[front cover]
[State Street Research logo]
STATE STREET RESEARCH GOVERNMENT INCOME FUND
SEMIANNUAL REPORT
April 30, 1996
[graphic of man fishing]
WHAT'S INSIDE
Investment Update:
About the Fund,
economy and markets
Fund Information
Facts and Figures
Plus, Complete Portfolio Holdings
and Financial Statements
[Dalbar logo]
For Excellence
in
Shareholder Service
<PAGE>
STATE STREET RESEARCH GOVERNMENT INCOME FUND
- --------------------------------------------
Investment Update
Investment Environment
The Economy
[bullet] After slowing in late 1995, economic growth increased in the early
months of 1996. Inflation has remained low, however.
[bullet] Consumer confidence and spending inched upward, despite higher debt
levels.
[bullet] The Federal Reserve cut interest rates by one-quarter point in
December 1995 and again in January 1996. Because of the stronger
economy, the Fed left rates untouched at its March meeting.
The Markets
[bullet] Bond performance was mixed. The Merrill Lynch Government Master
Index provided a total return of +0.05% for the six months ended
April 30, 1996.(1) Yields on 30-year U.S. Treasury bonds climbed to
6.90% by the end of April.
[bullet] Overseas bond markets also provided mixed performance for the six
months ended April 30, 1996. The Salomon Brothers Non-U.S. Dollar
World Government Bond Index--a commonly used indicator of
international bond performance--provided a total return of -0.18%.(1)
The Fund
Over the past six months
[bullet] For the six months ended April 30, 1996, Government Income Fund's
Class A shares provided a total return of +0.61% (does not reflect
sales charge).(2) The Fund outperformed the -0.60% (does not reflect
sales charge) average total return for 181 funds in Lipper
Analytical Services' General U.S. Government Funds category.
[bullet] Fluctuating interest rates also caused movement in the Fund's 30-day
yield (Class A shares). The yield started the period at 6.14%,
dropped to a low of 5.36% and stood at 5.82% on April 30, 1996.
[bullet] We were successful in adjusting the portfolio to the changing bond
market. We reduced our position in U.S. Treasuries and moved into
mortgage securities, which provided the best performance among
high-quality bonds.
Current strategy
[bullet] We have positioned the Fund conservatively, emphasizing bonds with
intermediate maturities, which are less sensitive to interest-rate
movements.
[bullet] We continue to be focused in mortgage-backed securities, whose
higher coupons make them less sensitive to rising interest rates.
[bullet] To keep balance in the portfolio, we have 13.6% of the Fund's assets
in longer-maturity Treasuries.
(1) The Salomon Brothers Non-U.S. Dollar World Government Bond Index is a
commonly used measure of international bond performance. The Merrill Lynch
Government Master Index is a commonly used measure 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) +0.15% for Class B shares; +0.73% for Class C shares; +0.15% for Class D
shares.
(3) All returns represent past performance, which is no guarantee of future
results. The investment return and principal value of an investment made in
the Fund will fluctuate, and shares, when redeemed, may be worth more or less
than their original cost. All returns assume reinvestment of capital gain
distributions and income dividends. Investments in the Fund are not insured
or guaranteed by the U.S. government or any other entity. Performance for a
class includes periods prior to the adoption of class designations.
Performance for "B" and "D" shares prior to class designations in 1993
reflects annual 12b-1 fees of .25%, and performance thereafter reflects
annual 12b-1 fees of 1%, which will reduce subsequent performance.
(4) Performance reflects maximum 4.5% "A" share front-end, or 5% "B" share or
1% "D" share contingent deferred, sales charges. "C" shares, offered without
a sales charge, are available only to certain employee benefit plans and
large institutions.
Please note that the discussion throughout this shareholder report is dated
as indicated and because of possible changes in viewpoint, data, and
transactions, should not be relied upon as being current thereafter.
Fund Information (all data are for periods ended April 30, 1996, except where
otherwise noted)
SEC Average Annual Compound Rates
of Return for periods ended 3/31/96
(at maximum applicable sales charge)(3,4)
- --------------------------------------------------------
Life of Fund
(since 3/23/87) 5 years 1 year
- -------- --------------- ---------- ------------
Class A +7.41% +7.33% +5.20%
- -------- ------------- -------- ----------
Class B +7.68% +7.53% +4.36%
- -------- ------------- -------- ----------
Class C +8.03% +8.46% +10.43%
- -------- ------------- -------- ----------
Class D +7.69% +7.84% +8.35%
- --------------------------------------------------------
Average Annual Compound Rates of Return
(at maximum applicable sales charge)(3,4)
- --------------------------------------------------------
Life of Fund
(since 3/23/87) 5 years 1 year
- -------- --------------- ---------- ------------
Class A +7.30% +7.06% +3.61%
- -------- ------------- -------- ----------
Class B +7.56% +7.22% +2.53%
- -------- ------------- -------- ----------
Class C +7.92% +8.19% +8.68%
- -------- ------------- -------- ----------
Class D +7.57% +7.54% +6.61%
- --------------------------------------------------------
SEC Yield
- ----------------------------
Class A 5.82%
- ------- ---------------
Class B 5.36%
- ------- ---------------
Class C 6.36%
- ------- ---------------
Class D 5.35%
- ---------------------------
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 April 30, 1996.
[Pie Chart]
Asset Allocation
(by percentage of net assets)
Foreign government bonds 6%
Cash 8%
Trusted certificates/other 17%
U.S. Treasury securities 24%
U.S. Agency mortgage securities 45%
<PAGE>
STATE STREET RESEARCH GOVERNMENT INCOME FUND
- --------------------------------------------
Investment Portfolio
April 30, 1996 (Unaudited)
Principal Maturity Value
Amount Date (Note 1)
-------------- ---------- -------------
U.S. Government Securities 69.2%
U.S. Treasury 23.7%
U.S. Treasury Bond, 13.75% $10,000,000 8/15/2004 $ 14,448,400
U.S. Treasury Bond, 10.75% 14,100,000 8/15/2005 17,975,244
U.S. Treasury Bond, 10.375% 8,425,000 11/15/2012 10,703,710
U.S. Treasury Bond, 12.00% 4,000,000 8/15/2013 5,655,000
U.S. Treasury Bond, 9.25% 29,500,000 2/15/2016 36,340,165
U.S. Treasury Bond, 8.125% 19,850,000 8/15/2021 22,232,000
U.S. Treasury Bond, 7.50% 20,000,000 11/15/2024 21,109,400
U.S. Treasury Note, 9.00% 32,675,000 5/15/1998 34,482,254
U.S. Treasury Note, 5.125% 5,525,000 6/30/1998 5,420,522
U.S. Treasury STRIPS, 0.00% 11,300,000 8/15/2021 1,854,330
-----------
170,221,025
-----------
U.S. Agency Mortgage 40.2%
Federal Home Loan Mortgage
Corp. Gold, 6.50% 415,790 2/01/2009 405,395
Federal Home Loan Mortgage
Corp. Gold, 6.50% 17,160,834 5/01/2009 16,731,814
Federal Home Loan Mortgage
Corp. FHA-VA, 9.00% 6,989,294 12/01/2009 7,347,985
Federal Home Loan Mortgage
Corp. Series 29-H PAC, 6.50% 5,525,000 3/25/2023 5,246,982
Federal Home Loan Mortgage
Corp. Gold, 7.50% 1,063,145 8/01/2024 1,051,844
Federal Home Loan Mortgage
Corp. Gold, 7.00% 20,223,004 12/01/2024 19,521,468
Federal Home Loan Mortgage
Corp. Gold, 7.50% 16,400,272 1/01/2025 16,225,938
Federal Home Loan Mortgage
Corp. Gold, 7.50% 6,832,197 11/01/2025 6,759,571
Federal Home Loan Mortgage
Corp. Gold, 7.50% 13,685,500 4/01/2026 13,540,023
Federal Home Loan Mortgage
Corp. Gold, 7.50%+ 13,550,000 5/20/2026 13,397,563
Federal Housing
Administration Court Yard
Project, 10.75% 6,500,816 8/01/2032 7,098,079
Federal Housing
Administration East Bay
Manor Project, 10.00% $6,775,932 3/01/2033 $7,142,256
Federal Housing
Administration Charles River
Project, 9.625% 9,497,581 12/01/2033 9,737,989
Federal National Mortgage
Association FHA-VA, 8.00% 5,433,496 4/01/2008 5,598,132
Federal National Mortgage
Association FHA-VA, 8.00% 6,916,499 6/01/2008 7,126,070
Federal National Mortgage
Association FHA-VA, 8.50% 10,147,229 2/01/2009 10,708,473
Federal National Mortgage
Association FHA-VA, 9.00% 17,230,625 5/01/2009 18,162,114
Federal National Mortgage
Association FHA-VA, 9.00% 594,358 4/01/2016 626,489
Federal National Mortgage
Association, 7.00% 45,887 2/01/2024 44,238
Government National Mortgage
Association, 10.00% 17,069,646 6/15/2023 18,179,174
Government National Mortgage 9/15/2009-
Association, 9.50% 15,161,837 9/15/2019 16,488,117
Government National Mortgage
Association, 9.00% 2,241,638 4/15/2017 2,390,384
Government National Mortgage 10/15/2017-
Association, 8.00% 12,665,645 2/15/2022 12,963,129
Government National Mortgage
Association, 8.00%+ 8,575,000 6/19/2026 8,658,071
Government National Mortgage 1/15/2023-
Association, 7.50% 46,212,694 11/15/2025 45,806,638
Government National Mortgage 2/15/2009-
Association, 6.50% 18,635,794 5/15/2009 18,148,380
-----------
289,106,316
-----------
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
STATE STREET RESEARCH GOVERNMENT INCOME FUND
- --------------------------------------------
Investment Portfolio (cont'd)
Principal Maturity Value
Amount Date (Note 1)
-------------- ---------- -------------
U.S. Agency 5.3%
Federal Home Loan Mortgage
Corp., 7.24% $10,020,000 5/15/2002 $ 10,013,687
Federal National Mortgage
Association, 0.00% 15,000,000 11/22/2001 14,449,200
Guaranteed Export Trust
Series 96-A, 6.55% 4,550,000 6/15/2004 4,550,000
Guaranteed Export Trust
Series 95-A, 6.28% 9,000,000 6/15/2004 8,838,811
-----------
37,851,698
-----------
Total U.S. Government Securities (Cost $493,315,429) 497,179,039
-----------
OTHER INVESTMENTS 22.7%
Trust Certificates 13.7%
Cooperative Utility Trust
Certificates, 9.50% 25,105,000 2/15/2017 27,429,221
Cooperative Utility Trust
Certificates, 9.52% 24,525,000 3/15/2019 26,839,670
Government Backed Trust,
Class T-2, 9.40% 306,461 11/15/1996 308,223
Government Backed Trust,
Class T-3, 9.625% 10,000,000 5/15/2002 10,770,200
Government Trust
Certificates, Class 2-D,
9.25% 6,941,785 11/15/1996 6,968,650
Government Trust
Certificates, Class 2-E,
9.40% 24,000,000 5/15/2002 25,847,280
-----------
98,163,244
-----------
Finance/Mortgage 3.4%
Prudential Home Mortgage
Series 93-29 A-6 PAC, 6.75% 11,064,659 8/25/2008 11,054,258
Fund America Investors Corp.,
Series 96-A 6.00% 3,025,000 4/25/2026 3,025,000
Residential Funding Corp.
Series 93-S95 A-1 PAC, 6.50% 10,758,303 7/25/2008 10,697,735
-----------
24,776,993
-----------
Foreign Government 5.6% Australian Dollar
Australian Government, 9.50% 13,450,000 8/15/2003 $11,070,523
Canadian Dollar
Canadian Government, 7.50% 10,875,000 12/01/2003 7,941,106
Danish Krone
Kingdom of Denmark, 8.00% 25,475,000 11/15/2001 4,661,640
Kingdom of Denmark, 8.00% 23,700,000 3/15/2006 4,235,642
French Franc
Government of France, 8.00% 2,525,000 4/25/2003 3,366,744
Deutsche Mark
German Unity Fund, 8.00% 12,650,000 1/21/2002 9,225,767
-----------
40,501,422
-----------
Total Other Investments (Cost $161,793,918) 163,441,659
-----------
SHORT-TERM OBLIGATIONS 10.1%
Federal Home Loan Bank, 5.15% $ 6,000,000 5/10/1996 5,992,290
Federal Home Loan Mortgage
Corp., 5.30% 16,625,000 5/01/1996 16,625,000
Federal National Mortgage
Association, 5.222% 23,330,000 5/02/1996 23,326,669
Federal National Mortgage
Association, 5.264% 12,000,000 5/10/1996 11,984,550
Federal National Mortgage
Association, 5.27% 15,000,000 5/16/1996 14,967,250
-----------
Total Short-Term Obligations (Cost $72,895,759) 72,895,759
-----------
Total Investments (Cost $728,005,106)--102.0% 733,516,457
Cash and Other Assets, Less Liabilities--(2.0)% (14,537,718)
-----------
Net Assets--100.0% $718,978,739
===========
Federal Income Tax Information:
At April 30, 1996, the net unrealized appreciation of
investments based on cost for Federal income tax purposes of
$728,005,106 was as follows:
Aggregate gross unrealized appreciation for all investments
in which there is an excess of value over tax cost $ 14,211,827
Aggregate gross unrealized depreciation for all investments
in which there is an excess of tax cost over value (8,700,476)
-----------
$ 5,511,351
===========
+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.
3
<PAGE>
STATE STREET RESEARCH GOVERNMENT INCOME FUND
- --------------------------------------------
Forward currency exchange contracts outstanding at April 30, 1996 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 8,097,000 AUD .75070 AUD $(276,212) 5/15/96
Sell Australian dollars, buy U.S. dollars 807,900 AUD .75220 AUD (26,348) 5/15/96
Sell Australian dollars, buy U.S. dollars 3,590,000 AUD .78280 AUD 3,389 7/24/96
Sell Australian dollars, buy U.S. dollars 570,000 AUD .78200 AUD 82 7/24/96
Sell British pounds, buy U.S. dollars 979,300 GBP 1.53650 GBP 30,926 5/15/96
Sell U.S. dollars, buy British pounds 1,189,900 GBP 1.53100 GBP (31,032) 5/15/96
Sell U.S. dollars, buy British pounds 979,300 GBP 1.53250 GBP (27,009) 5/15/96
Sell British pounds, buy U.S. dollars 1,189,900 GBP 1.53637 GBP 37,428 5/15/96
Sell Canadian dollars, buy U.S. dollars 3,070,177 CAD .72648 CAD (25,166) 5/15/96
Sell Canadian dollars, buy U.S. dollars 1,220,000 CAD .73540 CAD (178) 7/24/96
Sell Canadian dollars, buy U.S. dollars 6,096,000 CAD .73529 CAD (1,550) 7/24/96
Sell Danish krone, buy U.S. dollars 49,514,000 DKK .17623 DKK 330,262 5/15/96
Sell Danish krone, buy U.S. dollars 833,000 DKK .17164 DKK 1,267 7/24/96
Sell U.S. dollars, buy Deutsche marks 6,748,400 DEM .67820 DEM (164,750) 5/15/96
Sell Deutsche marks, buy U.S. dollars 1,424,000 DEM .68169 DEM 39,742 5/15/96
Sell Deutsche marks, buy U.S. dollars 4,980,300 DEM .68381 DEM 149,532 5/15/96
Sell Deutsche marks, buy U.S. dollars 789,600 DEM .68311 DEM 23,154 5/15/96
Sell Deutsche marks, buy U.S. dollars 12,784,000 DEM .66269 DEM 76,735 7/24/96
Sell European currency units, buy U.S. dollars 2,519,000 XEU 1.26095 XEU 81,176 5/15/96
Sell European currency units, buy U.S. dollars 232,200 XEU 1.23000 XEU 296 5/15/96
---------
$221,744
=========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
STATE STREET RESEARCH GOVERNMENT INCOME FUND
- --------------------------------------------
Statement of Assets and Liabilities
April 30, 1996 (Unaudited)
Assets
Investments, at value (Cost $728,005,106) (Note 1) $733,516,457
Cash 4,542
Interest receivable 10,405,562
Receivable for securities sold 8,730,787
Receivable for fund shares sold 1,405,580
Receivable for open forward contracts 773,989
Other assets 169,898
------------
755,006,815
Liabilities
Payable for securities purchased 30,941,707
Dividends payable 2,268,025
Payable for fund shares redeemed 1,390,209
Payable for open forward contracts 552,245
Accrued management fee (Note 2) 385,799
Accrued distribution and service fees (Note 3) 212,266
Accrued transfer agent and shareholder services
(Note 2) 196,002
Accrued trustees' fees (Note 2) 10,371
Other accrued expenses 71,452
------------
36,028,076
------------
$718,978,739
============
Net Assets
Net Assets consist of:
Undistributed net investment income $3,234,022
Unrealized appreciation of investments 5,511,351
Unrealized appreciation of forward contracts and
foreign currency 207,394
Accumulated net realized loss (116,948,715)
Shares of beneficial interest 826,974,687
------------
$718,978,739
============
Net Asset Value and redemption price per share of
Class A shares ($605,316,641 / 49,341,557 shares of
beneficial interest) $12.27
============
Maximum Offering Price per share of Class A shares
($12.27 / .955) $12.85
============
Net Asset Value and offering price per share of
Class B shares ($92,075,414 / 7,526,081 shares
of beneficial interest)* $12.23
============
Net Asset Value, offering price and redemption price
per share of Class C shares ($7,595,294 / 619,640
shares of beneficial interest) $12.26
============
Net Asset Value and offering price per share of
Class D shares ($13,991,390 / 1,142,922 shares
of beneficial interest)* $12.24
============
*Redemption price per share for Class B and Class D is equal to net asset
value less any applicable contingent deferred sales charge.
Statement of Operations
For the six months ended April 30, 1996 (Unaudited)
Investment Income
Interest $27,888,586
Expenses
Management fee (Note 2) 2,427,682
Transfer agent and shareholder services (Note 2) 393,340
Custodian fee 130,682
Service fee--Class A (Note 3) 795,609
Distribution and service fees--Class B (Note 3) 459,798
Distribution and service fees--Class D (Note 3) 67,193
Reports to shareholders 40,824
Registration fees 37,760
Legal fees 23,856
Audit fee 19,054
Trustees' fees (Note 2) 16,982
Miscellaneous 18,552
------------
4,431,332
------------
Net investment income 23,457,254
------------
Realized and Unrealized Gain (Loss) on Investments,
Forward Contracts and Foreign Currency
Net realized loss on investments (Notes 1 and 4) (1,897,694)
Net realized loss on forward contracts and foreign
currency (Note 1) (498,443)
------------
Total net realized loss (2,396,137)
------------
Net unrealized depreciation of investments (17,559,110)
Net unrealized appreciation of forward contracts and
foreign currency 1,200,660
------------
Total net unrealized depreciation (16,358,450)
------------
Net loss on investments, forward contracts and
foreign currency (18,754,587)
------------
Net increase in net assets resulting from operations $ 4,702,667
============
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
STATE STREET RESEARCH GOVERNMENT INCOME FUND
- --------------------------------------------
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Six months ended
April 30, 1996 Year ended
(Unaudited) October 31, 1995
----------------------------------------- ------------------ ----------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations:
Net investment income $ 23,457,254 $ 48,226,230
Net realized gain (loss) on investments,
forward contracts and foreign currency* (2,396,137) 2,583,992
Net unrealized appreciation
(depreciation) of investments, forward
contracts and foreign currency (16,358,450) 48,001,271
----------------- ---------------
Net increase resulting from operations 4,702,667 98,811,493
----------------- ---------------
Dividends from net investment income:
Class A (19,857,068) (42,302,801)
Class B (2,527,264) (3,875,565)
Class C (166,475) (166,657)
Class D (368,781) (735,022)
----------------- ---------------
(22,919,588) (47,080,045)
----------------- ---------------
Net increase (decrease) from fund share
transactions (Note 5) (23,825,879) 4,925,189
----------------- ---------------
Total increase (decrease) in net assets (42,042,800) 56,656,637
Net Assets
Beginning of period 761,021,539 704,364,902
----------------- ---------------
End of period (including undistributed
net investment income of $3,234,022 and
$2,696,356, respectively) $718,978,739 $761,021,539
================= ===============
*Net realized gain (loss) for Federal
income tax purposes (Note 1) $ (2,482,804) $ 2,398,429
================= ===============
</TABLE>
The accompanying notes are an integral part of the financial statements.
