<PAGE>
STATE STREET RESEARCH
--------------------------------------
GOVERNMENT INCOME FUND
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SEMIANNUAL REPORT
April 30, 1998
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WHAT'S INSIDE
--------------------------------------
INVESTMENT UPDATE
About the Fund, economy and markets
FUND INFORMATION
Facts and figures
PLUS, COMPLETE PORTFOLIO HOLDINGS
AND FINANCIAL STATEMENTS
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DALBAR LOGO
- -------------------
For Excellence
in
Shareholder Service
STATE STREET RESEARCH FUNDS
<PAGE>
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STATE STREET RESEARCH GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
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INVESTMENT UPDATE
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INVESTMENT ENVIRONMENT
THE ECONOMY
o The last quarter of 1997 and the first quarter of 1998 were periods of solid
economic growth, marked by low inflation and strong investment returns.
Unemployment fell to a 28-year low. Interest rates had little change, and
consumer confidence continued at near-record highs.
o Favorable economic factors have stimulated a boom in the housing market and
stronger- than-expected retail sales. Lower energy costs kept inflation in
check.
o Although last year's economic crisis in Southeast Asia raised concerns about
the U.S. exports and profits at multinational companies, the effects have yet
to make a significant impact on corporate profitability in the U.S.
THE MARKETS
o The S&P 500, a broad measure of common stock performance, gained 22.50% for
the six-month period ended April 30, 1998.(1) Small stocks rebounded from
losses following the turmoil in Southeast Asia, and large-capitalization
brand-name companies continued to benefit.
o Bonds delivered modest gains during the period. High-yield bonds were among
the strongest performers. Mortgage-backed securities held up well, despite
concerns that refinancing could become a negative factor in the future.
THE FUND
OVER THE PAST SIX MONTHS
o For the six months ended April 30, 1998, Class A shares of Government Income
Fund returned 3.25% (does not reflect sales charge).(2) The Fund outperformed
the average general U.S. government fund, which returned 3.17% according to
Lipper Analytical Services.
o The Fund's emphasis on long-term U.S. Treasuries and an underweighting in
mortgage-backed securities helped performance.
o Foreign interest rates dropped faster than U.S. rates. As a result, the
Fund's investment in non-dollar bonds made a positive contribution to
performance, despite accounting for only 5% of the portfolio.
CURRENT STRATEGY
o The Fund has been structured to anticipate a slowing economy and falling
interest rates. As a result, we increased the duration of the portfolio from
5.1 to 5.6 years. Duration is a measure of the Fund's sensitivity to changing
interest rates.
April 30, 1998
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.
(1) The Standard & Poor's 500 Composite Index (S&P 500) is a market-value
weighted index composed of 500 widely-held common stocks. The index is unmanaged
and does not take sales charges into account. Direct investment in the index is
not possible; results are for illustrative purposes only.
(2) 2.87% for Class B shares; 2.87% for Class C shares; 3.38% for Class S
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. "S" shares, offered
without a sales charge, are available only through certain employee benefit
plans and special programs.
(4) Performance reflects maximum 4.5% "A" share front-end sales charge or 5% "B"
share or 1% "C" share contingent deferred sales charges, where applicable.
(5) Before November 1, 1997, Class C shares were designated Class D and Class S
shares were designated Class C.
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FUND INFORMATION (all data are for periods ended April 30, 1998, except where
noted)
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
FOR PERIODS ENDED 3/31/98
(at maximum applicable sales charge)(3)(4)(5)
- -----------------------------------------------------------
10 YEARS 5 YEARS 1 YEAR
- -----------------------------------------------------------
Class A 7.89% 5.67% 6.59%
- -----------------------------------------------------------
Class B 7.97% 5.51% 5.73%
- -----------------------------------------------------------
Class C 7.98% 5.84% 9.72%
- -----------------------------------------------------------
Class S 8.51% 6.89% 11.90%
- -----------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
(does not reflect sales charge)(3)(5)
- -----------------------------------------------------------
10 YEARS 5 YEARS 1 YEAR
- -----------------------------------------------------------
Class A 8.46% 6.59% 10.47%
- -----------------------------------------------------------
Class B 8.04% 5.76% 9.69%
- -----------------------------------------------------------
Class C 8.05% 5.77% 9.68%
- -----------------------------------------------------------
Class S 8.59% 6.84% 10.76%
- -----------------------------------------------------------
SEC YIELD(5)
- -----------------------------------------------------------
Class A 5.31%
- -----------------------------------------------------------
Class B 4.83%
- -----------------------------------------------------------
Class C 4.82%
- -----------------------------------------------------------
Class S 5.82%
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SEC yield is based on the net investment income
produced for the 30 days ended April 30, 1998.
ASSET ALLOCATION
(by percentage of net assets)
U.S. Treasury 43%
U.S. Agency mortgage 27%
Other mortgages 13%
Trust certificates/other 8%
Foreign government 5%
U.S. Agency 3%
Cash 1%
<PAGE>
STATE STREET RESEARCH GOVERNMENT INCOME FUND
<TABLE>
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INVESTMENT PORTFOLIO
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April 30, 1998 (Unaudited)
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
PRINCIPAL MATURITY VALUE
AMOUNT DATE (NOTE 1)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. GOVERNMENT SECURITIES 72.4%
U.S. TREASURY 42.7%
U.S. Treasury Bond, 13.75% .................... $ 7,725,000 8/15/2004 $ 10,947,793
U.S. Treasury Bond, 11.625% ................... 39,400,000 11/15/2004 51,872,464
U.S. Treasury Bond, 10.75% .................... 9,500,000 8/15/2005 12,283,215
U.S. Treasury Bond, 12.00% .................... 12,000,000 8/15/2013 17,585,640
U.S. Treasury Bond, 9.875% .................... 8,500,000 11/15/2015 12,052,745
U.S. Treasury Bond, 9.25% ..................... 17,000,000 2/15/2016 22,992,500
U.S. Treasury Bond, 8.75% ..................... 19,150,000 5/15/2017 25,023,688
U.S. Treasury Bond, 8.50% ..................... 18,375,000 2/15/2020 23,798,565
U.S. Treasury Bond, 8.125% .................... 28,075,000 8/15/2021 35,282,414
U.S. Treasury Bond, 7.50% ..................... 20,000,000 11/15/2024 23,843,800
U.S. Treasury Bond, 6.875% .................... 24,825,000 8/15/2025 27,590,753
U.S. Treasury Bond, 6.625% .................... 3,675,000 2/15/2027 3,977,599
U.S. Treasury STRIPS, 0.00% ................... 13,000,000 11/15/2001 10,666,370
-------------
277,917,546
-------------
U.S. AGENCY MORTGAGE 27.0%
Federal Home Loan Mortgage Corp. FHA-VA, 9.00% 4,707,073 12/01/2009 4,995,381
Federal Home Loan Mortgage Corp. TBA, 6.00% ... 16,025,000 5/18/2013 15,814,672
Federal Housing Administration Charles River
Project, 9.625% ............................. 9,437,404 12/01/2033 10,375,246
Federal Housing Administration Court Yard
Project, 10.75% ............................. 6,469,228 8/01/2032 7,128,281
Federal Housing Administration East Bay Manor
Project, 10.00% ............................. 6,738,416 3/01/2033 7,381,724
Federal National Mortgage Association, 8.50% .. 10,000,000 2/01/2005 10,415,600
Federal National Mortgage Association, 7.00% .. 37,804 2/01/2024 38,300
Federal National Mortgage Association FHA-VA, 8.00% 3,703,750 4/01/2008 3,872,752
Federal National Mortgage Association FHA-VA, 8.00% 5,295,617 6/01/2008 5,537,256
Federal National Mortgage Association FHA-VA, 8.50% 6,887,131 2/01/2009 7,246,708
Federal National Mortgage Association FHA-VA, 9.00% 6,488,865 5/01/2009 6,910,252
Federal National Mortgage Association FHA-VA, 9.00% 1,493,036 4/01/2016 1,589,994
Federal National Mortgage Association TBA, 6.50% 36,225,000 4/15/2024 35,851,792
Government National Mortgage Association, 7.50% 9,305,074 6/15/2009 9,588,879
Government National Mortgage Association, 9.50% 2,407,345 9/15/2009 2,603,531
Government National Mortgage Association, 9.50% 4,385,070 10/15/2009 4,747,166
Government National Mortgage Association, 9.50% 1,919,634 11/15/2009 2,076,131
Government National Mortgage Association, 8.00% 1,549,780 10/15/2017 1,632,104
Government National Mortgage Association, 9.50% 792,177 11/15/2017 860,098
Government National Mortgage Association, 9.50% 10,435,362 11/15/2017 10,987,570
Government National Mortgage Association, 9.50% 246,668 9/15/2019 267,571
Government National Mortgage Association, 7.50% 2,287,548 9/15/2021 2,358,874
Government National Mortgage Association, 7.50% 1,268,438 1/15/2023 1,305,692
Government National Mortgage Association, 7.50% 10,847,213 6/15/2023 11,165,796
Government National Mortgage Association, 7.50% 682,083 8/15/2023 702,116
Government National Mortgage Association, 7.50% 744,316 10/15/2023 766,177
Government National Mortgage Association, 7.50% 499,008 12/15/2023 513,664
Government National Mortgage Association, 7.50% 663,312 1/15/2024 681,964
Government National Mortgage Association, 7.50% 8,466,434 4/15/2024 8,704,510
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176,119,801
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U.S. AGENCY 2.7%
EXIM Vnesheconombank, 5.73%+ .................. 7,000,000 1/15/2003 6,956,250
Guaranteed Export Trust Notes Series 95-A,
6.28% ....................................... 6,882,353 6/15/2004 6,962,670
Guaranteed Export Trust Notes Series 96-A,
6.55% ....................................... 3,479,405 6/15/2004 3,547,532
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17,466,452
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Total U.S. Government Securities (Cost $461,185,819) ................................... 471,503,799
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OTHER INVESTMENTS 26.5%
TRUST CERTIFICATES 8.3%
Cooperative Utility Trust Certificates, 9.52% . 24,525,000 3/15/2019 25,744,383
Government Backed Trust Class T-3, 9.625% ..... 7,329,589 5/15/2002 7,721,649
Government Trust Certificates
Class 2-E, 9.40% ............................ 19,554,120 5/15/2002 20,608,674
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54,074,706
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FOREIGN GOVERNMENT 4.9%
Australian Dollar
Commonwealth of Australia, 8.75% .............. 7,650,000 8/15/2008 6,078,968
New Zealand Dollar
Government of New Zealand, 10.00% 11,625,000 3/15/2002 7,007,495
Government of New Zealand, 8.00% .............. 9,500,000 11/15/2006 5,632,673
Pound Sterling
United Kingdom Treasury, 8.50% ................ 6,675,000 12/07/2005 12,913,332
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31,632,468
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FINANCE/MORTGAGE 13.3%
Chase Commercial Mortgage Securities Corp.
1996-2 A-2, 6.90% $ 4,675,000 9/19/2006 4,806,484
Chase Commercial Mortgage Securities Corp.
1997-1 A1, 7.27% ............................ 6,132,788 7/19/2004 6,381,549
Credit Suisse First Boston 97-C2 A2, 6.52% .... 6,680,000 7/17/2007 6,719,663
CWMBS Inc. Series 1994-9 A-2 PAC, 6.50% ....... 6,844,898 5/25/2024 6,855,593
DMARC Corp. 98-C1 A2, 6.54% ................... 4,950,000 6/15/2031 5,061,387
First Union Lehman Brothers Commercial Corp.
97-C2 A2, 6.60% 3,275,000 11/18/2029 3,299,563
First Union Lehman Brothers Commercial Corp.
Series 97-C2 A1, 6.48% ...................... 4,624,629 3/18/2004 4,666,539
GE Capital Mortgage Services Inc., 5.85% ...... 1,548,363 9/25/2023 1,542,061
GMAC Commercial Mortgage Security Inc. 1997-C2
A, 6.55% .................................... 6,700,000 4/15/2029 6,752,344
GMAC Commercial Mortgage Security Inc. 1998-C1
A1, 6.41% ................................... 3,175,000 11/15/2007 3,190,824
LB Commercial Conduit Mortgage Trust 98-C1 A1,
6.33% ....................................... 6,616,661 11/18/2004 6,550,494
Merrill Lynch Mortgage Investments Inc. Series
1997-C2 A1, 6.46% 3,281,150 12/10/2029 3,326,266
Merrill Lynch Mortgage Investments Inc. Series
1998-C2 A1, 6.22% 4,952,939 2/15/2030 4,968,418
Morgan Stanley Capital Inc. 98 A1, 6.19% ...... 3,084,292 1/15/2007 3,144,259
Prudential Home Mortgage Securities Co. Series
93-29 A-6 PAC, 6.75% ........................ 6,684,133 8/25/2008 6,707,059
Residential Funding Corp. Series 93-S25 A-1,
6.50% ....................................... 6,187,480 7/25/2008 6,200,968
Structured Asset Securities Corp. Series 97-
LL1-A1, 6.79% ............................... 6,552,276 6/12/2004 6,705,845
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86,879,316
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Total Other Investments (Cost $174,370,224) ............................................ 172,586,490
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COMMERCIAL PAPER 9.2%
Federal Home Loan Bank, 5.38% ................. 20,000,000 5/01/1998 20,000,000
Federal Home Loan Mortgage Corp., 5.41% ....... 14,810,000 5/08/1998 14,794,450
Federal National Mortgage Association, 5.44% . 4,975,000 5/13/1998 4,965,995
Federal National Mortgage Association, 5.41% .. 20,000,000 5/13/1998 19,964,067
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Total Commercial Paper (Cost $59,724,512) .............................................. 59,724,512
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SHARES
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SHORT-TERM INVESTMENTS 10.4%
Navigator Securities Lending Prime Portfolio
67,885,188 67,885,188
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Total Short-Term Investments (Cost $67,885,188) ........................................ 67,885,188
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Total Investments (Cost $763,165,743) -- 118.5% ........................................ 771,699,989
Other Assets, Less Liabilities -- (18.5%) .............................................. (120,353,134)
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Net Assets - 100.0% .................................................................... $ 651,346,855
=============
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Federal Income Tax Information:
At April 30, 1998, the net unrealized appreciation of investments based on cost for
Federal income tax purposes of $763,165,743 was as follows:
Aggregate gross unrealized appreciation for all investments in which there is an excess
of value over tax cost ............................................................... $ 13,970,635
Aggregate gross unrealized depreciation for all investments in which there is an excess
of tax cost over value ............................................................... (5,436,389)
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$ 8,534,246
=============
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TBA 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 1%.
+ 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, 1998 were $7,000,000 and $6,956,250 (1.08% of net assets), respectively.
Forward currency exchange contracts outstanding at April 30, 1998 are as follows:
<CAPTION>
UNREALIZED
CONTRACT APPRECIATION DELIVERY
TOTAL VALUE PRICE (DEPRECIATION) DATE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> >
Sell Australian dollars, Buy U.S. dollars 1,272,000 AUD .67830 AUD $ 32,954 5/13/98
Sell Australian dollars, Buy U.S. dollars 1,980,000 AUD .66880 AUD 31,824 6/10/98
Sell Australian dollars, Buy U.S. dollars 4,000,000 AUD .65110 AUD (8,985) 7/23/98
Sell Australian dollars, Buy U.S. dollars 5,120,000 AUD .65120 AUD (10,989) 7/23/98
Buy Australian dollars, Sell U.S. dollars 1,272,000 AUD .66950 AUD (21,760) 5/13/98
Buy Australian dollars, Sell U.S. dollars 1,980,000 AUD .66125 AUD (16,875) 6/10/98
Sell British pounds, Buy U.S. dollars 7,539,000 GBP 1.67265 GBP 49,484 7/23/98
Sell New Zealand dollars, Buy U.S. dollars 10,700,000 NZD .55600 NZD 48,167 7/23/98
Sell New Zealand dollars, Buy U.S. dollars 10,310,000 NZD .55570 NZD 43,319 7/23/98
Sell New Zealand dollars, Buy U.S. dollars 2,280,000 NZD .58265 NZD 63,376 5/13/98
--------
$210,515
========
Written put option transactions during the six months ended April 30, 1998 were as follows:
<CAPTION>
PRINCIPAL
AMOUNT PREMIUMS
--------- ---------
<S> <C> <C>
Outstanding, beginning of period -- --
Options written $14,500,000 $108,320
Options expired (14,500,000) (108,320)
Options closed -- --
----------- --------
Outstanding, end of period $ -- $ --
=========== ========
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
STATE STREET RESEARCH GOVERNMENT INCOME FUND
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STATEMENT OF ASSETS AND LIABILITIES
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April 30,1998 (Unaudited)
ASSETS
Investments, at value (Cost $763,165,743) (Note 1) ............ $771,699,989
Interest receivable ........................................... 10,379,410
Receivable for fund shares sold ............................... 523,029
Receivable for open forward contracts ......................... 269,124
Other assets .................................................. 21,065
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782,892,617
LIABILITIES
Payable for collateral received on securities loaned .......... 67,885,188
Payable for securities purchased .............................. 59,010,424
Dividends payable ............................................. 1,943,632
Payable for fund shares redeemed .............................. 1,603,735
Accrued management fee (Note 2) ............................... 350,474
Accrued transfer agent and shareholder services
(Note 2) .................................................... 255,397
Accrued distribution and service fees (Note 3) ................ 202,813
Accrued trustees' fees (Note 2) ............................... 65,856
Payable for open forward contracts ............................ 58,609
Payable to custodian .......................................... 756
Other accrued expenses ........................................ 168,878
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131,545,762
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NET ASSETS $651,346,855
============
Net Assets consist of:
Undistributed net investment income ......................... $ 2,026,381
Unrealized appreciation of investments ...................... 8,534,246
Unrealized appreciation of forward contracts
and foreign currency ...................................... 202,704
Accumulated net realized loss ............................... (29,164,919)
Paid-in capital ............................................. 669,748,443
------------
$651,346,855
============
Net Asset Value and redemption price per share of
Class A shares ($505,083,619 / 39,929,896 shares) $12.65
======
Maximum Offering Price per share of Class A
shares ($12.65 / .955) ............................................... $13.25
======
Net Asset Value and offering price per share of Class B shares
($101,787,385 / 8,071,630 shares)* ................................... $12.61
======
Net Asset Value and offering price per share of Class C shares
($16,899,398 / 1,339,239 shares)* .................................... $12.62
======
Net Asset Value, offering price and redemption
price per share of Class S shares
($27,576,453 / 2,182,040 shares) ..................................... $12.64
======
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* Redemption price per share for Class B and Class C is equal to net asset
value less any applicable contingent deferred sales charge.
