-end or contingent deferred sales charges. Total
return would be lower if the Distributor and its affiliates had not
voluntarily assumed a portion of the Fund's expenses.
** Per-share figures have been calculated using the average shares method.
14
<PAGE>
- -----------------------------------------------------------------------------
Report of Independent Accountants
- -----------------------------------------------------------------------------
To the Trustees of MetLife-State Street
Financial Trust and the Shareholders of
State Street Research Strategic Portfolios: Aggressive
In our opinion, the accompanying statement of assets and liabilities,
including the investment portfolio, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in
all material respects, the financial position of State Street Research
Strategic Portfolios: Aggressive (a series of MetLife-State Street Financial
Trust, hereafter referred to as the "Trust") at October 31, 1995, and the
results of its operations, the changes in its net assets and the financial
highlights for the periods indicated, in conformity with generally accepted
accounting principles. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of
the Trust's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at October 31, 1995 by
correspondence with the custodian and brokers and the application of
alternative auditing procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
December 8, 1995
15
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: AGGRESSIVE
- -----------------------------------------------------------------------------
Management's Discussion of Fund Performance
- -----------------------------------------------------------------------------
As of October 31, 1995, State Street Research Strategic Portfolios:
Aggressive held 76% of its assets in equities, 21% in fixed-income securities
and 3% in cash.
Stocks
Positive stock returns helped the portfolio's performance. Large-cap and
value stocks made up the largest equity holdings. Large-cap growth stocks
performed strongly, value stocks less so. International equities demonstrated
improved performance after a slow start at the beginning of the Fund's year.
Small-cap growth stocks underperformed for most of the period, hurting
overall performance somewhat. International equities and small-cap growth
stocks both represented small portions of the Fund, however.
Bonds
Overall, the Fund's fixed-income holdings performed well. The largest
position was in high-grade bonds, which gave strong performance. High-yield
and international bonds performed below expectations, but weren't heavily
weighted in the portfolio.
All returns represent past performance, which is no guarantee of future
results. The investment return and principal value of an investment made in
the Fund will fluctuate, and shares, when redeemed, may be worth more or less
than their original cost. All returns assume reinvestment of capital gain
distributions and income dividends. "A" share returns reflect the maximum
4.5% sales charge. "C" shares, offered without a sales charge, are available
only to certain employee benefit plans and institutions. The Standard &
Poor's 500 Composite Index (S&P 500) includes 500 widely traded common stocks
and is a commonly used measure of U.S. stock market performance. The Lehman
Brothers Government/Corporate Bond Index is a commonly used index of bond
market performance. The indices are unmanaged and do not take sales charges
into consideration. Direct investment in the indices is not possible; results
are for illustrative purposes only. Performance results for the Fund are
increased by the Distributor's voluntary reduction of Fund fees and expenses.
In the box in the chart at the right, the first figure reflects expense
reduction; the second shows what results would have been without
subsidization.
Comparison Of Change In Value Of A $10,000 Investment In Strategic
Portfolios: Aggressive, The S&P 500 And The Lehman Brothers
Government/Corporate Bond Index
- ------------------------------[GRAPHIC - LINE CHARTS]--------------------------
Class A Shares
Average Annual Total Return
-------------------------------------------
1 Year Life of Fund
+9.34%/+9.13% +8.04%/+7.82%
Strategic Lehman Brothers
Portfolios: S&P 500 Gov't./
Class A Shares Aggressive Index Corp. Index
5/16/94 9,550 10,000 10,000
10/31/94 9,780 10,549 10,006
10/31/95 11,622 13,334 11,198
Average Annual Total Return
-------------------------------------------
1 Year Life of Fund
+14.85%/+14.62% +11.80%/+11.57%
Strategic Lehman Brothers
Portfolios: S&P 500 Gov't./
Class A Shares Aggressive Index Corp. Index
5/16/94 10,000 10,000 10,000
10/31/94 10,250 10,549 10,006
10/31/95 11,772 13,334 11,622
- --------------------------------------------------------------------------------
Strategic Portfolios: Aggressive
S&P 500 Index
Lehman Brothers Gov't.
Corp. Index
16
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: AGGRESSIVE
- -------------------------------------------------------------------------------
Fund Information, Officers and Trustees of MetLife-State Street Financial Trust
- -------------------------------------------------------------------------------
Fund Information
State Street Research
Strategic Portfolios: Aggressive
One Financial Center
Boston, MA 02111
Investment Adviser
State Street Research &
Management Company
One Financial Center
Boston, MA 02111
Distributor
State Street Research
Investment Services, Inc.
One Financial Center
Boston, MA 02111
Shareholder Services
State Street Research
Shareholder Services
P.O. Box 8408
Boston, MA 02266-8408
1-800-562-0032
Custodian
State Street Bank and
Trust Company
225 Franklin Street
Boston, MA 02110
Legal Counsel
Goodwin, Procter & Hoar
Exchange Place
Boston, MA 02109
Independent Accountants
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110
Officers
Ralph F. Verni
Chairman of the Board,
President and
Chief Executive Officer
John H. Kallis
Vice President
Thomas A. Shively
Vice President
Michael R. Yogg
Vice President
Gerard P. Maus
Treasurer
Joseph W. Canavan
Assistant Treasurer
Douglas A. Romich
Assistant Treasurer
Francis J. McNamara, III
Secretary and General Counsel
Darman A. Wing
Assistant Secretary and
Assistant General Counsel
Amy L. Simmons
Assistant Secretary
Trustees
Ralph F. Verni
Chairman of the Board,
President, Chief Executive
Officer and Director,
State Street Research &
Management Company
Edward M. Lamont
Formerly in banking
(Morgan Guaranty Trust
Company of New York);
presently engaged in private
investments and civic affairs
Robert A. Lawrence
Partner, Saltonstall & Co.
Dean O. Morton
Retired; formerly Executive
Vice President, Chief
Operating Officer and Director,
Hewlett-Packard Company
Thomas L. Phillips
Retired; formerly Chairman of
the Board and Chief Executive
Officer, Raytheon Company
Toby Rosenblatt
President,
The Glen Ellen Company
Vice President,
Founders Investments Ltd.
Michael S. Scott Morton
Jay W. Forrester Professor of
Management, Sloan School
of Management, Massachusetts
Institute of Technology
Jeptha H. Wade
Retired; formerly Of Counsel,
Choate, Hall & Stewart
17
<PAGE>
[Back cover]
State Street Research Strategic Portfolios: Aggressive
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Questions? Comments?
Call us at 1-800-562-0032,
or write us at:
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[State Street Research Logo] STATE STREET RESEARCH
This report is prepared for the general information of current shareholders
only. It is not authorized for use as sales material with prospective investors.