Notes to Unaudited Financial Statements
April 30, 1996
Note 1
State Street Research Government Income Fund (the "Fund") is a series of
State Street Research Financial Trust, formerly 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 investment objective of the Fund is to seek high current income. In
seeking to achieve its investment objective, the Fund invests primarily in
U.S. Government securities.
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
6
<PAGE>
STATE STREET RESEARCH GOVERNMENT INCOME FUND
- --------------------------------------------
Notes (cont'd)
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 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 a merger that occurred on May 12, 1995, 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.
G. Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period.
Actual results could differ from those estimates.
Note 2
The Trust and State Street Research & Management Company (the "Adviser"), an
indirect wholly owned subsidiary of Metropolitan Life Insurance Company
("Metropolitan"), have entered into an agreement under which the Adviser
earns monthly fees at an annual rate of 0.65% 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 six months ended April 30, 1996, the fees pursuant
to such agreement amounted to $2,427,682.
State Street Research Shareholder Services, a division of State Street
Research Investment Services, Inc., the Trust's principal underwriter (the
"Distributor"), an indirect wholly owned subsidiary of Metropolitan, provides
certain shareholder services to the Fund such as responding to inquiries and
instructions from investors with respect to the purchase and redemption of
shares of the Fund. During the six months ended April 30, 1996, the amount of
such expenses was $142,937.
The fees of the Trustees not currently affiliated with the Adviser amounted
to $16,982 during the six months ended April 30, 1996.
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 six months ended April 30, 1996, fees
pursuant to such plan amounted to $795,609, $459,798 and $67,193 for Class A,
Class B and Class D shares, respectively.
7
<PAGE>
STATE STREET RESEARCH GOVERNMENT INCOME FUND
- --------------------------------------------
The Fund has been informed that the Distributor and MetLife Securities, Inc.,
a wholly owned subsidiary of Metropolitan, earned initial sales charges
aggregating $54,783 and $298,000, respectively, on sales of Class A shares of
the Fund during the six months ended April 30, 1996, and that MetLife
Securities, Inc. earned commissions aggregating $356,435 on sales of Class B
shares, and that the Distributor collected contingent deferred sales charges
aggregating $272,772 and $1,192 on redemptions of Class B and Class D shares,
respectively, during the same period.
Note 4
For the six months ended April 30, 1996, purchases and sales of securities,
exclusive of short-term obligations, aggregated $442,200,117 and $495,454,251
(including $349,898,666 and $425,570,015 of U.S. Government obligations),
respectively.
Note 5
The Trustees have the authority to issue an unlimited number of shares of
beneficial interest, $.001 par value per share. At April 30, 1996, the
Distributor owned 12,241 Class A shares of the Fund.
Share transactions were as follows:
<TABLE>
<CAPTION>
Six months ended
April 30, 1996 Year ended
(Unaudited) October 31, 1995
-------------------------- -----------------------------
Class A Shares Amount Shares Amount
- ------------------------------------- ---------- ------------ ----------- --------------
<S> <C> <C> <C> <C>
Shares sold 1,271,564 $ 15,971,976 8,692,870 $106,770,703
Issued upon reinvestment of dividends 825,378 10,378,640 1,902,247 23,135,012
Shares repurchased (4,834,901) (60,699,379) (13,184,315) (159,163,704)
-------- ---------- --------- ------------
Net decrease (2,737,959) $(34,348,763) (2,589,198) $(29,257,989)
======== ========== ========= ============
Class B Shares Amount Shares Amount
- ------------------------------------- -------- ---------- --------- ------------
Shares sold 1,395,626 $ 17,483,044 3,527,941 $ 42,934,470
Issued upon reinvestment of dividends 131,950 1,655,332 209,008 2,591,060
Shares repurchased (1,004,169) (12,597,264) (1,222,045) (14,751,417)
-------- ---------- --------- ------------
Net increase 523,407 $ 6,541,112 2,514,904 $30,774,113
======== ========== ========= ============
Class C Shares Amount Shares Amount
- ------------------------------------- -------- ---------- --------- ------------
Shares sold 290,143 $ 3,583,588 435,479 $ 5,346,473
Issued upon reinvestment of dividends 12,382 155,432 12,362 153,460
Shares repurchased (83,454) (1,061,944) (64,617) (809,530)
-------- ---------- --------- ------------
Net increase 219,071 $ 2,677,076 383,224 $ 4,690,403
======== ========== ========= ============
Class D Shares Amount Shares Amount
- ------------------------------------- -------- ---------- --------- ------------
Shares sold 313,895 $ 3,931,627 433,690 $ 5,281,361
Issued upon reinvestment of dividends 19,310 242,072 43,377 526,125
Shares repurchased (228,186) (2,869,003) (590,308) (7,088,824)
-------- ---------- --------- ------------
Net increase (decrease) 105,019 $ 1,304,696 (113,241) $ (1,281,338)
======== ========== ========= ============
</TABLE>
8
<PAGE>
STATE STREET RESEARCH GOVERNMENT INCOME FUND
- --------------------------------------------
Financial Highlights
For a share outstanding throughout each period.
<TABLE>
<CAPTION>
Class A
-----------------------------------------------------------------------
Six months Year ended October 31
ended ----------------------------------------------------
April 30, 1996
(Unaudited)* 1995* 1994* 1993 1992 1991
--------------- ------- ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $12.58 $11.68 $12.92 $12.38 $12.14 $11.28
Net investment income .40 .83 .81 .84 .90 .93
Net realized and unrealized gain (loss)
on investments, forward contracts and
foreign currency (.32) .88 (1.26) .56 .26 .84
Dividends from net investment income (.39) (.81) (.79) (.84) (.91) (.91)
Distributions from net realized gains -- -- -- (.02) (.01) --
------------- ----- ----- ----- ----- -------
Net asset value, end of period $12.27 $12.58 $11.68 $12.92 $12.38 $12.14
============= ===== ===== ===== ===== =======
Total return 0.61%+++ 15.07%+ (3.58)%+ 11.63%+ 9.86%+ 16.25%+
Net assets at end of period (000s) $605,317 $655,045 $638,418 $868,556 $798,705 $762,517
Ratio of operating expenses to average
net assets 1.08%++ 1.10% 1.07% 1.05% 1.05% 1.05%
Ratio of net investment income to
average net assets 6.39%++ 6.83% 6.54% 6.59% 7.25% 7.98%
Portfolio turnover rate 61.51% 105.57% 134.41% 103.49% 97.33% 29.20%
</TABLE>
<TABLE>
<CAPTION>
Class B
----------------------------------------------------------------
June 1, 1993
Six months (Commencement of
ended Year ended October 31 Share Class
April 30, 1996 -------------------------- Designations) to
(Unaudited)* 1995* 1994* October 31, 1993
--------------- ----------- ----------- ----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $12.55 $11.66 $12.91 $12.67
Net investment income .35 .73 .72 .30
Net realized and unrealized gain (loss)
on investments, forward contracts and
foreign currency (.33) .87 (1.27) .24
Dividends from net investment income (.34) (.71) (.70) (.30)
Distributions from net realized gains -- -- -- --
------------- --------- --------- ---------------
Net asset value, end of period $12.23 $12.55 $11.66 $12.91
============= ========= ========= ===============
Total return 0.15%+++ 14.15%+ (4.38)%+ 4.32%+++
Net assets at end of period (000s) $92,075 $87,908 $52,319 $26,578
Ratio of operating expenses to average
net assets 1.83%++ 1.85% 1.82% 1.81%++
Ratio of net investment income to
average net assets 5.63%++ 6.01% 5.86% 5.67%++
Portfolio turnover rate 61.51% 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.
9
<PAGE>
<TABLE>
<CAPTION>
Class C
---------------------------------------------------------------
June 1, 1993
Six months (Commencement of
ended Year ended October 31 Share Class
April 30, 1996 ------------------------ Designations) to
(Unaudited)* 1995* 1994* October 31, 1993
--------------- ---------- ---------- ----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $12.57 $11.67 $12.92 $12.67
Net investment income .41 .90 .84 .19
Net realized and unrealized gain (loss)
on investments, forward contracts and
foreign currency (.31) .84 (1.27) .42
Dividends from net investment income (.41) (.84) (.82) (.36)
------------- -------- -------- ---------------
Net asset value, end of period $12.26 $12.57 $11.67 $12.92
============= ======== ======== ===============
Total return 0.73%+++ 15.37%+ (3.42)%+ 4.82%+++
Net assets at end of period (000s) $7,595 $5,036 $203 $36
Ratio of operating expenses to average
net assets 0.83%++ 0.85% 0.82% 0.80%++
Ratio of net investment income to
average net assets 6.63%++ 6.79% 8.01% 6.59%++
Portfolio turnover rate 61.51% 105.57% 134.41% 103.49%
</TABLE>
<TABLE>
<CAPTION>
Class D
---------------------------------------------------------------
June 1, 1993
Six months (Commencement of
ended Year ended October 31 Share Class
April 30, 1996 ---------------------- Designations) to
(Unaudited)* 1995* 1994* October 31, 1993
--------------- ---------- ---------- ----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $12.56 $11.66 $12.91 $12.67
Net investment income .35 .74 .72 .30
Net realized and unrealized gain (loss)
on investments, forward contracts and
foreign currency (.33) .87 (1.27) .24
Dividends from net investment income (.34) (.71) (.70) (.30)
------------- -------- -------- ---------------
Net asset value, end of period $12.24 $12.56 $11.66 $12.91
============= ======== ======== ===============
Total return 0.15%+++ 14.24%+ (4.38)%+ 4.32%+++
Net assets at end of period (000s) $13,991 $13,033 $13,425 $12,101
Ratio of operating expenses to average
net assets 1.83%++ 1.85% 1.82% 1.88%++
Ratio of net investment income to
average net assets 5.63%++ 6.08% 5.84% 5.59%++
Portfolio turnover rate 61.51% 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>
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 ("Fund"), along with shareholders of other series of State Street
Research Financial Trust ("Meeting"), was convened on February 14, 1996, and
continued thereafter. The results of the Meeting are set forth below.
Votes (millions)
----------------
For Withheld
--- ---------
1. The following persons were elected as Trustees:
Edward M. Lamont 43.4 3.0
Robert A. Lawrence 43.4 3.0
Dean O. Morton 43.4 3.0
Thomas L. Phillips 43.4 3.0
Toby Rosenblatt 43.4 3.0
Michael S. Scott Morton 43.8 2.6
Ralph F. Verni 43.8 2.7
Jeptha H. Wade 43.8 2.6
<TABLE>
<CAPTION>
Votes (millions)
-------------------------
For Against Abstain
---- ------ --------
<S> <C> <C> <C>
2. The Fund's following investment policies were reclassified from fundamental
policies to nonfundamental policies:
a. The policy regarding investments in securities of companies with less than
three (3) years' continuous operation 26.5 3.8 2.9
b. The policy regarding investments in illiquid securities 26.1 4.0 3.1
3. The Fund's fundamental policy regarding investments in commodities and
commodity contracts was amended 25.7 4.5 3.1
4. The Fund's fundamental policy on lending was amended to clarify the
permissibility of securities lending 26.0 4.2 3.0
5. The Fund's fundamental policies regarding diversification of investments were
amended 27.3 3.0 2.9
6. The Master Trust Agreement was amended to permit the Trustees to reorganize,
merge or liquidate a fund without prior shareholder approval 33.1 7.3 4.2
7. The Master Trust Agreement was amended to eliminate specified time permitted
between the record date and any shareholders meeting 34.4 5.7 4.4
</TABLE>
11
<PAGE>
STATE STREET RESEARCH GOVERNMENT INCOME FUND
- --------------------------------------------
Fund Information, Officers and Trustees of State Street Research 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
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
12
<PAGE>
[back cover]
State Street Research Government Income Fund
One Financial Center
Boston, MA 02111
Bulk Rate
U.S. Postage
PAID
Brockton, MA
Permit No. 600
Questions? Comments?
Call us at 1-800-562-0032,
or write us at:
State Street Research
Shareholder Services
P.O. Box 8408
Boston, MA 02266-8408
[State Street Research logo]
This report is prepared for the general information of current shareholders
only. It is not authorized for use as sales material with prospective investors.
The Dalbar awards recognize quality shareholder service and should not be
considered a rating of fund performance. The survey included mutual fund
complexes that volunteered or were otherwise selected to participate and was
not industry-wide.
CONTROL NUMBER: 3207-960626(0797)SSR-LD Cover Illustration by Dorothy Cullinan
GI-049E-696
<PAGE>
STATE STREET RESEARCH
STRATEGIC PORTFOLIOS: MODERATE
SEMIANNUAL REPORT
April 30, 1996
[Photo Illustration of person reaching for the stars]
WHAT'S INSIDE
Investment Update
The Fund, economy
and markets
Fund Information
Facts and figures
Plus, Complete Portfolio Holdings
and Financial Statements
[Dalbar Logo]
For Excellence
in
Shareholder Service
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: MODERATE
- --------------------------------------------------------------------------------
INVESTMENT UPDATE
- --------------------------------------------------------------------------------
INVESTMENT ENVIRONMENT
The Economy
(bullet) After slowing in late 1995, economic growth picked up speed in the
early months of 1996. At the same time, inflation has remained low.
(bullet) Consumer confidence and spending inched upward, despite higher debt
levels.
(bullet) The Federal Reserve cut interest rates by one-quarter point in December
1995 and again in January 1996. Because of the stronger economy, the
Fed has since left rates untouched.
The Markets
(bullet) Stocks performed well, with gains concentrated in the largest stocks at
the end of 1995, and then in smaller stocks in 1996. The Dow Jones
Industrial Average, which represents 30 stocks, reported a gain of
+18.46% for the six months ended April 30, 1996. The much broader
Standard & Poor's 500 Index provided a total return of +13.76% over the
same time period.(1)
(bullet) Bond performance was mixed. The high-quality bond market was strong at
year-end 1995, then flattened entering 1996. Conversely, high-yield
bonds, which respond well to a strengthening economy, contributed to
strong first-quarter performance.
THE FUND
Over the past six months
(bullet) For the six months ended April 30, 1996, Class C shares of Strategic
Portfolios: Moderate provided a total return of +8.25%. The average
total return for the 260 funds in the Lipper Analytical Services'
Balanced Funds category was +8.31%.
(bullet) The equity portion of the Fund performed extremely well throughout the
period.
(bullet) The bond market was strong in late 1995, but came in flat for early
1996 due to the strengthening economy. High-yield bonds responded
favorably however.
Current strategy
(bullet) On April 30, 1996, the Fund held 46% of its assets in stocks, 39% in
bonds, and 15% in cash.
(bullet) Most of the equities are invested equally among large-cap, value, and
international stocks, with about 10% invested in small-cap stocks.
(bullet) The vast majority of the bond holdings are in high-grade bonds, with
the remaining 10% split between high-yield bonds and international
debt.
(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 Dow Jones Industrial Average represents 30 blue-chip U.S.
stocks and is a commonly used measure of U.S. stock market performance. The
indices are unmanaged and do not take sales charges into account. Direct
investment in the indices is not possible; results are for illustrative purposes
only.
(2) 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 large institutions.
Please note that the discussion throughout this shareholder report is dated as
indicated and because of possible changes in viewpoint, data, and transactions,
should not be relied upon as being current thereafter.
FUND INFORMATION (all data are for periods ended April 30, 1996, except where
otherwise noted)
SEC Average Annual Compound Rates
of Return for periods ended 3/31/96(2)
(at maximum applicable sales charge)
- -----------------------------------------------
Life of Fund
(since 9/28/93) 1 year
- -----------------------------------------------
Class C +7.95%/+7.29% +19.27%/+18.46%
- -----------------------------------------------
Average Annual Compound Rates of Return
for periods ended 4/30/96(2)
(do not reflect sales charge)
- -----------------------------------------------
Life of Fund
(since 9/28/93) 1 year
- -----------------------------------------------
Class C +8.23%/+7.57% +18.16%/+17.37%
- -----------------------------------------------
Asset Allocation
(by percentage of net assets)
Stocks 46%
Bonds 39%
Cash 15%
Performance results for the Fund are increased by the distributor's voluntary
reduction of fees and expenses related to the Fund. The first figure reflects
expense reduction; the second shows what results would have been without
subsidization.