<PAGE>
STATE STREET RESEARCH GOVERNMENT INCOME FUND
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STATEMENT OF OPERATIONS
- -----------------------------------------------------------------------------
For the six months ended April 30, 1998 (Unaudited)
INVESTMENT INCOME
Interest (Note 1) ......................................... $ 24,586,431
EXPENSES
Management fee (Note 2) ..................................... 2,147,719
Transfer agent and shareholder services (Note 2) ............ 348,474
Custodian fee ............................................... 127,704
Service fee-Class A (Note 3) ................................ 641,459
Distribution and service fees-Class B (Note 3) .............. 499,327
Distribution and service fees-Class C (Note 3) .............. 82,241
Reports to shareholders ..................................... 28,918
Legal fees .................................................. 24,710
Audit fee ................................................... 21,901
Trustees' fees (Note 2) ..................................... 21,754
Registration fees ........................................... 11,904
Miscellaneous ............................................... 1,479
------------
3,957,590
------------
Net investment income ....................................... 20,628,841
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS, OPTIONS, FORWARD
CONTRACTS AND FOREIGN CURRENCY
Net realized gain on investments (Notes 1 and 4) ............ 8,240,887
Net realized gain on written options ........................ 108,320
Net realized gain on forward contracts and foreign
currency (Note 1) ......................................... 2,175,361
------------
Total net realized gain ................................... 10,524,568
------------
Net unrealized depreciation of investments .................. (10,531,232)
Net unrealized appreciation of forward contracts
and foreign currency ...................................... 236,719
------------
Total net unrealized depreciation ......................... (10,294,513)
------------
Net gain on investments, options, forward
contracts and foreign currency ............................ 230,055
------------
Net increase in net assets resulting from
operations ................................................ $ 20,858,896
============
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATE STREET RESEARCH GOVERNMENT INCOME FUND
- -------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------
SIX MONTHS ENDED
YEAR ENDED APRIL 30, 1998
OCTOBER 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income ...................... $ 42,425,199 $ 20,628,841
Net realized gain on investments, options,
forward contracts and foreign currency ... 8,763,745 10,524,568
Net unrealized appreciation (depreciation)
of investments, forward contracts and
foreign currency ......................... 2,557,699 (10,294,513)
------------ ------------
Net increase resulting from operations ..... 53,746,643 20,858,896
------------ ------------
Dividends from net investment income:
Class A .................................. (35,201,643) (16,564,162)
Class B .................................. (5,410,928) (2,854,086)
Class C .................................. (880,065) (470,373)
Class S .................................. (1,061,597) (1,052,868)
------------ ------------
(42,554,233) (20,941,489)
------------ ------------
Net decrease from fund share transactions
(Note 5) ................................. (42,731,617) (18,803,274)
------------ ------------
Total decrease in net assets ............... (31,539,207) (18,885,867)
NET ASSETS
Beginning of period ........................ 701,771,929 670,232,722
------------ ------------
End of period (including undistributed net
investment income of $2,339,029 and
$2,026,381, respectively) ................ $670,232,722 $651,346,855
============ ============
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATE STREET RESEARCH GOVERNMENT INCOME FUND
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NOTES TO UNAUDITED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
April 30, 1998
NOTE 1
State Street Research Government Income Fund (the "Fund"), is a series of
State Street Research 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. Before November 1, 1997, Class C
shares were designated Class D and Class S shares were designated Class C.
Class A shares are subject to an initial sales charge of up to 4.50% and an
annual service fee 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 subject to a contingent deferred sales
charge of 1.00% on any shares redeemed within one year of their purchase.
Class C shares also pay annual distribution and service fees of 1.00%. Class S
shares are only offered through certain retirement accounts, advisory accounts
of State Street Research & Management Company (the "Adviser"), an indirect
wholly owned subsidiary of Metropolitan Life Insurance Company
("Metropolitan"), and special programs. No sales charge is imposed at the time
of purchase or redemption of Class S shares. Class S shares do not pay any
distribution or service fees. The Fund's expenses are borne pro-rata by each
class, except that each class bears expenses, and has exclusive voting rights
with respect to provisions of the Plan of Distribution, related specifically
to that class. The Trustees declare separate dividends on each class of
shares.
The following significant accounting policies are consistently followed by the
Fund in preparing its financial statements, and such policies are in
conformity with generally accepted accounting principles for investment
companies.
A. INVESTMENT VALUATION
Securities are valued by a pricing service, which utilizes market
transactions, quotations from dealers, and various relationships among
securities in determining value. Securities for which there is no such
valuation, if any, are valued at their fair value as determined in accordance
with established methods consistently applied. Short-term securities maturing
within sixty days are valued at amortized cost. Securities quoted in foreign
currencies are translated into U.S. dollars at the current exchange rate.
B. SECURITY TRANSACTIONS
Security transactions are accounted for on the trade date (date the order to
buy or sell is executed). Realized gains or losses are reported on the basis
of identified cost of securities delivered. Gains and losses that arise from
changes in exchange rates are not segregated from gains and losses that arise
from changes in market prices of investments.
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
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.
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,
1997, the Fund had a capital loss carryforward of $39,689,487 available, to
the extent provided in regulations, to offset future capital gains, if any, of
which $18,353,379, $17,196,293 and $4,139,815 expires on October 31, 1998,
2002 and 2004, respectively. The Fund had a capital loss carryforward of
$40,525,802 expire on October 31, 1997. 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 $5,100,777,
of which $3,074,207 and $2,026,570 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.
H. WRITTEN PUT OPTIONS
The Fund may write put options to enhance return and to hedge against
unfavorable market conditions. A written put option is a contract in which the
option writer grants the option buyer the right to sell back to the writer a
designated security at a specified price and time. The premium paid by the
buyer is recorded in the Fund's accounts as a liability and subsequently
marked to the current market value of the written option resulting in an
unrealized gain or loss. Exchange traded written options are valued at the
last sale price, or if the sales are reported, the last ask price. If the
written option expires unexercised, the Fund will realize a gain in the amount
of the premium. If the option is closed, the Fund will recognize a gain or
loss based on the difference between the cost of closing the option and the
premium. If the option is exercised, the Fund's cost basis of the acquired
security will be the exercise price decreased by the premium. The Fund accepts
the risk of a decline in value of the underlying security below the exercise
price and the risk that an illiquid secondary market will limit the Fund's
ability to close the option contract.
I. SECURITIES LENDING
The Fund may seek additional income by lending portfolio securities to
qualified institutions. The Fund will receive cash or securities as collateral
in an amount equal to at least 100% of the current market value of any loaned
securities plus accrued interest. By reinvesting any cash collateral it
receives in these transactions, the Fund could realize additional gains and
losses. If the borrower fails to return the securities and the value of the
collateral has declined during the term of the loan, the Fund will bear the
loss. At April 30, 1998, the value of the securities loaned and the value of
collateral were $66,777,082 and $67,885,188, respectively. During the six
months ended April 30, 1998, income from securities lending amounted to
$12,334 and is included in interest income.
NOTE 2
The Trust and the Adviser have entered into an agreement under which the
Adviser earns monthly fees at an annual rate of 0.65% 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, 1998, the fees
pursuant to such agreement amounted to $2,147,719.
State Street Research Service Center, a division of State Street Research
Investment Services, Inc., the Trust's principal underwriter (the
"Distributor"), an indirect wholly owned subsidiary of Metropolitan, provides
certain shareholder services to the Fund such as responding to inquires 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, 1998, the amount of such expenses was $104,498.
The fees of the Trustees not currently affiliated with the Adviser amounted to
$21,754 during the six months ended April 30, 1998.
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 C shares. In addition, the
Fund pays annual distribution fees of 0.75% of average daily net assets for
Class B and Class C shares. The Distributor uses such payments for personal
services and/or the maintenance or servicing of shareholder accounts, to
compensate or 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,
1998, fees pursuant to such plan amounted to $641,459, $499,327 and $82,241
for Class A, Class B and Class C shares, respectively.
The Fund has been informed that the Distributor and MetLife Securities, Inc.,
a wholly owned subsidiary of Metropolitan, earned initial sales charges
aggregating $26,734 and $135,622, respectively, on sales of Class A shares of
the Fund during the six months ended April 30, 1998, and that MetLife
Securities, Inc. earned commissions aggregating $140,136 on sales of Class B
shares, and that the Distributor collected contingent deferred sales charges
aggregating $103,784 and $563 on redemptions of Class B and Class C shares,
respectively, during the same period.
NOTE 4
For the six months ended April 30, 1998, purchases and sales of securities,
exclusive of short-term obligations, aggregated $448,913,668 and $477,789,869
(including $387,543,306 and $407,664,097 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, 1998,
Metropolitan owned 1,373,252 Class S shares of the Fund.
Share transactions were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED APRIL 30, 1998
OCTOBER 31, 1997 (UNAUDITED)
------------------------------- ------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold .................. 1,724,885 $ 21,326,126 1,324,058 $ 16,788,813
Issued in connection with
acquisition of International
Fixed Income Fund .......... 122,345 1,514,628 -- --
Issued upon reinvestment of
dividends .................. 1,617,477 20,020,535 714,169 9,051,652
Shares repurchased ........... (8,994,512) (111,248,439) (3,569,046) (45,304,354)
---------- ------------ ---------- ------------
Net decrease ................. (5,529,805) $(68,387,150) (1,530,819) $(19,463,889)
========== ============ ========== ============
<CAPTION>
CLASS B SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold .................. 1,428,886 $ 17,617,666 1,247,647 $ 15,790,615
Issued in connection with
acquisition of International
Fixed Income Fund .......... 226,623 2,798,800 -- --
Issued upon reinvestment of
dividends .................. 289,207 3,569,308 147,600 1,865,993
Shares repurchased ........... (1,914,285) (23,580,814) (1,033,304) (13,070,414)
---------- ------------ ---------- ------------
Net increase ................. 30,431 $ 404,960 361,943 $ 4,586,194
========== ============ ========== ============
<CAPTION>
CLASS C (FORMERLY CLASS D) SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold .................. 463,886 $ 5,714,578 239,256 $ 3,007,144
Issued in connection with
acquisition of International
Fixed Income Fund .......... 46,221 571,293 -- --
Issued upon reinvestment of
dividends .................. 51,335 634,002 23,217 293,722
Shares repurchased ........... (436,411) (5,400,255) (214,550) (2,695,939)
---------- ------------ ---------- ------------
Net increase ................. 125,031 $ 1,519,618 47,923 $ 604,927
========== ============ ========== ============
<CAPTION>
CLASS S (FORMERLY CLASS C) SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold .................. 211,412 $ 2,620,092 128,416 $ 1,627,658
Issued in connection with
acquisition of International
Fixed Income Fund .......... 1,845,952 22,834,432 -- --
Issued upon reinvestment of
dividends .................. 42,472 525,501 25,523 323,329
Shares repurchased ........... (184,733) (2,249,070) (512,277) (6,481,493)
---------- ------------ ---------- ------------
Net increase (decrease) ...... 1,915,103 $ 23,730,955 (358,338) $ (4,530,506)
========== ============ ========== ============
</TABLE>
<PAGE>
STATE STREET RESEARCH GOVERNMENT INCOME FUND
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
<TABLE>
For a share outstanding throughout each period:
<CAPTION>
CLASS A
-------------------------------------------------------------------------------------------------------
YEARS ENDED OCTOBER 31 SIX MONTHS ENDED
-------------------------------------------------------------------------------- APRIL 30, 1998
1993 1994(1) 1995(1) 1996(1) 1997(1) (UNAUDITED)(1)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD ($) 12.38 12.92 11.68 12.58 12.43 12.65
----- ----- ----- ----- ----- -----
Net investment income ($) 0.84 0.81 0.83 0.81 0.80 0.40
Net realized and
unrealized gain
(loss) on
investments, options,
forward contracts and
foreign currency ($) 0.56 (1.26) 0.88 (0.17) 0.22 0.01
----- ----- ----- ----- ----- -----
TOTAL FROM INVESTMENT
OPERATIONS ($) 1.40 (0.45) 1.71 0.64 1.02 0.41
----- ----- ----- ----- ----- -----
Dividends from net
investment income ($) (0.84) (0.79) (0.81) (0.79) (0.80) (0.41)
Distribution from net
realized gains ($) (0.02) -- -- -- -- --
----- ----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS ($) (0.86) (0.79) (0.81) (0.79) (0.80) (0.41)
----- ----- ----- ----- ----- -----
NET ASSET VALUE, END OF
PERIOD ($) 12.92 11.68 12.58 12.43 12.65 12.65
===== ===== ===== ===== ===== =====
Total return(3) (%) 11.63 (3.58) 15.07 5.28 8.52 3.25(4)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of
period ($ thousands) 868,556 638,418 655,045 584,313 524,565 505,084
Ratio of operating
expenses to average net
assets (%) 1.05 1.07 1.10 1.09 1.08 1.08(5)
Ratio of net investment
income to average net
assets (%) 6.59 6.54 6.83 6.50 6.44 6.36(5)
Portfolio turnover rate (%) 103.49 134.41 105.57 88.79 124.95 68.40
<CAPTION>
CLASS B
-------------------------------------------------------------------------------------------------------
YEARS ENDED OCTOBER 31 SIX MONTHS ENDED
-------------------------------------------------------------------------------- APRIL 30, 1998
1993(2) 1994(1) 1995(1) 1996(1) 1997(1) (UNAUDITED)(1)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD ($) 12.67 12.91 11.66 12.55 12.40 12.61
----- ----- ----- ----- ----- -----
Net investment income ($) 0.30 0.72 0.73 0.71 0.70 0.35
Net realized and
unrealized gain
(loss) on
investments, options,
forward contracts and
foreign currency ($) 0.24 (1.27) 0.87 (0.16) 0.22 0.01
----- ----- ----- ----- ----- -----
TOTAL FROM INVESTMENT
OPERATIONS ($) 0.54 (0.55) 1.60 0.55 0.92 0.36
----- ----- ----- ----- ----- -----
Dividends from net
investment income ($) (0.30) (0.70) (0.71) (0.70) (0.71) (0.36)
----- ----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS ($) (0.30) (0.70) (0.71) (0.70) (0.71) (0.36)
----- ----- ----- ----- ----- -----
NET ASSET VALUE, END OF
PERIOD ($) 12.91 11.66 12.55 12.40 12.61 12.61
===== ===== ===== ===== ===== =====
Total return(3) (%) 4.32(4) (4.38) 14.15 4.51 7.66 2.87(4)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of
period ($ thousands) 26,578 52,319 87,908 95,218 97,253 101,787
Ratio of operating
expenses to average net
assets (%) 1.81(5) 1.82 1.85 1.84 1.83 1.83(5)
Ratio of net investment
income to average net
assets (%) 5.67(5) 5.86 6.01 5.75 5.68 5.61(5)
Portfolio turnover rate (%) 103.49 134.41 105.57 88.79 124.95 68.40
- --------------------------------------------------------------------------------------------------------------------------------
(1) Per-share figures have been calculated using the average shares method.
(2) June 1, 1993 (commencement of shares class designations) to October 31, 1993.
(3) Does not reflect any front-end or contingent deferred sales charges.
(4) Not annualized.
(5) Annualized.
<CAPTION>
CLASS C (FORMERLY CLASS D)
--------------------------------------------------------------------------------------------------------
YEARS ENDED OCTOBER 31 SIX MONTHS ENDED
-------------------------------------------------------------------------------- APRIL 30, 1998
1993(2) 1994(1) 1995(1) 1996(1) 1997(1) (UNAUDITED)(1)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD ($) 12.67 12.91 11.66 12.56 12.41 12.62
----- ----- ----- ----- ----- -----
Net investment income ($) 0.30 0.72 0.74 0.71 0.70 0.35
Net realized and
unrealized gain
(loss) on
investments, options,
forward contracts and
foreign currency ($) 0.24 (1.27) 0.87 (0.16) 0.22 0.01
----- ----- ----- ----- ----- -----
TOTAL FROM INVESTMENT
OPERATIONS ($) 0.54 (0.55) 1.61 0.55 0.92 0.36
----- ----- ----- ----- ----- -----
Dividends from net
investment income ($) (0.30) (0.70) (0.71) (0.70) (0.71) (0.36)
----- ----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS ($) (0.30) (0.70) (0.71) (0.70) (0.71) (0.36)
----- ----- ----- ----- ----- -----
NET ASSET VALUE, END OF
PERIOD ($) 12.91 11.66 12.56 12.41 12.62 12.62
===== ===== ===== ===== ===== =====
Total return(3) (%) 4.32(4) (4.38) 14.24 4.51 7.65 2.87(4)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of
period ($ thousands) 12,101 13,425 13,033 14,473 16,301 16,899
Ratio of operating
expenses to average net
assets (%) 1.88(5) 1.82 1.85 1.84 1.83 1.83(5)
Ratio of net investment
income to average net
assets (%) 5.59(5) 5.84 6.08 5.76 5.68 5.61(5)
Portfolio turnover rate (%) 103.49 134.41 105.57 88.79 124.95 68.40
<CAPTION>
CLASS S (FORMERLY CLASS C)
--------------------------------------------------------------------------------------------------------
YEARS ENDED OCTOBER 31 SIX MONTHS ENDED
-------------------------------------------------------------------------------- APRIL 30, 1998
1993(2) 1994(1) 1995(1) 1996(1) 1997(1) (UNAUDITED)(1)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD ($) 12.67 12.92 11.67 12.57 12.42 12.64
----- ----- ----- ----- ----- -----
Net investment income ($) 0.19 0.84 0.90 0.84 0.80 0.42
Net realized and
unrealized gain
(loss) on
investments, options,
forward contracts and
foreign currency ($) 0.42 (1.27) 0.84 (0.17) 0.25 0.00
----- ----- ----- ----- ----- -----
TOTAL FROM INVESTMENT
OPERATIONS ($) 0.61 (0.43) 1.74 0.67 1.05 0.42
----- ----- ----- ----- ----- -----
Dividends from net
investment income ($) (0.36) (0.82) (0.84) (0.82) (0.83) (0.42)
----- ----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS ($) (0.36) (0.82) (0.84) (0.82) (0.83) (0.42)
----- ----- ----- ----- ----- -----
NET ASSET VALUE, END OF
PERIOD ($) 12.92 11.67 12.57 12.42 12.64 12.64
===== ===== ===== ===== ===== =====
Total return(3) (%) 4.82(4) (3.42) 15.37 5.55 8.80 3.38(4)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of
period ($ thousands) 36 203 5,036 7,767 32,115 27,576
Ratio of operating
expenses to average net
assets (%) 0.80(5) 0.82 0.85 0.84 0.82 0.83(5)
Ratio of net investment
income to average net
assets (%) 6.59(5) 8.01 6.79 6.78 6.66 6.61(5)
Portfolio turnover rate (%) 103.49 134.41 105.57 88.79 124.95 68.40
- -------------------------------------------------------------------------------------------------------------------------------
(1) Per-share figures have been calculated using the average shares method.