CONTROL NUMBER: 2847-951221(0197)SSR-LD
Cover Illustration by Dorothy Cullinan SP-112E-1295
<PAGE>
[Front cover]
[State Street Research Logo] State Street Research
STATE STREET RESEARCH
STRATEGIC PORTFOLIOS: AGGRESSIVE
ANNUAL REPORT
October 31, 1995
[Graphic: Man climbing rocks, reaching for stars]
What's Inside
From the Chairman:
The markets reward investors
Portfolio Manager's Review:
Favorable performance from stocks and bonds
Fund Information:
Facts and figures
Plus, Complete Portfolio Holdings
and Financial Statements
<PAGE>
[Front cover]
[State Street Research logo]
State Street Research
Strategic Portfolios: Conservative
Annual Report
October 31, 1995
[Graphic - person climbing stairway to the stars]
What's Inside
From the Chairman:
The markets reward
investors
Portfolio Manager's Review:
Strong performance from
stocks and bonds
Fund Information:
Facts and figures
Plus, Complete Portfolio Holdings
and Financial Statements
FROM THE CHAIRMAN
[photo of Ralph Verni]
To Our Shareholders:
The markets continue to reward investors. U.S. stocks, U.S. bonds and
overseas bonds have all enjoyed stellar returns over the past year.
International stocks have been disappointing, as a result of weaker overseas
economies.
For the twelve months ended October 31, 1995, the Standard & Poor's 500
Index, a common measure of U.S. stock market performance, provided a total
return of +26.41%.(1) The Lehman Brothers Government/Corporate Bond Index
provided a gain of +16.16% over the same time period--a very strong return
for bonds.(1)
The benefits of long-term investing
The past 12 months clearly demonstrated the benefits of investing for the
long term. One year ago, your Fund's annual report contained little in the
way of good news. Interest rates had risen and the stock and bond markets had
dropped sharply. Yet investors who remain true to their long- term strategy
remained invested and were able to enjoy the benefits of a much more positive
year in 1995.
Have you reviewed your portfolio?
The new year can be a good time to review your portfolio--especially
after a year of such strong market performance. Are you fully diversified--
invested in stock, bond and international funds? Diversification can be a
successful way to reduce the risk in your investment portfolio. Did your
asset allocation change because of 1995's market performance? Your
investment representative can help you answer these important questions.
Thank you for investing with State Street Research.
Sincerely,
/s/ Ralph F. Verni
Ralph F. Verni
Chairman
November 30, 1995
(1)The Standard & Poor's Composite Index (S&P 500) includes 500 widely traded
common stocks and is a commonly used measure of U.S. stock market
performance. The Lehman Brothers Government/ Corporate Bond Index is a
commonly used index of bond market performance. The indices are unmanaged and
do not take sales charges into consideration. Direct investment in the
indices is not possible; results are for illustrative purposes only.
(2)+16.11% for Class C shares.
(3)All returns represent past performance, which is no guarantee of future
results. The investment return and principal value of an investment made in
the Fund will fluctuate, and shares, when redeemed, may be worth more or less
than their original cost. All returns assume reinvestment of capital gain
distributions and income dividends.
(4)"A" share returns reflect the maximum 4.5% sales charge. "C" shares,
offered without a sales charge, are available only to certain employee
benefit plans and large institutions.
Fund Information (all data are for periods ended October 31, 1995, except
where noted)
SEC Average Annual Compound Rates of
Return for periods ended 9/30/95
(at maximum applicable sales charge)((3,4))
===================================================
Life of Fund
(since 5/16/94) 1 Year
- ---------------------------------------------------
Class A +8.35%/+7.96% +10.53%/+10.27%
- ---------------------------------------------------
Class C +12.30%/+11.89% +16.01%/+15.73%
===================================================
Performance results for the Fund are increased by the Distributor's voluntary
reduction of Fund fees and expenses. In the above charts, the first figure
reflects expense reduction; the second shows what results would have been
without subsidization.
Average Annual Compound Rates of
Return for periods ended 10/31/95
(at maximum applicable sales charge)((3,4))
===================================================
Life of Fund
(since 5/16/94) 1 Year
- ---------------------------------------------------
Class A +7.99%/+7.36% +10.63%/+10.03%
- ---------------------------------------------------
Class C +11.69%/+11.07% +16.11%/+15.53%
===================================================
Cumulative Total Returns for periods
ended 10/31/95
(do not reflect sales charge)((3))
===================================================
Life of Fund
(since 5/16/94) 1 Year
- ---------------------------------------------------
Class A +17.18%/+16.18% +15.84%/+15.21%
- ---------------------------------------------------
Class C +17.55%/+16.60% +16.11%/+15.53%
===================================================
<PAGE>
PORTFOLIO MANAGER'S REVIEW
[photo]
Michael R. Yogg
Portfolio Manager
State Street Research Strategic Portfolios: Conservative came out of the
unfriendly investing environment of 1994 and turned in strong returns. The
Fund outperformed its peer group for the year ended October 31, 1995. For the
12 months ended October 31, 1995, Class A shares of the Fund provided a total
return of +15.84% (does not reflect sales charge).(2) Lipper Analytical
Services' Flexible Income Funds category provided an average total return of
+13.20% over the same time period (does not reflect sales charge).
When considering the Fund's returns, you need to remember its investment
objective of primarily providing a high level of current income and,
secondarily, long-term growth of capital, consistent with the preservation of
capital and reasonable investment risk. The Fund invests in both bonds and
stocks to achieve this objective.
Asset-allocation adjustments
In November 1994, we shifted 6% of the portfolio from stocks to bonds. In
July 1995, after bonds had rallied for several months, we moved approximately
3% of the portfolio from bonds to stocks.
Bond holdings
This was an excellent year for bonds. In 1995, slowing economies both here
and overseas, low inflation, and declining interest rates helped create a
very favorable environment for bond investing. In keeping with our
conservative emphasis, we held our largest position in high-grade bonds and
benefited from their strong performance. Our holdings in international bonds
performed slightly below our benchmark, but they represented a much smaller
percentage of the bond portion.
Stock holdings
Overall, the past year also proved to be an exceptionally good one for
stocks. Value stocks and large-cap growth stocks made up the largest parts of
the equities in the Fund. Large-cap growth stocks performed well for us;
value stocks less so, as growth stocks led the market. International
equities, although not too heavily weighted, came on strong after a slow
start at the beginning of the Fund's year.
Current strategy
As of October 31, 1995, we held 69% of the Fund's assets in fixed-income
securities, 28% in equities and 3% in cash. High-grade bonds dominated our
fixed- income holdings, with smaller holdings in international bonds. Our
largest holdings in the equity portion remained large-cap growth stocks and
value stocks. We continue to maintain a smaller position in international
stocks. We believe the investment outlook is generally positive, given an
environment of moderate growth with low inflation and low interest rates.