<PAGE>
- --------------------------------------------------------------------------------
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: MODERATE
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
April 30, 1996 (Unaudited)
Value
Shares (Note 1)
-------- ------------
EQUITY SECURITIES 45.9%
Basic Industries 8.7%
Chemical 3.1%
Agrium, Inc.* 3,300 $ 42,488
Atlantic Richfield Co. 4,600 129,950
Cambrex Corp. 900 38,700
Hoechst AG* 1,150 387,315
IMC Global, Inc. 4,060 149,712
L'Air Liquide* 500 90,856
Mallinckrodt Group, Inc. 2,000 78,750
Monsanto Co. 1,100 166,650
Potash Corp. of Saskatchewan Inc. 1,600 112,800
Rohm & Haas Co. 5,700 378,338
----------
1,575,559
----------
Diversified 0.9%
Cardo AB* 5,100 111,301
Hoya Corp.* 4,000 141,485
Mark IV Industries, Inc. 5,567 115,515
Tenma Corp.* 4,000 98,657
----------
466,958
----------
Electrical Equipment 0.9%
Baldor Electric Co. 1,200 25,950
Belden, Inc.* 800 23,800
General Electric Co. 4,100 317,750
Philips Electronic NV 2,400 86,100
----------
453,600
----------
Forest Product 0.3%
Aracruz Celulose ADR 8,500 76,500
Nippon Paper Industries Co.* 10,000 73,228
----------
149,728
----------
Machinery 1.6%
Briggs & Stratton Corp. 1,800 81,675
Case Corp. 1,500 75,750
Fluor Corp. 1,200 79,350
Kajima Corp.* 7,000 78,964
Linde AG* 255 155,908
Minebea Co. Ltd.* 10,000 91,869
Pall Corp. 4,500 126,000
Sundstrand Corp. 2,800 102,900
Terex Corp. Rts.* 150 37
United States Filter Corp.* 900 27,675
----------
820,128
----------
Metal & Mining 1.9%
Alumax, Inc.* 4,600 $ 154,100
Aluminum Company of America 1,600 99,800
Bohler Uddeholm* 1,400 114,315
Carbide/Graphite Group, Inc.* 1,500 26,625
Century Aluminum Co.* 1,100 16,225
Nucor Corp. 2,600 146,250
RTZ Corp. PLC* 8,574 135,005
Reynolds Metals Co. 1,800 96,750
SGL Carbon AG* 1,300 122,706
Wyman-Gordon Co.* 1,300 23,563
----------
935,339
----------
Total Basic Industries 4,401,312
----------
Consumer Cyclical 5.5%
Airline 0.1%
Atlas Air, Inc.* 1,500 67,688
----------
Automotive 1.7%
Exide Corp. 6,200 174,375
Ford Motor Co. 11,700 419,738
Lear Seating Corp.* 5,400 178,200
Masland Corp.* 900 18,338
Michelin Cl. B* 1,500 74,339
----------
864,990
----------
Building 0.3%
Lafarge Corp. 6,100 129,625
----------
Hotel & Restaurant 0.5%
Au Bon Pain Co., Inc.* 1,100 8,800
Housecall Medical Resources, Inc.* 600 13,050
Main Street and Main, Inc.* 2,400 9,000
Mirage Resorts, Inc.* 3,100 162,363
Motels of America, Inc.*++ 75 6,000
Outback Steakhouse, Inc.* 700 28,087
Primadonna Resorts, Inc.* 1,000 19,250
Station Casinos, Inc.* 2,500 33,125
----------
279,675
----------
Recreation 1.0%
American Radio Systems Corp.* 300 10,125
Anchor Gaming* 500 22,094
Argyle Television, Inc. Series A* 800 18,300
Boomtown, Inc. Wts.* 85 4
Carmike Cinemas, Inc. Cl. A* 400 10,650
Comcast Corp. Cl. A 2,400 42,000
Comcast Corp. Cl. A Special 1,500 26,250
Mattel Inc. 3,187 82,862
News Corp. Ltd. ADR 3,500 82,250
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: MODERATE
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO (cont'd)
- --------------------------------------------------------------------------------
Value
Shares (Note 1)
-------- ------------
Recreation (cont'd)
Sierra On-Line, Inc.* 700 $ 27,475
Silver King Communications, Inc.* 700 20,475
Time Warner, Inc. 2,000 81,750
Walt Disney Co. 1,319 81,778
----------
506,013
----------
Retail Trade 1.8%
Corporate Express, Inc.* 360 13,455
Cost Plus, Inc.* 500 11,875
Federated Department Stores, Inc.* 4,800 160,200
Gymboree Corp.* 900 23,288
Home Depot, Inc. 3,500 165,812
Home Shopping Network, Inc.* 10,800 126,900
Intimate Brands, Inc. Cl. A* 6,100 128,863
Thrifty Payless Holdings, Inc. Cl. B* 10,700 144,450
Toy Biz, Inc.* 1,000 20,375
Viking Office Products, Inc.* 600 35,625
Wal-Mart Stores, Inc. 3,400 81,175
----------
912,018
----------
Textile & Apparel 0.1%
Authentic Fitness Corp. 2,100 50,138
----------
Total Consumer Cyclical 2,810,147
----------
Consumer Staple 9.2%
Business Service 1.3%
ADT Ltd.* 11,900 202,300
ADVO, Inc.* 2,000 20,250
Career Horizons, Inc.* 600 21,150
Catalina Marketing Corp.* 300 23,363
Data Processing Resources Corp.* 200 5,050
Eagle River Interactive, Inc.* 500 10,750
Eltron International Inc.* 800 23,000
Encad, Inc.* 600 20,625
Global DirectMail Corp.* 3,100 121,675
HA-LO Industries, Inc.* 3,000 102,000
NRP, Inc.* 1,800 24,750
Outdoor System, Inc.* 500 11,500
Personnel Group of America, Inc.* 2,000 47,000
PIA Merchandising Services, Inc.* 500 13,125
Profit Recovery Group International, Inc.* 400 7,950
Superior Services, Inc.* 300 4,200
Technology Solutions Co.* 800 21,600
VTEL Corp.* 1,100 11,687
----------
691,975
----------
Drug 2.0%
Arris Pharmaceutical Corp.* 2,000 $ 31,000
Cyto Therapeutics, Inc.* 1,600 23,600
Eli Lilly & Co. 1,760 103,840
Healthdyne Technologies, Inc.* 3,400 43,350
Liposome Company, Inc.* 600 14,700
Merck & Company, Inc. 2,400 145,200
Pfizer, Inc. 2,900 199,738
Roussel-Uclaf* 1,400 329,985
Sandoz AG* 100 109,214
----------
1,000,627
----------
Food & Beverage 2.5%
Anheuser-Busch, Inc. 1,900 127,538
Campbell Soup Co. 2,400 150,000
Coca-Cola Co. 1,200 97,800
Coca-Cola Enterprises, Inc. 7,700 227,150
Cott Corp. 2,800 22,750
General Mills, Inc. 400 22,200
LVMH Moet Hennessy Louis Vuitton ADR* 600 153,498
PepsiCo., Inc. 3,000 190,500
Ralcorp Holdings, Inc.* 3,400 74,800
Whitman Corp. 9,000 227,250
----------
1,293,486
----------
Hospital Supply 2.5%
American Medical Response, Inc.* 700 25,900
Arterial Vascular Engineering, Inc.* 100 4,400
Baxter International, Inc. 4,600 203,550
Circon Corp.* 1,000 14,375
Columbia/HCA Healthcare Corp.* 2,200 116,875
Community Health Systems, Inc.* 600 26,025
Cytyc Corp.* 300 6,637
Heartport Inc.* 400 14,300
Integra Lifesciences Corp.* 700 8,925
I Stat Corp.* 700 20,388
Johnson & Johnson 1,500 138,750
Lincare Holdings, Inc.* 1,700 65,981
Medtronic, Inc. 2,500 132,812
Respironics, Inc.* 700 15,302
Roche Holding AG 35 275,270
Rotech Medical Corp.* 800 33,200
Rural/Metro Corp.* 600 17,775
Ultra-Fem, Inc.* 1,000 14,625
United Healthcare Corp. 2,200 128,700
----------
1,263,790
----------
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: MODERATE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Value
Shares (Note 1)
-------- ------------
Personal Care 0.1%
Bush Boake Allen, Inc.* 700 $ 18,900
U.S.A. Detergents, Inc.* 750 30,750
----------
49,650
----------
Printing & Publishing 0.3%
Heritage Media Corp. Cl. A* 400 15,350
Hollinger International, Inc.* 11,200 133,000
----------
148,350
----------
Tobacco 0.5%
Philip Morris Cos., Inc. 2,400 216,300
Schweitzer-Manduit International* 1,000 27,125
----------
243,425
----------
Total Consumer Staple 4,691,303
----------
Energy 5.2%
Oil 3.4%
Abacan Resource Corp.* 6,400 35,600
Amerada Hess Corp. 2,800 158,550
Global Natural Resources, Inc.* 2,000 29,000
Imperial Oil Ltd. 2,700 109,350
Nuevo Energy Co.* 1,500 42,375
Oryx Energy Co. 6,100 97,600
Phoenix Resource Cos., Inc. 2,500 63,750
Plains Resources, Inc.* 2,200 25,575
Ranger Oil Ltd.* 3,000 22,500
Repsol S.A.* 3,500 128,361
Repsol S.A. ADR 3,000 111,000
Royal Dutch Petroleum Co. 1,400 200,550
Swift Energy Co.* 2,500 38,750
Tom Brown, Inc.* 400 6,200
Tosco Corp. 4,000 214,000
Total S.A. Cl. B* 2,049 139,058
Total S.A. ADR 4,957 169,777
Woodside Petroleum Ltd. ADR* 25,000 144,540
----------
1,736,536
----------
Oil Service 1.8%
Atwood Oceanics, Inc.* 400 17,050
Baker Hughes, Inc. 4,200 133,350
Coflexip* 3,022 116,962
Halliburton Co. 3,200 183,600
Schlumberger Ltd. 2,300 202,975
Transocean AS* 8,900 249,269
----------
903,206
----------
Total Energy 2,639,742
----------
Finance 6.5%
Bank 3.3%
Banco Industrial Colombiano S.A. ADR 11,000 $ 215,875
Bank of New York Co., Inc. 800 38,800
BankAmerica Corp. 2,500 189,375
Chase Manhattan Corp.* 2,704 186,238
Citicorp 2,700 212,625
Fleet Financial Group, Inc. 5,600 240,800
Mellon Bank Corp. 1,800 96,750
SouthTrust Corp. 3,700 100,362
Sparbanken Sverige AB*++ 24,100 271,860
Tornet Fastighets AB* 24,100 24,100
U.S. Bancorp 2,863 92,690
----------
1,669,475
----------
Financial Service 1.2%
Alex Brown, Inc. 500 27,063
Federal Home Loan Mortgage Corp. 2,800 233,450
Federal National Mortgage Association 9,600 294,000
Piper Jaffray Companies, Inc. 900 12,262
RAC Financial Group, Inc.* 400 12,350
Raymond James Financial, Inc.* 600 13,575
----------
592,700
----------
Insurance 2.0%
ACE Ltd. 6,700 294,800
AMBAC, Inc. 2,700 131,288
American Travellers Corp.* 600 11,700
Delphi Financial Group, Inc. Cl. A* 500 13,750
IPC Holdings Ltd.* 500 9,812
Mid Ocean Ltd.* 5,000 178,750
Mutual Risk Management Ltd. 500 19,750
NAC Re Corp. 1,500 49,125
National Re Corp. 800 28,400
Penn Treaty American Corp.* 600 11,400
PMI Group, Inc.* 3,700 157,250
Travelers/Aetna Property Casualty Corp. 2,200 60,775
Travelers Group, Inc. 1,300 79,950
----------
1,046,750
----------
Total Finance 3,308,925
----------
Science & Technology 7.8%
Aerospace 0.9%
Boeing Co. 3,000 246,375
Honeywell, Inc. 800 42,100
Raytheon Co. 3,200 162,000
----------
450,475
----------
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: MODERATE
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO (cont'd)
- --------------------------------------------------------------------------------
Value
Shares (Note 1)
-------- ------------
Computer Software & Service 3.2%
Affinity Technology Group, Inc.* 700 $ 16,450
Applied Graphics Technologies, Inc.* 1,500 20,063
Cerner Corp.* 1,400 28,875
Cisco Systems, Inc.* 4,700 243,813
Computervision Corp.* 20,800 252,200
Comshare, Inc.* 1,000 24,000
Datastream Systems, Inc.* 1,300 42,250
Enterprise Systems, Inc.* 400 13,400
General Motors Corp. Cl. E 2,700 152,212
Hyperion Software Corp.* 1,800 22,500
Intersolv, Inc.* 3,100 33,713
Microsoft Corp.* 2,100 238,087
OnTechnologies Corp.* 1,900 21,850
Optical Data Systems, Inc. 1,800 49,275
Pixar* 600 13,950
Sapient Corp.* 100 5,275
SystemSoft Corp.* 2,400 66,900
Teltrend, Inc.* 500 24,687
Transition Systems, Inc.* 800 19,400
Ultratech Stepper, Inc.* 1,700 44,412
VideoServer, Inc.* 1,200 40,200
Western Digital Corp.* 8,700 204,450
Wonderware Corp.* 1,700 38,250
----------
1,616,212
----------
Electronic Components 0.8%
AMP, Inc. 1,800 80,550
BBC Brown Boveri AG* 65 78,318
Intel Corp.* 1,500 101,625
Mosaid Technologies, Inc.* 600 13,441
Thomas & Betts Corp. 1,800 70,875
U.S. Order, Inc.* 600 12,075
VLSI Technology, Inc.* 2,700 47,081
----------
403,965
----------
Electronic Equipment 1.9%
Berg Electronics Corp.* 1,600 42,600
Electroglas, Inc.* 1,100 21,450
L.M. Ericsson Telephone Co. Cl. B ADR* 6,570 133,864
L.M. Ericsson Telephone Co. Cl. B* 8,769 177,795
Itron, Inc.* 1,200 70,500
Lucent Technologies, Inc.* 2,400 84,300
Nokia Corp. Cl. A* 1,960 70,023
Perkin-Elmer Corp. 5,200 285,350
Polycom, Inc. 700 6,212
Tokyo Electronics Ltd.* 2,000 74,375
----------
966,469
----------
Office Equipment 1.0%
Digital Equipment Corp.* 3,800 $ 227,050
FileNet Corp.* 600 33,600
HMT Technology Corp.* 1,000 22,125
International Business Machines Corp. 2,000 215,000
----------
497,775
----------
Total Science & Technology 3,934,896
----------
Utility 3.0%
Electric 0.4%
Allegheny Power Systems, Inc. 1,400 40,950
American Electric Power, Inc. 2,200 89,375
Texas Utilities Co. 2,000 80,500
----------
210,825
----------
Natural Gas 0.8%
Coastal Corp. 3,500 138,688
ENSERCH Corp. 10,300 221,450
KCS Energy, Inc. 300 6,787
TransTexas Gas Corp 5,600 56,700
----------
423,625
----------
Telephone 1.8%
Airtouch Communications, Inc.* 5,300 165,625
Allen Group Inc. 1,200 29,700
AT&T Corp. 1,800 110,250
BCE, Inc. 3,000 118,125
Colonial Data Technologies, Inc.* 1,300 29,738
Geotek Communications, Inc.* 2,600 26,975
Orange PLC* 47,800 171,254
Rural Cellular Corp. Cl. A* 400 4,900
Southern New England Telecom Corp. 4,100 182,450
Tel-Save Holdings, Inc.* 1,500 25,125
Trescom International, Inc.* 1,100 21,175
----------
885,317
----------
Total Utility 1,519,767
----------
Total Equity Securities (Cost $19,309,504) 23,306,092
----------
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: MODERATE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Principal Maturity Value
Amount Date (Note 1)
- ------------------------------------------------------------------------------
Fixed Income Securities 38.6%
U.S. Treasury 9.4%
U.S. Treasury Bond, 12.00% $250,000 8/15/2013 $ 353,438
U.S. Treasury Bond, 8.125% 775,000 8/15/2021 868,000
U.S. Treasury Bond, 6.25% 750,000 8/15/2023 676,402
U.S. Treasury Note, 8.50% 550,000 5/15/1997 565,213
U.S. Treasury Note, 5.125% 125,000 6/30/1998 122,636
U.S. Treasury Note, 6.75% 650,000 5/31/1999 658,834
U.S. Treasury Note, 7.125% 700,000 9/30/1999 717,388
U.S. Treasury Note, 6.875% 550,000 3/31/2000 559,713
U.S. Treasury Note, 6.25% 275,000 8/31/2000 273,452
----------
4,795,076
----------
U.S. Agency Mortgage 12.3%
Federal Home Loan Mortgage
Corp. Gold, 6.50% 187,105 2/01/2009 182,428
Federal Home Loan Mortgage
Corp. Gold, 6.50% 129,907 1/01/2010 126,660
Federal Home Loan Mortgage
Corp. Gold, 6.00% 459,000 4/01/2011 434,903
Federal Home Loan Mortgage
Corp. Gold, 9.50% 124,458 7/25/2022 132,545
Federal Home Loan Mortgage
Corp., 29-H PAC, 6.50% 100,000 3/25/2023 94,968
Federal Home Loan Mortgage
Corp. Gold, 7.50% 70,646 8/01/2024 69,896
Federal Home Loan Mortgage
Corp. Gold, 7.00% 342,092 12/01/2024 330,225
Federal Home Loan Mortgage
Corp. Gold, 7.50% 156,152 1/01/2025 154,492
Federal Home Loan Mortgage
Corp. Gold, 8.00% 60,607 6/01/2025 61,251
Federal Home Loan Mortgage
Corp. Gold, 7.50% 86,076 7/01/2025 85,161
Federal Home Loan Mortgage
Corp. Gold, 7.50% 216,436 11/01/2025 214,136
Federal Home Loan Mortgage
Corp. Gold, 7.50% 328,250 4/01/2026 324,761
Federal Home Loan Mortgage
Corp. Gold, 7.50%+ 625,000 5/20/2026 617,969
Federal National Mortgage
Association, 9.50%+ 250,000 10/01/2003 262,813
Federal National Mortgage
Association FHA-VA, 7.00% 201,296 12/01/2007 200,104
Federal National Mortgage
Association FHA-VA, 8.00% 238,417 4/01/2008 245,642
U.S. Agency Mortgage (cont'd)
Government National Mortgage
Association, 6.50% $121,727 2/15/2009 $ 118,570
Government National Mortgage
Association, 6.50% 274,169 5/15/2009 266,972
Government National Mortgage
Association, 6.50% 73,860 6/15/2009 71,945
Government National Mortgage
Association, 9.00% 133,596 2/15/2022 141,026
Government National Mortgage
Association, 8.00% 292,651 12/15/2022 298,038
Government National Mortgage
Association, 6.50% 93,101 12/15/2023 87,136
Government National Mortgage
Association, 6.50% 309,655 7/15/2024 289,816
Government National Mortgage
Association, 7.00% 155,770 1/15/2025 149,977
Government National Mortgage
Association, 7.00% 69,641 10/15/2025 67,051
Government National Mortgage
Association, 7.50% 320,720 11/15/2025 317,009
Government National Mortgage
Association, 7.50% 151,499 4/15/2026 149,746
Government National Mortgage
Association, 8.00%+ 725,000 6/19/2026 732,023
----------
6,227,263
----------
Trust Certificates 0.3%
Cooperative Utility Trust
Certificates, 10.70% 125,000 9/15/2017 138,391
----------
Corporate 7.0%
Anacomp Inc. Sr. Sub. Note,
15.00%[ ] 100,000 11/01/2000 100,000
B.E. Aerospace Sr. Notes,
9.875%++ 100,000 2/01/2006 98,500
Chevron Corp. Note, 8.11% 100,000 12/01/2004 105,227
Clearnet Communications, Inc.
Units, 0.00% to 12/14/2000,
14.75% from 12/15/2000 to
maturity 1,500 12/15/2005 93,000
Columbia/HCA Healthcare Corp.
Master Trust Note, 6.87% 125,000 9/15/2003 122,745
Continental Cablevision, Inc.
Sr. Note, 8.30%++ 100,000 5/15/2006 102,750
Crown Packaging, Inc. Sr. Notes
Series B, 10.75% 75,000 11/01/2000 69,563
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: MODERATE
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO (cont'd)
- --------------------------------------------------------------------------------
Principal Maturity Value
Amount Date (Note 1)
- ------------------------------------------------------------------------------
Corporate (cont'd)
Dade International Inc. Sr.
Sub. Note, 11.125%++ $250,000 5/01/2006 $ 253,375
Grand Union Co. Sr. Sub. Notes,
12.00% [ ] 75,000 9/01/2004 66,750
Haynes International Inc. Sr.
Sec. Notes, 11.25% 100,000 6/15/1998 100,250
Hollinger International Sr.
Sub. Notes, 9.25% 150,000 2/01/2006 143,625
ITT Corp. Note, 6.25% 100,000 11/15/2000 97,272
Jitney-Jungle Stores of
America, Inc. Sr. Note,
12.00% 100,000 3/01/2006 102,000
K & F Industries, Inc. Sr. Sub.
Deb. 13.75% 30,000 8/01/2001 27,040
K & F Industries, Inc. Sr. Sec.
Notes, 11.875% 175,000 12/01/2003 189,000
K-III Communications Corp.
Sr. Note, 8.50%++ 100,000 2/01/2006 94,000
Loews Corp. Sr. Notes, 7.00% 100,000 10/15/2023 88,039
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 108,000
MFS Communications Co. Sr.
Disc. Note, 0.00% to 1/14/99,
9.375% from 1/15/99 to
maturity 100,000 1/15/2004 76,750
Motels of America, Inc. Sr.
Sub. Notes, 12.00% 75,000 4/15/2004 72,375
Norcal Waste Systems, Inc. Sr.
Notes, 12.50% to 5/14/96, 12.75%
from 5/15/96 to 11/14/96, 13.00%
from 11/15/96 to 5/14/97, 13.25%
from 5/15/97 to 11/14/97, 13.50%
from 11/15/97 to maturity++ 200,000 11/15/2005 204,000
Overhead Door Corp., 12.25% 250,000 2/01/2000 250,000
Presidio Oil Co. Sr. Sec. Notes
Series B, 11.50%[ ] 100,000 9/15/2000 101,500
Ralphs Grocery Co. Sr. Note,
10.45% 170,000 6/15/2004 166,175
Sappi BVI Finance Ltd. Cv.
Note, 7.50%++ 180,000 8/12/2002 171,000
Tele-Communications Inc. Sr.
Notes, 8.25% 250,000 1/15/2003 252,265
Corporate (cont'd)
United Meridian Corp. Sr. Sub.
Note, 10.375% $120,000 10/15/2005 $ 124,200
Viacom Inc. Sr. Note, 6.75% 200,000 1/15/2003 186,564
----------
3,565,965
----------
Finance/Mortgage 4.7%
Allmerica Financial Corp. Sr.