(2) June 1, 1993 (commencement of shares class designations) to October 31, 1993.
(3) Does not reflect any front-end or contingent deferred sales charges.
(4) Not annualized.
(5) Annualized.
</TABLE>
<PAGE>
STATE STREET RESEARCH GOVERNMENT INCOME FUND
<TABLE>
- -----------------------------------------------------------------------------------------------------------
FUND INFORMATION, OFFICERS AND TRUSTEES OF STATE STREET RESEARCH FINANCIAL TRUST
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
FUND INFORMATION OFFICERS TRUSTEES
STATE STREET RESEARCH RALPH F. VERNI RALPH F. VERNI
GOVERNMENT INCOME FUND Chairman of the Board, Chairman of the Board,
One Financial Center President and President, Chief Executive
Boston, MA 02111 Chief Executive Officer Officer and Director,
State Street Research &
INVESTMENT ADVISER PETER C. BENNETT Management Company
State Street Research & Vice President
Management Company
One Financial Center JOHN H. KALLIS STEVE A. GARBAN
Boston, MA 02111 Vice President Retired; formerly Senior Vice
President for Finance and
DISTRIBUTOR THOMAS A. SHIVELY Operations and Treasurer, The
State Street Research Vice President Pennsylvania State University
Investment Services, Inc.
One Financial Center GERARD P. MAUS
Boston, MA 02111 Treasurer MALCOLM T. HOPKINS
Former Vice Chairman of the
SHAREHOLDER SERVICES JOSEPH W. CANAVAN Board and Chief Financial
State Street Research Assistant Treasurer Officer, St. Regis Corp.
Service Center
P.O. Box 8408 DOUGLAS A. ROMICH
Boston, MA 02266-8408 Assistant Treasurer EDWARD M. LAMONT
1-800-562-0032 Formerly in banking (with an
FRANCIS J. MCNAMARA, III affiliate of J.P. Morgan & Co.
CUSTODIAN Secretary and General Counsel in New York); presently engaged
State Street Bank and in private investments and
Trust Company DARMAN A. WING civic affairs
225 Franklin Street Assistant Secretary and
Boston, MA 02110 Assistant General Counsel
ROBERT A. LAWRENCE
LEGAL COUNSEL AMY L. SIMMONS Formerly Partner, Saltonstall & Co.
Goodwin, Procter & Hoar LLP Assistant Secretary
Exchange Place
Boston, MA 02109 DEAN O. MORTON
Retired; formerly Executive
Vice President, Chief
Operating Officer and Director,
Hewlett-Packard 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
</TABLE>
<PAGE>
STATE STREET RESEARCH GOVERNMENT INCOME FUND -------------------
One Financial Center Bulk Rate
Boston, MA 02111 U.S. Postage
PAID
Permit #6
Hartford, CT
-------------------
QUESTIONS? COMMENTS?
CALL us at 1-800-562-0032 or
WRITE us at:
State Street Research
Service Center
P.O. Box 8408
Boston, MA 02266-8408
E-MAIL us at:
[email protected]
INTERNET site:
WWW.SSRFUNDS.COM
[LOGO] STATE STREET RESEARCH
This report is prepared for the general information of current shareholders.
When used in the general solicitation of investors, this report must be
accompanied or preceded by a current State Street Research Money Market Fund
prospectus. When used after June 30, 1998, this report must be accompanied by a
current Quarterly Performance Update.
Portfolio changes should not be considered recommendations for action by
individual investors.
The Dalbar awards recognize quality shareholder service and should not be
considered a rating of fund performance. The survey included mutual fund
complexes that volunteered or were otherwise selected to participate and was not
industry-wide.
CONTROL NUMBER: 4996-980617(0799)SSR-LD
GI-049E-0698
<PAGE>
STATE STREET RESEARCH
------------------------------
STRATEGIC PORTFOLIOS: MODERATE
------------------------------
SEMIANNUAL REPORT
April 30, 1998
------------------------------
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
STATE STREET RESEARCH FUNDS
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: MODERATE
- -------------------------------------------------------------------------------
INVESTMENT UPDATE
- -------------------------------------------------------------------------------
INVESTMENT ENVIRONMENT
THE ECONOMY
o The U.S. economy experienced solid growth during the last quarter of 1997
and the first quarter of 1998. Inflation was low and the financial markets,
in general, were strong. Unemployment fell to a 28-year low. Interest rates
had little change, and consumer confidence continued at near- record highs.
o Favorable economic factors have stimulated a boom in the housing market and
stronger- than-expected retail sales. Lower energy costs kept inflation in
check.
o Although last year's economic crisis in Southeast Asia raised concerns about
the U.S. exports and profits at multinational companies, the effects have
yet to make a significant impact on corporate profitability in the United
States.
THE MARKETS
o The S&P 500, a broad measure of common stock performance, gained 22.50% for
the six-month period ended April 30, 1998.(1) Small stocks rebounded from
declines following the turmoil in Southeast Asia. Large-capitalization
brand-name companies continued to benefit.
o Bonds delivered modest gains during the period. High-yield bonds were among
the strongest performers. Mortgage-backed securities held up well, despite
concerns that refinancing could become a negative factor in the future.
THE FUND
OVER THE PAST SIX MONTHS
o For the six months ended April 30, 1998, Class S shares of Strategic
Portfolios: Moderate returned 10.51%. The Fund fell a little short of the
Lipper balanced fund average, which was up 11.46% over the same period.
o The Fund's investments in stocks, 50% of portfolio assets, accounted for its
strong performance. Stocks of large- and small-cap growth companies did
well, and a lower capital gains rate made growth stocks more attractive.
o International stocks and bonds underperformed at first, then recovered in
early 1998.
CURRENT STRATEGY
o No major changes were made to the Fund's asset allocation (shown below)
during the period. Generally, the manager is underweighting large-cap stocks
and overweighting bonds for their attractive real returns and lower risk
profile.
o The Fund is positioned to anticipate continued slow, steady growth in the
U.S. with low inflation. Asia is still a question mark for U.S. companies
and for the economy, as well. Diversification among value and growth assets,
small- and large- cap stocks, and domestic and international sectors should
help the Fund deal with the current uncertainty.
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.
(1) The Standard & Poor's 500 Composite Index (S&P 500) is a market-value
weighted index composed of 500 widely held common stocks. The index is
unmanaged and does not take transaction charges into account. Direct
investment in the index is not possible; results are for illustrative
purposes only.
(2) All returns represent past performance, which is no guarantee of future
results. The investment return and principal value of an investment made in
the Fund will fluctuate and shares, when redeemed, may be worth more or less
than their original cost. All returns assume reinvestment of capital gain
distributions and income dividends.
(3) "S" shares, offered without a sales charge, are available only through
certain employee benefit plans and special programs.
(4) Before November 1, 1997, Class S shares were designated Class C.
April 30, 1998
- -------------------------------------------------------------------------------
FUND INFORMATION (all data are for periods ended April 30, 1998, except where
noted)
- -------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
FOR PERIODS ENDED 3/31/98(2)(3)(4)
- ---------------------------------------------------------------------------
LIFE OF FUND
(since 9/28/93) 1 YEAR
- ---------------------------------------------------------------------------
Class S 12.09% 26.44%
- ---------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN(2)(3)(4)
- ---------------------------------------------------------------------------
LIFE OF FUND
(since 9/28/93) 1 YEAR
- ---------------------------------------------------------------------------
Class S 12.02% 24.72%
- ---------------------------------------------------------------------------
Performance results for the Fund are increased by the voluntary reduction of
Fund fees and expenses; without subsidization, performance would have been
lower.
ASSEST ALLOCATION
(by percentage of net assets)
Stocks 50%
Cash 3%
Bonds 47%
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: MODERATE
- -------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
- -------------------------------------------------------------------------------
April 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
VALUE
SHARES (NOTE 1)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
EQUITY SECURITIES 50.2%
BASIC INDUSTRIES 7.7%
CHEMICAL 2.3%
Agrium Inc. ............................................................... 22,800 $ 357,675
Cabot Corp. ............................................................... 10,500 377,344
Cambrex Corp. ............................................................. 1,050 58,275
Ciba Specialty Chemicals AG* .............................................. 600 72,576
E.I. Du Pont De Nemours & Co. ............................................. 1,200 87,375
OM Group Inc.* ............................................................ 600 26,587
Thiokol Corp. ............................................................. 3,400 183,175
-----------
1,163,007
-----------
DIVERSIFIED 0.9%
Johnson Controls Inc. ..................................................... 1,900 112,813
Mark IV Industries Inc. ................................................... 10,500 221,156
Ogden Corp. ............................................................... 3,100 95,325
-----------
429,294
-----------
ELECTRICAL EQUIPMENT 1.1%
Asia Pacific Wire & Cable Corp. Ltd.* ..................................... 13,600 81,600
Essex International Inc.* ................................................. 1,200 43,050
General Electric Co. ...................................................... 3,400 289,425
Sony Corp.* ............................................................... 2,000 166,390
-----------
580,465
-----------
FOREST PRODUCT 0.6%
Abitibi-Consolidated Inc. ................................................. 21,800 324,275
-----------
MACHINERY 1.7%
Harsco Corp. .............................................................. 900 41,400
Howmet International Inc.* ................................................ 11,100 183,150
ITEQ Inc.* ................................................................ 7,300 93,075
Sundstrand Corp. .......................................................... 4,000 276,250
Tyco International Ltd. ................................................... 4,900 267,050
-----------
860,925
-----------
METAL & MINING 0.9%
General Cable Corp.* ...................................................... 1,200 54,375
Kennametal Inc. ........................................................... 6,500 346,531
Wyman-Gordon Co.* ......................................................... 3,400 68,850
-----------
469,756
-----------
TRUCKERS 0.2%
CNF Transportation Inc. ................................................... 2,800 108,150
-----------
Total Basic Industries .................................................... 3,935,872
-----------
CONSUMER CYCLICAL 7.7%
AIRLINE 0.3%
Aeroporti Di Roma SPA* .................................................... 9,100 127,406
-----------
AUTOMOTIVE 0.9%
Budget Group Inc. Cl. A* .................................................. 800 26,800
Exide Corp. ............................................................... 10,600 204,713
Gencorp Inc. .............................................................. 3,900 118,706
Midas Inc.* ............................................................... 1,433 27,675
Renault SA* ............................................................... 2,300 106,754
-----------
484,648
-----------
BUILDING 0.0%
Golf Trust of America Inc.* ............................................... 500 16,313
-----------
HOTEL & RESTAURANT 1.1%
CKE Restaurants Inc.* ..................................................... 830 28,739
Harrah's Entertainment Inc.* .............................................. 9,900 258,018
Landry Seafood Restaurants Inc.* .......................................... 600 17,100
MGM Grand Inc.* ........................................................... 1,200 40,500
Mirage Resorts Inc.* ...................................................... 8,700 191,944
Motels of America Inc.*+ .................................................. 75 750
-----------
537,051
-----------
RECREATION 1.9%
American Radio Systems Corp. Cl. A* ....................................... 800 53,050
Chancellor Media Corp. .................................................... 1,700 80,644
Cox Communications Inc. Cl. A* ............................................ 2,700 120,487
GTech Holdings Corp.* ..................................................... 3,300 118,387
International Game Technology Inc. ........................................ 5,600 155,750
Mattel Inc. ............................................................... 3,100 118,769
Panavision Inc.* .......................................................... 200 5,225
Steiner Leisure Ltd.* ..................................................... 2,400 75,750
US West Inc.* ............................................................. 6,500 245,375
-----------
973,437
-----------
RETAIL TRADE 3.3%
Blyth Industries Inc.* .................................................... 500 18,344
Cendant Corp.* ............................................................ 5,700 142,500
CSK Auto Corp.* ........................................................... 400 10,800
Dayton Hudson Corp. ....................................................... 1,600 139,700
Hannaford Brothers Co. .................................................... 6,800 302,175
Home Depot Inc. ........................................................... 3,100 215,837
InaCom Corp.* ............................................................. 1,100 39,394
Kroger Co.* ............................................................... 4,700 196,812
Proffitts Inc.* ........................................................... 1,850 73,538
Rite Aid Corp. ............................................................ 7,700 247,362
Wal-Mart Stores, Inc. ..................................................... 4,000 202,250
Wolters Kluwer NV* ........................................................ 900 117,841
-----------
1,706,553
-----------
TEXTILE & APPAREL 0.2%
Maxwell Shoe Inc. Cl. A* .................................................. 2,000 35,500
Warnaco Group Inc. Cl. A .................................................. 1,000 42,250
-----------
77,750
-----------
Total Consumer Cyclical ................................................... 3,923,158
-----------
CONSUMER STAPLE 10.6%
BUSINESS SERVICE 1.8%
A.C. Nielson Corp.* ....................................................... 10,600 296,800
Apollo Group Inc. Cl. A* .................................................. 3,750 128,437
Avis Rent A Car, Inc.* .................................................... 400 10,475
Comverse Technology Inc.* ................................................. 920 43,585
Dollar Thrifty Automotive Group, Inc.* .................................... 700 13,213
Hagler Bailly Inc.* ....................................................... 1,500 39,750
HBO & Co. ................................................................. 3,600 215,325
Maximus Inc.* ............................................................. 1,600 50,400
Pameco Corp.* ............................................................. 1,000 19,500
Provant Inc.* ............................................................. 200 3,725
Shared Medical Systems Corp. .............................................. 100 7,294
Staff Leasing Inc.* ....................................................... 1,100 32,175
Vestcom International Inc.* ............................................... 1,100 12,375
Waterlink Inc.* ........................................................... 2,500 34,687
-----------
907,741
-----------
CONTAINER 0.7%
Ball Corp. ................................................................ 9,300 359,212
-----------
DRUG 1.6%
Ascent Pediatrics Inc.* ................................................... 800 3,100
Atrix Laboratories Inc.* .................................................. 1,500 27,375
Axogen Ltd. ADR* .......................................................... 700 40,250
Biovail Corp.* ............................................................ 3,100 126,712
Bristol-Myers Squibb Co. .................................................. 1,400 148,225
Intelligent Polymers Ltd.* ................................................ 2,500 63,438
Kos Pharmaceuticals, Inc.* ................................................ 4,400 49,500
Pathogenesis Corp.* ....................................................... 600 23,775
Pfizer Inc. ............................................................... 2,000 227,625
Schering-Plough Corp. ..................................................... 1,200 96,150
-----------
806,150
-----------
FOOD & BEVERAGE 2.1%
Coca-Cola Co. ............................................................. 2,100 159,338
PepsiCo Inc. .............................................................. 2,700 107,156
Sara Lee Corp. ............................................................ 3,900 232,294
Spiros Development Corp.* ................................................. 3,000 49,875
Warner-Lambert Co. ........................................................ 1,400 264,862
Whitman Corp. ............................................................. 8,800 172,150
H.J. Heinz Co. ............................................................ 1,400 76,300
-----------
1,061,975
-----------
HOSPITAL SUPPLY 1.9%
Aradigm Corp.* ............................................................ 1,100 15,950
Aviron Corp.* ............................................................. 1,300 32,256
Centennial Healthcare Corp.* .............................................. 1,000 23,750
Guidant Corp. ............................................................. 2,100 140,437
Johnson & Johnson ......................................................... 1,000 71,375
National Surgery Centers Inc.* ............................................ 1,100 31,213
NCS Healthcare Inc. Cl. A* ................................................ 1,100 32,313
Quorum Health Group Inc.* ................................................. 5,700 183,112
Respironics Inc.* ......................................................... 2,850 47,559
Rural/Metro Corp.* ........................................................ 400 13,000
Total Renal Care Holdings Inc.* ........................................... 6,600 218,625
U.S. Surgical Corp. ....................................................... 3,400 107,100
Xomed Surgical Products Inc.* ............................................. 1,700 49,513
-----------
966,203
-----------
PERSONAL CARE 0.2%
Wesley Jessen VisionCare Inc.* ............................................ 2,900 89,538
-----------
PRINTING & PUBLISHING 2.2%
A.H. Belo Corp. Cl. A ..................................................... 719 38,062
Hollinger International, Inc. Cl. A* ...................................... 21,900 339,450
Prosieben Media AG* ....................................................... 3,200 164,944
Torstar Corp. Cl. B* ...................................................... 5,600 189,937
Valassis Communications Inc. .............................................. 9,800 384,650
-----------
1,117,043
-----------
TOBACCO 0.1%
Dimon Inc. ................................................................ 5,800 84,825
-----------
Total Consumer Staple ..................................................... 5,392,687
-----------
ENERGY 2.9%
OIL 2.6%
Abacan Resource Corp.* .................................................... 11,300 14,478
Anadarko Petroleum Corp. .................................................. 1,100 80,575
Arakis Energy Corp.* ...................................................... 9,700 16,975
British Petroleum Co. PLC* ................................................ 7,500 118,553
Cliffs Drilling Co.* ...................................................... 500 24,656
Energy Africa Ltd.* ....................................................... 25,900 125,554
ENI SPA ADR ............................................................... 1,800 119,025
Exxon Corp. ............................................................... 1,600 116,700
KCS Energy Inc. ........................................................... 2,000 31,000
Maxx Petroleum Ltd.* ...................................................... 6,800 8,500
Oryx Energy Co. ........................................................... 7,600 198,550
PTT Exploration & Production Public Co. Ltd.* ............................. 7,500 79,172
Seagull Energy Corp.* ..................................................... 10,112 172,536
Seven Seas Petroleum Inc.* ................................................ 1,300 27,300
Total SA Cl. B ADR ........................................................ 3,600 211,500
-----------
1,345,074
-----------
OIL SERVICE 0.3%
Schlumberger Ltd. ......................................................... 1,100 91,162
UTI Energy Corp.* ......................................................... 1,500 26,063
Willbros Group Inc.* ...................................................... 1,100 18,288
-----------
135,513
-----------
Total Energy .............................................................. 1,480,587