[pie chart]
Asset Allocation
(by percentage of net assets)
Bonds 69%
Equities 28%
Cash 3%
[bar chart]
Top 5 Bond Sectors
(by percentage of net assets)
U.S. Treasury 27.5%
U.S. Agency Mortgage 18.9%
Finance/Mortgage 9.0%
Foreign Government 6.3%
Canadian-Yankee 3.3%
Total net assets: 65.0%
2
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: CONSERVATIVE
-----------------------------------------------------------------------------
INVESTMENT PORTFOLIO
-----------------------------------------------------------------------------
October 31, 1995
<TABLE>
<CAPTION>
Value
Shares (Note 1)
-----------------------------------------------------------------
<S> <C> <C>
EQUITY SECURITIES 27.5%
Basic Industries 5.3%
Chemical 2.0%
Atlantic Richfield Co. 3,200 $ 71,600
Ciba-Geigy AG ADR* 1,200 51,960
Cytec Industries, Inc. 1,600 87,600
FMC Corp.* 1,000 71,625
L'Air Liquide* 200 33,537
Mallinckrodt Group, Inc. 300 10,425
Monsanto Co. 600 62,850
Potash Corp. of Saskatchewan, Inc. 700 48,737
Rohm & Haas Co. 2,300 127,075
----------
565,409
----------
Diversified 0.5%
Cardo AB* 2,900 44,981
Johnson Controls, Inc. 600 34,950
Mark IV Industries, Inc. 1,575 30,712
Nippon Electric Glass Co. Ltd.* 2,000 36,952
U.S. Industries, Inc.* 100 1,500
----------
149,095
----------
Electrical Equipment 0.3%
General Electric Co. 800 50,600
Philips Electronics NV 1,000 38,625
----------
89,225
----------
Forest Product 0.3%
Aracruz Celulose ADR* 3,300 29,700
Champion International Corp. 700 37,450
Crown Vantage, Inc.* 50 994
Nippon Paper Industries Co.* 4,000 27,489
----------
95,633
----------
Machinery 1.2%
Cincinnati Milacron, Inc. 1,800 46,350
Elsag Bailey Process Automation NV 1,200 32,700
Fluor Corp. 600 33,900
Harnischfeger Industries, Inc. 200 6,300
Kajima Corp.* 3,000 27,685
Linde AG* 81 49,776
Millipore Corp. 1,000 35,375
Minebea Co. Ltd.* 4,000 32,455
Pall Corp. 1,900 46,313
Sundstrand Corp. 700 42,875
----------
353,729
----------
Metal & Mining 1.0%
Alumax, Inc.* 2,000 $ 59,000
Bohler Uddeholm* 500 35,247
Cyprus Amax Minerals Co. 1,400 36,575
RTZ Corp. PLC* 2,500 34,625
Reynolds Metals Co. 900 45,337
SGL Carbon AG* 1,000 65,573
----------
276,357
----------
Total Basic Industries 1,529,448
----------
Consumer Cyclical 4.4%
Automotive 1.2%
Cooper Tire & Rubber Co. 400 9,250
Douglas & Lomason Co. 500 5,500
Exide Corp. 1,600 70,200
Federal-Mogul Corp. 2,500 44,688
Ford Motor Co. 900 25,875
Ford Motor Co. Series A Cv. Pfd. 600 56,400
Lear Seating Corp.* 4,300 119,325
Michelin Cl.B 700 28,271
----------
359,509
----------
Building 0.3%
Fleetwood Enterprises, Inc. 1,100 22,550
LaFarge Corp. 1,300 22,750
Owens-Corning Fiberglas Corp. 1,100 46,612
----------
91,912
----------
Hotel & Restaurant 0.4%
Circus Circus Enterprises, Inc.* 1,100 29,288
Darden Restaurants, Inc.* 1,300 14,787
Harrah's Entertainment, Inc.* 1,600 39,600
Mirage Resorts, Inc.* 1,400 45,850
----------
129,525
----------
Recreation 0.8%
Capital Cities/ABC, Inc. 200 23,725
Comcast Corp. Cl. A 1,000 17,750
Comcast Corp. Cl. A Special 400 7,150
Walt Disney Co. 800 46,100
Infinity Broadcasting Corp. Cl. A* 550 17,875
Mattel, Inc. 1,000 28,750
Time Warner Financing Trust 1,000 32,000
Time Warner, Inc. 800 29,200
Viacom, Inc. Cl. B* 300 15,000
----------
217,550
----------
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: CONSERVATIVE
Value
Shares (Note 1)
-----------------------------------------------------------------
Retail Trade 1.7%
Federated Department Stores, Inc.* 3,800 $ 96,425
Home Depot, Inc. 1,400 52,150
Intimate Brands, Inc. Cl. A* 500 8,375
May Department Stores Co. 700 27,475
Office Depot, Inc.* 1,100 31,487
J.C. Penney, Inc. 500 21,063
Tandy Corp. 1,200 59,250
Toys 'R Us, Inc.* 1,400 30,625
Vons Companies, Inc.* 200 5,075
Wal-Mart Stores, Inc. 2,400 51,900
Woolworth Corp. 7,200 105,300
----------
489,125
----------
Total Consumer Cyclical 1,287,621
----------
Consumer Staple 4.5%
Business Service 0.5%
ADT Ltd.* 5,200 72,800
First Data Corp 900 59,513
----------
132,313
----------
Container 0.1%
Owens-Illinois Inc. 1,200 15,150
----------
Drug 0.8%
Eli Lilly & Co. 465 44,931
Merck & Company, Inc. 2,100 120,750
Pfizer, Inc. 1,200 68,850
Schering AG 100 6,976
----------
241,507
----------
Food & Beverage 1.5%
Anheuser-Busch, Inc. 800 52,800
Arnotts Ltd.* 6,000 40,219
Campbell Soup Co. 1,100 57,613
Coca-Cola Co. 400 28,750
Coca-Cola Enterprises, Inc. 3,000 79,875
LVMH Moet Hennessy Louis Vuitton ADR* 200 39,795
PepsiCo, Inc. 1,200 63,300
Whitman Corp. 3,400 72,250
----------
434,602
----------
Hospital Supply 0.9%
Abbott Laboratories 1,900 75,525
Columbia/HCA Healthcare Corp.* 300 14,737
Johnson & Johnson 600 48,900
Medtronic, Inc. 600 34,650
Roche Holdings AG 5 36,334
United Healthcare Corp. 1,000 53,125
----------
263,271
----------
Personal Care 0.3%
Procter & Gamble Co. 1,000 $ 81,000
----------
Printing & Publishing 0.1%
American Greetings Corp. 1,300 40,950
----------
Tobacco 0.3%
Philip Morris Cos., Inc. 1,100 92,950
----------
Total Consumer Staple 1,301,743
----------
Energy 2.0%
Oil 1.7%
Amerada Hess Corp. 600 27,075
Ashland Oil, Inc. 500 15,813
Exxon Corp. 800 61,100
Imperial Oil Ltd. 850 31,025
Louisiana Land & Exploration Co. 2,500 88,438
Lyondell Petrochemical Co. 100 2,137
Phillips Petroleum Co. 1,300 41,925
Repsol S.A.* 1,500 44,795
Tosco Corp. 2,000 69,000
Total S.A. Cl. B* 717 44,309
Ultramar Corp. 100 2,438
Union Pacific Resources Group, Inc. 1,300 29,575
Woodside Petroleum Ltd. ADR* 7,700 36,893
----------
494,523
----------
Oil Service 0.3%
Coflexip* 1,106 31,325