Note, 7.625% 150,000 10/15/2025 141,708
ASFS Corp. Series 94-C2, 8.00% 55,557 8/25/2010 56,442
Associates Corp. of North
America Note, 6.375% 150,000 10/15/2002 145,421
Beneficial Corp. Master Trust
Note, 8.17% 150,000 11/9/1999 156,486
Citibank Credit Card Master
Trust 94-4, 8.25% 125,000 11/07/2003 132,656
Countrywide MBS Inc. Series
94-2 A-7 PAC, 6.50% 150,000 4/25/2008 150,093
Discover Credit Card Trust
Series 1993-A, 6.25% 125,000 8/16/2000 124,765
First Chicago Credit Card Trust
Series 91-D, 8.40% 66,667 6/15/1998 67,104
Ford Credit Auto Loan Master
Trust Series 95-1, 6.50% 200,000 8/15/2002 197,936
GE Global Insurance Holdings
Corp. Note, 7.00% 175,000 2/15/2026 162,837
General Electric Capital Corp.
Master Trust Note, 7.625% 150,000 7/24/1996 150,690
General Motors Acceptance Corp.
Note, 8.375% 200,000 5/01/1997 204,196
General Motors Acceptance Corp.
Master Trust Note, 7.85% 50,000 11/17/1997 51,208
Household Finance Co. Note,
6.75% 100,000 6/01/2000 99,621
Nations Bank Master Trust
Series 1995-I, 6.45% 150,000 4/15/2003 149,015
Prudential Home Mortgage Series
93-29 A-6 PAC, 6.75% 77,617 8/25/2008 77,544
Prudential Home Mortgage Series
93-57 A-1 PAC, 6.50% 192,656 12/26/2023 192,053
Sears Credit Account Master
Trust II 95-2, 8.10% 100,000 6/15/2004 104,781
----------
2,364,556
----------
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: MODERATE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Principal Maturity Value
Amount Date (Note 1)
- ------------------------------------------------------------------------------
Canadian-Yankee 1.1%
British Columbia Hydroelectric
Authority Series FH, 15.50% $ 130,000 7/15/2011 $ 141,019
Hydro-Quebec Deb. Series HS,
9.40% 225,000 2/01/2021 259,659
Laidlaw Inc. Deb., 8.75% 50,000 4/15/2025 53,073
Talisman Energy Deb., 7.125% 125,000 6/01/2007 120,421
----------
574,172
----------
Foreign Government 3.8% Australian Dollar
Government of Australia, 7.50% 550,000 8/15/2003 452,698
Canadian Dollar
Government of Canada, 7.50% 515,000 12/01/2003 376,062
Danish Krone
Kingdom of Denmark, 8.00% 1,200,000 3/15/2006 214,463
Kingdom of Denmark, 8.00% 1,200,000 11/15/2001 219,585
French Franc
Government of France, 8.00% 125,000 4/25/2003 166,670
Deutsche Mark
German Unity Fund, 8.00% 650,000 1/21/2002 474,051
----------
1,903,529
----------
Total Fixed Income Securities (Cost $19,749,722) 19,568,952
----------
Short-Term Obligations 17.9%
American Express Credit Corp.,
5.25% $ 420,000 5/02/1996 420,000
American Express Credit Corp.,
5.15% 160,000 5/02/1996 1,600,000
Associates Corp. of North
America, 5.08% 200,000 5/02/1996 200,000
Commercial Credit Co., 5.28% 1,400,000 5/20/1996 1,400,000
Ford Motor Credit Co., 5.25% 1,200,000 5/02/1996 1,200,000
General Electric Capital Corp.,
5.25% 1,977,000 5/15/1996 1,977,000
Raytheon Co., 5.27% 2,288,324 5/06/1996 2,288,324
----------
Total Short-Term Obligations (Cost $9,085,324) 9,085,324
----------
Total Investments (Cost $48,144,550)--102.4% 51,960,368
Cash and Other Assets, Less Liabilities--(2.4)% (1,219,641)
----------
Net Assets--100.0% $50,740,727
==========
Federal Income Tax Information: At April 30, 1996, the net unrealized
appreciation of investments based on cost for Federal income tax purposes of
$48,240,556 was as follows:
Aggregate gross unrealized
appreciation for all investments in
which there is an excess of value
over tax cost $4,415,011
Aggregate gross unrealized
depreciation for all investments in
which there is an excess of tax
cost over value (695,199)
----------
$3,719,812
==========
ADR stands for American Depositary Receipt, 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
April 30, 1996 were $1,178,341 and $1,201,485 (2.37% of net assets),
respectively.
[] Security is in default.
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: MODERATE
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO (cont'd)
- --------------------------------------------------------------------------------
Forward currency exchange contracts outstanding at April 30, 1996, 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 260,600 AUD .75070 AUD $(8,890) 5/15/96
Sell Australian dollars, buy U.S. dollars 34,100 AUD .75220 AUD (1,112) 5/15/96
Sell Australian dollars, buy U.S. dollars 157,000 AUD .78150 AUD (56) 7/24/96
Sell Australian dollars, buy U.S. dollars 83,000 AUD .78200 AUD 12 7/24/96
Sell Canadian dollars, buy U.S. dollars 76,137 CAD .72661 CAD (614) 5/15/96
Sell Canadian dollars, buy U.S. dollars 269,500 CAD .73660 CAD 516 5/15/96
Sell Canadian dollars, buy U.S. dollars 47,743 CAD .73530 CAD (12) 7/24/96
Sell Canadian dollars, buy U.S. dollars 103,000 CAD .73530 CAD (26) 7/24/96
Sell Danish krone, buy U.S. dollars 489,000 DKK .17621 DKK 3,251 5/15/96
Sell Danish krone, buy U.S. dollars 523,000 DKK .17522 DKK 2,964 7/15/96
Sell Danish krone, buy U.S. dollars 1,438,000 DKK .17167 DKK 2,230 7/24/96
Sell Deutsche mark, buy U.S. dollars 108,000 DEM .68169 DEM 3,014 5/15/96
Sell U.S. dollars, buy Deutsche mark 267,900 DEM .67820 DEM (6,540) 5/15/96
Sell Deutsche mark, buy U.S. dollars 476,900 DEM .68380 DEM 14,319 5/15/96
Sell Deutsche mark, buy U.S. dollars 28,200 DEM .68311 DEM 827 5/15/96
Sell Deutsche mark, buy U.S. dollars 160,900 DEM .67677 DEM 3,699 5/15/96
Sell Deutsche mark, buy U.S. dollars 390,000 DEM .67916 DEM 9,035 7/09/96
Sell Deutsche mark, buy U.S. dollars 198,000 DEM .66269 DEM 1,188 7/24/96
Sell European Currency Unit, buy U.S.
dollars 137,000 ECU 1.26095 ECU 4,415 5/15/96
Sell French francs, buy U.S. dollars 2,135,800 FRF .19881 FRF 9,979 7/09/96
Sell Japanese yen, buy U.S. dollars 46,620,000 JPY .00945 JPY (9,282) 7/09/96
Sell Pound sterling, buy U.S. dollars 24,300 GBP 1.53650 GBP 767 5/15/96
Sell U.S. dollars, buy Pound sterling 24,300 GBP 1.53250 GBP (670) 5/15/96
Sell U.S. dollars, buy Pound sterling 23,400 GBP 1.53100 GBP (610) 5/15/96
Sell Pound sterling, buy U.S. dollars 23,400 GBP 1.53637 GBP 736 5/15/96
Sell Swiss francs, buy U.S. dollars 170,000 CHF .84225 CHF 5,310 7/09/96
---------
$34,450
=========
</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
- --------------------------------------------------------------------------------
April 30, 1996 (Unaudited)
Assets
Investments, at value (Cost $48,144,550) (Note 1) $51,960,368
Cash 6,732
Receivable for securities sold 994,815
Interest and dividends receivable 336,642
Receivable for fund shares sold 217,661
Receivable for open forward contracts 62,262
Receivable from Distributor (Note 3) 11,347
Deferred organization costs and other assets (Note 1) 41,417
-----------
53,631,244
Liabilities
Payable for securities purchased 2,777,407
Payable for open forward contracts 27,812
Accrued management fee (Note 2) 26,324
Accrued transfer agent and shareholder services (Note 2) 18,489
Accrued trustees' fees (Note 2) 2,961
Payable for fund shares redeemed 4,839
Other accrued expenses 32,685
-----------
2,890,517
-----------
Net Assets $50,740,727
===========
Net Assets consist of:
Undistributed net investment income $241,856
Unrealized appreciation of investments 3,815,818
Unrealized appreciation of forward contracts and
foreign currency 33,533
Accumulated net realized gain 1,129,215
Shares of beneficial interest 45,520,305
-----------
$50,740,727
===========
Net Asset Value, offering price and redemption price
per share of Class C shares ($50,740,727 / 4,682,803
shares of beneficial interest) $10.84
===========
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the six months ended April 30, 1996 (Unaudited)
Investment Income
Interest $ 766,796
Dividends, net of foreign taxes of $3,023 159,589
-----------
926,385
Expenses
Management fee (Note 2) 140,422
Custodian fee 76,665
Transfer agent and shareholder services (Note 2) 42,207
Audit fee 12,315
Reports to shareholders 11,604
Registration fees 9,837
Amortization of organization costs (Note 1) 8,296
Trustees' fees (Note 2) 5,630
Legal fees 3,302
Miscellaneous 4,027
-----------
314,305
Expenses borne by the Distributor (Note 3) (98,957)
-----------
215,348
-----------
Net investment income 711,037
-----------
Realized and Unrealized Gain on Investments,
Foreign Currency and Forward Contracts
Net realized gain on investments (Notes 1 and 4) 1,485,407
Net realized gain on forward contracts and foreign
currency (Note 1) 29,866
-----------
Total net realized gain 1,515,273
-----------
Net unrealized appreciation of investments 1,067,144
Net unrealized appreciation of forward contracts and
foreign currency 82,863
-----------
Total net unrealized appreciation 1,150,007
-----------
Net gain on investments, foreign currency and
forward contracts 2,665,280
-----------
Net increase in net assets resulting from operations $3,376,317
===========
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
- --------------------------------------------------------------------------------
Six months
ended
April 30, Year ended
1996 October 31,
(Unaudited) 1995
- --------------------------------------------------------------------------
Increase (Decrease) in Net Assets
Operations:
Net investment income $ 711,037 $ 1,224,242
Net realized gain on
investments, foreign
currency and forward
contracts 1,515,273 579,909
Net unrealized appreciation
of investments, foreign
currency and forward
contracts 1,150,007 2,954,377
---------- ------------
Net increase resulting from
operations 3,376,317 4,758,528
---------- ------------
Dividends from net investment
income--Class C (1,020,925) (996,013)
---------- ------------
Class C share transactions
(Note 6):
Proceeds from sale of
shares 9,979,547 10,791,980
Net asset value of shares
issued in payment of
dividends 353,381 236,847
Cost of shares repurchased (1,768,502) (3,464,385)
---------- ------------
Net increase from fund share
transactions 8,564,426 7,564,442
---------- ------------
Total increase in net assets 10,919,818 11,326,957
Net Assets
Beginning of period 39,820,909 28,493,952
---------- ------------
End of period (including
undistributed net
investment income of
$241,856 and $551,744,
respectively) $50,740,727 $39,820,909
========== ============
Number of Class C shares:
Sold 935,082 1,120,799
Issued upon reinvestment of
dividends 33,836 24,757
Repurchased (166,229) (371,031)
---------- ------------
Net increase in fund shares 802,689 774,525
========== ============
* Net realized gain for
Federal income tax purposes
(Note 1) $ 1,461,420 $ 522,329
========== ============
- --------------------------------------------------------------------------------
NOTES TO UNAUDITED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
April 30, 1996
Note 1
State Street Research Strategic Portfolios: Moderate (the "Fund"), is a
series of State Street Research Financial Trust, formerly 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 investment objective of the fund is to provide both current income and
capital appreciation, consistent with the preservation of capital and reasonable
investment risk.
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.
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: MODERATE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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. 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.
H. Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period.
Actual results could differ from those estimates.
Note 2
The Trust and State Street Research & Management Company (the "Adviser"), an
indirect wholly owned subsidiary of Metropolitan Life Insurance Company
("Metropolitan"), have entered into an agreement under which the Adviser earns
monthly fees at an annual rate of 0.65% 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 six months ended April 30, 1996, the fees pursuant to such agreement
amounted to $140,422.
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 six months ended
April 30, 1996, the amount of such expenses was $41,674.
The fees of the Trustees not currently affiliated with the Adviser amounted to
$5,630 during the six months ended April 30, 1996.
Note 3
The Distributor and its affiliates may from time to time and in varying amounts
voluntarily assume some portion of fees or expenses relating to the Fund. During
the six months ended April 30, 1996, the amount of such expenses assumed by the
Distributor and its affiliates was $98,957.
Note 4
For the six months ended April 30, 1996, purchases and sales of securities,
exclusive of short-term obligations, aggregated $26,465,424 and $23,572,222
(including $9,594,684 and $8,178,886 of U.S. Government securities),
respectively.
12
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: MODERATE
- --------------------------------------------------------------------------------
NOTES (cont'd)
- --------------------------------------------------------------------------------
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 April 30, 1996, Metropolitan owned 2,617,801 Class C shares of the Fund and
the Adviser owned one Class C share of the Fund.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
For a Class C share outstanding throughout each period:
<TABLE>
<CAPTION>
Six months
ended September 28, 1993
April 30, Year ended October 31 (Commencement of
1996 --------------------- Operations)
(Unaudited) 1995** 1994 to October 31, 1993
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $10.26 $9.18 $9.57 $9.55
Net investment income* .20 .36 .28 .02
Net realized and unrealized gain (loss) on
investments, foreign currency and
forward contracts .64 1.01 (.45) --
Dividends from net investment income (.26) (.29) (.22) --
------ ------ ------ -----
Net asset value, end of period $10.84 $10.26 $9.18 $9.57
====== ====== ====== =====
Total return 8.25%+++ 15.24%+ (1.81)%+ 0.21%+++
Net assets at end of period (000s) $50,741 $39,821 $28,494 $25,040
Ratio of operating expenses to average net
assets* 1.00%++ 1.00% 1.00% 1.00%++
Ratio of net investment income to average
net assets* 3.29%++ 3.68% 3.05% 2.32%++
Portfolio turnover rate 58.52% 120.62% 142.86% 0.00%
Average commission rate $.0018 -- -- --
*Reflects voluntary assumption of fees or
expenses per share in each period (Note 3) $.02 $.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>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: MODERATE
- --------------------------------------------------------------------------------
REPORT ON SPECIAL MEETING OF SHAREHOLDERS
- --------------------------------------------------------------------------------
A Special Meeting of Shareholders of State Street Research Strategic Portfolios:
Moderate ("Fund"), along with shareholders of other series of State Street
Research Financial Trust ("Meeting"), was convened on February 14, 1996, and
continued thereafter. The results of the Meeting are set forth below.
Votes (millions)
-----------------
For Withheld
--- --------
1. The following persons were elected as Trustees:
Edward M. Lamont 43.4 3.0
Robert A. Lawrence 43.4 3.0
Dean O. Morton 43.4 3.0
Thomas L. Phillips 43.4 3.0
Toby Rosenblatt 43.4 3.0
Michael S. Scott Morton 43.8 2.6
Ralph F. Verni 43.8 2.7
Jeptha H. Wade 43.8 2.6
Votes (millions)
--------------------
For Against Abstain
--- ------- -------
2. The Fund's fundamental policy on diversification
of investments was amended 3.1 0.1 0.2
3. The Master Trust Agreement was amended to permit
the Trustees to reorganize, merge or liquidate
a fund without prior shareholder approval 33.1 7.3 4.2
4. The Master Trust Agreement was amended to
eliminate specified time permitted between the
record date and any shareholders meeting. 34.4 5.7 4.4
14
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: MODERATE
- --------------------------------------------------------------------------------
FUND INFORMATION, OFFICERS AND TRUSTEES OF STATE STREET
RESEARCH 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
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
15
<PAGE>
State Street Research Strategic Portfolios: Moderate
One Financial Center
Boston, MA 02111
Bulk Rate
U.S. Postage
PAID
Brockton, MA
Permit No. 600
Questions? Comments?
Call us at 1-800-562-0032,
or write us at:
State Street Research
Shareholder Services
P.O. Box 8408
Boston, MA 02266-8408
[State Street Research Logo]
This report is prepared for the general information of current shareholders
only. It is not authorized for use as sales material with prospective investors.
The Dalbar awards recognize quality shareholder service and should not be
considered a rating of fund performance. The survey included mutual fund
complexes that volunteered or were otherwise selected to participate and was not
industry-wide.
CONTROL NUMBER: 3198-960620(0797)SSR-LD
Cover Illustration by Dorothy Cullinan
SP-029E-696
<PAGE>
[COVER PAGE]
[LOGO] STATE STREET RESEARCH
STATE STREET RESEARCH
STRATEGIC PORTFOLIOS: AGGRESSIVE
SEMIANNUAL REPORT
April 30, 1996 [Illustration of person reaching for stars]
WHAT'S INSIDE
Investment Update
The Fund, economy
and markets
Fund Information:
Facts and Figures
Plus, Complete Portfolio Holdings
and Financial Statements
[DALBAR LOGO]
For Excellence
in
Shareholder Service
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: AGGRESSIVE
______________________________________________________________
INVESTMENT UPDATE
______________________________________________________________
INVESTMENT ENVIRONMENT
The Economy
(bullet) After slowing in late 1995, economic growth picked up speed in the
early months of 1996. At the same time, inflation has remained low.
(bullet) Consumer confidence and spending inched upward, despite higher debt
levels.
(bullet) The Federal Reserve cut interest rates by one-quarter point in
December 1995 and again in January 1996. Because of the stronger
economy, the Fed has since left rates untouched.
The Markets
(bullet) Stocks performed well, with gains concentrated in the largest stocks
at the end of 1995, and then in smaller stocks in 1996. The Dow
Jones Industrial Average, which represents 30 stocks, reported a
gain of +18.46% for the six months ended April 30, 1996. The much
broader Standard & Poor's 500 Index provided a total return of
+13.76% over the same time period.(1)
(bullet) Bond performance was mixed. The high-quality bond market was strong
at year-end 1995, then flattened entering 1996. Conversely,
high-yield bonds, which respond well to a strengthening economy,
contributed to strong first-quarter performance.
THE FUND
Over the past six months
(bullet) For the six months ended April 30, 1996, Class A shares of STRATEGIC
PORTFOLIOS: AGGRESSIVE provided a total return of +12.23% (does not
reflect sales charge).(2) The average total return for the 185 funds
in Lipper Analytical Services' Flexible Portfolio Funds category was
+9.06% (does not reflect sales charge).
(bullet) The Fund's equity holdings performed well across all sectors,
especially early in 1996 as small-cap growth stocks were up over 7%
for the month of April.
(bullet) The high-yield portion of our bond portfolio, representing about 5%,
performed rather well.
Current strategy
(bullet) On April 30, 1996, the Fund held 70% of its assets in stocks, 17% in
bonds, and 13% in cash.
(bullet) The equities in the portfolio are evenly split among stocks of large
U.S. companies, undervalued companies, small companies, and
international companies.
(bullet) The bonds are mostly invested in high-grade bonds, with about 5%
each invested in high-yield bonds and international debt.
(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 Dow Jones Industrial Average represents 30 blue-chip U.S.
stocks and is a commonly used measure of U.S. stock market performance. The
indices are unmanaged and do not take sales charges into account. Direct
investment in the indices is not possible; results are for illustrative
purposes only.
(2)+12.49% 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.
Please note that the discussion throughout this shareholder report is
dated as indicated and because of possible changes in viewpoint, data, and
transactions, should not be relied upon as being current thereafter.