-----------
FINANCE 7.3%
BANK 2.8%
Banc One Corp. ............................................................ 3,330 195,846
BankAmerica Corp.+ ........................................................ 2,300 195,500
Canadian Imperial Bank of Commerce ........................................ 7,500 265,781
Chase Manhattan Corp. ..................................................... 1,200 166,275
Commercial Federal Corp. .................................................. 350 12,688
Fleet Financial Group Inc. ................................................ 1,700 146,837
Golden State Bancorp Inc. ................................................. 1,000 39,000
National Bank of Canada ................................................... 13,300 274,380
U.S. Bancorp .............................................................. 1,300 165,100
-----------
1,461,407
-----------
FINANCIAL SERVICE 0.6%
CMAC Investment Corp. ..................................................... 700 45,194
Contifinancial Corp.* ..................................................... 900 29,025
CRIIMI MAE Inc.* .......................................................... 900 13,444
Federal National Mortgage Association ..................................... 1,400 83,825
First Industrial Realty Trust Inc. ........................................ 500 16,250
FirstPlus Financial Group Inc.* ........................................... 900 43,650
Global-Tech Appliances Inc.* .............................................. 1,000 19,625
INMC Mortgage Holdings Inc. ............................................... 1,500 36,375
Liberty Property Trust .................................................... 500 12,781
-----------
300,169
-----------
INSURANCE 3.9%
Ace Ltd. .................................................................. 17,600 666,600
AMBAC Inc. ................................................................ 6,000 340,125
Capital Re Corp.* ......................................................... 300 22,144
HCC Insurance Holdings Inc.* .............................................. 1,900 41,325
Mid Ocean Ltd. ............................................................ 4,500 339,187
Mutual Risk Management Ltd. ............................................... 1,832 62,059
Transamerica Corp. ........................................................ 500 58,131
Travelers Group Inc. ...................................................... 2,800 171,325
UNUM Corp. ................................................................ 5,100 274,125
-----------
1,975,021
-----------
Total Finance ............................................................. 3,736,597
-----------
SCIENCE & TECHNOLOGY 8.9%
COMPUTER SOFTWARE & SERVICE 4.0%
Check Point Software Technologies Ltd.* ................................... 1,000 29,375
Cisco Systems Inc.* ....................................................... 4,750 347,937
Complete Business Solutions Inc.* ......................................... 1,000 34,187
Diamond Multimedia Systems Inc.* .......................................... 1,400 16,275
Duane Reade Inc.* ......................................................... 200 4,750
EMC Corp.* ................................................................ 2,200 101,475
Industir-Matematik International Corp.* ................................... 1,000 22,250
Mapics Inc.* .............................................................. 3,000 53,250
Mastech Corp.* ............................................................ 2,400 63,600
Microsoft Corp.* .......................................................... 2,200 198,275
Nintendo Co. Ltd.* ........................................................ 2,500 229,334
Sema Group PLC* ........................................................... 5,800 209,847
Sonic Foundry Inc.* ....................................................... 100 688
STB Systems Inc.* ......................................................... 800 11,450
Summitt Design Inc.* ...................................................... 1,000 15,438
Transition Systems Inc.* .................................................. 2,000 45,000
TT Tieto Oy Cl. B* ........................................................ 1,300 238,681
Veritas Software Co.* ..................................................... 600 32,850
Walker Interactive Systems, Inc.* ......................................... 2,200 40,287
Wang Laboratories Inc.* ................................................... 1,100 29,700
WM Data AB Cl. B* ......................................................... 8,200 246,784
Xylan Corp.* .............................................................. 1,500 42,703
-----------
2,014,136
-----------
ELECTRONIC COMPONENTS 1.8%
ATMI Inc.* ................................................................ 400 11,150
Lernout & Hauspie Speech Products NV ADR* ................................. 7,800 497,250
Remec Inc.* ............................................................... 3,750 93,281
RF Micro Devices Inc.* .................................................... 2,400 38,400
Rohm Co.* ................................................................. 1,000 112,891
Texas Instruments Inc. .................................................... 2,800 179,375
-----------
932,347
-----------
ELECTRONIC EQUIPMENT 2.0%
Aeroflex Inc.* ............................................................ 6,900 94,012
Applied Micro Circuits Corp.* ............................................. 800 22,100
Chicago Miniature Lamp, Inc.* ............................................. 5,150 197,631
Digital Microwave Corp.* .................................................. 2,280 25,935
L.M. Ericsson Telephone Co. Cl. B* ........................................ 5,000 263,498
Lucent Technologies Inc. .................................................. 4,000 304,500
Spectrian Corp.* .......................................................... 1,000 17,125
Teradyne Inc.* ............................................................ 2,400 87,600
-----------
1,012,401
-----------
OFFICE EQUIPMENT 1.1%
Unisys Corp. .............................................................. 14,500 325,344
Xerox Corp. ............................................................... 2,100 238,350
-----------
563,694
-----------
Total Science & Technology ................................................ 4,522,578
-----------
UTILITY 5.1%
ELECTRIC 1.7%
Allegheny Energy Inc.* .................................................... 1,600 49,000
Edison International Inc. ................................................. 7,100 211,669
Illinova Corp. ............................................................ 1,800 55,013
OGE Energy Corp. .......................................................... 3,900 214,256
Pinnacle West Capital Corp. ............................................... 5,600 247,800
Western Resources Inc. .................................................... 2,800 109,375
-----------
887,113
-----------
NATURAL GAS 0.8%
Calpine Corp.* ............................................................ 1,300 23,481
TransTexas Gas Corp.* ..................................................... 4,500 53,156
Williams Companies Inc. ................................................... 11,187 353,789
-----------
430,426
-----------
TELEPHONE 2.6%
AirTouch Communications Inc.* ............................................. 2,600 138,125
Brio Technology Inc.* ..................................................... 100 1,100
Clearnet Communications Inc. Wts.* ........................................ 495 5,198
GPU Inc. .................................................................. 3,700 146,612
Hussmann International Inc.* .............................................. 4,300 74,712
Keebler Foods Co.* ........................................................ 1,600 45,600
Lexmark International Group Inc. Cl. A* ................................... 2,000 115,750
Mobius Management Systems Inc.* ........................................... 100 1,850
Montana Power Co. ......................................................... 1,700 63,219
Nokia AB Oy Cl. K* ........................................................ 1,400 93,049
Nova Corp.* ............................................................... 800 27,200
ONIX Systems Inc.* ........................................................ 1,900 27,313
Radiant Systems Inc.* ..................................................... 3,800 85,500
T & W Financial Corp.* .................................................... 2,600 74,100
Telecom Italia SPA* ....................................................... 18,700 139,879
US LEC Corp. Cl. A* ....................................................... 300 7,275
Waddell & Reed Financial Inc. Cl. A* ...................................... 500 12,375
WorldCom Inc.* ............................................................ 5,800 248,131
-----------
1,306,988
-----------
Total Utility .................................................................. 2,624,527
-----------
Total Equity Securities (Cost $19,979,023) ..................................... 25,616,006
-----------
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Principal Maturity Value
Amount Date (Note 1)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FIXED INCOME SECURITIES 46.8%
U.S. TREASURY 12.8%
U.S. Treasury Bond, 12.00% ........................... $ 400,000 8/15/2013 586,188
U.S. Treasury Bond, 8.75% ............................ 1,050,000 5/15/2017 1,372,056
U.S. Treasury Bond, 8.50% ............................ 550,000 2/15/2020 712,338
U.S. Treasury Bond, 8.125% ........................... 675,000 8/15/2021 848,286
U.S. Treasury Bond, 6.875% ........................... 200,000 8/15/2025 222,282
U.S. Treasury Bond, 6.625% ........................... 150,000 2/15/2027 162,351
U.S. Treasury Note, 5.625% ........................... 200,000 10/31/1999 200,062
U.S. Treasury Note, 7.875% ........................... 575,000 11/15/2004 641,217
U.S. Treasury Note, 7.50% ............................ 200,000 2/15/2005 219,562
U.S. Treasury TIPS, 3.625% ........................... 100,207 1/15/2008 99,111
U.S. Treasury TIPS, 3.625% ........................... 100,093 4/15/2028 99,467
U.S. Treasury STRIPS, 0.00% .......................... 525,000 11/15/2001 430,757
U.S. Treasury STRIPS, 0.00% .......................... 850,000 5/15/2003 641,002
U.S. Treasury STRIPS, 0.00% .......................... 500,000 5/15/2007 296,520
-----------
6,531,199
-----------
U.S. AGENCY MORTGAGE 9.1%
Federal Home Loan Mortgage Corp., 7.00% .............. 284,686 12/01/2024 288,777
Federal Home Loan Mortgage Corp., 7.50% .............. 504,320 2/01/2027 517,084
Federal Home Loan Mortgage Corp. TBA, 6.00% .......... 550,000 5/18/2013 542,781
Federal Home Loan Mortgage Corp. TBA, 7.00% .......... 325,000 5/18/2013 331,094
Federal National Mortgage Association, 9.50% ......... 127,006 10/01/2003 132,393
Federal National Mortgage Association, 7.00% ......... 137,883 12/01/2007 141,272
Federal National Mortgage Association, 8.00% ......... 162,518 4/01/2008 169,934
Federal National Mortgage Association, 7.00% ......... 209,231 10/01/2025 211,518
Federal National Mortgage Association REMIC Series
1993-102H, 6.80% ................................... 100,000 9/25/2022 101,718
Federal National Mortgage Association TBA, 6.50% ..... 600,000 5/13/2028 593,819
Federal National Mortgage Association TBA, 7.00% ..... 400,000 5/13/2028 404,375
Government National Mortgage Association, 6.50% ...... 91,669 2/15/2009 92,671
Government National Mortgage Association, 6.50% ...... 200,566 5/15/2009 202,758
Government National Mortgage Association, 8.00% ...... 38,818 9/15/2017 40,880
Government National Mortgage Association, 6.50% ...... 78,931 12/15/2023 78,536
Government National Mortgage Association, 6.50% ...... 263,553 7/15/2024 262,285
Government National Mortgage Association, 7.00% ...... 127,091 1/15/2025 128,957
Government National Mortgage Association, 7.50% ...... 275,554 11/15/2025 283,129
Government National Mortgage Association, 7.50% ...... 122,202 4/15/2026 125,523
-----------
4,649,504
-----------
CANADIAN-YANKEE 1.4%
British Aerospace Finance Inc. Note, 7.50%+ 100,000 7/01/2027 108,059
Petroliam Nasional BHD Note, 6.875%+ ................. 125,000 7/01/2003 119,207
Petroliam Nasional BHD Note, 7.125%+ ................. 100,000 8/15/2005 94,295
Province of Quebec Deb., 7.125% ...................... 50,000 2/09/2024 52,235
Southern Investments PLC Sr. Note, 6.80% ............. 150,000 12/01/2006 152,798
Trans-Canada Pipelines Ltd. Note, 6.43% .............. 100,000 3/15/2004 100,636
Woodside Finance Ltd. Note, 6.60%+ ................... 100,000 4/15/2008 98,350
-----------
725,580
-----------
FOREIGN GOVERNMENT 2.8%
Australian Dollar
Commonwealth of Australia, 8.75% ..................... 350,000 8/15/2008 278,123
New Zealand Dollar
Government of New Zealand, 10.00% .................... 150,000 3/15/2002 90,419
Government of New Zealand, 8.00% ..................... 650,000 11/15/2006 385,394
Pound Sterling
United Kingdom Treasury, 8.50% ....................... 350,000 12/07/2005 677,103
-----------
1,431,039
-----------
FINANCE/MORTGAGE 12.8%
Advanta Credit Card Master Trust Series 95F-A1, 6.05% $ 75,000 8/01/2003 75,070
AFC Capital Trust Note, 8.21% ........................ 275,000 2/03/2027 307,783
Allbritton Communications Co. Sr. Sub. Deb., 9.75% ... 250,000 11/30/2007 262,500
American Express Credit Account Master Trust Series
97-1A, 6.40% ....................................... 75,000 4/15/2005 76,101
Amresco Commercial Mortgage Funding Corp. Series 1997-
A1, 6.73% .......................................... 120,848 6/17/2029 122,661
Arcadia Automobile Trust 97-C A5, 6.55% .............. 100,000 6/15/2005 101,574
Associates Corp. of North America, 6.45% ............. 100,000 10/15/2001 100,817
Associates Corp. of North America, 6.50% ............. 200,000 8/15/2002 201,930
AT&T Universal Card Master Trust Series 95-2A, 5.95% . 200,000 10/17/2002 200,250
Bank of New York Institutional Capital Trust, 7.78%+ . 250,000 12/01/2026 256,975
Capital One Bank Sr. Note, 7.08% ..................... 150,000 10/30/2001 153,555
Chase Manhattan Master Trust 96-3A, 7.04% ............ 175,000 2/15/2005 180,031
CIT Group Holdings Inc. Note, 6.20% .................. 200,000 10/20/2000 200,714
Citibank Credit Card Master Trust 1998-1-A, 5.75% .... 75,000 1/15/2003 74,555
Commercial Credit Group Inc. Note, 6.45% ............. 200,000 7/01/2002 201,378
Countrywide Funding Corp. Note, 6.58% ................ 150,000 9/21/2001 151,260
Countrywide Funding Corp. Note, 6.46% ................ 225,000 2/10/2003 225,457
Countrywide Mortgage Inc. Series 1994-2 A-7, 6.50% ... 51,459 4/25/2008 51,314
CS First Boston Mortgage Securities Corp. Note 97-C2
A2, 6.52% .......................................... 200,000 7/17/2007 201,187
CS First Boston Mortgage Securities Corp. Note 96-2
A2, 6.32% .......................................... 100,000 3/25/2005 99,664
DMARC Corp. 98-C1-A2, 6.54% .......................... 150,000 6/15/2031 153,375
DMARC Corp. 98-1 A1, 6.22% ........................... 149,400 6/15/2031 151,081
First Union Lehman Brothers Commercial 97-C2 A2, 6.60% 100,000 11/18/2029 100,750
Ford Credit Auto Loan Master Trust Series 95-1, 6.50% 200,000 8/15/2002 201,874
Ford Credit Auto Owner Trust Series 1997B-A3, 6.05% .. 75,000 4/15/2001 75,328
GE Global Insurance Holding Corp. Note, 7.00% ........ 200,000 2/15/2026 208,334
GMAC Commercial Mortgage Security Inc. 97-C2-A, 6.45% 98,476 12/15/2004 99,399
Household Finance Co. Sr. Note, 6.75% ................ 100,000 6/01/2000 101,263
IBM Credit Corp. Note, 5.79% ......................... 200,000 3/20/2000 199,494
International Lease Finance Corp. Note, 6.50% ........ 200,000 7/01/2001 202,076
MBNA Corp. Sr. Note, 6.875% .......................... 100,000 11/15/2002 101,526
Morgan Stanley Capital Inc. 98-A1, 6.19% ............. 99,493 1/15/2007 101,428
Morgan Stanley Capital Inc. Series 1997-WF1-A1, 6.83%+ 94,219 10/15/2006 96,280
NationsBank Credit Card Master Trust Series 1995-1A,
6.45% .............................................. 150,000 4/15/2003 151,687
Prime Credit Card Master Trust Series 1995-1A, 6.75% . 125,000 11/15/2005 127,656
Prime Credit Card Master Trust Series 1996-1A, 6.70% . 100,000 7/15/2004 101,781
Prudential Home Mortgage Securities Co. Series 93-29
A-6 PAC, 6.75% ..................................... 46,888 8/25/2008 47,049
Railcar Leasing LLC 1997-1 A1, 6.75%+ ................ 153,976 7/15/2006 156,041
Sears Credit Account Master Trust Series 1995-2A, 8.10% 100,000 6/15/2004 102,968
Sears Credit Account Master Trust Series 1997-1A, 6.20% 100,000 7/16/2007 100,680
Structured Asset Securities Corp. Series
97-LL1-A1, 6.79% ................................... 197,805 6/12/2004 202,441
World Omni Automobile Lease Trust 97-B A3, 6.18% ..... 200,000 11/25/2003 200,859
World Omni Inc. Note 98-1 A4, 6.07% .................. 100,000 2/15/2002 99,938
Zurich Capital Trust Note, 8.38%+ .................... 200,000 6/01/2037 217,782
-----------
6,545,866
-----------
TRUST CERTIFICATES 0.3%
Cooperative Utility Trust Certificates, 10.70% ....... $ 125,000 9/15/2017 $ 131,300
-----------
CORPORATE 7.6%
Ameristar Casinos Inc. Sr. Sub. Note, 10.50%+ ........ 100,000 8/01/2004 106,250
Archibald Candy Corp. Sr. Sec. Note, 10.25% .......... 250,000 7/01/2004 268,750
Chevron Corp. Profit Sharing Note, 8.11% ............. 92,000 12/01/2004 98,301
Columbia/HCA Healthcare Corp. Deb., 7.50% ............ 100,000 12/15/2023 93,496
Columbia/HCA Healthcare Corp. Note, 6.50% ............ 200,000 3/15/1999 197,560
Columbia/HCA Healthcare Corp. Note, 7.69% ............ 100,000 6/15/2025 95,481
Edison Mission Energy Funding Corp. Series A Note,
6.77%+ ............................................. 187,133 9/15/2003 189,361
Empire Gas Corp. Sr. Sec. Note, 7.00% to 7/14/99,
12.875% from 7/15/99 to maturity ................... 250,000 7/15/2004 230,000
Envirosource Inc. Note, 9.75% ........................ 125,000 6/15/2003 127,500
First Wave Marine Inc. Sr. Note, 11.00% .............. 150,000 2/01/2008 157,500
Fort James Corp. Note, 6.23% ......................... 75,000 3/15/2001 74,954
Fort James Corp. Sr. Note, 6.625% .................... 200,000 9/15/2004 199,954
French Fragrances Inc. Series B Sr. Note, 10.375% .... 100,000 5/15/2007 105,500
International Shipholding Corp. Sr. Note Series B,
7.75% .............................................. 250,000 10/15/2007 244,687
J.B. Poindexter Inc. Sr. Note, 12.50% ................ 50,000 5/15/2004 51,625
Johnstown America Industries Inc. Sr. Sub. Note Series
C, 11.75% .......................................... 125,000 8/15/2005 139,375
LB Commercial Conduit Mortgage Trust 98-C1 A1, 6.33% . 98,756 11/18/2004 97,769
Microcell Telecommunications Sr. Note Series B, 0.00%
to 10/14/2002, 11.125% from 10/15/2002 to maturity . 250,000 10/15/2007 113,640
New York State Power Authority Revenue Bonds Series D,
6.17% .............................................. 150,000 2/15/2001 149,793
News America Holdings Inc., 7.375% ................... 125,000 10/17/2008 129,348
Norcal Waste Systems Inc. Series B Sr. Note, 13.50% .. 200,000 11/15/2005 234,000
Owens-Illinois Inc. Sr. Note, 8.10% .................. 150,000 5/15/2007 159,053
Pool Energy Services Co., 8.625%+ .................... 150,000 4/01/2008 150,000
Sitel Corp. Sr. Sub. Note, 9.25%+ .................... 150,000 3/15/2006 153,750
Spanish Broadcasting Systems Inc. Sr. Note, 12.50% ... 100,000 6/15/2002 115,000
Sun Media Corp. Sr. Sub. Note, 9.50% ................. 65,000 2/15/2007 69,550
Viatel Inc. Sr. Note Series A 11.25%+ ................ 50,000 4/15/2008 53,000
Wisconsin Central Transportation Corp. Note, 6.625% .. 100,000 4/15/2008 98,893
-----------
3,904,090
-----------
Total Fixed Income Securities (Cost $23,607,627) ..... 23,918,578
-----------
COMMERCIAL PAPER 6.8%
Beneficial Corp., 5.53% .............................. $ 1,849,000 5/04/1998 $ 1,849,000
Ford Motor Credit Co., 5.46% ......................... 957,000 5/01/1998 957,000
General Electric Capital Corp., 5.50% ................ 688,000 5/05/1998 688,000
-----------
Total Commercial Paper (Cost $3,494,000) 3,494,000
-----------
- -------------------------------------------------------------------------------------------------------
Shares
- -------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS 20.8%
Navigator Securities Lending Prime Portfolio ............................... 10,629,341 10,629,341
-----------
Total Short-Term Investments (Cost $10,629,341) ............................ 10,629,341
-----------
Total Investments (Cost $57,709,991) 124.6% ................................ 63,657,925
Other Assets, Less Liabilities - (24.6%) ................................... (12,571,181)
-----------
Net Assets - 100.0% ........................................................ $51,086,744
===========
Federal Income Tax Information:
At April 30, 1998, the net unrealized appreciation of investments based on
cost for Federal income tax purposes of $57,761,318 was as follows:
Aggregate gross unrealized appreciation for all investments in which there
is an excess of value over tax cost ...................................... $ 6,505,899
Aggregate gross unrealized depreciation for all investments in which there
is an excess of tax cost over value ...................................... (609,292)
-----------
$ 5,896,607
===========
- ------------------------------------------------------------------------------------------
ADR Stands for American Depositary Receipt, representing ownership of foreign securities.