Schlumberger Ltd. 800 49,800
----------
81,125
----------
Total Energy 575,648
----------
Finance 3.6%
Bank 1.3%
Banco Industrial Colombiano ADR 4,500 61,312
BankAmerica Corp. 1,100 63,250
Bank of New York Company, Inc. 400 16,800
Chase Manhattan Corp. 1,000 57,000
Citicorp 1,400 90,825
Mellon Bank Corp. 300 15,038
Sparbanken Sverige AB++ 1,700 17,920
West One Bancorp 1,400 59,500
----------
381,645
----------
Financial Service 0.9%
Amoy Properties Ltd.* 16,000 15,417
Bear Stearns Companies, Inc. 1,200 23,850
Federal Home Loan Mortgage Corp. 2,200 152,350
Federal National Mortgage Association 800 83,900
----------
275,517
----------
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: CONSERVATIVE
-----------------------------------------------------------------------------
INVESTMENT PORTFOLIO (cont'd)
-----------------------------------------------------------------------------
Value
Shares (Note 1)
-----------------------------------------------------------------
Insurance 1.4%
Ace Ltd. 2,300 $ 78,200
Ambac, Inc. 900 37,913
American Re Corp.* 2,500 95,625
Equitable Companies, Inc. 1,300 27,625
Mid Ocean Ltd.* 2,200 77,825
Progressive Corp. 200 8,300
SAFECO Corp. 1,100 70,606
----------
396,094
----------
Total Finance 1,053,256
----------
Science & Technology 6.1%
Aerospace 0.9%
Boeing Co. 2,400 157,500
Honeywell, Inc. 400 16,800
Raytheon Co. 1,000 43,625
Sequa Corp. Cl. A* 2,000 51,500
----------
269,425
----------
Computer Software & Service 1.6%
Cisco Systems, Inc.* 700 54,250
Computervision Corp.* 16,800 197,400
General Motors Corp. Cl. E 900 42,412
Microsoft Corp.* 500 50,000
Parametric Technology Corp.* 200 13,400
SAP AG ADR*++ 1,200 61,200
3Com Corp.* 300 14,100
Western Digital Corp.* 2,200 34,100
----------
466,862
----------
Electronic Components 0.9%
AMP, Inc. 1,900 74,575
BBC Brown Boveri AG 30 34,801
Intel Corp. 500 34,938
Kyocera Corp. 1,000 81,920
Thomas & Betts Corp. 500 32,313
VLSI Technology, Inc.* 800 18,800
----------
277,347
----------
Electronic Equipment 1.6%
Applied Materials, Inc. 200 10,025
General Motors Corp. Cl. H 800 33,600
L.M. Ericsson Telephone Co. ADR Cl. B* 2,090 44,641
L.M. Ericsson Telephone Co. Cl. B* 3,568 75,759
Motorola, Inc. 400 26,250
Nokia Corp.* 1,360 77,804
Perkin-Elmer Corp. 3,400 119,425
Tektronix, Inc. 600 35,550
Tokyo Electronics Ltd.* 1,000 43,404
----------
466,458
----------
Office Equipment 1.1%
Diebold, Inc. 200 $ 10,600
Digital Equipment Corp.* 600 32,475
Fujitsu Ltd. 7,000 83,484
Hewlett-Packard Co. 600 55,575
International Business Machines Corp. 800 77,800
Xerox Corp. 400 51,900
----------
311,834
----------
Total Science & Technology 1,791,926
----------
Utility 1.6%
Natural Gas 0.7%
Coastal Corp. 2,200 71,225
ENSERCH Corp. 4,700 68,150
Tenneco, Inc. 600 26,325
TransTexas Gas Corp.* 2,600 41,600
----------
207,300
----------
Telephone 0.9%
AT&T Corp. 900 57,600
AirTouch Communications, Inc.* 1,700 48,450
Korea Mobile Telecom GDR* 1,000 36,750
Southern New England Telecom Corp. 1,000 36,125
Sprint Corp.* 1,000 36,500
Telecom Italia Mobile SPA 31,500 34,978
----------
250,403
----------
Total Utility 457,703
----------
Total Equity Securities (Cost $6,887,317) 7,997,345
----------
</TABLE>
Principal Maturity
Amount Date
-------------------------------------------------------------------
FIXED INCOME SECURITIES 69.5%
U.S. Treasury 27.5%
U.S. Treasury Bond, 12.00% $ 725,000 8/15/2013 1,087,616
U.S. Treasury Bond, 6.25% 825,000 8/15/2023 806,305
U.S. Treasury Bond, 8.125% 1,050,000 8/15/2021 1,269,839
U.S. Treasury Note, 8.50% 500,000 5/15/1997 520,935
U.S. Treasury Note, 5.125% 275,000 6/30/1998 271,219
U.S. Treasury Note, 6.75% 750,000 5/31/1999 773,437
U.S. Treasury Note, 7.125% 275,000 9/30/1999 287,675
U.S. Treasury Note, 6.875% 475,000 3/31/2000 494,447
U.S. Treasury Note, 7.50% 925,000 11/15/2001 1,000,304
U.S. Treasury Note, 6.375% 150,000 8/15/2002 153,867
U.S. Treasury Note, 6.25% 375,000 2/15/2003 381,622
U.S. Treasury Note, 5.75% 950,000 8/15/2003 937,090
----------
7,984,356
----------
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: CONSERVATIVE
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Maturity Value
Amount Date (Note 1)
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Agency Mortgage 18.9%
Federal Home Loan Mortgage Corp. Series 29-H PAC,
6.50% $ 125,000 3/25/2023 $ 123,320
Federal Home Loan Mortgage Corp. Gold, 7.00% 924,345 6/01/2024 917,117
Federal Home Loan Mortgage Corp. Gold, 8.00% 91,520 6/01/2025 93,809
Federal Home Loan Mortgage Corp. Gold, 7.50% 593,649 8/01/2024 600,138
Federal Home Loan Mortgage Corp. Gold, 7.50%+ 300,000 11/13/2025 303,187
Government National Mortgage Association, 8.00% 381,262 5/15/2008 392,223
Government National Mortgage Association, 6.50% 817,780 4/15/2009 814,968
Government National Mortgage Association, 8.00% 420,264 10/15/2017 439,833
Government National Mortgage Association, 8.00% 122,500 11/15/2017 126,022
Government National Mortgage Association, 6.50% 96,230 12/15/2023 93,584
Government National Mortgage Association, 6.50% 489,779 7/15/2024 476,311
Government National Mortgage Association, 7.00% 353,881 1/15/2025 351,447
Government National Mortgage Association, 5.50%+ 100,000 12/21/2025 98,969
Government National Mortgage Association, 6.00% 100,000 12/21/2025 100,094
Government National Mortgage Association, 7.00% 353,129 9/15/2025 350,700
Government National Mortgage Association, 7.00% 225,000 10/15/2025 223,452
----------
5,505,174
----------
Canadian--Yankee 3.3%
British Columbia Hydroelectric Authority Deb.