______________________________________________________________________________
FUND INFORMATION
(all data are for periods ended April 30, 1996, except where otherwise noted)
____________________________________________________________________________
SEC Average Annual Compound Rates
of Return for periods ended 3/31/96
(at maximum applicable sales charge)(3,4)
- ---------------------------------------------
Life of Fund
(since 5/16/94) 1 Year
- ----------------------------------------------
Class A +11.30%/+11.08% +17.18%/+16.97%
- ----------------------------------------------
Class C +14.39%/+14.16% +23.10%/+22.88%
- ----------------------------------------------
Average Annual Compound Rates of Return
for periods ended 4/30/96
(do not reflect sales charge)(3)
- ----------------------------------------------
Life of Fund
(since 5/16/94) 1 Year
- ----------------------------------------------
Class A +15.02%/+14.80% +23.57%/+23.35%
- ----------------------------------------------
Class C +15.39%/+15.16% +24.08%/+23.86%
- ----------------------------------------------
Asset Allocation
(by percentage of net assets)
- ----------------------------------------------
[PIE CHART]
Bonds 17%
Cash 13%
Stocks 70%
Performance results for the Fund are increased by the distributor's voluntary
reduction of fees and expenses related to the Fund. The first figure reflects
expense reduction; the second shows what results would have been without
subsidization.
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: AGGRESSIVE
____________________________________________________________________________
INVESTMENT PORTFOLIO
___________________________________________________________________________
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Value
Shares (Note 1)
- ------------------------------------------------ ------ ------------
<S> <C> <C>
EQUITY SECURITIES 70.3%
Basic Industries 12.1%
Chemical 4.0%
Agrium, Inc.* 5,400 $ 69,525
Atlantic Richfield Co. 8,500 240,125
Cambrex Corp. 4,300 184,900
Hoechst AG* 2,225 749,370
IMC Global, Inc. 7,720 284,675
L'Air Liquide* 1,100 199,884
Mallinckrodt Group, Inc. 3,800 149,625
Monsanto Co. 2,100 318,150
Potash Corp. of Saskatchewan Inc. 3,000 211,500
Rohm & Haas Co. 11,200 743,400
----------
3,151,154
----------
Diversified 1.2%
Cardo AB* 10,000 218,238
Hoya Corp.* 8,000 282,969
Mark IV Industries, Inc. 10,550 218,913
Tenma Corp.* 9,000 221,978
----------
942,098
----------
Electrical Equipment 1.4%
Baldor Electric Co. 5,800 125,425
Belden, Inc.* 4,100 121,975
General Electric Co. 8,200 635,500
Philips Electronics NV 5,700 204,488
----------
1,087,388
----------
Forest Product 0.5%
Aracruz Celulose ADR 20,000 180,000
Nippon Paper Industries Co.* 25,000 183,070
----------
363,070
----------
Machinery 2.3%
Briggs & Stratton Corp. 3,400 154,275
Case Corp. 3,000 151,500
Fluor Corp. 2,500 165,313
Kajima Corp.* 18,000 203,050
Linde AG* 546 333,827
Minebea Co. Ltd.* 22,000 202,113
Pall Corp. 9,000 252,000
Sundstrand Corp. 5,200 191,100
Terex Corp. Rts.* 300 75
United States Filter Corp.* 4,500 138,375
----------
1,791,628
----------
Metal & Mining 2.7%
Alumax, Inc.* 8,800 294,800
Aluminum Company of America 3,200 199,600
Bohler Uddeholm* 3,100 253,126
Carbide/Graphite Group, Inc.* 5,300 94,075
Century Aluminum Co.* 5,300 78,175
Nucor Corp. 5,200 292,500
Reynolds Metals Co. 3,300 177,375
RTZ Corp. PLC* 17,653 277,962
SGL Carbon AG* 3,000 283,167
Wyman-Gordon Co.* 6,800 123,250
----------
2,074,030
----------
Total Basic Industries 9,409,368
----------
Consumer Cyclical 9.1%
Airline 0.4%
Atlas Air, Inc.* 7,700 347,463
----------
Automotive 2.7%
Exide Corp. 11,700 329,062
Ford Motor Co. 22,900 821,538
Ford Motor Co. Series A Cv. Pfd. 2,200 255,200
Lear Seating Corp.* 13,600 448,800
Masland Corp.* 4,200 85,575
Michelin Cl. B* 3,900 193,283
----------
2,133,458
----------
Building 0.3%
LaFarge Corp. 11,600 246,500
----------
Hotel & Restaurant 1.1%
Au Bon Pain Company, Inc.* 5,600 44,800
Housecall Medical Resources, Inc.* 2,500 54,375
Main Street and Main, Inc.* 10,700 40,125
Mirage Resorts, Inc.* 6,300 329,962
Motel of America, Inc.*++ 175 14,000
Outback Steakhouse, Inc.* 3,700 148,463
Primadonna Resorts, Inc.* 4,800 92,400
Station Casinos, Inc.* 11,500 152,375
----------
876,500
----------
Recreation 1.7%
Anchor Gaming* 1,800 79,537
American Radio Systems Corp.* 1,600 54,000
Argyle Television, Inc. Series A* 4,200 96,075
Boomtown, Inc. Wts.* 165 8
Carmike Cinemas, Inc. Cl. A* 1,800 47,925
Comcast Corp. Cl. A* 6,800 119,000
Mattel Inc. 7,031 182,806
News Corp. Ltd. ADR 7,000 164,500
Sierra On-Line, Inc.* 3,600 141,300
Silver King Communications, Inc. 3,300 96,525
Time Warner, Inc. 4,300 175,762
Walt Disney Co. 2,539 157,418
----------
1,314,856
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: AGGRESSIVE
___________________________________________________________________________
INVESTMENT PORTFOLIO (cont'd)
___________________________________________________________________________
<TABLE>
<CAPTION>
Value
Shares (Note 1)
- ------------------------------------------------ ------ ------------
<S> <C> <C>
Retail Trade 2.6%
Corporate Express, Inc.* 1,620 $ 60,547
Cost Plus, Inc.* 2,000 47,500
Federated Department Stores, Inc.* 8,700 290,363
Gymboree Corp.* 4,300 111,262
Home Depot, Inc. 7,000 331,625
Home Shopping Network, Inc.* 20,300 238,525
Intimate Brands, Inc. Cl. A* 11,600 245,050
Thrifty Payless Holdings, Inc. Cl. B* 20,200 272,700
Toy Biz, Inc.* 3,100 63,163
Viking Office Products, Inc.* 2,700 160,313
Wal-Mart Stores, Inc. 6,900 164,737
----------
1,985,785
----------
Textile & Apparel 0.3%
Authentic Fitness Corp. 8,800 210,100
----------
Total Consumer Cyclical 7,114,662
----------
Consumer Staple 15.5%
Business Service 3.3%
ADT Ltd.* 22,400 380,800
ADVO, Inc.* 10,300 104,287
Career Horizons, Inc.* 3,000 105,750
Catalina Marketing Corp.* 1,700 132,387
Data Processing Resources Corp.* 600 15,150
Eagle River Interactive, Inc.* 1,900 40,850
Eltron International, Inc.* 4,200 120,750
Encad, Inc.* 2,700 92,813
Global Direct Mail Corp.* 15,300 600,525
HA-LO Industries, Inc.* 10,100 343,400
NRP, Inc.* 8,100 111,375
Outdoor System, Inc.* 1,500 34,500
Personnel Group of America, Inc.* 9,800 230,300
PIA Merchandising Services, Inc.* 1,700 44,625
Profit Recovery Group International, Inc.* 2,000 39,750
Superior Services, Inc.* 1,900 26,600
Technology Solutions Co.* 3,200 86,400
VTEL Corp.* 4,700 49,938
----------
2,560,200
----------
Drug 2.9%
Arris Pharmaceutical Corp.* 6,900 106,950
CytoTherapeutics, Inc.* 5,300 78,175
Eli Lilly & Co. 3,588 211,692
Healthdyne Technologies, Inc.* 13,600 173,400
Liposome Company, Inc.* 2,500 61,250
Merck & Company, Inc. 4,800 290,400
Pfizer, Inc. 6,200 427,025
Roussel-Uclaf* 3,100 730,682
Sandoz AG* 200 218,428
----------
2,298,002
----------
Food & Beverage 3.3%
Anheuser-Busch, Inc. 3,800 $255,075
Campbell Soup Co. 4,300 268,750
Coca-Cola Co. 1,900 154,850
Coca-Cola Enterprises, Inc. 14,400 424,800
Cott Corp. 8,700 70,687
General Mills, Inc. 700 38,850
LVMH Moet Hennessy Louis Vuitton ADR* 1,500 383,745
PepsiCo, Inc. 6,000 381,000
Ralcorp Holdings, Inc.* 6,400 140,800
Whitman Corp. 17,000 429,250
----------
2,547,807
----------
Hospital Supply 4.5%
American Medical Response, Inc.* 3,600 133,200
Arterial Vascular Engineering, Inc.* 200 8,800
Baxter International, Inc. 8,800 389,400
Circon Corp.* 4,700 67,562
Columbia/HCA Healthcare Corp.* 4,400 233,750
Community Health Systems, Inc.* 3,100 134,462
Cytyc Corp.* 1,600 35,400
E.S.C. Medical Systems Ltd.* 700 30,800
Heartport Inc.* 1,300 46,475
I Stat Corp.* 3,600 104,850
Integra Lifesciences Corp.* 3,600 45,900
Johnson & Johnson 2,900 268,250
Lincare Holdings, Inc.* 8,300 322,144
Medtronic, Inc. 5,000 265,625
Physicians Support Systems, Inc.* 4,700 115,150
Respironics, Inc.* 3,200 69,950
Roche Holdings AG* 90 707,837
Rotech Medical Corp.* 3,800 157,700
Rural/Metro Corp.* 2,100 62,213
Ultra-Fem, Inc. 5,600 81,900
United Healthcare Corp. 4,200 245,700
----------
3,527,068
----------
Personal Care 0.3%
Bush Boake Allen, Inc.* 3,100 83,700
U.S.A. Detergents, Inc.* 3,550 145,550
----------
229,250
----------
Printing & Publishing 0.4%
Heritage Media Corp. Cl. A* 1,900 72,913
Hollinger International, Inc.* 21,200 251,750
----------
324,663
----------
Tobacco 0.8%
Philip Morris Cos., Inc. 5,400 486,675
Schweitzer-Manduit International* 5,000 135,625
----------
622,300
----------
Total Consumer Staple 12,109,290
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: AGGRESSIVE
___________________________________________________________________________
___________________________________________________________________________
<TABLE>
<CAPTION>
Value
Shares (Note 1)
- ------------------------------------------------ ------ ------------
<S> <C> <C>
Energy 7.7%
Oil 5.3%
Abacan Resource Corp.* 24,900 $138,506
Amerada Hess Corp. 5,300 300,112
Global Natural Resources, Inc.* 6,600 95,700
Imperial Oil Ltd. 5,700 230,850
Nuevo Energy Co.* 6,700 189,275
Oryx Energy Co. 11,500 184,000
Phoenix Resource Cos., Inc. 8,100 206,550
Plains Resources, Inc.* 7,300 84,862
Ranger Oil Ltd.* 21,300 159,750
Repsol S.A.* 7,000 256,722
Repsol S.A. ADR 5,700 210,900
Royal Dutch Petroleum Co. 2,800 401,100
Swift Energy Co.* 12,400 192,200
Tom Brown, Inc.* 6,000 93,000
Tosco Corp. 7,800 417,300
Total S.A.* 4,610 312,864
Total S.A. Cl. B ADR* 9,632 329,896
Woodside Petroleum Ltd. ADR* 51,300 296,597
----------
4,100,184
----------
Oil Service 2.4%
Atwood Oceanics, Inc.* 2,000 85,250
Baker Hughes, Inc. 7,900 250,825
Coflexip* 6,043 233,885
Halliburton Co. 6,500 372,937
Schlumberger Ltd. 4,600 405,950
Transocean AS* 20,100 562,957
----------
1,911,804
----------
Total Energy 6,011,988
----------
Finance 8.9%
Bank 4.0%
Banco Industrial Colombiano ADR 20,600 404,275
BankAmerica Corp. 4,900 371,175
Bank of New York Company, Inc. 1,500 72,750
Chase Manhattan Corp.* 4,888 336,661
Citicorp 5,400 425,250
Fleet Financial Group, Inc. 10,900 468,700
Mellon Bank Corp. 3,300 177,375
South Trust Corp. 7,000 189,875
Sparbanken Sverige AB++* 38,000 428,660
Tornet Fastighets AB* 38,000 38,000
U.S. Bancorp 5,438 176,055
----------
3,088,776
----------
Financial Service 1.7%
Alex Brown, Inc. 2,600 140,725
Federal Home Loan Mortgage Corp. 5,300 441,887
Federal National Mortgage Association 19,300 591,063
Piper Jaffray Companies, Inc. 4,500 61,313
RAC Financial Group* 1,700 52,487
Raymond James Financial, Inc.* 2,700 61,088
----------
1,348,563
----------
Insurance 3.2%
ACE Ltd. 12,600 554,400
AMBAC, Inc. 5,100 247,988
American Travellers Corp.* 3,150 61,425
Delphi Financial Group, Inc.* 2,600 71,500
IPC Holdings Ltd.* 2,400 47,100
Mid Ocean Ltd.* 9,300 332,475
Mutual Risk Management Ltd. 2,900 114,550
NAC Re Corp. 7,600 248,900
National Re Corp. 4,600 163,300
Penn Treaty American Corp.* 1,900 36,100
PMI Group, Inc.* 7,100 301,750
Travelers/Aetna Property Casualty Corp.* 4,100 113,262
Travelers Group, Inc. 2,600 159,900
----------
2,452,650
----------
Total Finance 6,889,989
----------
Science & Technology 12.6%
Aerospace 1.2%
Boeing Co. 5,700 468,113
Honeywell, Inc. 1,500 78,937
Raytheon Co. 7,000 354,375
----------
901,425
----------
Computer Software & Service 5.6%
Affinity Technology Group, Inc.* 2,100 49,350
Applied Graphics Technologies, Inc. 5,100 68,213
Cerner Corp.* 7,100 146,437
Cisco Systems, Inc.* 9,500 492,813
Computervision Corp.* 39,300 476,512
Comshare, Inc.* 4,700 112,800
Datastream Systems, Inc.* 6,300 204,750
Enterprise Systems, Inc.* 2,100 70,350
General Motors Corp. Cl. E 5,400 304,425
Hyperion Software Corp.* 7,400 92,500
Intersolv, Inc.* 15,600 169,650
Microsoft Corp.* 4,300 487,513
On Technologies Corp.* 9,500 109,250
Optical Data Systems, Inc.* 5,600 153,300
Pixar* 2,700 62,775
Sapient Corp.* 600 31,650
SystemSoft Corp.* 9,400 262,025
Teltrend, Inc.* 2,300 113,562
Transition Systems, Inc.* 2,600 63,050
Ultratech Stepper, Inc.* 5,800 151,525
Video Server, Inc.* 6,100 204,350
</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>
Computer Software & Service (cont'd)
Western Digital Corp.* 16,400 $ 385,400
Wonderware Corp.* 5,900 132,750
----------
4,344,950
----------
Electronic Components 1.2%
AMP, Inc.* 3,200 143,200
BBC Brown Boveri AG* 165 198,808
Intel Corp.* 3,000 203,250
Mosaid Technologies, Inc.* 3,100 69,446
Thomas & Betts Corp. 3,400 133,875
US Order, Inc.* 3,000 60,375
VLSI Technology, Inc.* 9,200 160,425
----------
969,379
----------
Electronic Equipment 3.1%
Berg Electronics* 6,800 181,050
Electroglas, Inc.* 3,600 70,200
Itron, Inc.* 5,700 334,875
L.M. Ericsson Telephone Co. Cl. B ADR* 13,130 267,524
L.M. Ericsson Telephone Co. Cl. B* 21,920 444,438
Lucent Technologies, Inc.* 4,800 168,600
Nokia Corp.* 4,600 164,340
Perkin-Elmer Corp. 10,700 587,162
Polycom, Inc.* 2,300 20,413
Tokyo Electronics Ltd.* 5,000 185,938
----------
2,424,540
----------
Office Equipment 1.5%
Digital Equipment Corp.* 7,600 454,100
FileNet Corp.* 3,200 179,200
HMT Technology Corp.* 5,100 112,838
International Business Machines Corp. 4,000 430,000
----------
1,176,138
----------
Total Science & Technology 9,816,432
----------
Utility 4.4%
Electric 0.5%
Allegheny Power Systems, Inc. 2,900 84,825
American Electric Power, Inc. 4,200 170,625
Texas Utilities Co. 3,700 148,925
----------
404,375
----------
Natural Gas 1.1%
Coastal Corp. 6,600 261,525
ENSERCH Corp. 19,500 419,250
KCS Energy, Inc. 1,100 24,888
TransTexas Gas Corp.* 10,600 107,325
----------
812,988
----------
Telephone 2.8%
AirTouch Communications, Inc.* 10,700 334,375
Allen Group, Inc. 6,200 153,450
AT&T Corp. 3,900 238,875
BCE, Inc. 6,000 236,250
Colonial Data Technologies, Inc.* 6,200 141,825
Geotek Communications, Inc.* 12,600 130,725
Orange PLC* 106,900 382,993
Rural Cellular Corp. Cl. A* 2,100 25,725
Southern New England Telecom Corp. 7,800 347,100
Tel-Save Holdings, Inc.* 7,800 130,650
Trescom International, Inc.* 4,500 86,625
----------
2,208,593
----------
Total Utility 3,425,956
----------
Total Equity Securities (Cost $45,065,410) 54,777,685
----------
</TABLE>
<TABLE>
<CAPTION>
Principal Maturity
Amount Date
----------------------------------- ------- --------- -----------
<S> <C> <C> <C>
FIXED INCOME SECURITIES 16.9%
U.S. Treasury 1.9%
U.S. Treasury Bond, 12.00% $175,000 8/15/2013 247,406
U.S. Treasury Bond, 8.125% 325,000 8/15/2021 364,000
U.S. Treasury Bond, 6.25% 425,000 8/15/2023 383,295
U.S. Treasury Note, 9.00% 325,000 5/15/1998 342,976
U.S. Treasury Note, 6.75% 125,000 5/31/1999 126,699
---------
1,464,376
---------
U.S. Agency Mortgage 3.6%
Federal Home Loan Mortgage
Corp. Gold, 6.50% 127,908 7/01/2008 124,710
Federal Home Loan Mortgage
Corp. Gold, 6.00% 204,000 4/01/2011 193,290
Federal Home Loan Mortgage Corp.
Gold, 9.50% 52,488 7/25/2022 55,899
Federal Home Loan Mortgage
Corp. Series 29-H PAC, 6.50% 50,000 3/25/2023 47,484
Federal Home Loan Mortgage Corp.
Gold, 7.00% 187,766 6/01/2024 181,253
Federal Home Loan Mortgage Corp.