TBA 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 1%.
* Nonincome-producing securities.
+ 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, 1998 were $1,900,678 and $1,995,600 (3.91% of net assets),
respectively.
Forward currency exchange contracts outstanding at April 30, 1998, are as follows:
<CAPTION>
UNREALIZED
CONTRACT APPRECIATION DELIVERY
TOTAL VALUE PRICE (DEPRECIATION) DATE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sell Australian dollars, Buy U.S. dollars 115,000 AUD .68109 AUD $ 3,262 6/10/98
Sell Australian dollars, Buy U.S. dollars 405,000 AUD .66880 AUD 6,510 6/10/98
Sell Australian dollars, Buy U.S. dollars 62,000 AUD .67830 AUD 1,606 5/13/98
Buy Australian dollars, Sell U.S. dollars 62,000 AUD .66950 AUD (1,061) 5/13/98
Buy Australian dollars, Sell U.S. dollars 340,000 AUD .66125 AUD (2,898) 6/10/98
Sell Australian dollars, Buy U.S. dollars 240,000 AUD .65110 AUD (539) 7/23/98
Sell British pounds, Buy U.S. dollars 335,000 GBP 1.67265 GBP 2,199 7/23/98
Sell British pounds, Buy U.S. dollars 65,000 GBP 1.67000 GBP 254 7/23/98
Sell Canadian dollars, Buy U.S. dollars 160,000 CAD .70033 CAD (32) 7/23/98
Sell Japanese yen, Buy U.S. dollars 54,400,000 JPY .00824 JPY 31,232 8/11/98
Sell New Zealand dollars, Buy U.S. dollars 450,000 NZD .55600 NZD 2,026 7/23/98
Sell New Zealand dollars, Buy U.S. dollars 430,000 NZD .55570 NZD 1,807 7/23/98
--------
$ 44,366
========
The accompanying notes are an integral part of the financial statements
</TABLE>
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: MODERATE
- -------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- -------------------------------------------------------------------------------
April 30, 1998 (Unaudited)
ASSETS
Investments, at value (Cost $57,709,991) (Note 1) ............. $63,657,925
Receivable for securities sold ................................ 552,643
Interest and dividends receivable ............................. 350,606
Receivable from Distributor (Note 3) .......................... 50,597
Receivable for open forward contracts ......................... 48,896
Receivable for fund shares sold ............................... 38,864
Deferred organization costs and other assets (Note 1) 25,560
-----------
64,725,091
LIABILITIES
Payable for collateral received on securities loaned .......... 10,629,341
Payable for securities purchased .............................. 2,645,607
Payable for fund shares redeemed .............................. 130,737
Accrued transfer agent and shareholder services (Note 2) ...... 99,723
Accrued management fee (Note 2) ............................... 52,578
Payable to custodian .......................................... 28,899
Accrued trustees' fees (Note 2) ............................... 8,618
Payable for open forward contracts ............................ 4,530
Other accrued expenses ........................................ 38,314
-----------
13,638,347
-----------
NET ASSETS $51,086,744
===========
Net Assets consist of:
Undistributed net investment income ......................... $ 262,841
Unrealized appreciation of investments ...................... 5,947,934
Unrealized appreciation of forward contracts and
foreign currency .......................................... 43,731
Accumulated net realized gain ............................... 2,829,015
Paid-in capital ............................................. 42,003,223
-----------
$51,086,744
===========
Net Asset Value, offering price and redemption price
per share of Class S shares
($51,086,744 / 4,355,647 shares) ............................ $11.73
======
The accompanying notes are an integral part of the financial statements
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: MODERATE
- -------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- -------------------------------------------------------------------------------
For the six months ended April 30, 1998 (Unaudited)
INVESTMENT INCOME
Interest, net of foreign taxes of $362 (Note 1) ............... $ 916,365
Dividends, net of foreign taxes of $3,360 ..................... 128,476
----------
1,044,841
EXPENSES
Management fee (Note 2) ....................................... 167,730
Transfer agent and shareholder services (Note 2) .............. 99,723
Custodian fee ................................................. 67,097
Reports to shareholders ....................................... 24,315
Registration fees ............................................. 17,000
Audit fee ..................................................... 11,946
Trustees' fees (Note 2) ....................................... 9,397
Amortization of organization costs (Note 1) ................... 8,250
Miscellaneous ................................................. 1,011
----------
406,469
Expenses borne by the Distributor (Note 3) .................... (148,423)
----------
258,046
----------
Net investment income ......................................... 786,795
----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS,
FOREIGN CURRENCY AND FORWARD CONTRACTS
Net realized gain on investments (Notes 1 and 4) .............. 2,774,759
Net realized gain on forward contracts and foreign
currency (Note 1) ........................................... 102,811
----------
Total net realized gain ..................................... 2,877,570
----------
Net unrealized appreciation of investments .................... 1,424,832
Net unrealized appreciation of forward contracts and
foreign currency ............................................ 37,253
----------
Total net unrealized appreciation ........................... 1,462,085
----------
Net gain on investments, foreign currency and forward contracts 4,339,655
----------
Net increase in net assets resulting from operations .......... $5,126,450
==========
The accompanying notes are an integral part of the financial statements
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: MODERATE
- -------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------
SIX MONTHS ENDED
YEAR ENDED APRIL 30, 1998
OCTOBER 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income .................... $ 1,470,707 $ 786,795
Net realized gain on investments,
foreign currency and forward
contracts .............................. 5,688,492 2,877,570
Net unrealized appreciation of
investments, foreign currency and
forward contracts ...................... 728,722 1,462,085
----------- -----------
Net increase resulting from operations ... 7,887,921 5,126,450
----------- -----------
Dividends from net investment income --
Class S ................................ (1,636,395) (973,191)
----------- -----------
Distributions from net realized gains
-- Class S ............................. (2,787,815) (5,543,465)
----------- -----------
Class S share transactions (Note 6):
Proceeds from sale of shares ........... 10,637,538 3,952,736
Net asset value of shares issued in
payment of:
Dividends from net investment
income ............................. 1,010,909 625,097
Distributions from net realized
gains .............................. 2,787,811 5,543,456
Cost of shares repurchased ............. (9,391,187) (11,141,972)
----------- -----------
Net increase (decrease) from fund share
transactions ........................... 5,045,071 (1,020,683)
----------- -----------
Total increase (decrease) in net assets 8,508,782 (2,410,889)
NET ASSETS
Beginning of period ...................... 44,988,851 53,497,633
----------- -----------
End of period (including undistributed net
investment income of $499,237 and
$262,841, respectively) ................ $53,497,633 $51,086,744
=========== ===========
Number of Class S shares:
Sold ................................... 930,934 343,493
Issued upon reinvestment of:
Dividends from net investment
income ............................. 90,518 57,139
Distributions from net realized
gains .............................. 258,131 520,024
Repurchased ............................ (837,303) (993,952)
----------- -----------
Net increase (decrease) in fund
shares ............................... 442,280 (73,296)
=========== ===========
The accompanying notes are an integral part of the financial statements
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: MODERATE
- -------------------------------------------------------------------------------
NOTES TO UNAUDITED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
April 30, 1998
NOTE 1
State Street Research Strategic Portfolios: Moderate (the "Fund"), is a series
of State Street Research 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. Before November 1, 1997,
Class S shares were designated Class C. Only Class S shares are presently
available for purchase. Class A, Class B and Class C shares are not being
offered at this time. Class A shares are subject to an initial sales charge of
up to 4.50% and an annual service fee 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 subject to a contingent deferred sales
charge of 1.00% on any shares redeemed within one year of their purchase. Class
C shares also pay annual distribution and service fees of 1.00%. Class S shares
are only offered through certain retirement accounts, advisory accounts of State
Street Research & Management Company (the "Adviser"), an indirect wholly owned
subsidiary of Metropolitan Life Insurance Company ("Metropolitan"), and special
programs. No sales charge is imposed at the time of purchase or redemption of
Class S shares. Class S shares do not pay any distribution or service fees. The
Fund's expenses are borne pro-rata by each class, except that each class bears
expenses, and has exclusive voting rights with respect to provisions of the Plan
of Distribution, related specifically to that class. The Trustees declare
separate dividends on each class of shares.
The following significant accounting policies are consistently followed by the
Fund in preparing its financial statements, and such policies are in conformity
with generally accepted accounting principles for investment companies.
A. INVESTMENT VALUATION
Values for listed equity securities reflect final sales on national securities
exchanges quoted prior to the close of the New York Stock Exchange. Over-the-
counter securities quoted on the National Association of Securities Dealers
Automated Quotation ("NASDAQ") system are valued at closing prices supplied
through such system. If not quoted on the NASDAQ system, such securities are
valued at prices obtained from brokers. In the absence of recorded sales,
valuations are at the mean of the closing bid and asked quotations. Fixed income
securities are valued by a pricing service, which utilizes market transactions,
quotations from dealers, and various relationships among securities in
determining value. Short-term securities maturing within sixty days are valued
at amortized cost. Securities quoted in foreign currencies are translated into
U.S. dollars at the current exchange rate.
B. SECURITY TRANSACTIONS
Security transactions are accounted for on the trade date (date the order to buy
or sell is executed). Realized gains or losses are reported on the basis of
identified cost of securities delivered. Gains and losses that arise from
changes in exchange rates are not segregated from gains and losses that arise
from changes in market prices of investments.
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 accured 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. The difference is primarily due to differing treatments
for foreign currency transactions.
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 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.
I. SECURITIES LENDING
The Fund may seek additional income by lending portfolio securities to qualified
institutions. The Fund will receive cash or securities as collateral in an
amount equal to at least 100% of the current market value of any loaned
securities plus accrued interest. By reinvesting any cash collateral it receives
in these transactions, the Fund could realize additional gains and losses. If
the borrower fails to return the securities and the value of the collateral has
declined during the term of the loan, the Fund will bear the loss. At April 30,
1998, the value of the securities loaned and the value of collateral were
$10,439,091 and $10,629,341, respectively. During the six months ended April 30,
1998, income from securities lending amounted to $706 and is included in
interest income.
NOTE 2
The Trust and the Adviser have entered into an agreement under which the Adviser
earns monthly fees at an annual rate of 0.65% 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, 1998, the fees pursuant to
such agreement amounted to $167,730.
State Street Research Service Center, a division of State Street Research
Investment Services, Inc., the Trust's principal underwriter (the
"Distributor"), an indirect wholly owned subsidiary of Metropolitan, provides
certain shareholder services to the Fund such as responding to inquiries and
instructions from investors with respect to the purchase and redemption of
shares of the Fund. 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, 1998, the amount of such expenses was $85,223.
The fees of the Trustees not currently affiliated with the Adviser amounted to
$9,397 during the six months ended April 30, 1998.
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, 1998, the amount of such expenses assumed by the
Distributor and its affiliates was $148,423.
NOTE 4
For the six months ended April 30, 1998, purchases and sales of securities,
exclusive of short-term obligations, aggregated $14,949,161 and $19,505,381
(including $14,619,009 and $15,780,064 of U.S. Government obligations),
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 C shares. In addition, the Fund will pay
annual distribution fees of 0.75% of average daily net assets for Class B and
Class C shares. The Distributor uses such payments for personal service and/or
the maintenance or servicing of shareholder accounts, to compensate or 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, $.001 par value per share.
At April 30, 1998, Metropolitan owned 1,704,109 Class S shares of the Fund.
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------------------------------------------------------
For a Class S share (formerly Class C) outstanding throughout each period:
<CAPTION>
YEARS ENDED OCTOBER 31 SIX MONTHS ENDED
---------------------------------------------------------------------------- APRIL 30, 1998
1993(2) 1994 1995(1) 1996(1) 1997(1) (UNAUDITED)(1)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD ($) 9.55 9.57 9.18 10.26 11.28 12.08
---- ---- ----- ----- ----- -----
Net investment income ($)* 0.02 0.28 0.36 0.35 0.35 0.17
Net realized and
unrealized gain
(loss) on
investments, foreign
currency and forward
contracts ($) 0.00 (0.45) 1.01 1.07 1.53 0.95
---- ---- ----- ----- ----- -----
TOTAL FROM INVESTMENT
OPERATIONS ($) 0.02 (0.17) 1.37 1.42 1.88 1.12
---- ---- ----- ----- ----- -----
Dividends from net
investment income ($) -- (0.22) (0.29) (0.40) (0.39) (0.22)
Distributions from net
realized gains ($) -- -- -- -- (0.69) (1.25)
---- ---- ----- ----- ----- -----
TOTAL DISTRIBUTIONS ($) -- (0.22) (0.29) (0.40) (1.08) (1.47)
---- ---- ----- ----- ----- -----
NET ASSET VALUE, END OF
PERIOD ($) 9.57 9.18 10.26 11.28 12.08 11.73
==== ==== ===== ===== ===== =====
Total return(3) (%) 0.21 (4)(1.81) 15.24 14.08 17.83 10.51(4)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of
period ($ thousands) 25,040 28,494 39,821 44,989 53,498 51,087
Ratio of operating
expenses to average net
assets (%)* 1.00(5) 1.00 1.00 1.00 1.00 1.00(5)
Ratio of net investment
income to average net
assets (%)* 2.32(5) 3.05 3.68 3.23 3.03 3.05(5)
Portfolio turnover rate (%) 0.00 142.86 120.62 127.59 136.17 39.22
* Reflects voluntary
assumption of fees or
expenses per share in
each period (Note 3) ($) 0.00 0.05 0.07 0.05 0.07 0.03
- ---------------------------------------------------------------------------------------------------------------------------------
(1) Per-share figures have been calculated using the average shares method.
(2) September 28, 1993 (commencement of operations) to October 31, 1993.
(3) 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.
(4) Not annualized.
(5) Annualized.
</TABLE>
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: MODERATE
- -------------------------------------------------------------------------------
FUND INFORMATION, OFFICERS AND TRUSTEES OF STATE STREET RESEARCH FINANCIAL TRUST
- -------------------------------------------------------------------------------
<TABLE>
FUND INFORMATION OFFICERS TRUSTEES
<S> <C> <C>
STATE STREET RESEARCH RALPH F. VERNI RALPH F. VERNI
STRATEGIC PORTFOLIOS: MODERATE Chairman of the Board, Chairman of the Board,
One Financial Center President and President, Chief Executive
Boston, MA 02111 Chief Executive Officer Officer and Director,
State Street Research &
INVESTMENT ADVISER PETER C. BENNETT Management Company
State Street Research & Vice President
Management Company
One Financial Center JOHN H. KALLIS STEVE A. GARBAN
Boston, MA 02111 Vice President Retired; formerly Senior Vice
President for Finance and
DISTRIBUTOR THOMAS A. SHIVELY Operations and Treasurer, The
State Street Research Vice President Pennsylvania State University
Investment Services, Inc.
One Financial Center GERARD P. MAUS
Boston, MA 02111 Treasurer MALCOLM T. HOPKINS
Former Vice Chairman of the
SHAREHOLDER SERVICES JOSEPH W. CANAVAN Board and Chief Financial
State Street Research Assistant Treasurer Officer, St. Regis Corp.
Service Center
P.O. Box 8408 DOUGLAS A. ROMICH
Boston, MA 02266-8408 Assistant Treasurer EDWARD M. LAMONT
1-800-562-0032 Formerly in banking
FRANCIS J. MCNAMARA, III (with an affiliate of
CUSTODIAN Secretary and General Counsel J.P. Morgan & Co.
State Street Bank and in New York);
Trust Company DARMAN A. WING presently engaged in private
225 Franklin Street Assistant Secretary and investments and civic affairs
Boston, MA 02110 Assistant General Counsel
LEGAL COUNSEL AMY L. SIMMONS ROBERT A. LAWRENCE
Goodwin, Procter & Hoar LLP Assistant Secretary Formerly Partner, Saltonstall & Co.
Exchange Place
Boston, MA 02109
DEAN O. MORTON
Retired; formerly Executive
Vice President, Chief
Operating Officer and Director,
Hewlett-Packard 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
</TABLE>
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: MODERATE -------------------
One Financial Center Bulk Rate
Boston, MA 02111 U.S. Postage
PAID
Permit #6
Hartford, CT
-------------------
QUESTIONS? COMMENTS?
CALL us at 1-800-562-0032 or
WRITE us at:
State Street Research
Service Center
P.O. Box 8408
Boston, MA 02266-8408
E-MAIL us at:
[email protected]
INTERNET site:
WWW.SSRFUNDS.COM
[LOGO] STATE STREET RESEARCH
This report is prepared for the general information of current shareholders.
When used in the general solicitation of investors, this report must be
accompanied or preceded by a current State Street Research Money Market Fund
prospectus. When used after June 30, 1998, this report must be accompanied by a
current Quarterly Performance Update.
Portfolio changes should not be considered recommendations for action by
individual investors.
The Dalbar awards recognize quality shareholder service and should not be
considered a rating of fund performance. The survey included mutual fund
complexes that volunteered or were otherwise selected to participate and was not
industry-wide.