Series FH, 15.50% 225,000 7/15/2011 253,600
Carter Holt Harvey Deb, 9.50% 175,000 12/01/2024 219,616
Hydro-Quebec Deb. Series HS, 9.40% 225,000 2/01/2021 269,386
Laidlaw, Inc. Deb., 8.75% 100,000 4/15/2025 113,785
Province of Quebec Global Notes, 7.50% 100,000 7/15/2023 99,110
----------
955,497
----------
Trust Certificates 1.6%
Cooperative Utility Trust Certificates, 10.70% $ 225,000 9/15/2017 $ 253,143
Rural Electric Cooperative Grantor Trust
Certificates, 10.11% 200,000 12/15/2017 223,172
----------
476,315
----------
Foreign Government 6.3% Australian Dollar
Government of Australia, 7.50% 750,000 7/15/2005 523,897
Canadian Dollar
Government of Canada, 9.75% 50,000 12/01/2001 41,819
Government of Canada, 7.50% 50,000 12/01/2003 37,359
Danish Krone
Kingdom of Denmark, 8.00% 1,300,000 3/15/2006 239,348
French Francs
Government of France, 7.75% 400,000 4/12/2000 85,528
Government of France, 7.50% 300,000 4/25/2005 62,226
Deutsche Mark
Republic of Germany, 6.625% 600,000 7/09/2003 433,163
Italian Lira
Republic of Italy, 8.50% 120,000,000 4/01/1999 70,058
Republic of Italy, 10.00% 175,000,000 8/01/2003 101,915
Spanish Peseta
Government of Spain, 10.90% 19,000,000 8/30/2003 156,477
British Pound
United Kingdom Treasury Stock, 8.00% 50,000 6/10/2003 79,866
----------
1,831,656
----------
Finance/Mortgage 9.0%
American General Finance Corp. Notes, 8.00% $ 125,000 2/15/2000 132,533
ASFS Corp., Series 94-C2 A-1, 8.00% 100,520 8/25/2010 102,719
Beneficial Corp. Note, 8.17% 250,000 11/09/1999 265,975
Discover Credit Card Trust Series 1993-A, 6.25% 250,000 8/16/2000 251,093
First Chicago Credit Trust Series 91-D, 8.40% 150,000 6/15/1998 151,875
Ford Credit Auto Loan Master Trust Series 95-1,
6.50% 375,000 8/15/2000 378,750
General Electric Capital Corp. Deb., 7.625% 225,000 7/24/1996 227,880
General Motors Acceptance Corp. Note, 7.85% 325,000 11/17/1997 335,673
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: CONSERVATIVE
-----------------------------------------------------------------------------
INVESTMENT PORTFOLIO (cont'd)
-----------------------------------------------------------------------------
Principal Maturity Value
Amount Date (Note 1)
--------------------------------------------------------------------------------------------------
Finance/Mortgage (cont'd)
Household Affinity Master Trust Series 94-1A,
6.275% $ 175,000 5/15/2001 $ 174,671
Investment Portfolio (cont'd)Prudential Home
Mortgage Series 93-29 A-6 PAC, 6.75% 280,822 8/25/2008 281,876
Standard Credit Card Master Trust Series 93-3A,
5.50% 275,000 1/07/1999 270,443
Tandy Master Trust Series 1991-A, 8.25% 33,864 4/15/1999 33,949
----------
2,607,437
----------
Corporate 2.9%
Chevron Corp. Note, 8.11% 175,000 12/01/2001 190,274
Columbia/HCA Healthcare Corp. Note, 6.87% 150,000 9/15/2003 150,558
Electronic Data Systems Corp. Note, 6.85%++ 250,000 5/15/2000 255,385
Loews Corp. Sr. Notes, 7.00% 125,000 10/15/2023 116,681
Magna International, Inc. Cv. Sub. Deb, 5.00% 21,000 10/12/2002 21,420
Sappi BVI Finance Ltd. Cv. Note, 7.50%++ 100,000 8/12/2002 102,625
----------
836,943
----------
Total Fixed Income Securities (Cost $19,452,895) 20,197,378
----------
SHORT-TERM OBLIGATIONS 3.9%
Commercial Credit Co., 5.80% $1,129,000 11/3/1995 $ 1,129,000
----------
Total Short-Term Obligations (Cost $1,129,000) 1,129,000
----------
Total Investments (Cost $27,469,212)--100.9% 29,323,723
Cash and Other Assets, Less Liabilities--(0.9)% (253,883)
----------
Net Assets--100.0% $29,069,840
==========
</TABLE>
Federal Income Tax Information:
At October 31, 1995, the net unrealized appreciation
of investments based on cost for Federal income tax
purposes of $27,496,803 was as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of value
over tax cost $ 2,078,542
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax cost
over value (251,622)
----------
$ 1,826,920
==========
ADR and GDR stand for American Depositary Receipt and Global Depositary
Receipt, respectively, representing ownership of foreign securities.
* Nonincome-producing securities.
+ Represents "TBA" (to be announced) purchase commitment to purchase
securities for a fixed unit price at a future date beyond customary
settlement time. Although the unit price has been established, the
principal value has not been finalized and may vary by no more than 2%.
++ Security restricted in accordance with Rule 144A under the Securities Act
of 1933, which allows for the resale of such securities among certain
qualified institutional buyers. The total cost and market value of Rule
144A securities owned at October 31, 1995 were $417,506 and $437,130
(1.50% of net assets), respectively.
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: CONSERVATIVE
-----------------------------------------------------------------------------
Forward currency exchange contracts outstanding at October 31, 1995 are as
follows:
<TABLE>
<CAPTION>
Unrealized
Contract Appreciation Delivery
Total Value Price (Depreciation) Date
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sell Australian dollars, buy U.S.
dollars 250,418 AUD .73840 AUD $ (5,692) 11/16/95
Sell Australian dollars, buy U.S.
dollars 53,007 AUD .73790 AUD (1,231) 11/16/95
Sell Australian dollars, buy U.S.