Gold, 7.50% 159,706 1/01/2025 158,008
Federal Home Loan Mortgage
Corp. Gold, 7.50% 98,621 11/01/2025 97,573
Federal Home Loan Mortgage
Corp. Gold, 8.00% 99,870 1/01/2026 100,930
Federal Home Loan Mortgage
Corp. Gold, 7.50% 126,250 4/01/2026 124,908
Federal Home Loan Mortgage
Corp. Gold, 7.50%+ 200,000 5/20/2026 197,750
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: AGGRESSIVE
____________________________________________________________________________
___________________________________________________________________________
<TABLE>
<CAPTION>
Principal Maturity Value
Amount Date (Note 1)
- -------------------------------------------- -------------- --------- -----------
<S> <C> <C> <C>
U.S. Agency Mortgage (cont'd)
Government National Mortgage
Association, 8.00% $116,532 5/15/2008 $120,428
Government National Mortgage
Association, 6.50% 48,691 2/15/2009 47,428
Government National Mortgage
Association, 6.50% 120,254 7/15/2009 117,135
Government National Mortgage
Association, 8.00% 246,682 12/15/2022 251,224
Government National Mortgage
Association, 8.00% 72,329 12/15/2022 73,660
Government National Mortgage Association,
6.50% 236,310 7/15/2024 221,169
Government National Mortgage Association,
7.00% 26,937 1/15/2025 25,935
Government National Mortgage
Association, 7.50% 123,354 11/15/2025 121,927
Government National Mortgage
Association, 7.50% 75,750 4/15/2026 74,874
Government National Mortgage
Association, 8.00%+ 375,000 5/20/2026 379,570
Government National Mortgage
Association, 8.00%+ 75,000 6/19/2026 75,727
---------
2,790,882
---------
Canadian-Yankee 0.2%
British Columbia Hydroelectric Authority
Series FH, 15.50% 50,000 7/15/2011 54,238
Hydro-Quebec Deb. Series HS, 9.40% 75,000 2/01/2021 86,553
Laidlaw Inc., Deb., 8.75% 50,000 4/15/2025 53,072
---------
193,863
---------
Trust Certificates 0.2%
Cooperative Utility Trust Certificates,
10.70% 75,000 9/15/2007 83,035
Deseret Generation Cooperative Trust
Certificates, 10.11% 75,000 12/15/2017 82,585
---------
165,620
---------
Foreign Government 4.2%
Australian
Dollar
Government of Australia, 9.50% 1,350,000 8/15/2003 1,111,168
Canadian
Dollar
Government of Canada, 7.50% 565,000 12/01/2003 412,572
Danish Krone
Kingdom of Denmark, 8.00% 2,300,000 3/15/2006 411,054
Kingdom of Denmark, 8.00% 1,375,000 11/15/2001 251,610
Deutsche Mark
German Unity Fund, 8.00% 1,025,000 1/21/2012 747,543
French Franc
Government of France, 8.00% 225,000 4/25/2003 300,006
---------
3,233,953
---------
Finance/Mortgage 1.2%
ASFS Corp. Series
94-C2 SR A-1, 8.00% 37,038 8/25/2010 37,628
Associates Corp. of North America Note,
6.375% 50,000 10/15/2002 48,473
Beneficial Corp. Mortgage Note, 8.17% 75,000 11/09/1999 78,243
Citibank Credit Card Master Trust 94-4,
8.25% 50,000 11/07/2003 53,062
Discover Credit Card Trust Series 1993-A,
6.25% 75,000 8/16/2000 74,859
First Chicago Credit Trust Series 91-D,
8.40% 33,333 6/15/1998 33,552
Ford Credit Auto Loan Master Trust Series
95-1, 6.50% 125,000 8/15/2002 123,710
GE Global Insurance Holdings
Corp. Note, 7.00% 75,000 2/15/2026 69,787
General Electric Capital Corp. Note, 7.625% 100,000 7/24/1996 100,460
General Motors Acceptance Corp. Note, 7.85% 100,000 11/17/1997 102,417
General Motors Acceptance Corp. Deb., 8.625% 75,000 6/15/1999 78,970
Household Affinity Master Trust Series
94-1A, 6.275% 50,000 5/15/2001 50,000
Household Finance Co.
Note, 6.75% 75,000 6/01/2000 74,716
---------
925,877
---------
Corporate 5.6%
Anacomp Inc. Sr. Sub. Note, 15.00% |B( 100,000 11/01/2000 100,000
B.E. Aerospace Sr. Notes, 9.875%++ 150,000 2/01/2006 147,750
Chevron Corp. Profit Sharing Note, 8.11% 75,000 12/01/2004 78,920
Clearnet Communications, Inc. Units, 0.00%
to 12/14/2000, 14.75% from 12/15/2000 to
maturity 3,000 12/15/2005 186,000
Columbia/HCA Healthcare Corp. Note, 6.87% 50,000 9/15/2003 49,098
</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>
Corporate (cont'd)
Continental Cablevision, Inc. Sr. Note,
8.30%++ $ 50,000 5/15/2006 $ 51,375
Crown Packaging, Inc. Sr. Note Series B,
10.75% 175,000 11/01/2000 162,312
Dade International Inc. Sr. Sub. Note,
11.125%++ 250,000 5/01/2006 252,250
Grand Union Co. Sr. Sub. Notes, 12.25% |B( 175,000 7/15/2002 155,750
Haynes International, Inc., Sr. Sec. Notes,
11.25% 200,000 6/15/1998 200,500
Hollinger International, Inc. Sr. Sub.
Notes, 9.25% 100,000 2/01/2006 95,750
ITT Corp. Note, 6.25% 50,000 11/15/2000 48,636
Jitney-Jungle Stores of America, Inc. Sr.
Note, 12.00% 150,000 3/01/2006 153,000
K & F Industries, Inc. Sr. Sub. Deb., 13.75% 214,000 8/01/2001 222,560
K & F Industries, Inc. Sr. Sec. Notes,
11.875% 30,000 12/01/2003 32,400
K-III Communications Corp. Sr. Note, 8.50%++ 150,000 2/01/2006 141,000
Loews Corp. Sr. Notes, 7.00% 50,000 10/15/2023 44,019
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 180,000
MFS Communications Co. Sr. Note, 0.00% to
1/14/99, 9.375% from 1/15/99 to maturity 150,000 1/15/2004 115,125
Motels of America, Inc. Sr. Sub. Notes,
12.00% 175,000 4/15/2004 168,875
Norcal Waste Systems, Inc. Sr. Notes, 12.50%
to 5/14/96, 12.75% from 5/15/96 to
11/14/96, 13.00% from 11/15/96 to 5/14/97,
13.25% from 5/15/97 to 11/14/97, 13.50%
from 11/15/97 to maturity++ 250,000 11/15/2005 255,000
Overhead Door Corp., 12.25% 250,000 2/01/2000 250,000
Presidio Oil Co. Sr. Sec. Notes Series B,
11.50% |B( 200,000 9/15/2000 203,000
Ralphs Grocery Co. Sr. Note, 10.45% 150,000 6/15/2004 146,625
Sappi BVI Finance Ltd. Co. Note, 7.50%++ 365,000 8/12/2002 346,750
Tele-Communications Inc. Sr. Notes, 8.25% 375,000 1/15/2003 378,397
United Meridian Corp. Sr. Sub. Note, 10.375% 130,000 10/15/2005 134,550
Viacom Inc. Sr. Note, 6.75% 100,000 1/15/2003 93,282
---------
4,392,924
---------
Total Fixed Income Securities (Cost $13,189,125) 13,167,495
---------
SHORT-TERM OBLIGATIONS 12.9%
American Express Credit Corp., 5.20% 1,472,000 5/03/1996 1,472,000
American Express Credit Corp.,
5.05% 2,409,000 5/02/1996 2,409,000
Commercial Credit Co., 5.23% 2,859,000 5/03/1996 2,859,000
Ford Motor Credit Co., 5.18% 682,000 5/03/1996 682,000
General Electric Capital Corp.,
5.20% 2,599,000 5/08/1996 2,599,000
---------
Total Short-Term Obligations (Cost $10,021,000) 10,021,000
---------
Total Investments (Cost $68,275,535)--100.1% 77,966,180
Cash and Other Assets, Less Liabilities--(0.1)% (53,216)
---------
Net Assets--100.0% $77,912,964
=========
</TABLE>
<TABLE>
<S> <C>
Federal Income Tax Information:
At April 30, 1996, the net unrealized
appreciation of investments based on
cost for Federal income tax purposes
of $68,339,695 was as follows:
Aggregate gross unrealized appreciation
for all investments in which there is
an excess of value over tax cost $10,449,447
Aggregate gross unrealized depreciation
for all investments in which there is
an excess of tax cost over value (822,962)
----------
$9,626,485
==========
</TABLE>
_____________________________________________________________________________
ADR stands for American Depositary Receipt, 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 April 30, 1996 were $1,633,818 and $1,636,785 (2.10% of net
assets), respectively.
[ ] Security is in default.
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: AGGRESSIVE
___________________________________________________________________________
___________________________________________________________________________
Forward currency exchange contracts outstanding at April 30, 1996, 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 505,000 AUD .75070 AUD $(17,227) 5/15/96
Sell Australian dollars, buy U.S. dollars 85,500 AUD .75220 AUD (2,788) 5/15/96
Sell Australian dollars, buy U.S. dollars 516,000 AUD .78150 AUD (184) 7/24/96
Sell Australian dollars, buy U.S. dollars 205,000 AUD .78200 AUD 30 7/24/96
Sell Canadian dollars, buy U.S. dollars 155,310 CAD .72661 CAD (1,252) 5/15/96
Sell Canadian dollars, buy U.S. dollars 12,813 CAD .72648 CAD (105) 5/15/96
Sell Canadian dollars, buy U.S. dollars 122,500 CAD .73660 CAD 235 5/15/96
Sell Canadian dollars, buy U.S. dollars 252,000 CAD .73529 CAD (64) 7/24/96
Sell Danish krone, buy U.S. dollars 926,000 DKK .17621 DKK 6,156 5/15/96
Sell Danish krone, buy U.S. dollars 1,497,000 DKK .17164 DKK 2,277 7/24/96
Sell Danish krone, buy U.S. dollars 1,305,800 DKK .17167 DKK 2,025 7/24/96
Sell Deutsche mark, buy U.S. dollars 186,000 DEM .68169 DEM 5,191 5/15/96
Sell U.S. dollars, buy Deutsche mark 536,600 DEM .67820 DEM (13,076) 5/15/96
Sell Deutsche mark, buy U.S. dollars 906,900 DEM .68381 DEM 27,229 5/15/96
Sell Deutsche mark, buy U.S. dollars 56,400 DEM .68311 DEM 1,654 5/15/96
Sell Deutsche mark, buy U.S. dollars 840,000 DEM .67916 DEM 19,461 7/09/96
Sell Deutsche mark, buy U.S. dollars 495,000 DEM .66269 DEM 2,971 7/24/96
Sell European currency unit, buy U.S.
dollars 246,400 ECU 1.26095 ECU 7,940 5/15/96
Sell French francs, buy U.S. dollars 4,845,100 FRF .19881 FRF 22,637 7/09/96
Sell Japanese yen, buy U.S. dollars 95,940,000 JPY .00945 JPY (19,101) 7/09/96
Sell Pound sterling, buy U.S. dollars 48,900 GBP 1.53650 GBP 1,544 5/15/96
Sell U.S. dollars, buy Pound sterling 48,900 GBP 1.53250 GBP (1,349) 5/15/96
Sell U.S. dollars, buy Pound sterling 70,200 GBP 1.53100 GBP (1,831) 5/15/96
Sell Pound sterling, buy U.S. dollars 70,200 GBP 1.53637 GBP 2,208 5/15/96
Sell Swiss francs, buy U.S. dollars 595,000 CHF .84225 CHF 18,584 7/09/96
---------
$63,165
=========
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: AGGRESSIVE
___________________________________________________________________________
STATEMENT OF ASSETS AND LIABILITIES
___________________________________________________________________________
April 30, 1996 (Unaudited)
<TABLE>
<S> <C>
Assets
Investments, at value (Cost $68,275,535) (Note 1) $77,966,180
Cash 60,040
Receivable for securities sold 849,515
Interest and dividends receivable 315,788
Receivable for fund shares sold 211,257
Receivable for open forward contracts 120,142
Receivable from Distributor (Note 3) 3,126
Deferred organization costs and other assets (Note 1) 72,117
---------
79,598,165
Liabilities
Payable for securities purchased 1,528,335
Payable for open forward contracts 56,977
Accrued management fee (Note 2) 46,222
Accrued transfer agent and shareholder services
(Note 2) 8,274
Accrued trustees' fees (Note 2) 3,692
Payable for fund shares redeemed 1,106
Accrued service fee (Note 5) 139
Other accrued expenses 40,456
---------
1,685,201
---------
Net Assets $77,912,964
=========
Net Assets consist of:
Undistributed net investment income $ 213,787
Unrealized appreciation of investments 9,690,645
Unrealized appreciation of forward contracts and
foreign currency 61,758
Accumulated net realized gain 3,237,520
Shares of beneficial interest 64,709,254
---------
$77,912,964
=========
Net Asset Value and redemption price per share of Class
A shares ($595,471 / 50,022 shares of beneficial
interest) $11.90
=========
Maximum Offering Price per share of Class A shares
($11.90 / .955) $12.46
=========
Net Asset Value, offering price and redemption price
per share of Class C shares ($77,317,493 / 6,504,965
shares of beneficial interest) $11.89
=========
</TABLE>
- ----------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- ----------------------------------------------------------------------------
For the six months ended April 30, 1996 (Unaudited)
<TABLE>
<S> <C>
Investment Income
Interest $633,203
Dividends, net of foreign taxes of $8,398 319,239
--------
952,442
Expenses
Management fee (Note 2) 246,886
Custodian fee 91,398
Service fee--Class A (Note 5) 35,629
Transfer agent and shareholder services (Note 2) 21,483
Audit fee 10,649
Reports to shareholders 9,440
Trustees' fees (Note 2) 6,916
Legal fees 4,808
Amortization of organization costs (Note 1) 3,731
Registration fees 1,757
Miscellaneous 3,006
--------
435,703
Expenses borne by the Distributor (Note 3) (37,975)
--------
397,728
--------
Net investment income 554,714
--------
Realized and Unrealized Gain
(Loss) on Investments, Foreign
Currency and Forward Contracts
Net realized gain on investments (Notes 1 and 4) 3,382,990
Net realized loss on forward contracts and foreign
currency (Note 1) (22,089)
--------
Total net realized gain 3,360,901
--------
Net unrealized appreciation of investments 3,652,276
Net unrealized appreciation of forward contracts and
foreign currency 166,029
--------
Total net unrealized appreciation 3,818,305
--------
Net gain on investments, foreign currency and forward
contracts 7,179,206
--------
Net increase in net assets resulting from operations $7,733,920
========
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: AGGRESSIVE
___________________________________________________________________________
STATEMENT OF CHANGES IN NET ASSETS
___________________________________________________________________________
<TABLE>
<CAPTION>
Six months
ended
April 30, Year ended
1996 October 31,
(Unaudited) 1995
- ----------------------------------- ------------ --------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations:
Net investment income $ 554,714 $ 1,118,939
Net realized gain on investments,
foreign currency and forward
contracts 3,360,901 1,877,149
Net unrealized appreciation of
investments, foreign currency and
forward contracts 3,818,305 4,697,296
---------- ------------
Net increase resulting from
operations 7,733,920 7,693,384
---------- ------------
Dividends from net investment
income:
Class A (361,924) (853,158)
Class C (443,970) (262,218)
---------- ------------
(805,894) (1,115,376)
---------- ------------
Distribution from net realized gains:
Class A (850,522) --
Class C (463,669) --
---------- ------------
(1,314,191) --
---------- ------------
Net increase from fund share
transactions (Note 6) 11,935,128 2,684,658
---------- ------------
Total increase in net assets 17,548,963 9,262,666
Net Assets
Beginning of period 60,364,001 51,101,335
---------- ------------
End of period (including
undistributed net investment
income of $213,787, and $464,967,
respectively) $77,912,964 $60,364,001
========== ============
* Net realized gain for Federal
income tax purposes
(Note 1) $ 3,315,586 $ 1,314,496
========== ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
____________________________________________________________________________
NOTES TO UNAUDITED FINANCIAL STATEMENTS
____________________________________________________________________________
April 30, 1996
Note 1
State Street Research Strategic Portfolios: Aggressive (the "Fund"), is a
series of State Street Research Financial Trust, formerly 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 investment objective of the fund is to provide high total return from,
primarily, growth of capital and secondarily, current income, consistent with
reasonable investment risk.
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
10
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: AGGRESSIVE
___________________________________________________________________________
NOTES (cont'd)
___________________________________________________________________________
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.
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.
H. Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period.
Actual results could differ from those estimates.
Note 2
The Trust and State Street Research & Management Company (the "Adviser"), an
indirect wholly owned subsidiary of Metropolitan Life
Insurance Company ("Metropolitan"), have entered into an agreement under
which the Adviser earns monthly fees at an annual rate of 0.75% 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 six months ended April
30, 1996, the fees pursuant to such agreement amounted to $246,886.
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 six months
ended April 30, 1996, the amount of such expenses was $10,884.
The fees of the Trustees not currently affiliated with the Adviser amounted
to $6,916 during the six months ended April 30, 1996.
Note 3
The Distributor and its affiliates may from time to time and in varying
amounts voluntarily assume some portion of fees or expenses relating to the
Fund. During the six months ended April 30, 1996, the amount of such expenses
assumed by the Distributor and its affiliates was $37,975.
11
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: AGGRESSIVE
___________________________________________________________________________
___________________________________________________________________________
Note 4
For the six months ended April 30, 1996, purchases and sales of securities,
exclusive of short-term obligations, aggregated $42,058,672 and $39,247,332
(including $5,931,739 and $4,686,803 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 six
months ended April 30, 1996, fees pursuant to such plan amounted to $35,629 for
Class A shares.
Note 6
The Trustees have the authority to issue an unlimited number of shares of
beneficial interest, $.001 par value per share. At April 30, 1996, Metropolitan
owned 50,000 Class A shares and 5,301,401 Class C shares of the Fund and the
Adviser owned one Class A share of the Fund.
Share transactions were as follows:
<TABLE>
<CAPTION>
Six months ended
April 30, 1996 Year ended
(Unaudited) October 31, 1995
-------------------------- ----------------------------
Class A Shares Amount Shares Amount
- ------------------------------------------------- ---------- ------------ ---------- --------------
<S> <C> <C> <C> <C>
Shares sold -- $ -- 21 $ 191
Issued upon reinvestment of distribution from net
realized gains 78,245 850,523 -- --
Shares repurchased (3,647,468) (42,320,295) (1,616,379) (15,000,000)
-------- ---------- -------- ------------
Net decrease (3,569,223) $(41,469,772) (1,616,358) $(14,999,809)
======== ========== ======== ============
Class C Shares Amount Shares Amount
- ------------------------------------------------- -------- ---------- -------- ------------
Shares sold 4,612,968 $53,544,995 1,924,849 $18,026,952
Issued upon reinvestment of:
Dividends from net investment income 3,422 37,229 3,000 31,088
Distribution from net realized gains 44,415 484,461 -- --
Shares repurchased (58,133) (661,785) (36,027) (373,573)
Net increase 4,602,672 $53,404,900 1,891,822 $17,684,467
</TABLE>
12
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: AGGRESSIVE
___________________________________________________________________________
FINANCIAL HIGHLIGHTS
___________________________________________________________________________
For a share outstanding throughout each period.
<TABLE>
<CAPTION>
Class A Class C
----------------------------------------------------- -----------------------------------------------------
May 16, 1994 May 16, 1994
Six months ended (Commencement Six months ended (Comencement
April 30, 1996 Year ended of Operations) to April 30, 1996 Year ended of Operations) to
(Unaudited) October 31, 1995** October 31, 1994 (Unaudited)** October 31, 1995** October 31, 1994
---------------- ------------------ ----------------- ---------------- ------------------ -----------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of
period $10.93 $ 9.74 $ 9.55 $10.94 $ 9.74 $9.55
Net investment
income* .08 .20 .09 .11 .22 .10
Net realized and
unrealized gain
on investments,
foreign currency
and forward
contracts 1.23 1.19 .14 1.23 1.20 .14
Dividends from net
investment income (.10) (.20) (.04) (.15) (.22) (.05)
Distribution from
net realized gains (.24) -- -- (.24) -- --
----- ------ ------- -------- ------- ------
Net asset value,
end of period $11.90 $10.93 $9.74 $11.89 $10.94 $9.74
===== ====== ======= ======== ======= ======
Total return 12.23%+++ 14.49%+ 2.41%+++ 12.49%+++ 14.85%+ 2.50%+++
Net assets at end
of period (000s) $595 $39,555 $50,999 $77,317 $20,809 $102
Ratio of operating
expenses to average
net assets* 1.35%++ 1.35% 1.35%++ 1.10%++ 1.10% 1.10%++
Ratio of net
investment income
to average net
assets* 1.43%++ 1.98% 2.01%++ 1.88%++ 2.13% 2.26%++
Portfolio turnover
rate 63.60% 127.44% 37.75% 63.60% 127.44% 37.75%
Average commission
rate $.0018 -- -- $.0018 -- --
*Reflects voluntary
assumption of fees
or expenses per
share in each period
(Note 3) $.01 $.02 $.01 $.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.