CONTROL NUMBER: 4998-980619(0799)SSR-LD
SP-029E-0698
<PAGE>
STATE STREET RESEARCH
--------------------------------------
STRATEGIC PORTFOLIOS: AGGRESSIVE
--------------------------------------
SEMIANNUAL REPORT
April 30, 1998
--------------------------------------
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
STATE STREET RESEARCH FUNDS
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: AGGRESSIVE
- -------------------------------------------------------------------------------
INVESTMENT UPDATE
- -------------------------------------------------------------------------------
INVESTMENT ENVIRONMENT
THE ECONOMY
o The U.S. economy experienced solid growth during the last quarter of 1997
and the first quarter of 1998. Inflation was low and the financial markets,
in general, were strong. Unemployment fell to a 28-year low. Interest rates
had little change, and consumer confidence continued at near- record highs.
o Favorable economic factors have stimulated a boom in the housing market and
stronger- than-expected retail sales. Lower energy costs kept inflation in
check.
o Although last year's economic crisis in Southeast Asia raised concerns about
the U.S. exports and profits at multinational companies, the effects have
yet to make a significant impact on corporate profitability in the United
States.
THE MARKETS
o The S&P 500, a broad measure of common stock performance, gained 22.50% for
the six-month period ended April 30, 1998.(1) Small stocks rebounded from
declines following the turmoil in Southeast Asia. Large-capitalization
brand-name companies continued to benefit.
o Bonds delivered modest gains during the period. High-yield bonds were among
the strongest performers. Mortgage-backed securities held up well, despite
concerns that refinancing could become a negative factor in the future.
THE FUND
OVER THE PAST SIX MONTHS
o For the six months ended April 30, 1998, Class S shares of Strategic
Portfolios: Aggressive returned 14.06%. That was higher than the Lipper
flexible portfolio fund average, which was up 12.29% over the same period.
o The Fund's investments in stocks -- nearly 75% of portfolio assets --
accounted for its strong performance. Stocks of large- and small-cap growth
companies did well, and a lower capital gains rate made growth stocks more
attractive.
o International stocks and bonds underperformed at first, then recovered in
early 1998.
CURRENT STRATEGY
o No major changes were made to the Fund's asset allocation (shown below)
during the period. Generally, the manager is underweighting large-cap stocks
and overweighting bonds for their attractive real returns and lower risk
profile.
o The Fund is positioned to anticipate continued slow, steady growth in the
U.S. with low inflation. Asia is still a question mark for U.S. companies
and for the economy, as well. Diversification among value and growth assets,
small- and large- cap stocks, and domestic and international sectors should
help the Fund deal with the current uncertainty.
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.
(1)The Standard & Poor's 500 Composite Index (S&P 500) is a market-value
weighted index composed of 500 widely held common stocks. The index is unmanaged
and does not take transaction charges into account. Direct investment in the
index is not possible; results are for illustrative purposes only.
(2)All returns represent past performance, which is no guarantee of future
results. The investment return and principal value of an investment made in the
Fund will fluctuate and shares, when redeemed, may be worth more or less than
their original cost. All returns assume reinvestment of capital gain
distributions and income dividends.
(3)"S" shares, offered without a sales charge, are available only through
certain employee benefit plans and special programs.
(4)Before November 1, 1997, Class S shares were designated Class C.
April 30, 1998
<TABLE>
- -----------------------------------------------------------------------------------------------------------
FUND INFORMATION (all data are for periods ended April 30, 1998, except where noted)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AVERAGE ANNUAL TOTAL RETURN
FOR PERIODS ENDED 3/31/98(2)(3)(4) ASSET ALLOCATION
- ------------------------------------------------------------------- (by percentage of net assets)
LIFE OF FUND
(since 5/16/94) 1 YEAR Stocks ................ 74%
- ------------------------------------------------------------------- Cash .................. 4%
Class S 18.48% 34.94% Bonds ................. 22%
- -------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN(2)(3)(4)
- -------------------------------------------------------------------
LIFE OF FUND
(since 5/16/94) 1 YEAR
- -------------------------------------------------------------------
Class S 18.33% 33.60%
- -------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: AGGRESIVE
- -------------------------------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
- -------------------------------------------------------------------------------------------------------
April 30, 1998 (Unaudited)
<CAPTION>
- -------------------------------------------------------------------------------------------------------
VALUE
SHARES (NOTE 1)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
EQUITY SECURITIES 74.2%
BASIC INDUSTRIES 10.7%
CHEMICAL 3.2%
Agrium Inc. .................................................... 39,000 $ 611,813
Cabot Corp. .................................................... 17,400 625,312
Cambrex Corp. .................................................. 2,650 147,075
Ciba Specialty Chemicals AG* ................................... 1,200 145,152
E.I. Du Pont De Nemours & Co. .................................. 2,100 152,906
OM Group Inc. .................................................. 2,400 106,350
Thiokol Corp. .................................................. 5,800 312,475
-----------
2,101,083
-----------
DIVERSIFIED 1.1%
Johnson Controls Inc. .......................................... 3,200 190,000
Mark IV Industries Inc. ........................................ 17,400 366,487
Ogden Corp. .................................................... 5,300 162,975
-----------
719,462
-----------
ELECTRICAL EQUIPMENT 1.5%
Asia Pacific Wire & Cable Corp. Ltd.* .......................... 29,700 178,200
Essex International Inc.* ...................................... 2,800 100,450
General Electric Co. ........................................... 5,300 451,162
Sony Corp.* .................................................... 3,300 274,543
-----------
1,004,355
-----------
FOREST PRODUCT 0.9%
Abitibi-Consolidated Inc. ...................................... 37,400 556,325
-----------
MACHINERY 2.3%
Harsco Corp. ................................................... 1,600 73,600
Howmet International Inc.* ..................................... 18,300 301,950
ITEQ Inc.* ..................................................... 16,900 215,475
Sundstrand Corp. ............................................... 6,900 476,531
Tyco International Ltd. ........................................ 8,000 436,000
-----------
1,503,556
-----------
METAL & MINING 1.4%
General Cable Corp.* ........................................... 3,100 140,469
Kennametal Inc. ................................................ 11,200 597,100
Wyman-Gordon Co.* .............................................. 7,500 151,875
-----------
889,444
-----------
TRUCKERS 0.3%
CNF Transportation Inc. ........................................ 5,100 196,988
-----------
Total Basic Industries ......................................... 6,971,213
-----------
CONSUMER CYCLICAL 11.1%
AIRLINE 0.4%
Aeroporti Di Roma SPA* ......................................... 17,700 247,811
-----------
AUTOMOTIVE 1.6%
Budget Group Inc. Cl. A* ....................................... 2,200 73,700
Exide Corp. .................................................... 18,200 351,488
Gencorp Inc. ................................................... 6,700 203,931
Midas Inc.* .................................................... 2,416 46,659
Renault SA* .................................................... 7,500 348,112
-----------
1,023,890
-----------
BUILDING 0.1%
Golf Trust of America Inc.* .................................... 1,400 45,675
Morrison Knudsen Corp. Wts.* ................................... 23 115
-----------
45,790
-----------
HOTEL & RESTAURANT 1.5%
CKE Restaurants Inc.* .......................................... 2,330 80,676
Harrah's Entertainment Inc.* ................................... 17,000 443,063
Landry Seafood Restaurants Inc.* ............................... 1,900 54,150
MGM Grand Inc.* ................................................ 2,100 70,875
Mirage Resorts Inc.* ........................................... 14,400 317,700
Motels of America Inc.*+ ....................................... 175 1,750
-----------
968,214
-----------
RECREATION 2.7%
American Radio Systems Corp. Cl. A* ............................ 2,000 132,625
Chancellor Media Corp. ......................................... 4,200 199,237
Cox Communications Inc. Cl. A* ................................. 4,200 187,425
GTECH Holdings Corp.* .......................................... 5,500 197,312
International Game Technology Inc. ............................. 9,100 253,094
Mattel Inc. .................................................... 5,100 195,394
Panavision Inc.* ............................................... 1,100 28,738
Steiner Leisure Ltd.* .......................................... 6,450 203,578
US West Inc.* .................................................. 10,500 396,375
-----------
1,793,778
-----------
RETAIL TRADE 4.5%
Blyth Industries Inc.* ......................................... 1,900 69,706
Cendant Corp.* ................................................. 9,200 230,000
CSK Auto Corp.* ................................................ 1,000 27,000
Dayton Hudson Corp. ............................................ 2,600 227,013
Hannaford Brothers Co. ......................................... 11,700 519,919
Home Depot Inc. ................................................ 5,000 348,125
InaCom Corp.* .................................................. 2,700 96,694
Kroger Co.* .................................................... 7,700 322,437
Proffitts Inc.* ................................................ 4,500 178,875
Rite Aid Corp. ................................................. 12,300 395,137
Wal-Mart Stores, Inc. .......................................... 6,500 328,656
Wolters Kluwer NV* ............................................. 1,700 222,588
-----------
2,966,150
-----------
TEXTILE & APPAREL 0.3%
Maxwell Shoe Inc. Cl. A* ....................................... 5,200 92,300
Warnaco Group Inc. Cl. A ....................................... 2,500 105,625
-----------
197,925
-----------
Total Consumer Cyclical ........................................ 7,243,558
-----------
CONSUMER STAPLE 16.3%
BUSINESS SERVICE 2.8%
A.C. Nielson Corp.* ............................................ 17,500 490,000
Apollo Group Inc. Cl. A* ....................................... 6,000 205,500
Avis Rent A Car, Inc.* ......................................... 1,400 36,663
Comverse Technology Inc.* ...................................... 1,945 92,144
Dollar Thrifty Automotive Group, Inc.* ......................... 1,900 35,863
Global-Tech Appliances Inc.* ................................... 2,600 51,025
Hagler Bailly Inc.* ............................................ 3,600 95,400
HBO & Co. ...................................................... 5,800 346,912
Maximus Inc.* .................................................. 3,900 122,850
Pameco Corp.* .................................................. 5,300 103,350
Provant Inc.* .................................................. 400 7,450
Shared Medical Systems Corp. ................................... 100 7,294
Staff Leasing Inc.* ............................................ 3,000 87,750
Vestcom International Inc.* .................................... 4,700 52,875
Waddell & Reed Financial Inc. Cl. A* ........................... 1,300 32,175
Waterlink Inc.* ................................................ 6,000 83,250
-----------
1,850,501
-----------
CONTAINER 0.9%
Ball Corp. ..................................................... 15,400 594,825
-----------
DRUG 3.5%
Ascent Pediatrics Inc.* ........................................ 4,500 17,438
Atrix Laboratories Inc.* ....................................... 4,000 73,000
Axogen Ltd. ADR* ............................................... 2,000 115,000
Biovail Corp.* ................................................. 7,400 302,475
Bristol-Myers Squibb Co. ....................................... 2,300 243,512
Intelligent Polymers Ltd.* ..................................... 9,000 228,375
Kos Pharmaceuticals, Inc.* ..................................... 10,400 117,000
Pathogenesis Corp.* ............................................ 1,700 67,363
Pfizer Inc. .................................................... 3,400 386,962
Schering-Plough Corp. .......................................... 1,900 152,237
Spiros Development Corp.* ...................................... 8,300 137,988
Warner-Lambert Co. ............................................. 2,200 416,212
-----------
2,257,562
-----------
FOOD & BEVERAGE 2.1%
Coca-Cola Co. .................................................. 3,300 250,388
H.J. Heinz Co. ................................................. 2,200 119,900
Hussmann International Inc.* ................................... 7,250 125,969
Keebler Foods Co.* ............................................. 2,600 74,100
PepsiCo Inc. ................................................... 4,400 174,625
Sara Lee Corp. ................................................. 6,200 369,287
Whitman Corp. .................................................. 14,600 285,612
-----------
1,399,881
-----------
HOSPITAL SUPPLY 3.3%
Aradigm Corp.* ................................................. 4,200 60,900
Aviron Corp.* .................................................. 3,300 81,881
Centennial Healthcare Corp.* ................................... 4,500 106,875
Guidant Corp. .................................................. 3,400 227,375
Johnson & Johnson .............................................. 1,600 114,200
National Surgery Cemters Inc.* ................................. 2,850 80,869
NCS HealthCare Inc. Cl. A* ..................................... 2,700 79,313
Quorum Health Group Inc.* ...................................... 9,800 314,825
Respironics Inc.* .............................................. 9,112 152,056
Rural/Metro Corp.* ............................................. 1,500 48,750
Total Renal Care Holdings Inc.* ................................ 17,133 567,531
U.S. Surgical Corp. ............................................ 5,900 185,850
Xomed Surgical Products Inc.* .................................. 4,900 142,712
-----------
2,163,137
-----------
PERSONAL CARE 0.4%
Wesley Jessen VisionCare Inc.* ................................. 7,700 237,737
-----------
PRINTING & PUBLISHING 3.1%
A.H. Belo Corp. Cl. A .......................................... 1,659 87,823
Hollinger International, Inc. Cl. A* ........................... 37,600 582,800
Prosieben Media AG* ............................................ 6,200 319,579
Torstar Corp. Cl. B* ........................................... 9,700 328,998
Valassis Communications Inc. ................................... 17,800 698,650
-----------
2,017,850
-----------
TOBACCO 0.2%
Dimon Inc. ..................................................... 9,900 144,788
-----------
Total Consumer Staple .......................................... 10,666,281
-----------
ENERGY 4.2%
OIL 3.7%
Abacan Resource Corp.* ......................................... 30,200 38,694
Anadarko Petroleum Corp. ....................................... 1,800 131,850
Arakis Energy Corp.* ........................................... 22,900 40,075
British Petroleum Co. PLC* ..................................... 16,100 254,493
Energy Africa Ltd.* ............................................ 63,700 308,795
ENI SPA ADR .................................................... 1,300 85,963
Exxon Corp. .................................................... 2,600 189,637
KCS Energy Inc. ................................................ 5,100 79,050
Maxx Petroleum Ltd.* ........................................... 26,800 33,500
Oryx Energy Co. ................................................ 12,600 329,175
PTT Exploration & Production Public Co. Ltd.* .................. 16,100 169,956
Seagull Energy Corp.* .......................................... 19,124 326,303
Seven Seas Petroleum Inc.* ..................................... 3,300 70,125
Total SA Cl. B ADR ............................................. 5,900 346,625
-----------
2,404,241
-----------
OIL SERVICE 0.5%
UTI Energy Corp.* .............................................. 4,000 69,500
Cliffs Drilling Co.* ........................................... 1,400 69,038
Schlumberger Ltd. .............................................. 1,700 140,887
Willbros Group Inc.* ........................................... 4,200 69,825
-----------
349,250
-----------
Total Energy ................................................... 2,753,491
-----------
FINANCE 10.4%
BANK 3.8%
Banc One Corp. ................................................. 5,370 315,823
BankAmerica Corp. .............................................. 3,700 314,500
Canadian Imperial Bank of Commerce ............................. 12,400 439,425
Chase Manhattan Corp. .......................................... 1,900 263,269
Commercial Federal Corp. ....................................... 1,400 50,750
Fleet Financial Group Inc. ..................................... 2,900 250,487
Golden State Bancorp Inc. ...................................... 2,900 113,100
National Bank of Canada ........................................ 22,800 470,366
U.S. Bancorp ................................................... 2,000 254,000
-----------
2,471,720
-----------
FINANCIAL SERVICE 1.4%
CMAC Investment Corp. .......................................... 2,000 129,125
Contifinancial Corp.* .......................................... 2,300 74,175
CRIIMI MAE Inc.* ............................................... 3,300 49,294
Federal National Mortgage Association .......................... 2,300 137,712
First Industrial Realty Trust Inc. ............................. 2,100 68,250
FirstPlus Financial Group Inc.* ................................ 2,400 116,400
INMC Mortgage Holdings Inc. .................................... 3,900 94,575
Liberty Property Trust ......................................... 1,800 46,013
T & W Financial Corp.* ......................................... 6,800 193,800
-----------
909,344
-----------
INSURANCE 5.2%
Ace Ltd. ....................................................... 29,100 1,102,162
AMBAC Inc. ..................................................... 10,000 566,875
Capital Re Corp.* .............................................. 1,000 73,813
HCC Insurance Holdings Inc. .................................... 5,100 110,925
Mid Ocean Ltd. ................................................. 7,600 572,850
Mutual Risk Management Ltd. .................................... 4,732 160,297
Transamerica Corp. ............................................. 800 93,010
Travelers Group Inc. ........................................... 4,800 293,700
UNUM Corp. ..................................................... 8,300 446,125
-----------
3,419,757
-----------
Total Finance .................................................. 6,800,821
-----------
SCIENCE & TECHNOLOGY 16.0%
COMPUTER SOFTWARE & SERVICE 6.5%
Brio Technology Inc.* .......................................... 400 4,400
Check Point Software Technologies Ltd.* ........................ 2,600 76,375
Cisco Systems Inc.* ............................................ 7,650 560,362
Complete Business Solutions Inc.* .............................. 2,800 95,725
Diamond Multimedia Systems Inc.* ............................... 3,700 43,013
Duane Reade Inc.* .............................................. 400 9,500
EMC Corp.* ..................................................... 3,500 161,437
First Virtual Corp.* ........................................... 100 1,575
Industir-Matematik International Corp.* ........................ 2,300 51,175
Mapics Inc.* ................................................... 6,800 120,700
Mastech Corp.* ................................................. 5,600 148,400
Microsoft Corp.* ............................................... 3,400 306,425
Mobius Management Systems Inc.* ................................ 300 5,550
Nintendo Co. Ltd.* ............................................. 5,200 477,014
Nova Corp.* .................................................... 2,100 71,400
Radiant Systems Inc.* .......................................... 10,000 225,000
Sema Group PLC* ................................................ 9,300 336,479
Sonic Foundry Inc.* ............................................ 400 2,750
Sonic Foundry Inc. Wts.* ....................................... 200 338
STB Systems Inc.* .............................................. 2,200 31,488
Summit Design Inc.* ............................................ 2,800 43,225
Transition Systems Inc.* ....................................... 4,900 110,250
TT Tieto Oy Cl. B* ............................................. 2,600 477,362
Veritas Software Co.* .......................................... 1,700 93,075