dollars 265,900 AUD .75600 AUD (768) 1/24/96
Sell Canadian dollars, buy U.S. dollars 85,000 CAD .73333 CAD (1,103) 11/16/95
Sell Canadian dollars, buy U.S. dollars 5,407 CAD .73551 CAD (59) 11/16/95
Sell Danish krone, buy U.S. dollars 352,000 DKK .17319 DKK (3,468) 11/16/95
Sell Danish krone, buy U.S. dollars 865,000 DKK .18299 DKK (111) 1/24/96
Sell Deutsche mark, buy U.S. dollars 865,000 DEM .67476 DEM (31,349) 11/16/95
Sell U.S. dollars, buy deutsche mark 292,000 DEM .679163 DEM 9,298 11/16/95
Sell Deutsche mark, buy U.S. dollars 130,000 DEM .698324 DEM (1,855) 1/05/96
Sell French francs, buy U.S. dollars 848,000 FRF .20145 FRF (2,395) 1/05/96
Sell U.S. dollars, buy French francs 143,252 FRF .204161 FRF 16 1/05/96
Sell French francs, buy U.S. dollars 302,000 FRF .20173 FRF (740) 1/24/96
Sell French francs, buy U.S. dollars 392,500 FRF .20138 FRF (1,100) 1/24/96
Sell Italian lira, buy U.S. dollars 99,020,393 ITL .00062 ITL (910) 11/16/95
Sell Italian lira, buy U.S. dollars 149,000,000 ITL .00061 ITL (1,928) 11/16/95
Sell Japanese yen, buy U.S. dollars 15,060,000 JPY .01002 JPY 2,051 1/05/96
Sell Pound sterling, buy U.S. dollars 47,700 GBP 1.53300 GBP (2,262) 11/16/95
Sell Spanish peseta, buy U.S. dollars 5,725,000 ESP .00810 ESP (471) 11/16/95
Sell Spanish peseta, buy U.S. dollars 601,000 ESP .00785 ESP (200) 11/16/95
Sell Spanish peseta, buy U.S. dollars 11,200,000 ESP .00789 ESP (3,268) 11/16/95
---------
$(47,545)
=========
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: CONSERVATIVE
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1995
Assets
Investments, at value (Cost $27,469,212 (Note 1) $29,323,723
Cash 48,824
Receivable for securities sold 481,326
Interest and dividends receivable 316,788
Receivable from Distributor (Note 3) 21,603
Receivable for open forward contracts 11,365
Receivable for fund shares sold 871
Deferred organization costs and other assets (Note 1) 31,296
----------
30,235,796
Liabilities
Payable for securities purchased 1,043,289
Payable for open forward contracts 58,910
Accrued management fee (Note 2) 14,855
Accrued transfer agent and shareholder services (Note 2) 8,372
Accrued distribution fee (Note 5) 5,682
Accrued trustees' fees (Note 2) 1,792
Other accrued expenses 33,056
----------
1,165,956
----------
Net Assets $29,069,840
==========
Net Assets consist of:
Undistributed net investment income $ 303,997
Unrealized appreciation of investments 1,854,511
Unrealized depreciation of forward contracts and
foreign currency (47,193)
Accumulated net realized gain 667,786
Shares of beneficial interest 26,290,739
----------
$29,069,840
==========
Net Asset Value and redemption price per share of Class A
shares ($27,636,771 / 2,617,823 shares of beneficial
interest) $10.56
==========
Maximum Offering Price per share of Class A shares
($10.56 / .955) $11.06
==========
Net Asset Value, offering price and redemption price per
share of Class C shares ($1,433,069 / 135,691 shares of
beneficial interest) $10.56
==========
STATEMENT OF OPERATIONS
For the year ended October 31, 1995
Investment Income
Interest, net of foreign taxes of $1,724 $1,470,760
Dividends, net of foreign taxes of $2,166 127,324
---------
1,598,084
Expenses
Management fee (Note 2) 162,835
Custodian fee 108,292
Distribution fee--Class A (Note 5) 65,003
Audit fee 21,510
Legal fees 16,256
Reports to shareholders 15,743
Transfer agent and shareholder services (Note 2) 13,498
Registration fees 9,553
Trustees' fees (Note 2) 8,921
Amortization of organization costs (Note 1) 7,483
Miscellaneous 4,406
---------
433,500
Expenses borne by the Distributor (Note 3) (124,191)
---------
309,309
---------
Net investment income 1,288,775
---------
Realized and Unrealized Gain (Loss)
on Investments, Foreign Currency
and Forward Contracts
Net realized gain on investments (Notes 1 and 4) 738,800
Net realized gain on forward contracts and foreign
currency (Note 1) 53,016
---------
Total net realized gain 791,816
---------
Net unrealized appreciation of investments 1,972,686
Net unrealized depreciation of forward contracts and
foreign currency (17,146)
---------
Total net unrealized appreciation 1,955,540
---------
Net gain on investments, foreign currency and
forward contracts 2,747,356
---------
Net increase in net assets resulting from operations $4,036,131
=========
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: CONSERVATIVE
STATEMENT OF CHANGES IN NET ASSETS
May 16, 1994
(Commencement of
Year ended Operations) to
October 31, 1995 October 31, 1994
---------------------------------------------------------------------
Increase (Decrease) in Net Assets
Operations:
Net investment income $ 1,288,775 $ 520,741
Net realized gain (loss) on
investments, foreign
currency and forward
contracts 791,816 (95,181)
Net unrealized appreciation
(depreciation) of
investments, foreign
currency and forward
contracts 1,955,540 (148,222)
--------------- ---------------
Net increase resulting from
operations 4,036,131 277,338
--------------- ---------------
Dividends from net investment income:
Class A (1,230,373) (261,780)
Class C (51,204) (1,142)
--------------- ---------------
(1,281,577) (262,922)
--------------- ---------------
Net increase from fund share
transactions (Note 6) 1,200,860 25,100,010
--------------- ---------------
Total increase in net assets 3,955,414 25,114,426
Net Assets
Beginning of year 25,114,426 --
--------------- ---------------
End of year (including
undistributed net
investment income of
$303,997 and $217,135,
respectively) $29,069,840 $25,114,426
=============== ===============
* Net realized gain (loss)
for Federal income tax
purposes
(Note 1) $ 693,902 $ (50,922)
=============== ===============
The accompanying notes are an integral part of the financial statements.
NOTES TO FINANCIAL STATEMENTS
October 31, 1995
Note 1
State Street Research Strategic Portfolios: Conservative (the "Fund") is a
series of MetLife-State Street Financial Trust (the "Trust"), which was
organized as a Massachusetts business trust in November, 1986 and is
registered under the Investment Company Act of 1940, as amended, as an
open-end management investment company. The Fund commenced operations in May,
1994. The Trust consists presently of four separate funds: State Street
Research Strategic Portfolios: Conservative, State Street Research Government
Income Fund, State Street Research Strategic Portfolios: Moderate and State
Street Research Strategic Portfolios: Aggressive.
The Fund is authorized to issue four classes of shares. Only Class A and
Class C shares are presently available for purchase. Class B and Class D
shares are not being offered at this time. Class A shares are subject to an
initial sales charge of up to 4.50% and annual service fees of 0.25% of
average daily net assets. Class B shares will be subject to a contingent
deferred sales charge on certain redemptions made within five years of
purchase and pay annual distribution and service fees of 1.00%. Class B
shares automatically convert into Class A shares (which pay lower ongoing
expenses) at the end of eight years after the issuance of the Class B shares.
Class C shares are only offered to certain employee benefit plans and large
institutions. No sales charge is imposed at the time of purchase or
redemption of Class C shares. Class C shares do not pay any distribution or
service fees. Class D shares are subject to a contingent deferred sales
charge of 1.00% on any shares redeemed within one year of their purchase.
Class D shares also pay annual distribution and service fees of 1.00%. The
Fund's expenses are borne pro-rata by each class, except that each class
bears expenses, and has exclusive voting rights with respect to provisions of
the Plan of Distribution, related specifically to that class. The Trustees
declare separate dividends on each class of shares.
The following significant accounting policies are consistently followed by
the Fund in preparing its financial statements, and such policies are in
conformity with generally accepted accounting principles for investment
companies.
A. Investment Valuation
Values for listed equity securities reflect final sales on national
securities exchanges quoted prior to the close of the New York Stock
Exchange. Over-the-counter securities quoted on the National Association of
Securities Dealers Automated Quotation ("NASDAQ") system are valued at
closing prices supplied through such system. If not quoted on the NASDAQ
system, such securities are valued at prices obtained from brokers. In the
absence of recorded sales, valuations are at the mean of the closing bid and
asked quotations. Fixed income securities are valued by a pricing service,
which utilizes market transactions, quotations from dealers, and various
relationships among securities in determining value. Short-term securities
maturing within sixty days are valued at amortized cost. Securities quoted in
foreign currencies are translated into U.S. dollars at the current exchange
rate.