13
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: AGGRESSIVE
___________________________________________________________________________
REPORT ON SPECIAL MEETING OF SHAREHOLDERS
___________________________________________________________________________
A Special Meeting of Shareholders of State Street Research Strategic Portfolios:
Aggressive ("Fund"), along with shareholders of other series of State Street
Research Financial Trust ("Meeting"), was convened on February 14, 1996, and
continued thereafter. The results of the Meeting are set forth below.
Votes (millions)
----------------
For Withheld
--- ---------
1. The following persons were elected as Trustees:
Edward M. Lamont 43.4 3.0
Robert A. Lawrence 43.4 3.0
Dean O. Morton 43.4 3.0
Thomas L. Phillips 43.4 3.0
Toby Rosenblatt 43.4 3.0
Michael S. Scott Morton 43.8 2.6
Ralph F. Verni 43.8 2.7
Jeptha H. Wade 43.8 2.6
Votes (millions)
--------------------
For Withheld Abstain
--- -------- -------
2. The Fund's fundamental policy on
diversification of investments was amended 3.9 0.4 1.0
3. The Master Trust Agreement was amended to
permit the Trustees to reorganize, merge or
liquidate a fund without prior shareholder
approval 33.1 7.3 4.2
4. The Master Trust Agreement was amended to
eliminate specified time permitted between the
record date and any shareholders meeting 34.4 5.7 4.4
14
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: AGGRESSIVE
___________________________________________________________________________
FUND INFORMATION, OFFICERS AND TRUSTEES OF
STATE STREET RESEARCH 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
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
15
<PAGE>
[BACK COVER PAGE]
State Street Research Strategic Portfolios: Aggressive Bulk Rate
One Financial Center U.S. Postage
Boston, MA 02111 PAID
Brockton, MA
Questions? Comments? Permit No. 600
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.
The Dalbar awards recognize quality shareholder service and should not be
considered a rating of fund performance. The survey included mutual fund
complexes that volunteered or were otherwise selected to participate and was
not industry-wide.
CONTROL NUMBER:3190-960620(0797)SSR-LD
Cover Illustration by Dorothy Cullinan SP-237E-696
<PAGE>
[COVER PAGE]
[LOGO] STATE STREET RESEARCH
STATE STREET RESEARCH
STRATEGIC PORTFOLIOS: CONSERVATIVE
SEMIANNUAL REPORT
April 30, 1996 [Illustration of person reaching for stars]
WHAT'S INSIDE
Investment Update
The Fund, economy
and markets
Fund Information:
Facts and Figures
Plus, Complete Portfolio Holdings
and Financial Statements
[DALBAR LOGO]
For Excellence
in
Shareholder Service
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: CONSERVATIVE
____________________________________________________________________________
INVESTMENT UPDATE
___________________________________________________________________________
INVESTMENT ENVIRONMENT
The Economy
(bullet) After slowing in late 1995, economic growth picked up speed in the
early months of 1996. At the same time, inflation has remained low.
(bullet) Consumer confidence and spending inched upward, despite higher debt
levels.
(bullet) The Federal Reserve cut interest rates by one-quarter point in
December 1995 and again in January 1996. Because of the stronger
economy, the Fed has since left rates untouched.
The Markets
(bullet) Stocks performed well, with gains concentrated in the largest stocks
at the end of 1995, and then in smaller stocks in 1996. The Dow
Jones Industrial Average, which represents 30 stocks, reported a
gain of 18.46% for the six months ended April 30, 1996. The much
broader Standard & Poor's 500 Index provided a total return of
13.76% over the same time period.
(bullet) Bond performance was mixed. The high-quality bond market was strong
at year-end 1995, then flattened entering 1996. Conversely,
high-yield bonds, which respond well to a strengthening economy,
contributed to strong first-quarter performance.
THE FUND
Over the past six months
(bullet) For the six months ended April 30, 1996, Class A shares of STRATEGIC
PORTFOLIOS: CONSERVATIVE provided a total return of +4.32% (does not
reflect sales charge).(2) The average total return for the 17 funds in
the Lipper Analytical Services' Flexible Income Funds category was
+5.31% (does not include sales charge).
(bullet) The Fund's short-term underperformance was largely the result of
first-quarter market activity: the bond market was flat, as the
economy unexpectedly gained strength, and the stock market saw a
flight from quality. High-yield bonds, while only a small percentage
of the bond portfolio, helped offset disappointing returns of
high-quality issues.
(bullet) The asset allocation in the Fund has remained relatively stable in
order to limit risk.
Current strategy
(bullet) On April 30, 1996, the Fund held 58% of its assets in bonds, 31% in
stocks, and 11% in cash.
(bullet) Most of the bonds in the Fund are high-grade bonds, with about 6% of
bonds invested in international debt.
(bullet) 15% of the Fund's portfolio is invested in stocks of undervalued
companies, with just over 10% in stocks of large U.S. companies. In
addition, about 5% of the portfolio is invested in international
stocks.
(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 Dow Jones Industrial Average represents 30 blue-chip U.S.
stocks and is a commonly used measure of U.S. stock market performance. The
indices are unmanaged and do not take sales charges into account. Direct
investment in the indices is not possible; results are for illustrative
purposes only.
(2)+4.48% 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.
Please note that the discussion throughout this shareholder report is dated
as indicated and because of possible changes in viewpoint, data, and
transactions, should not be relied upon as being current thereafter.
_____________________________________________________________________________
FUND INFORMATION
(all data are for periods ended April 30, 1996, except where otherwise noted)
_____________________________________________________________________________
SEC Average Annual Compound Rates
of Return for periods ended 3/31/96
(at maximum applicable sales charge)(3,4)
__________________________________________
Life of Fund
(since 5/16/94) 1 year
- ------------------------------------------
Class A +8.48%/+7.87% +10.35%/+9.82%
- ------------------------------------------
Class C +11.45%/+10.85% +15.85%/+15.29%
- ------------------------------------------
Average Annual Compound Rates of Return
for periods ended 4/30/96
(do not reflect sales charge)(3)
__________________________________________
Life of Fund
(since 5/16/94) 1 year
- ------------------------------------------
Class A +10.78%/+10.17% +13.54%/+13.01%
- ------------------------------------------
Class C +11.05%/+10.46% +13.84%/+13.30%
- ------------------------------------------
Asset Allocation
(by percentage of net assets)
[PIE CHART]
Bonds 58%
Stocks 31%
Cash 11%
Performance results for the Fund are increased by the distributor's voluntary
reduction of fees and expenses related to the Fund. The first figure reflects
expense reduction; the second shows what results would have been without
subsidization.
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: CONSERVATIVE
____________________________________________________________________________
INVESTMENT PORTFOLIO
____________________________________________________________________________
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Value
Shares (Note 1)
- ----------------------------------------- ----- -----------
<S> <C> <C>
EQUITY SECURITIES 30.5%
Basic Industries 5.9%
Chemical 2.4%
Agrium, Inc.* 2,500 $ 32,187
Atlantic Richfield Co.
2,900 81,925
Hoechst AG* 625 210,497
IMC Global, Inc. 2,480 91,450
L'Air Liquide* 200 36,343
Mallinckrodt Group, Inc. 1,600 63,000
Monsanto Co. 500 75,750
Potash Corp. of Saskatchewan, Inc. 1,000 70,500
Rohm & Haas Co. 3,000 199,125
---------
860,777
---------
Diversified 0.6%
Cardo AB* 1,400 30,553
Hoya Corp.* 1,000 35,371
Mark IV Industries, Inc. 4,338 90,014
Tenma Corp.* 2,000 49,328
---------
205,266
---------
Electrical Equipment 0.4%
General Electric Co. 1,700 131,750
Philips Electronics NV 1,000 35,875
---------
167,625
---------
Forest Product 0.2%
Aracruz Celulose ADR 3,300 29,700
Nippon Paper Industries Co.* 4,000 29,291
---------
58,991
---------
Machinery 1.1%
Briggs & Stratton Corp. 1,400 63,525
Case Corp. 1,700 85,850
Fluor Corp. 600 39,675
Kajima Corp.* 3,000 33,842
Linde AG* 81 49,524
Minebea Co. Ltd.* 4,000 36,748
Pall Corp. 1,900 53,200
Sundstrand Corp. 1,700 62,475
---------
424,839
---------
Metal & Mining 1.2%
Alumax, Inc.*
2,900 97,150
Aluminum Company of America 1,300 81,087
Bohler Uddeholm* 500 40,827
Nucor Corp. 1,300 73,125
RTZ Corp. PLC* 2,521 39,695
Reynolds Metals Co. 1,100 59,125
SGL Carbon AG* 500 47,194
---------
438,203
---------
Total Basic Industries 2,155,701
---------
Consumer Cyclical 4.1%
Automotive 1.5%
Exide Corp. 3,800 $ 106,875
Ford Motor Co. 7,200 258,300
Ford Motor Co. Series A Cv. Pfd. 600 69,600
Lear Seating Corp.* 2,600 85,800
Michelin Cl.B* 700 34,692
---------
555,267
---------
Building 0.3%
LaFarge Corp. 4,800 102,000
---------
Hotel & Restaurant 0.2%
Mirage Resorts, Inc.* 1,600 83,800
---------
Recreation 0.6%
Comcast Corp. Cl. A 1,000 17,500
Comcast Corp. Cl. A Special 400 7,000
Walt Disney Co. 609 37,758
Mattel, Inc. 3,250 84,500
News Corp. Ltd. ADR 1,500 35,250
Time Warner, Inc. 1,000 40,875
---------
222,883
---------
Retail Trade 1.5%
Federated Department Stores, Inc.*
2,900 96,788
Home Depot, Inc. 1,500 71,062
Home Shopping Network, Inc.* 6,700 78,725
Intimate Brands, Inc. Cl. A* 4,800 101,400
Thrifty Payless Holdings, Inc. Cl. B* 8,300 112,050
Wal-Mart Stores, Inc. 3,500 83,562
---------
543,587
---------
Total Consumer Cyclical 1,507,537
---------
Consumer Staple 5.2%
Business Service 0.3%
ADT Ltd.* 7,300 124,100
---------
Drug 1.1%
Eli Lilly & Co. 930 54,870
Merck & Company, Inc. 1,200 72,600
Pfizer, Inc. 2,200 151,525
Roussel-Uclaf* 400 94,282
Sandoz AG* 30 32,764
---------
406,041
---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: CONSERVATIVE
____________________________________________________________________________
INVESTMENT PORTFOLIO (cont'd)
____________________________________________________________________________
<TABLE>
<CAPTION>
Value
Shares (Note 1)
- ----------------------------------------- ----- -----------
<S> <C> <C>
Food & Beverage 2.0%
Anheuser-Busch, Inc. 1,300 $ 87,262
Campbell Soup Co. 1,100 68,750
Coca-Cola Co. 400 32,600
Coca-Cola Enterprises, Inc. 4,800 141,600
General Mills, Inc. 200 11,100
LVMH Moet Hennessy Louis Vuitton ADR* 200 51,166
PepsiCo, Inc. 2,300 146,050
Ralcorp Holdings, Inc.* 2,200 48,400
Whitman Corp. 5,600 141,400
---------
728,328
---------
Hospital Supply 1.2%
Baxter International, Inc. 3,000 132,750
Columbia/HCA Healthcare Corp.* 900 47,812
Johnson & Johnson 600 55,500
Medtronic, Inc. 1,100 58,437
Roche Holdings AG* 10 78,649
United Healthcare Corp. 1,000 58,500
---------
431,648
---------
Printing & Publishing 0.2%
Hollinger International, Inc.* 6,100 72,437
---------
Tobacco 0.4%
Philip Morris Cos., Inc. 1,600 144,200
---------
Total Consumer Staple 1,906,754
---------
Energy 3.1%
Oil 2.1%
Amerada Hess Corp. 2,200 124,575
Imperial Oil Ltd. 850 34,425
Oryx Energy Co. 3,800 60,800
Repsol S.A.* 1,500 55,012
Repsol S.A. ADR 1,900 70,300
Royal Dutch Petroleum Co. 600 85,950
Tosco Corp. 2,400 128,400
Total Cl. B ADR 2,600 89,050
Total S.A. Cl. B* 717 48,660
Woodside Petroleum Ltd. ADR* 7,700 44,518
---------
741,690
---------
Oil Service 1.0%
Baker Hughes, Inc. 3,200 101,600
Coflexip* 1,106 42,805
Halliburton Co. 1,400 80,325
Schlumberger Ltd. 1,000 88,250
Transocean AS* 2,000 56,016
---------
368,996
---------
Total Energy 1,110,686
---------
Finance 5.3%
Bank 2.4%
Banco Industrial Colombiano ADR 3,300 $ 64,762
BankAmerica Corp. 1,100 83,325
Bank of New York Company, Inc. 500 24,250
Chase Manhattan Corp.* 1,448 99,731
Citicorp 2,100 165,375
Fleet Financial Group, Inc. 3,700 159,100
Mellon Bank Corp. 1,300 69,875
Sparbanken Sverige AB++* 5,700 64,299
South Trust Corp. 2,900 78,663
Tornet Fastighets AB* 5,700 5,700
U.S. Bancorp 1,758 56,915
---------
871,995
---------
Financial Service 1.0%
Federal Home Loan Mortgage Corp. 2,200 183,425
Federal National Mortgage Association 6,100 186,813
---------
370,238
---------
Insurance 1.9%
ACE Ltd. 5,800 255,200
AMBAC, Inc. 2,200 106,975
Mid Ocean Ltd.* 3,100 110,825
PMI Group, Inc.* 2,900 123,250
Travelers/Aetna Property Casualty Corp.* 1,700 46,963
Travelers Group, Inc. 500 30,750
---------
673,963
---------
Total Finance 1,916,196
---------
Science & Technology 4.9%
Aerospace 0.6%
Boeing Co. 1,700 139,613
Honeywell, Inc. 500 26,312
Raytheon Co. 1,000 50,625
---------
216,550
---------
Computer Software & Service 1.9%
Cisco Systems, Inc.* 3,500 181,563
Computervision Corp.* 10,800 130,950
General Motors Corp. Cl. E 1,400 78,925
Microsoft Corp.* 1,400 158,725
Western Digital Corp.* 5,400 126,900
---------
677,063
---------
Electronic Components 0.6%
AMP, Inc. 1,100 49,225
BBC Brown Boveri AG* 30 36,147
Intel Corp.* 1,300 88,075
Thomas & Betts Corp. 1,200 47,250
---------
220,697
---------
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: CONSERVATIVE
____________________________________________________________________________
____________________________________________________________________________
<TABLE>
<CAPTION>
Value
Shares (Note 1)
- ----------------------------------------- ----- -----------
<S> <C> <C>
Electronic Equipment 1.1%
Lucent Technologies, Inc.* 1,000 $ 35,125
L.M. Ericsson Telephone Co. ADR Cl. B* 3,390 69,071
L.M. Ericsson Telephone Co. Cl. B* 3,568 72,343
Nokia AB Pfd. Cl. A* 760 27,152
Perkin-Elmer Corp. 2,700 148,163
Tokyo Electronics Ltd.* 1,000 37,187
---------
389,041
---------
Office Equipment 0.7%
Digital Equipment Corp.* 2,000 119,500
International Business Machines Corp. 1,400 150,500
270,000
---------
Total Science & Technology 1,773,351
---------
Utility 2.0%
Electric 0.3%
Allegheny Power Systems, Inc. 1,000 29,250
American Electric Power, Inc. 1,300 52,813
Texas Utilities Co. 1,300 52,325
---------
134,388
---------
Natural Gas 0.7%
Coastal Corp. 2,200 87,175
ENSERCH Corp. 6,400 137,600
TransTexas Gas Corp.* 2,600 26,325
---------
251,100
---------
Telephone 1.0%
AT&T Corp. 900 55,125
AirTouch Communications, Inc.* 2,300 71,875
BCE, Inc. 1,000 39,375
Orange PLC* 12,700 45,501
Southern New England Telecom Corp. 3,200 142,400
---------
354,276
---------
Total Utility 739,764
---------
Total Equity Securities (Cost $9,516,517) 11,109,989
---------
</TABLE>
<TABLE>
<CAPTION>
Principal Maturity Value
Amount Date (Note 1)
----------------------------- --------- --------- -----------
<S> <C> <C> <C>
FIXED INCOME SECURITIES 57.9%
U.S. Treasury 15.4%
U.S. Treasury Bond, 12.00% $ 200,000 8/15/2013 $ 282,750
U.S. Treasury Bond, 8.125% 1,275,000 8/15/2021 1,428,000
U.S. Treasury Bond, 6.25% 775,000 8/15/2023 698,949
U.S. Treasury Note, 8.50% 575,000 5/15/1997 590,905
U.S. Treasury Note, 5.125% 275,000 6/30/1998 269,800
U.S. Treasury Note, 6.75% 675,000 5/31/1999 684,173
U.S. Treasury Note, 7.125% 450,000 9/30/1999 461,178
U.S. Treasury Note, 6.875% 350,000 3/31/2000 356,181
U.S. Treasury Note, 6.25% 875,000 8/31/2000 870,074
---------
5,642,010
---------
U.S. Agency Mortgage 21.7%
Federal Home Loan Mortgage
Corp. Gold, 6.00% 586,500 4/01/2011 555,709
Federal Home Loan Mortgage
Corp. Gold, 9.50% 158,342 7/25/2022 168,631
Federal Home Loan Mortgage
Corp. Series 29-H PAC, 6.50% 125,000 3/25/2023 118,710
Federal Home Loan Mortgage
Corp. Gold, 7.00% 896,936 6/01/2024 865,821
Federal Home Loan Mortgage
Corp. Gold, 7.50% 564,257 8/01/2024 558,260
Federal Home Loan Mortgage
Corp. Gold, 8.00% 80,461 6/01/2025 81,316
Federal Home Loan Mortgage
Corp. Gold, 7.50% 288,582 11/01/2025 285,514
Federal Home Loan Mortgage
Corp. Gold, 7.50% 387,750 4/01/2026 374,724
Federal Home Loan Mortgage
Corp. Gold, 7.50%+ 1,075,000 5/20/2026 1,062,906
Government National Mortgage
Association, 8.00% 349,595 5/15/2008 361,283
Government National Mortgage
Association, 6.50% 146,073 2/15/2009 142,284
Government National Mortgage
Association, 6.50% 73,861 6/15/2009 71,945
Government National Mortgage
Association, 6.50% 336,704 7/15/2009 327,970
Government National Mortgage
Association, 8.00% 143,549 10/15/2017 147,684
Government National Mortgage
Association, 8.00% 194,234 2/15/2022 197,809
Government National Mortgage
Association, 8.00% 172,678 12/15/2022 175,857
Government National Mortgage
Association, 6.50% 93,073 12/15/2023 87,111
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: CONSERVATIVE
____________________________________________________________________________
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, 6.50% $476,392 7/15/2024 $ 445,870
Government National Mortgage
Association, 7.00% 341,355 1/15/2025 328,661
Government National Mortgage
Association, 7.00% 49,619 10/15/2025 47,774
Government National Mortgage
Association, 7.50% 394,732 11/15/2025 390,165
Government National Mortgage
Association, 7.50% 202,000 4/15/2026 199,663
Government National Mortgage
Association, 8.00%+ 925,000 6/19/2026 933,961
---------
7,929,628
---------
Canadian--Yankee 2.0%
British Columbia
Hydroelectric Authority Deb.
Series FH, 15.50% 225,000 7/15/2011 244,071
Hydro-Quebec Deb. Series HS,
9.40% 325,000 2/01/2021 375,063
Laidlaw, Inc. Deb., 8.75% 100,000 4/15/2025 106,145
---------
725,279
---------
Trust Certificates 1.3%
Cooperative Utility Trust
Certificates, 10.70% 225,000 9/15/2017 249,104
Rural Electric Cooperative
Grantor Trust Certificates,
10.11% 200,000 12/15/2017 220,228
---------
469,332
---------
Foreign Government 5.5% Australian
Dollar
Government of Australia,
9.50% 750,000 8/15/2003 617,315
Canadian
Dollar
Government of Canada, 7.50% 420,000 12/01/2003 306,691
Danish
Krone
Kingdom of Denmark, 8.00% 800,000 3/15/2006 142,975
Kingdom of Denmark, 8.00% 975,000 11/15/2001 178,414
French
Franc
Government of France, 8.00% 175,000 4/25/2003 233,339
Deutsche
Mark
Republic of Germany, 8.00% 725,000 1/21/2002 528,749
---------
2,007,483
---------
Finance/Mortgage 8.1%
Associates Corp. of North
America Note, 6.375% $200,000 10/15/2002 193,894
ASFS Corp. Series 94-C2 A-1,
8.00% 92,594 8/25/2010 94,070
Beneficial Corp. Note, 8.17% 250,000 11/09/1999 260,810
Citibank Credit Card Master
Trust 94-4, 8.25% $150,000 11/07/2003 $ 159,188
Countrywide Funding Corp.