Walker Interactive Systems, Inc.* .............................. 5,800 106,212
Wang Laboratories Inc.* ........................................ 2,900 78,300
WM Data AB Cl. B* .............................................. 16,100 484,539
Xylan Corp.* ................................................... 3,600 102,487
-----------
4,224,556
-----------
ELECTRONIC COMPONENTS 3.7%
Digital Microwave Corp.* ....................................... 6,120 69,615
Lernout & Hauspie Speech Products NV ADR* ...................... 17,600 1,122,000
ONIX Systems Inc.* ............................................. 4,800 69,000
Remec Inc.* .................................................... 9,150 227,606
RF Micro Devices Inc.* ......................................... 6,400 102,400
Rohm Co.* ...................................................... 5,000 564,455
Texas Instruments Inc. ......................................... 4,500 288,281
-----------
2,443,357
-----------
ELECTRONIC EQUIPMENT 4.1%
Aeroflex Inc.* ................................................. 18,600 253,425
Applied Micro Circuits Corp.* .................................. 3,000 82,875
ATMI Inc.* ..................................................... 1,000 27,875
Chicago Miniature Lamp, Inc.* .................................. 13,700 525,738
L.M. Ericsson Telephone Co. Cl. B* ............................. 17,100 901,162
Lucent Technologies Inc. ....................................... 6,600 502,425
Nokia AB Oy Cl. K* ............................................. 2,800 186,098
Spectrian Corp.* ............................................... 3,800 65,075
Teradyne Inc.* ................................................. 2,600 94,900
-----------
2,639,573
-----------
OFFICE EQUIPMENT 1.7%
Lexmark International Group Inc. Cl. A* ........................ 3,300 190,988
Unisys Corp. ................................................... 23,900 536,256
Xerox Corp. .................................................... 3,500 397,250
-----------
1,124,494
-----------
Total Science & Technology ..................................... 10,431,980
-----------
UTILITY 5.5%
ELECTRIC 2.8%
Allegheny Energy Inc.* ......................................... 2,700 82,688
Edison International Corp. ..................................... 12,100 360,731
GPU Inc. ....................................................... 6,100 241,712
Illinova Corp. ................................................. 3,000 91,688
Montana Power Co. .............................................. 2,800 104,125
OGE Energy Corp. ............................................... 6,600 362,587
Pinnacle West Capital Corp. .................................... 9,300 411,525
Western Resources Inc. ......................................... 4,700 183,594
-----------
1,838,650
-----------
NATURAL GAS 1.2%
Calpine Corp.* ................................................. 5,300 95,731
TransTexas Gas Corp.* .......................................... 7,700 90,956
Williams Companies Inc. ........................................ 18,447 583,387
-----------
770,074
-----------
TELEPHONE 1.5%
AirTouch Communications Inc.* .................................. 4,300 228,437
Clearnet Communications Inc. Wts.* ............................. 990 10,395
Telecom Italia SPA* ............................................ 40,500 302,947
US LEC Corp. Cl. A* ............................................ 900 21,825
WorldCom Inc.* ................................................. 9,300 397,866
-----------
961,470
-----------
Total Utility .................................................. 3,570,194
-----------
Total Equity Securities (Cost $36,884,730) ..................... 48,437,538
-----------
- -------------------------------------------------------------------------------------------------------
PRINCIPAL MATURITY VALUE
AMOUNT DATE (NOTE 1)
- -------------------------------------------------------------------------------------------------------
FIXED INCOME SECURITIES 21.8%
U.S. TREASURY 4.9%
U.S. Treasury Bond, 8.75% ........................ $ 335,000 5/15/2017 437,751
U.S. Treasury Bond, 8.50% ........................ 305,000 2/15/2020 395,024
U.S. Treasury Bond, 8.125% ....................... 335,000 8/15/2021 421,001
U.S. Treasury Bond, 6.875% ....................... 25,000 8/15/2025 27,785
U.S. Treasury Bond, 6.625% ....................... 100,000 2/15/2027 108,234
U.S. Treasury Note, 7.125% ....................... 250,000 9/30/1999 255,195
U.S. Treasury Note, 6.25% ........................ 350,000 2/28/2002 356,835
U.S. Treasury Note, 6.50% ........................ 60,000 5/31/2002 61,772
U.S. Treasury Note, 7.875% ....................... 150,000 11/15/2004 167,274
U.S. Treasury Note, 7.50% ........................ 50,000 2/15/2005 54,891
U.S. Treasury Note, 6.875% ....................... 115,000 5/15/2006 123,121
U.S. Treasury TIPS, 3.625% ....................... 25,052 1/15/2008 24,777
U.S. Treasury TIPS, 3.625% ....................... 50,047 4/15/2028 49,734
U.S. Treasury STRIPS, 0.00% ...................... 220,000 11/15/2001 180,508
U.S. Treasury STRIPS, 0.00% ...................... 450,000 5/15/2003 339,354
U.S. Treasury STRIPS, 0.00% ...................... 350,000 5/15/2007 207,564
-----------
3,210,820
-----------
U.S. AGENCY MORTGAGE 2.7%
Federal Home Loan Mortgage Corp., 7.50% .......... 321,751 12/01/2026 329,895
Federal Home Loan Mortgage Corp., 7.50% .......... 28,345 3/01/2027 29,062
Federal Home Loan Mortgage Corp. Gold, 7.00% ..... 156,258 12/01/2024 158,503
Federal Home Loan Mortgage Corp. TBA, 6.00% ...... 200,000 5/18/2013 197,375
Federal Home Loan Mortgage Corp. TBA, 7.00% ...... 75,000 5/18/2013 76,406
Federal National Mortgage Association Remic
93-102-H PAC, 6.80% ............................ 25,000 9/25/2022 25,430
Federal National Mortgage Association TBA, 6.50% . 250,000 5/13/2028 247,425
Federal National Mortgage Association TBA, 7.00% . 175,000 5/13/2028 176,914
Government National Mortgage Association, 6.50% .. 36,668 2/15/2009 37,069
Government National Mortgage Association, 6.50% .. 88,998 7/15/2009 89,970
Government National Mortgage Association, 6.50% .. 107,808 11/15/2010 108,650
Government National Mortgage Association, 7.50% .. 99,000 12/15/2010 102,279
Government National Mortgage Association, 7.00% .. 21,978 1/15/2025 22,300
Government National Mortgage Association, 7.50% .. 105,983 11/15/2025 108,896
Government National Mortgage Association, 7.50% .. 61,101 4/15/2026 62,762
-----------
1,772,936
-----------
CANADIAN-YANKEE 0.6%
Usinor Sacilor Note, 7.25% ....................... 350,000 8/01/2006 357,952
Woodside Finance Ltd. Note, 6.60%+ ............... 50,000 4/15/2008 49,175
-----------
407,127
-----------
TRUST CERTIFICATES 0.1%
Cooperative Utility Trust Certificates, 10.70% ... 75,000 9/15/2017 78,780
-----------
FOREIGN GOVERNMENT 2.9%
Australian Dollar
Commonwealth of Australia, 8.75% ................. 500,000 8/15/2008 397,318
New Zealand Dollar
Government of New Zealand, 10.00% ................ 600,000 3/15/2002 361,678
Government of New Zealand, 8.00% ................. 550,000 11/15/2006 326,102
Pound Sterling
United Kingdom Treasury, 8.50% ................... 425,000 12/07/2005 822,197
-----------
1,907,295
-----------
FINANCE/MORTGAGE 3.0%
American Express Credit Account Master Trust
Series 97-1A, 6.40% ............................ $ 50,000 4/15/2005 50,734
Arcadia Automobile Trust 97-C A5, 6.55% .......... 50,000 6/15/2005 50,787
Bank of New York Institutional Capital Trust,
7.78%+ ......................................... 100,000 12/01/2026 102,790
Capital One Bank Sr. Note, 7.08% ................. 75,000 10/30/2001 76,777
Chemical Master Credit Card Trust Series 1996-1 A,
5.55% .......................................... 100,000 9/15/2003 98,945
Cigna Corp. Deb., 7.875% ......................... 100,000 5/15/2027 109,534
Citibank Credit Card Master Trust 1998-1 Cl. A,
5.75% .......................................... 100,000 1/15/2003 99,406
Countrywide Funding Corp. Note, 6.58% ............ 75,000 9/21/2001 75,630
CS First Boston Mortgage Series 97C2-A2, 6.52% ... 100,000 7/17/2007 100,594
DMARC Commercial Mortgage Series 98-1 A1, 6.22% .. 59,760 6/15/2031 60,432
First Union Lehman Brothers Commercial Mortgage
97C2-A2, 6.60% ................................. 50,000 11/18/2029 50,375
First USA Credit Card Master Trust Series 1997-6A,
6.42% .......................................... 75,000 3/17/2005 76,099
Florida Windstorm Underwriting Association Sr ....
Sec. Note Series 1997, MBIA Insured, 6.85%+ .... 25,000 8/25/2007 25,637
Ford Credit Auto Loan Master Trust Series 95-1,
6.50% .......................................... 125,000 8/15/2002 126,171
Ford Credit Auto Owner Trust 1996A-A3, 6.50% ..... 88,668 11/15/1999 88,890
IBM Credit Corp. Note, 5.79% ..................... 50,000 3/20/2000 49,874
LB Commercial Mortgage Trust 98C1-A1, 6.33% ...... 49,378 11/18/2004 48,884
LB Commercial Mortgage Trust Series 97LL1-A1,
6.79% .......................................... 98,902 6/12/2004 101,220
MBNA Corp. Sr. Note, 6.875% ...................... 100,000 11/15/2002 101,526
Morgan Stanley Capital Inc. Mortgage Certificate
98-A1, 6.19% ................................... 34,823 1/15/2007 35,500
Prime Credit Card Master Trust Series 1995-1A,
6.75% .......................................... 50,000 11/15/2005 51,062
Prime Credit Card Master Trust Series 1996-1A,
6.70% .......................................... 50,000 7/15/2004 50,891
Sears Credit Trust Series 1995-2A, 8.10% ......... 50,000 6/15/2004 51,484
Textron Finance Corp. Note, 6.125%+ .............. 25,000 3/15/2001 24,975
World Omni Automobile Lease Trust 97B-A3, 6.18% .. 100,000 11/25/2003 100,281
Zurich Capital Trust, 8.376%+ .................... 100,000 6/01/2037 108,891
-----------
1,917,389
-----------
CORPORATE 7.6%
Advanstar Commerce Inc. Sr. Note, 9.25%+ ......... 150,000 5/01/2008 150,187
American Lawyer Media Inc. Sr. Sub. Note, 9.75%+ . 250,000 12/15/2007 259,375
Ameristar Casinos Inc. Sr. Sub. Note, 10.50% ..... 150,000 8/01/2004 159,375
Archibald Candy Corp. Sr. Sec. Note, 10.25% ...... 250,000 7/01/2004 268,750
Arizona Public Service Co. Note, 6.25% ........... 75,000 1/15/2005 73,218
California Infrastructure & Economic Development
Bank Series 1997-A4, 6.15% ..................... 50,000 3/25/2004 50,943
CHC Helicopter Corp. Sr. Sub. Note, 11.50% ....... 250,000 7/15/2002 265,625
Columbia/HCA Healthcare Corp. Deb., 7.50% ........ 50,000 12/15/2023 46,748
Columbia/HCA Healthcare Corp. Note, 7.69% ........ 50,000 6/15/2025 47,741
Columbia/HCA Healthcare Corp. Trust, 8.12% ....... 75,000 8/04/2003 76,424
Empire Gas Corp. Sr. Sec. Note, 7.00% to 7/14/99,
12.875% from 7/15/99 to maturity ............... 250,000 7/15/2004 230,000
Envirosource Inc. Sr. Note, 9.75% ................ 500,000 6/15/2003 510,000
First Wave Marine Inc. Sr. Note, 11.00% .......... 100,000 2/01/2008 105,000
Fort James Corp. Note, 6.23% ..................... 50,000 3/15/2001 49,970
French Fragrances Inc. Sr. Note Series B, 10.375% 150,000 5/15/2007 158,250
International Shipholding Corp. Sr. Note Series B,
7.75%+ ......................................... 100,000 10/15/2007 97,875
J.B. Poindexter Inc. Sr. Note, 12.50% ............ 100,000 5/15/2004 103,250
Johnstown America Industries Inc. Sr. Sub. Note
Series C, 11.75% ............................... 125,000 8/15/2005 139,375
Microcell Telecommunications Sr. Note Series B,
0.00% to 10/14/2002, 11.125% from 10/15/2002 to
maturity ....................................... 150,000 10/15/2007 68,184
Norcal Waste Systems Inc. Series B Sr. Note,
13.50% ......................................... 250,000 11/15/2005 292,500
Owens-Illinois Inc. Sr. Note, 8.10% .............. 100,000 5/15/2007 106,035
Packaging Resources Inc. Sr. Sec. Note, 11.625% .. 250,000 5/01/2003 245,000
Pool Energy Services Co. Sr. Sub. Note, 8.625%+ .. 150,000 4/01/2008 150,000
Rose Hills Co. Sr. Sub. Note, 9.50% .............. 250,000 11/15/2004 261,250
Sitel Corp. Sr. Sub. Note, 9.25%+ ................ 100,000 3/15/2006 102,250
Solutia Inc. Note, 6.50% ......................... 100,000 10/15/2002 100,925
Spanish Broadcasting Systems Inc. Sr. Note, 7.50% 250,000 6/15/1997 287,500
Stena AB Sr. Note, 8.75% ......................... 250,000 6/15/2007 256,250
Sun Media Corp. Sr. Sub. Note, 9.50% ............. 162,000 2/15/2007 173,340
Viatel Inc. Sr. Note Series A, 11.25%+ ........... 100,000 4/15/2008 106,000
-----------
4,941,340
-----------
Total Fixed Income Securities (Cost $14,082,208) . 14,235,687
-----------
COMMERCIAL PAPER 4.4%
American Express Credit Corp., 5.51% ............. 2,898,000 5/04/1998 2,898,000
-----------
Total Commercial Paper (Cost $2,898,000) ......... 2,898,000
-----------
- -------------------------------------------------------------------------------------------------------
Shares
- -------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS 24.9%
Navigator Securities Lending Prime Portfolio.................... 16,250,559 16,250,559
-----------
Total Short-Term Investments (Cost $16,250,559) .............................. 16,250,559
-----------
Total Investments (Cost $70,115,497) - 125.3% ................................ 81,821,784
Cash and Other Assets, Less Liabilities - (25.3%) ............................ (16,526,751)
-----------
Net Assets - 100.0% .......................................................... $65,295,033
===========
Federal Income Tax Information:
At April 30, 1998, the net unrealized appreciation of investments based
on cost for Federal income tax purposes of $70,185,869 was as
follows:
Aggregate gross unrealized appreciation for all investments in which
there is an excess of value over tax cost .................................. $12,692,875
Aggregate gross unrealized depreciation for all investments in which
there is an excess of tax cost over value .................................. (1,056,960)
-----------
$11,635,915
===========
- -------------------------------------------------------------------------------------------------------
ADR Stands for American Depositary Receipt, representing ownership of foreign securities.
* Non-income-producing securities.
TBA 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 1%.
+ 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, 1998 were $1,165,236 and $1,178,905 (1.81% of net assets),
respectively.
</TABLE>
<TABLE>
Forward currency exchange contracts outstanding at April 30, 1998, are as follows:
<CAPTION>
UNREALIZED
CONTRACT APPRECIATION DELIVERY
TOTAL VALUE PRICE (DEPRECIATION) DATE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sell Australian dollars, Buy U.S. dollars 124,000 AUD .67830 AUD $ 3,212 5/13/98
Buy Australian dollars, Sell U.S. dollars 235,000 AUD .66125 AUD (2,003) 6/10/98
Sell Australian dollars, Buy U.S. dollars 115,000 AUD .68109 AUD 3,262 6/10/98
Sell Australian dollars, Buy U.S. dollars 120,000 AUD .66880 AUD 1,929 6/10/98
Sell Australian dollars, Buy U.S. dollars 430,000 AUD .65110 AUD (966) 7/23/98
Sell Canadian dollars, Buy U.S. dollars 95,000 CAD .70033 CAD (19) 7/23/98
Sell British pounds, Buy U.S. dollars 475,000 GBP 1.67265 GBP 3,118 7/23/98
Sell Japanese yen, Buy U.S. dollars 137,479,000 JPY .00824 JPY 78,929 8/11/98
Sell New Zealand dollars, Buy U.S. dollars 110,000 NZD .58265 NZD 3,058 5/13/98
Sell New Zealand dollars, Buy U.S. dollars 1,110,000 NZD .55600 NZD 4,997 7/23/98
--------
$ 95,517
========
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: AGGRESSIVE
- --------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------------------
April 30, 1998 (Unaudited)
<S> <C>
ASSETS
Investments, at value (Cost $70,115,497) (Note 1) ........................ $81,821,784
Cash ..................................................................... 92,445
Receivable for securities sold ........................................... 475,049
Interest and dividends receivable ........................................ 306,743
Receivable for open forward contracts .................................... 98,505
Receivable for fund shares sold .......................................... 61,653
Receivable from Distributor (Note 3) ..................................... 22,652
Deferred organization costs and other assets (Note 1) .................... 52,475
-----------
82,931,306
LIABILITIES
Payable for collateral received on securities loaned ..................... 16,250,559
Payable for securities purchased ......................................... 1,053,034
Payable for fund shares redeemed ......................................... 166,066
Accrued transfer agent and shareholder services (Note 2) ................. 43,519
Accrued management fee (Note 2) .......................................... 40,265
Accrued trustees' fees (Note 2) .......................................... 8,694
Payable for open forward contracts ....................................... 2,988
Other accrued expenses ................................................... 71,148
-----------
17,636,273
-----------
NET ASSETS $65,295,033
===========
Net Assets consist of:
Undistributed net investment income .................................... $ 115,574
Unrealized appreciation of investments ................................. 11,706,287
Unrealized appreciation of forward contracts and foreign currency ...... 94,807
Accumulated net realized gain .......................................... 4,879,967
Paid-in capital ........................................................ 48,498,398
-----------
$65,295,033
===========
Net Asset Value, offering price and redemption price per share of
Class S shares ($65,295,033 / 5,149,249 shares) ........................ $12.68
======
</TABLE>
<TABLE>
- -------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- -------------------------------------------------------------------------------------------
For the six months ended April 30, 1998 (Unaudited)
<S> <C>
INVESTMENT INCOME
Interest (Note 1) ........................................................ $ 694,552
Dividends, net of foreign taxes of $5,775 ................................ 236,215
----------
930,767
EXPENSES
Management fee (Note 2) .................................................. 255,932
Custodian fee ............................................................ 68,681
Transfer agent and shareholder services (Note 2) ......................... 67,053
Reports to shareholders .................................................. 14,507
Audit fee ................................................................ 13,032
Trustees' fees (Note 2) .................................................. 9,547
Amortization of organization costs (Note 1) .............................. 3,711
Registration fees ........................................................ 3,656
Miscellaneous ............................................................ 1,157
----------
437,276
Expenses borne by the Distributor (Note 3) ............................... (61,908)
----------
375,368
----------
Net investment income .................................................... 555,399
----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS,
FOREIGN CURRENCY AND FORWARD CONTRACTS
Net realized gain on investments (Notes 1 and 4) ......................... 4,737,032
Net realized gain on foreign currency and forward contracts (Note 1) ..... 217,146
----------
Total net realized gain ................................................ 4,954,178
----------
Net unrealized appreciation of investments ............................... 2,643,535
Net unrealized appreciation of foreign currency and forward contracts .... 64,552
----------
Total net unrealized appreciation ...................................... 2,708,087
----------
Net gain on investments, foreign currency and forward contracts .......... 7,662,265
----------
Net increase in net assets resulting from operations ..................... $8,217,664
==========
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: AGGRESSIVE
- --------------------------------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED
YEAR ENDED APRIL 30, 1998
OCTOBER 31, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income ...................................... $ 1,245,547 $ 555,399
Net realized gain on investments, foreign currency and
forward contracts ........................................ 11,183,938 4,954,178
Net unrealized appreciation of investments, foreign currency
and forward contracts .................................... 1,440,757 2,708,087
----------- -----------
Net increase resulting from operations ..................... 13,870,242 8,217,664
----------- -----------
Dividends from net investment income:
Class A .................................................. (7,266) --
Class S .................................................. (1,418,981) (913,651)
----------- -----------
(1,426,247) (913,651)
----------- -----------
Distributions from net realized gains:
Class A .................................................. (80,854) --
Class S .................................................. (7,708,753) (11,099,159)
----------- -----------
(7,789,607) (11,099,159)
----------- -----------
Net increase (decrease) from fund share transactions (Note 6) 9,203,933 (8,662,841)
----------- -----------
Total increase (decrease) in net assets .................... 13,858,321 (12,457,987)
NET ASSETS
Beginning of period ........................................ 63,894,699 77,753,020
----------- -----------
End of period (including undistributed net investment income
of $473,826 and $115,574, respectively) .................. $77,753,020 $65,295,033
=========== ===========
The accompanying notes are an integral part of the financial statements.