10
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: CONSERVATIVE
-----------------------------------------------------------------------------
NOTES (cont'd)
-----------------------------------------------------------------------------
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. Gains and losses that arise from
changes in exchange rates are not segregated from gains and losses that arise
from changes in market prices of investments.
C. Net Investment Income
Net investment income is determined daily and consists of interest and
dividends accrued and discount earned, less the estimated daily expenses of
the Fund. Interest income is accrued daily as earned. Dividend income is
accrued on the ex-dividend date. Discount on debt obligations is amortized
under the effective yield method. The Fund is charged for expenses directly
attributable to it, while indirect expenses are allocated among all funds in
the Trust.
D. Dividends
Dividends from net investment income are declared and paid or reinvested
quarterly. Net realized capital gains, if any, are distributed annually,
unless additional distributions are required for compliance with applicable
tax regulations. Income dividends and capital gain distributions are
determined in accordance with Federal income tax regulations which may differ
from generally accepted accounting principles.
E. Federal Income Taxes
No provision for Federal income taxes is necessary because the Fund intends
to qualify under Subchapter M of the Internal Revenue Code and its policy is
to distribute all of its taxable income, including net realized capital
gains, within the prescribed time periods.
F. Deferred Organization Costs
Certain costs incurred in the organization and registration of the Fund were
capitalized and are being amortized under the straight-line method over a
period of five years.
G. Forward Contracts and Foreign Currencies
The Fund enters into forward foreign currency exchange contracts in order to
hedge its exposure to changes in foreign currency exchange rates on its
foreign portfolio holdings and to hedge certain purchase and sale commitments
denominated in foreign currencies. A forward foreign currency exchange
contract is an obligation by the Fund to purchase or sell a specific currency
at a future date, which may be any fixed number of days from the origination
date of the contract. Forward foreign currency exchange contracts establish
an exchange rate at a future date. These contracts are transferable in the
interbank market conducted directly between currency traders (usually large
commercial banks) and their customers. Risks may arise from the potential
inability of a counterparty to meet the terms of a contract and from
unanticipated movements in the value of foreign currencies relative to the
U.S. dollar. The aggregate principal amount of forward currency exchange
contracts is recorded in the Fund's accounts. All commitments are
marked-to-market at the applicable transaction rates resulting in unrealized
gains or losses. The Fund records realized gains or losses at the time the
forward contracts are extinguished by entry into a closing contract or by
delivery of the currency. Neither spot transactions nor forward currency
exchange contracts eliminate fluctuations in the prices of the Fund's
portfolio securities or in foreign exchange rates, or prevent loss if the
price of these securities should decline.
Note 2
The Trust and State Street Research & Management Company (the "Adviser"), an
indirect wholly owned subsidiary of Metropolitan Life Insurance Company
("Metropolitan"), have entered into an agreement under which the Adviser
earns monthly fees at an annual rate of 0.60% 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 year ended October 31, 1995, the fees pursuant to
such agreement amounted to $162,835.
State Street Research Shareholder Services, a division of State Street
Research Investment Services, Inc., the Trust's principal underwriter (the
"Distributor"), an indirect wholly owned subsidiary of Metropolitan, provides
certain shareholder services to the Fund such as responding to inquiries and
instructions from investors with respect to the purchase and redemption of
shares of the Fund. In addition, Metropolitan receives a fee for maintenance
of the accounts of certain shareholders who are participants in sponsored
arrangements, employee benefit plans and similar programs or plans, through
or under which shares of the Fund may be purchased. During the year ended
October 31, 1995, the amount of such expenses was $8,422.
The fees of the Trustees not currently affiliated with the Adviser amounted
to $8,921 during the year ended October 31, 1995.
Note 3
The Distributor and its affiliates may from time to time and in varying
amounts voluntarily assume some portion of fees or expenses relating to the
Fund. During the year ended October 31, 1995, the amount of such expenses
assumed by the Distributor and its affiliates was $124,191.
Note 4
For the year ended October 31, 1995, purchases and sales of securities,
exclusive of short-term obligations, aggregated $35,778,596 and $34,397,400
(including $24,098,870 and $23,626,103 of U.S. Government securities),
respectively.
Note 5
The Trust has adopted a Plan of Distribution Pursuant to Rule 12b-1 (the
"Plan") under the Investment Company Act of 1940. Under the Plan, the Fund
will pay annual service fees to the Distributor at a rate of 0.25% of average
daily net assets for Class A, Class B and Class D shares. In addition, the
Fund will pay annual distribution fees of 0.75% of average daily net assets
for Class B and Class D shares. The Distributor uses such payments for
personal service and/or the maintenance of shareholder accounts, to reimburse
securities dealers for distribution and marketing services, to furnish
ongoing assistance to investors and to defray a portion of its distribution
and marketing expenses. For the year ended October 31, 1995, fees pursuant to
such plan amounted to $65,003 for Class A.
11
<PAGE>
STATE STREET RESEACH STRATEGIC PORTFOLIOS: CONSERVATIVE
-----------------------------------------------------------------------------
Note 6
The Trustees have the authority to issue an unlimited number of shares of
beneficial interest, $.001 par value per share. At October 31, 1995,
Metropolitan owned 2,617,801 Class A shares and 10,471 Class C shares of the
Fund and the Adviser owned one Class A share of the Fund.
Share transactions were as follows:
<TABLE>
<CAPTION>
May 16, 1994
(Commencement of
Year ended Operations) to
October 31, 1995 October 31, 1994
-------------------- ------------------------
Class A Shares Amount Shares Amount
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 21 $ 192 2,617,802 $25,000,010
----- ------- ------ ----------
Net increase 21 $ 192 2,617,802 $25,000,010
===== ======= ====== ==========
Class C Shares Amount Shares Amount
----------------------------------------------------------------------------------------
Shares sold 164,827 $1,608,388 10,471 $ 100,000
Issued upon reinvestment of dividends 3,527 35,611 -- --
Shares repurchased (43,134) (443,331) -- --
----- ------- ------ ----------
Net increase 125,220 $1,200,668 10,471 $ 100,000
===== ======= ====== ==========
</TABLE>
12
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: CONSERVATIVE
-----------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------------------
For a share outstanding throughout each year:
<TABLE>
<CAPTION>
Class A Class C
--------------------------------------- -----------------------------------------
May 16, 1994 May 16, 1994
(Commencement of (Commencement of
Year ended Operations) to Year ended Operations) to
October 31, 1995** October 31, 1994 October 31, 1995** October 31, 1994
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of year $ 9.56 $ 9.55 $ 9.56 $9.55
Net investment income* .47 .20 .52 .21
Net realized and unrealized gain
(loss) on investments, foreign
currency and forward contracts 1.00 (.09) .97 (.09)
Dividends from net investment
income (.47) (.10) (.49) (.11)
---------------- ---------------- ---------------- ------------------
Net asset value, end of year $ 10.56 $ 9.56 $10.56 $9.56
================ ================ ================ ==================
Total return 15.84%+ 1.15%+++ 16.11%+ 1.25%+++
Net assets at end of year (000s) $27,637 $25,014 $1,433 $ 100
Ratio of operating expenses to
average net assets* 1.15% 1.15%++ 0.90% 0.90%++
Ratio of net investment income to
average net assets* 4.74% 4.48%++ 4.91% 4.73%++
Portfolio turnover rate 132.50% 70.35% 132.50% 70.35%
*Reflects voluntary assumption of
fees or expenses per share in
each year (Note 3) $.05 $.03 $.05 $.03
</TABLE>
++ Annualized
+ Total return figures do not reflect any front-end or contingent deferred
sales charges. Total return would be lower if the Distributor and its
affiliates had not voluntarily assumed a portion of the Fund's expenses.