Note, 6.28% 200,000 1/15/2003 188,910
Discover Credit Card Trust
Series 1993-A, 6.25% 250,000 8/16/2000 249,530
First Chicago Credit Card
Trust Series 91-D, 8.40% 100,000 6/15/1998 100,656
Ford Credit Auto Loan Master
Trust Series 95-1, 6.50% 375,000 8/15/2002 371,130
GE Global Insurance Holdings
Corp. Note, 7.00% 225,000 2/15/2026 209,363
General Electric Capital
Corp. Deb., 7.625% 225,000 7/24/1996 226,035
General Motors Acceptance
Corp. Note, 7.85% 325,000 11/17/1997 332,855
Household Affinity Master
Trust Series 94-1A, 6.275% 175,000 5/15/2001 175,000
Household Finance Co. Note,
6.75% 125,000 6/01/2000 124,526
Prudential Home Mortgage
Series 93-29 A-6 PAC, 6.75% 257,546 8/25/2008 257,305
---------
2,943,272
---------
Corporate 3.9%
Chevron Corp. Note, 8.11% 175,000 12/01/2001 184,147
Columbia/HCA Healthcare Corp.
Note, 6.87% 150,000 9/15/2003 147,294
Continental Cablevision, Inc.
Sr. Note, 8.30%++ 100,000 5/15/2006 102,750
Electronic Data Systems Corp.
Note, 6.85%++ 250,000 5/15/2000 251,070
ITT Corp. Note, 6.25% 125,000 11/15/2000 121,590
K-III Communication Corp. Sr.
Note, 8.50%++ 75,000 2/01/2006 70,500
Loews Corp. Sr. Notes, 7.00% 125,000 10/15/2023 110,049
Sappi BVI Finance Ltd. Cv.
Note, 7.50%++ 55,000 8/12/2002 52,250
Tele-Communications Inc. Sr.
Notes, 8.25% 175,000 1/15/2003 176,585
Viacom Inc. Sr. Note, 6.75% 200,000 1/15/2003 186,564
---------
1,402,799
---------
Total Fixed Income Securities (Cost $21,173,480) 21,119,803
---------
</TABLE>
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>
Short-Term Obligations 15.8%
Commercial Credit Co., 5.28% $ 600,000 5/20/1996 $ 600,000
Ford Motor Credit Co., 5.29% 647,000 5/03/1996 647,000
General Electric Capital
Corp., 5.22% 1,400,000 5/08/1996 1,400,000
Norwest Financial Inc., 5.27% 862,000 5/20/1996 862,000
Norwest Financial Inc., 5.25% 365,000 5/01/1996 365,000
Philip Morris Cos., Inc.,
5.35% 670,000 5/06/1996 698,060
Philip Morris Cos., Inc.,
5.33% 700,000 5/20/1996 669,512
Toys 'R Us, Inc., 5.40% 538,000 5/01/1996 538,000
---------
Total Short-Term Obligations (Cost $5,779,572) 5,779,572
---------
Total Investments (Cost $36,469,569)--104.2% 38,009,364
Cash and Other Assets, Less Liabilities--(4.2)% (1,533,439)
---------
Net Assets--100.0% $36,475,925
=========
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Federal Income Tax Information:
At April 30, 1996, the net unrealized appreciation
of investments based on cost for Federal income
tax purposes of $36,491,832 was as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of value
over tax cost $1,928,181
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax
cost over value (410,649)
---------
$1,517,532
=========
</TABLE>
______________________________________________________________________________
ADR stands for American Depositary Receipt, 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 April 30, 1996 were $538,581 and $540,869 (1.48%
of net assets), respectively.
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: CONSERVATIVE
____________________________________________________________________________
INVESTMENT PORTFOLIO (cont'd)
____________________________________________________________________________
Forward currency exchange contracts outstanding at April 30, 1996, 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 318,000 AUD .75070 AUD $(10,848) 5/15/96
Sell Australian dollars, buy U.S. dollars 32,600 AUD .75220 AUD (1,063) 5/15/96
Sell Australian dollars, buy U.S. dollars 265,900 AUD .78150 AUD (95) 7/24/96
Sell Australian dollars, buy U.S. dollars 112,000 AUD .78200 AUD 16 7/24/96
Sell Canadian dollars, buy U.S. dollars 78,655 CAD .72661 CAD (634) 5/15/96
Sell Canadian dollars, buy U.S. dollars 98,100 CAD .73314 CAD (151) 5/15/96
Sell Canadian dollars, buy U.S. dollars 5,407 CAD .72648 CAD (44) 5/15/96
Sell Canadian dollars, buy U.S. dollars 122,500 CAD .73659 CAD 235 5/15/96
Sell Canadian dollars, buy U.S. dollars 101,000 CAD .73529 CAD (27) 7/24/96
Sell Swiss francs, buy U.S. dollars 99,000 CHF .84225 CHF 3,092 7/09/96
Sell Danish krone, buy U.S. dollars 352,000 DKK .17621 DKK 2,340 5/15/96
Sell Danish krone, buy U.S. dollars 529,600 DKK .16961 DKK 26 5/15/96
Sell Danish krone, buy U.S. dollars 104,000 DKK .17164 DKK 158 7/24/96
Sell Danish krone, buy U.S. dollars 837,500 DKK .17167 DKK 1,299 7/24/96
Sell U.S. dollars, buy Deutsche mark 321,400 DEM .67820 DEM (7,846) 5/15/96
Sell Deutsche mark, buy U.S. dollars 113,000 DEM .68169 DEM 3,153 5/15/96
Sell Deutsche mark, buy U.S. dollars 573,000 DEM .68381 DEM 17,204 5/15/96
Sell Deutsche mark, buy U.S. dollars 28,200 DEM .68311 DEM 827 5/15/96
Sell Deutsche mark, buy U.S. dollars 135,100 DEM .65389 DEM 15 5/15/96
Sell Deutsche mark, buy U.S. dollars 130,000 DEM .67916 DEM 3,012 7/09/96
Sell Deutsche mark, buy U.S. dollars 257,000 DEM .66270 DEM 1,543 7/24/96
Sell European currency unit, buy U.S. dollars 109,500 ECU 1.26095 ECU 3,529 5/15/96
Sell European currency unit, buy U.S. dollars 77,400 ECU 1.23000 ECU 99 5/15/96
Sell French francs, buy U.S. dollars 704,800 FRF .19881 FRF 3,293 7/09/96
Sell Japanese yen, buy U.S. dollars 15,060,000 JPY .00945 JPY (2,998) 7/09/96
Sell U.S. dollars, buy Pound sterling 24,300 GBP 1.53250 GBP (670) 5/15/96
Sell U.S. dollars, buy Pound sterling 23,400 GBP 1.53100 GBP (610) 5/15/96
Sell Pound sterling, buy U.S. dollars 24,300 GBP 1.53650 GBP 767 5/15/96
Sell Pound sterling, buy U.S. dollars 23,400 GBP 1.53637 GBP 736 5/15/96
========
$16,358
=========
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: CONSERVATIVE
____________________________________________________________________________
STATEMENT OF ASSETS AND LIABILITIES
____________________________________________________________________________
April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
<S> <C>
Assets
Investments, at value (Cost $36,469,569) (Note 1) $38,009,364
Cash 64,308
Receivable for securities sold 1,024,747
Interest and dividends receivable 309,102
Receivable for fund shares sold 117,472
Receivable for open forward contracts 41,344
Receivable from Distributor (Note 3) 9,304
Deferred organization costs and other assets (Note 1) 63,794
----------
39,639,435
Liabilities
Payable for securities purchased 3,023,424
Accrued transfer agent and shareholder services (Note
2) 31,109
Payable for open forward contracts 24,986
Payable for fund shares redeemed 24,692
Accrued management fee (Note 2) 17,579
Accrued trustees' fees (Note 2) 2,809
Accrued service (Note 5) 108
Other accrued expenses 38,803
----------
3,163,510
----------
Net Assets $36,475,925
==========
Net Assets consist of:
Undistributed net investment income $231,213
Unrealized appreciation of investments 1,539,795
Unrealized appreciation of forward contracts and
foreign currency 15,804
Accumulated net realized gain 814,138
Shares of beneficial interest 33,874,975
----------
$36,475,925
==========
Net Asset Value and redemption price per share of Class
A shares ($529,721 / 50,023 shares of beneficial
interest) $10.59
==========
Maximum Offering Price per share of Class A shares
($10.59 / .955) $11.09
==========
Net Asset Value, offering price and redemption price
per share of Class C shares ($35,946,204 / 3,422,503
shares of beneficial interest) $10.50
==========
</TABLE>
____________________________________________________________________________
STATEMENT OF OPERATIONS
____________________________________________________________________________
For the six months ended April 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
<S> <C>
Investment Income
Interest $784,078
Dividends, net of foreign taxes of $937 70,777
----------
854,855
Expenses
Management fee (Note 2) 93,192
Custodian fee 65,632
Transfer agent and shareholder services (Note 2) 39,933
Service fee--Class A (Note 5) 24,567
Audit fee 10,238
Registration fees 8,585
Trustees' fees (Note 2) 8,367
Reports to shareholders 8,325
Amortization of organization costs (Note 1) 3,731
Miscellaneous 517
----------
263,087
Expenses borne by the Distributor (Note 3) (98,721)
----------
164,366
----------
Net investment income 690,489
----------
Realized and Unrealized Gain (Loss)
on Investments, Foreign Currency
and Forward Contracts
Net realized gain on investments (Notes 1 and 4) 875,553
Net realized loss on forward contracts and foreign
currency (Note 1) (35,153)
----------
Total net realized gain 840,400
----------
Net unrealized depreciation of investments (314,716)
Net unrealized appreciation of forward contracts and
foreign currency 62,997
----------
Total net unrealized depreciation (251,719)
----------
Net gain on investments, foreign currency and forward
contracts 588,681
----------
Net increase in net assets resulting from operations $1,279,170
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: CONSERVATIVE
____________________________________________________________________________
STATEMENT OF CHANGES IN NET ASSETS
____________________________________________________________________________
<TABLE>
<CAPTION>
Six months
ended
April 30, Year ended
1996 October 31,
(Unaudited) 1995
- ---------------------------- ------------ ---------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations:
Net investment income $690,489 $ 1,288,775
Net realized gain on
investments, foreign
currency and forward
contracts 840,400 791,816
Net unrealized appreciation
(depreciation) of
investments, foreign
currency and forward
contracts (251,719) 1,955,540
---------- -------------
Net increase resulting from
operations 1,279,170 4,036,131
---------- -------------
Dividends from net
investment income:
Class A (445,030) (1,230,373)
Class C (318,243) (51,204)
---------- -------------
(763,273) (1,281,577)
---------- -------------
Distribution from
net realized gains:
Class A (651,838) --
Class C (42,210) --
---------- -------------
(694,048) --
---------- -------------
Net increase from fund share
transactions (Note 6) 7,584,236 1,200,860
---------- -------------
Total increase in net assets 7,406,085 3,955,414
Net Assets
Beginning of period 29,069,840 25,114,426
---------- -------------
End of period (including
undistributed net
investment income of
$231,213 and $303,997,
respectively) $36,475,925 $29,069,840
========== =============
* Net realized gain for
Federal income tax
purposes
(Note 1) $870,225 $693,902
========== =============
</TABLE>
____________________________________________________________________________
NOTES TO UNAUDITED FINANCIAL STATEMENTS
____________________________________________________________________________
April 30, 1996
Note 1
State Street Research Strategic Portfolios: Conservative (the "Fund") is a
series of State Street Research Financial Trust, formerly 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 investment objective of the fund is to provide, primarily, 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 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.
9
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: CONSERVATIVE
____________________________________________________________________________
____________________________________________________________________________
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.
H. Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period.
Actual results could differ from those estimates.
Note 2
The Trust and State Street Research & Management Company (the "Adviser"), an
indirect wholly owned subsidiary of Metropolitan Life
Insurance Company ("Metropolitan"), have entered into an agreement under
which the Adviser earns monthly fees at an annual rate of 0.60% 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 six months ended April
30, 1996, the fees pursuant to such agreement amounted to $93,192.
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 six months
ended April 30, 1996, the amount of such expenses was $7,019.
The fees of the Trustees not currently affiliated with the Adviser amounted
to $8,367 during the six months ended April 30, 1996.
Note 3
The Distributor and its affiliates may from time to time and in varying
amounts voluntarily assume some portion of fees or expenses relating to the
Fund. During the six months ended April 30, 1996, the amount of such expenses
assumed by the Distributor and its affiliates was $98,721.
Note 4
For the six months ended April 30, 1996, purchases and sales of securities,
exclusive of short-term obligations, aggregated $23,258,412 and $19,416,157
(including $11,601,400 and $10,396,624 of U.S. Government securities),
respectively.
10
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: CONSERVATIVE
____________________________________________________________________________
NOTES (cont'd)
____________________________________________________________________________
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 six months ended April 30, 1996, fees
pursuant to such plan amounted to $24,567 for Class A.
Note 6
The Trustees have the authority to issue an unlimited number of shares of
beneficial interest, $.001 par value per share. At April 30, 1996,
Metropolitan owned 50,000 Class A shares and 2,628,016 Class C shares of the
Fund and the Adviser owned one Class A share of the Fund.
Share transactions were as follows:
<TABLE>
<CAPTION>
Six months ended
April 30, 1996 Year ended
(Unaudited) October 31, 1995
-------------------------- ----------------------
Class A Shares Amount Shares Amount
- ---------------------------------------------- ---------- ------------ ------- -----------
<S> <C> <C> <C> <C>
Shares sold -- $ -- 21 $ 192
Issued upon reinvestment of distribution from
net realized gains 62,677 651,777 -- --
Shares repurchased (2,630,477) (28,098,377) -- --
-------- ---------- ----- ---------
Net increase (decrease) (2,567,800) $(27,446,600) 21 $192
======== ========== ===== =========
Class C Shares Amount Shares Amount
- ---------------------------------------------- -------- ---------- ----- ---------
Shares sold 3,325,031 $35,430,280 164,827 $1,608,388
Issued upon reinvestment of:
Dividends from net investment income 5,312 55,437 3,527 35,611
Distribution from net realized gains 4,058 42,206 -- --
Shares repurchased (47,589) (497,087) (43,134) (443,331)
-------- ---------- ----- ---------
Net increase 3,286,812 $35,030,836 125,220 $1,200,668
======== ========== ===== =========
</TABLE>
11
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: CONSERVATIVE
____________________________________________________________________________
FINANCIAL HIGHLIGHTS
____________________________________________________________________________
For a share outstanding throughout each period:
<TABLE>
<CAPTION>
Class A Class C
----------------------------------------------------- -----------------------------------------------------
May 16, 1994 May 16, 1994
Six months ended (Commencement Six months ended (Comencement
April 30, 1996 Year ended of Operations) to April 30, 1996 Year ended of Operations) to
(Unaudited) October 31, 1995** October 31, 1994 (Unaudited)** October 31, 1995** October 31, 1994
---------------- ------------------ ----------------- ---------------- ------------------ -----------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $10.56 $ 9.56 $ 9.55 $ 10.56 $ 9.56 $ 9.55
Net investment
income* .22 .47 .20 .26 .52 .21
Net realized and
unrealized gain
(loss) on
investments,
foreign currency
and forward
contracts .23 1.00 (.09) .21 .97 (.09)
Dividends from net
investment income (.17) (.47) (.10) (.28) (.49) (.11)
Distribution from
net realized gains (.25) -- -- (.25) -- --
----- ------ ------ ------- ------ ------
Net asset value,
end of period $10.59 $10.56 $ 9.56 $10.50 $10.56 $9.56
===== ====== ====== ====== ====== ======
Total return 4.32%+++ 15.84%+ 1.15%+++ 4.48%+++ 16.11%+ 1.25%+++
Net assets at
end of period (000s) $530 $27,637 $25,014 $35,946 $1,433 $100
Ratio of operating
expenses to
average net assets* 1.15%++ 1.15% 1.15%++ 0.90%++ 0.90% 0.90%++
Ratio of net
investment income to
average net assets* 4.35%++ 4.74% 4.48%++ 4.61%++ 4.91% 4.73%++
Portfolio turnover
rate 65.80% 132.50% 70.35% 65.80% 132.50% 70.35%
Average commission
rate $.0016 -- -- $.0016 -- --
*Reflects voluntary
assumption of fees
or expenses per share
in each period
(Note 3). $.02 $.05 $.03 $.02 $.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.
12
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: CONSERVATIVE
____________________________________________________________________________
REPORT ON SPECIAL MEETING OF SHAREHOLDERS
____________________________________________________________________________
A Special Meeting of Shareholders of State Street Research Strategic Portfolios:
Conservative ("Fund"), along with shareholders of other series of State Street
Research Financial Trust ("Meeting"), was convened on February 14, 1996, and
continued thereafter. The results of the Meeting are set forth below.
Votes (millions)
----------------
For Withheld
--- ---------
1. The following persons were elected as
Trustees:
Edward M. Lamont 43.4 3.0
Robert A. Lawrence 43.4 3.0
Dean O. Morton 43.4 3.0
Thomas L. Phillips 43.4 3.0
Toby Rosenblatt 43.4 3.0
Michael S. Scott Morton 43.8 2.6
Ralph F. Verni 43.8 2.7
Jeptha H. Wade 43.8 2.6
Votes (millions)
-------------------
For Against Abstain
--- ------- -------
2. The Fund's fundamental policy on
diversification of investments was not
amended 1.3 1.1 0.2
3. The Master Trust Agreement was amended to
permit the Trustees to reorganize, merge or
liquidate a fund without prior shareholder
approval 33.1 7.3 4.2
4. The Master Trust Agreement was amended to
eliminate specified time permitted between
the record date and any shareholders meeting 34.4 5.7 4.4
13
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: CONSERVATIVE
____________________________________________________________________________
FUND INFORMATION, OFFICERS AND TRUSTEES OF
STATE STREET RESEARCH FINANCIAL TRUST
____________________________________________________________________________
Fund Information
State Street Research
One Financial Center
Boston, MA 02111
Investment Adviser
State Street Research &
Management Company
One Financial Center
Boston, MA 02111
Distributor
State Street Research
Investment Services, Inc.
One Financial Center
Boston, MA 02111
Shareholder Services
State Street Research
Shareholder Services
P.O. Box 8408
Boston, MA 02266-8408
1-800-562-0032
Custodian
State Street Bank and
Trust Company
225 Franklin Street
Boston, MA 02110
Legal Counsel
Goodwin, Procter & Hoar
Exchange Place
Boston, MA 02109
Officers
Ralph F. Verni
Chairman of the Board,
President and
Chief Executive Officer
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 Strategic Portfolios: Conservative [Bulk Rate
One Financial Center U.S. Postage
Boston, MA 02111 Paid
Brockton, MA
Permit No. 600]
Questions? Comments?
Call us at 1-800-562-0032,
or write us at:
State Street Research
Shareholder Services
P.O. Box 8408
Boston, MA 02266-8408
[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.
The Dalbar awards recognize quality shareholder service and should not be
considered a rating of fund performance. The survey included mutual fund
complexes that volunteered or were otherwise selected to particiapte and was
not industry-wide.
CONTROL NUMBER:3191-960620(0797)SSR-LD
Cover Illustration by Dorothy Cullinan SP-125E-696