+++Represents aggregate return for the period without annualization and does
not reflect any front-end or contingent deferred sales charges.
Total return would be lower if the Distributor and its affiliates had not
voluntarily assumed a portion of the Fund's expenses.
**Per-share figures have been calculated using the average shares method.
13
<PAGE>
- -----------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
-----------------------------------------------------------------------------
To the Trustees of MetLife-State Street
Financial Trust and the Shareholders of
State Street Research Strategic Portfolios: Conservative
In our opinion, the accompanying statement of assets and liabilities,
including the investment portfolio, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in
all material respects, the financial position of State Street Research
Strategic Portfolios: Conservative (a series of MetLife-State Street
Financial Trust, hereafter referred to as the "Trust") at October 31, 1995,
and the results of its operations, the changes in its net assets and the
financial highlights for the periods indicated, in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Trust's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits, which included confirmation of securities at October 31, 1995 by
correspondence with the custodian and brokers and the application of
alternative auditing procedures where confirmations from brokers were not
received, provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
December 8, 1995
14
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: CONSERVATIVE
-----------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
-----------------------------------------------------------------------------
As of October 31, 1995, State Street Research Strategic Portfolios:
Conservative held 69% of its assets in fixed-income securities, 28% in
equities and 3% in cash.
Bonds
The Fund's fixed-income component performed well. The largest position was in
high-grade bonds, which delivered strong performance. International bonds
performed below expectations, but weren't heavily weighted in the portfolio.
Stocks
Healthy stock returns also helped the portfolio's performance. Large-cap and
value stocks dominated the Fund's equity holdings. Large- cap growth stocks
performed strongly, value stocks less so. International equities demonstrated
improved performance after a slow start at the beginning of the year.
All returns represent past performance, which is no guarantee of future
results. The investment return and principal value of an investment made in
the Fund will fluctuate, and shares, when redeemed, may be worth more or less
than their original cost. All returns assume reinvestment of capital gain
distributions and income dividends. "A" share returns reflect the maximum
4.5% sales charge. "C" shares, offered without a sales charge, are available
only to certain employee benefit plans and institutions. The Standard &
Poor's 500 Composite Index (S&P 500) includes 500 widely traded common stocks
and is a commonly used measure of U.S. stock market performance. The Lehman
Brothers Government/Corporate Bond Index is a commonly used index of bond
market performance. The indices are unmanaged and do not take sales charges
into consideration. Direct investment in the indices is not possible; results
are for illustrative purposes only. Performance results for the Fund are
increased by the Distributor's voluntary reduction of Fund fees and expenses.
In the box in the chart at the right, the first figure reflects expense
reduction; the second shows what results would have been without
subsidization.
Comparison Of Change In Value Of A $10,000
Investment In Strategic Portfolios: Conservative,
The S&P 500 And The Lehman Brothers
Government/Corporate Bond Index
[line chart]
Class A Shares
Strategic Portfolios: Conservative LB Gov't/Corp Index S&P 500
5/16/94 9550 10000 10000
10/31/94 9660 10549 10006
10/31/95 11190 13334 11622
Average Annual Total Return
1 Year Life of Fund
+10.63%/+10.03% +7.99%/+7.36%
[line chart]
Class C Shares
Strategic Portfolios: Conservative LB Gov't/Corp Index S&P 500
5/16/94 10000 10000 10000
10/31/94 10125 10549 10006
10/31/95 11755 13334 11622
Average Annual Total Return
1 Year Life of Fund
+16.11%/+15.53% +11.69%/+11.07%
[legend graphic]
Strategic Portfolios: Conservative S&P 500
LB Gov't/Corp Index
15
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: CONSERVATIVE
FUND INFORMATION, OFFICERS AND TRUSTEES OF METLIFE-STATE STREET FINANCIAL TRUST
Fund Information
State Street Research
Strategic Portfolios: Conservative
One Financial Center
Boston, MA 02111
Investment Adviser
State Street Research &
Management Company
One Financial Center
Boston, MA 02111
Distributor
State Street Research
Investment Services, Inc.
One Financial Center
Boston, MA 02111
Shareholder Services
State Street Research
Shareholder Services
P.O. Box 8408
Boston, MA 02266-8408
1-800-562-0032
Custodian
State Street Bank and
Trust Company
225 Franklin Street
Boston, MA 02110
Legal Counsel
Goodwin, Procter & Hoar
Exchange Place
Boston, MA 02109
Independent Accountants
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110
Officers
Ralph F. Verni
Chairman of the Board,
President and
Chief Executive Officer
John H. Kallis
Vice President
Thomas A. Shively
Vice President
Michael R. Yogg
Vice President
Gerard P. Maus
Treasurer
Joseph W. Canavan
Assistant Treasurer
Douglas A. Romich
Assistant Treasurer
Francis J. McNamara, III
Secretary and General Counsel
Darman A. Wing
Assistant Secretary and
Assistant General Counsel
Amy L. Simmons
Assistant Secretary
Trustees
Ralph F. Verni
Chairman of the Board,
President, Chief Executive
Officer and Director,
State Street Research &
Management Company
Edward M. Lamont
Formerly in banking
(Morgan Guaranty Trust
Company of New York);
presently engaged in private
investments and civic affairs
Robert A. Lawrence
Partner, Saltonstall & Co.
Dean O. Morton
Retired; formerly Executive
Vice President, Chief
Operating Officer and Director,
Hewlett-Packard Company
Thomas L. Phillips
Retired; formerly Chairman of the Board and Chief Executive Officer, Raytheon
Company
Toby Rosenblatt
President,
The Glen Ellen Company
Vice President,
Founders Investments Ltd.
Michael S. Scott Morton
Jay W. Forrester Professor of
Management, Sloan School of Management, Massachusetts Institute of Technology
Jeptha H. Wade
Retired; formerly Of Counsel, Choate, Hall & Stewart
16
<PAGE>
[Back cover]
State Street Research Strategic Portfolios: Conservative
One Financial Center
Boston, MA 02111
[Indicia]
Bulk Rate
U.S. Postage
PAID
Brockton, MA
Permit No. 600
Questions? Comments?
Call us at 1-800-562-0032,
or write us at:
State Street Research
Shareholder Services
P.O. Box 8408
Boston, MA 02266-8408
[logo-State Street Research]
This report is prepared for the general information of current shareholders
only. It is not authorized for use as sales material with prospective investors.
CONTROL NUMBER: 2849-951221(0197)SSR-LD
Cover Illustration by Dorothy Cullinan
SP-125E-1295