</TABLE>
- --------------------------------------------------------------------------------
NOTES TO UNAUDITED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
April 30, 1998
NOTE 1
State Street Research Strategic Portfolios: Aggressive (the "Fund"), is a
series of State Street Research 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. Before November 1,
1997, Class S shares were designated Class C. Only Class S shares are
presently available for purchase. Class A, Class B and Class C shares are not
being offered at this time. Effective March 27, 1997, the Fund discontinued
offering Class A shares. Class A shares are subject to an initial sales charge
of up to 4.50% and an annual service fee 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 subject to
a contingent deferred sales charge of 1.00% on any shares redeemed within one
year of their purchase. Class C shares also pay annual distribution and
service fees of 1.00%. Class S shares are only offered through certain
retirement accounts, advisory accounts of State Street Research & Management
Company (the "Adviser"), an indirect wholly owned subsidiary of Metropolitan
Life Insurance Company ("Metropolitan"), and special programs. No sales charge
is imposed at the time of purchase or redemption of Class S shares. Class S
shares do not pay any distribution or service fees. The Fund's expenses are
borne pro-rata by each class, except that each class bears expenses, and has
exclusive voting rights with respect to provisions of the Plan of
Distribution, related specifically to that class. The Trustees declare
separate dividends on each class of shares.
The following significant accounting policies are consistently followed by the
Fund in preparing its financial statements, and such policies are in
conformity with generally accepted accounting principles for investment
companies.
A. INVESTMENT VALUATION
Values for listed equity securities reflect final sales on national securities
exchanges quoted prior to the close of the New York Stock Exchange. Over-the-
counter securities quoted on the National Association of Securities Dealers
Automated Quotation ("NASDAQ") system are valued at closing prices supplied
through such system. If not quoted on the NASDAQ system, such securities are
valued at prices obtained from brokers. In the absence of recorded sales,
valuations are at the mean of the closing bid and asked quotations. Fixed
income securities are valued by a pricing service, which utilizes market
transactions, quotations from dealers, and various relationships among
securities in determining value. Short-term securities maturing within sixty
days are valued at amortized cost. Securities quoted in foreign currencies are
translated into U.S. dollars at the current exchange rate.
B. SECURITY TRANSACTIONS
Security transactions are accounted for on the trade date (date the order to
buy or sell is executed). Realized gains or losses are reported on the basis
of identified cost of securities delivered. Gains and losses that arise from
changes in exchange rates are not segregated from gains and losses that arise
from changes in market prices of investments.
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
accured 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. The difference is primarily due to differing treatments
for foreign currency transactions.
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.
I. SECURITIES LENDING
The Fund may seek additional income by lending portfolio securities to
qualified institutions. The Fund will receive cash or securities as collateral
in an amount equal to at least 100% of the current market value of any loaned
securities plus accrued interest. By reinvesting any cash collateral it
receives in these transactions, the Fund could realize additional gains and
losses. If the borrower fails to return the securities and the value of the
collateral has declined during the term of the loan, the Fund will bear the
loss. At April 30, 1998, the value of the securities loaned and the value of
collateral were $15,890,776 and $16,250,559, respectively. During the six
months ended April 30, 1998, income from securities lending amounted to $855
and is included in interest income.
NOTE 2
The Trust and the Adviser have entered into an agreement under which the
Adviser earns monthly fees at an annual rate of 0.75% 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, 1998, the fees
pursuant to such agreement amounted to $255,932.
State Street Research Service Center, a division of State Street Research
Investment Services, Inc., the Trust's principal underwriter (the
"Distributor"), an indirect wholly owned subsidiary of Metropolitan, provides
certain shareholder services to the Fund such as responding to inquiries and
instructions from investors with respect to the purchase and redemption of
shares of the Fund. 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, 1998, the amount of such expenses was $51,956.
The fees of the Trustees not currently affiliated with the Adviser amounted to
$9,547 during the six months ended April 30, 1998.
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, 1998, the amount of such expenses
assumed by the Distributor and its affiliates was $61,908.
NOTE 4
For the six months ended April 30, 1998, purchases and sales of securities,
exclusive of short-term obligations, aggregated $40,744,783 and $57,351,310
(including $9,274,688 and $8,940,928 of U.S. Government obligations),
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 C shares. In addition, the Fund will pay
annual distribution fees of 0.75% of average daily net assets for Class B and
Class C shares. The Distributor uses such payments for personal service and/or
the maintenance or servicing of shareholder accounts, to compensate or 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, 1998,
Metropolitan owned 2,863,567 Class S shares of the Fund.
Share transactions were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED APRIL 30, 1998
OCTOBER 31, 1997 (UNAUDITED)
-------------------------- -------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ................... 8,328 $ 101,499 -- $ --
Issued upon reinvestment of:
Dividend from net investment
income .................... 54 615 -- --
Distribution from net
realized gains ............ 606 6,845 -- --
Shares repurchased ............ (59,010) (669,014) -- --
---------- ------------ ---------- ------------
Net decrease .................. (50,022) $ (560,055) -- $ --
========== ============ ========== ============
CLASS S (FORMERLY CLASS C) SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------
Shares sold ................... 1,008,062 $ 12,442,073 529,405 $ 6,330,874
Issued upon reinvestment of:
Dividends from net investment
income .................... 47,450 565,762 25,087 274,950
Distributions from net
realized gains ............ 683,399 7,708,745 1,012,696 11,099,149
Shares repurchased ............ (927,982) (10,952,592) (2,318,670) (26,367,814)
---------- ------------ ---------- ------------
Net increase (decrease) ....... 810,929 $ 9,763,988 (751,482) $ (8,662,841)
========== ============ ========== ============
</TABLE>
<PAGE>
<TABLE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: AGGRESSIVE
- --------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------------------------------------------------
For a share outstanding throughout each period:
<CAPTION>
Class A
-----------------------------------------------------------
Years ended October 31
------------------------------------ November 1, 1996
1994(2) 1995(1) 1996(1) to March 27, 1997(1)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD($) 9.55 9.74 10.93 12.45
------ ------ ------ ------
Net investment income ($)* 0.09 0.20 0.14 0.10
Net realized and unrealized gain on investments, foreign
currency and forward contracts ($) 0.14 1.19 1.79 0.41
------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS ($) 0.23 1.39 1.93 0.51
------ ------ ------ ------
Dividends from net investment income($) 0.04) (0.20) (0.17) (0.13)
Distributions from net realized gains ($) -- -- (0.24) (1.48)
------ ------ ------ ------
TOTAL DISTRIBUTIONS ($) (0.04) (0.20) (0.41) (1.61)
------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD ($) 9.74 10.93 12.45 11.35
==== ===== ===== =====
Total return(3) (%) 2.41(4) 14.49 18.05 4.18(4)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period ($ thousands) 50,999 39,555 623 --
Ratio of operating expenses to average net assets (%)* 1.35(5) 1.35 1.35 1.35(5)
Ratio of net investment income to average net assets (%)* 2.01(5) 1.98 1.43 1.69(5)
Portfolio turnover rate (%) 37.75 127.44 145.59 136.48
*Reflects voluntary assumption of fees or expenses per share
in each period (Note 3) ($) 0.01 0.02 0.01 0.02
</TABLE>
<TABLE>
<CAPTION>
Class S (Fomerly Class C)
----------------------------------------------------------------------
Years ended October 31 Six months ended
-------------------------------------------------- April 30, 1998
1994(2) 1995(1) 1996(1) 1997(1) (Unaudited)(1)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ($) 9.55 9.74 10.94 12.43 13.18
----- ------ ------ ------ ------
Net investment income ($)* 0.10 0.22 0.22 0.22 0.10
Net realized and unrealized gain on investments, foreign
currency and forward contracts ($) 0.14 1.20 1.74 2.27 1.44
----- ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS ($) 0.24 1.42 1.96 2.49 1.54
----- ------ ------ ------ ------
Dividends from net investment income ($) (0.05) (0.22) (0.23) (0.26) (0.16)
Distributions from net realized gains ($) -- -- (0.24) (1.48) (1.88)
----- ------ ------ ------ ------
TOTAL DISTRIBUTIONS ($) (0.05) (0.22) (0.47) (1.74) (2.04)
----- ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD ($) 9.74 10.94 12.43 13.18 12.68
===== ====== ====== ====== ======
Total return(3) (%) 2.50(4) 14.85 18.37 22.54 14.06(4)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period ($ thousands) 102 20,809 63,272 77,753 65,295
Ratio of operating expenses to average net assets (%)* 1.10(5) 1.10 1.10 1.10 1.10(5)
Ratio of net investment income to average net assets (%)* 2.26(5) 2.13 1.78 1.79 1.63(5)
Portfolio turnover rate (%) 37.75 127.44 145.59 136.48 61.69
*Reflects voluntary assumption of fees or expenses per
share in each period (Note 3) ($) 0.01 0.02 0.03 0.02 0.01
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Per-share figures have been calculated using the average shares method.
(2) May 16,1994 (commencement of operations) to October 31, 1994.
(3) 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.
(4) Not Annualized.
(5) Annualized.
</TABLE>
<PAGE>
<TABLE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: AGGRESSIVE
- ------------------------------------------------------------------------------------------------------------
FUND INFORMATION, OFFICERS AND TRUSTEES OF STATE STREET RESEARCH FINANCIAL TRUST
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FUND INFORMATION OFFICERS TRUSTEES
STATE STREET RESEARCH RALPH F. VERNI RALPH F. VERNI
STRATEGIC PORTFOLIOS: AGGRESSIVE Chairman of the Board, Chairman of the Board,
One Financial Center President and President, Chief Executive
Boston, MA 02111 Chief Executive Officer Officer and Director,
State Street Research &
INVESTMENT ADVISER PETER C. BENNETT Management Company
State Street Research & Vice President
Management Company
One Financial Center JOHN H. KALLIS STEVE A. GARBAN
Boston, MA 02111 Vice President Retired; formerly Senior Vice
President for Finance and
DISTRIBUTOR THOMAS A. SHIVELY Operations and Treasurer, The
State Street Research Vice President Pennsylvania State University
Investment Services, Inc.
One Financial Center GERARD P. MAUS
Boston, MA 02111 Treasurer MALCOLM T. HOPKINS
Former Vice Chairman of the
SHAREHOLDER SERVICES JOSEPH W. CANAVAN Board and Chief Financial
State Street Research Assistant Treasurer Officer, St. Regis Corp.
Service Center
P.O. Box 8408 DOUGLAS A. ROMICH
Boston, MA 02266-8408 Assistant Treasurer EDWARD M. LAMONT
1-800-562-0032 Formerly in banking
FRANCIS J. MCNAMARA, III (with an affiliate of
CUSTODIAN Secretary and General Counsel J.P. Morgan & Co. in
State Street Bank and New York); presently engaged
Trust Company DARMAN A. WING in private investments and
225 Franklin Street Assistant Secretary and civic affairs
Boston, MA 02110 Assistant General Counsel
LEGAL COUNSEL AMY L. SIMMONS ROBERT A. LAWRENCE
Goodwin, Procter & Hoar LLP Assistant Secretary Formerly Partner, Saltonstall & Co.
Exchange Place
Boston, MA 02109
DEAN O. MORTON
Retired; formerly Executive
Vice President, Chief
Operating Officer and Director,
Hewlett-Packard 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
</TABLE>
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: AGGRESSIVE -------------------
One Financial Center Bulk Rate
Boston, MA 02111 U.S. Postage
PAID
Permit #6
Hartford, CT
-------------------
QUESTIONS? COMMENTS?
CALL us at 1-800-562-0032 or
WRITE us at:
State Street Research
Service Center
P.O. Box 8408
Boston, MA 02266-8408
E-MAIL us at:
[email protected]
INTERNET site:
WWW.SSRFUNDS.COM
[LOGO] STATE STREET RESEARCH
This report is prepared for the general information of current shareholders.
When used in the general solicitation of investors, this report must be
accompanied or preceded by a current State Street Research Strategic Portfolios:
Aggressive prospectus. When used after June 30, 1998, this report must be
accompanied by a current Quarterly Performance Update.
Portfolio changes should not be considered recommendations for action by
individual investors.
The Dalbar awards recognize quality shareholder service and should not be
considered a rating of fund performance. The survey included mutual fund
complexes that volunteered or were otherwise selected to participate and was not
industry-wide.
CONTROL NUMBER: 4999-980619(0799)SSR-LD SP-237E-0698
<PAGE>
STATE STREET RESEARCH
----------------------------------
STRATEGIC PORTFOLIOS: CONSERVATIVE
----------------------------------
SEMIANNUAL REPORT
April 30, 1998
------------------------------
WHAT'S INSIDE
------------------------------
INVESTMENT UPDATE
About the Fund,
economy and markets
FUND INFORMATION
Facts and figures
PLUS, COMPLETE PORTFOLIO HOLDINGS
AND FINANCIAL STATEMENTS
- ---------------------
DALBAR
HONORS COMMITMENT TO:
INVESTORS
1997
- ---------------------
For Excellence
in
Shareholder Service
STATE STREET RESEARCH FUNDS
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: CONSERVATIVE
- ----------------------------------------------------------------------------
INVESTMENT UPDATE
- ----------------------------------------------------------------------------
INVESTMENT ENVIRONMENT
THE ECONOMY
o The U.S. economy experienced solid growth during the last quarter of 1997
and the first quarter of 1998. Inflation was low and the financial markets,
in general, were strong. Unemployment fell to a 28-year low. Interest rates
had little change, and consumer confidence continued at near- record highs.
o Favorable economic factors have stimulated a boom in the housing market and
stronger- than-expected retail sales. Lower energy costs kept inflation in
check.
o Although last year's economic crisis in Southeast Asia raised concerns about
the U.S. exports and profits at multinational companies, the effects have
yet to make a significant impact on corporate profitability in the United
States.
THE MARKETS
o The S&P 500, a broad measure of common stock performance, gained 22.50% for
the six-month period ended April 30, 1998.(1) Small stocks rebounded from
declines following the turmoil in Southeast Asia. Large-capitalization
brand-name companies continued to benefit.
o Bonds delivered modest gains during the period. High-yield bonds were among
the strongest performers. Mortgage-backed securities held up well, despite
concerns that refinancing could become a negative factor in the future.
THE FUND
OVER THE PAST SIX MONTHS
o For the six months ended April 30, 1998, Class S shares of Strategic
Portfolios: Conservative returned 7.13%. The Fund significantly outperformed
the Lipper flexible income fund average, which was up 2.86% over the same
period.
o Although bonds were positive performers during the period, the Fund's
investment in stocks -- more than 25% of portfolio assets -- accounted for
its strong performance.
o Stocks of large- and small-cap growth companies did well, and a lower
capital gains rate made growth stocks more attractive.
CURRENT STRATEGY
o No major changes were made to the Fund's asset allocation (shown below)
during the period. Generally, the manager is underweighting large-cap stocks
and overweighting bonds for their attractive real returns and lower risk
profile.
o The Fund is positioned to anticipate continued slow, steady growth in the
U.S. with low inflation. Asia is still a question mark for U.S. companies
and for the economy, as well. Diversification among value and growth assets,
small- and large- cap stocks, and domestic and international sectors should
help the Fund deal with the current uncertainty.
(1)The Standard & Poor's 500 Composite Index (S&P 500) is a market-value
weighted index composed of 500 widely held common stocks. The index is unmanaged
and does not take transaction charges into account. Direct investment in the
index is not possible; results are for illustrative purposes only.
(2)All returns represent past performance, which is no guarantee of future
results. The investment return and principal value of an investment made in the
Fund will fluctuate and shares, when redeemed, may be worth more or less than
their original cost. All returns assume reinvestment of capital gain
distributions and income dividends.
(3)"S" shares, offered without a sales charge, are available only through
certain employee benefit plans and special programs.
(4)Before November 1, 1997, Class S shares were designated Class C.
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.
April 30, 1998
- -------------------------------------------------------------------------------
FUND INFORMATION (all data are for periods ended April 30, 1998, except where
noted)
- -------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
FOR PERIODS ENDED 3/31/98(2)(3)(4)
- ---------------------------------------------------------------------------
LIFE OF FUND
(since 5/16/94) 1 YEAR
- ---------------------------------------------------------------------------
Class S 12.45% 18.67%
- ---------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN(2)(3)(4)
- ---------------------------------------------------------------------------
LIFE OF FUND
(since 5/16/94) 1 YEAR
- ---------------------------------------------------------------------------
Class S 12.46% 17.48%
- ---------------------------------------------------------------------------
Performance results for the Fund are increased by the voluntary reduction of
Fund fees and expenses; without subsidization, performance would have been
lower.
ASSET ALLOCATION
(by percentage of net assets)
Bonds 71%
Stocks 27%
Cash 2%
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: CONSERVATIVE
- ----------------------------------------------------------------------------
INVESTMENT PORTFOLIO
- ----------------------------------------------------------------------------
April 30, 1998 (Unaudited)
- ----------------------------------------------------------------------------
Value
Shares (Note 1)
- ----------------------------------------------------------------------------
EQUITY SECURITIES 26.9%
BASIC INDUSTRIES 4.8%
CHEMICAL 1.5%
Agrium Inc. ................................... 12,700 $ 199,231
Cabot Corp. ................................... 5,700 204,844
Ciba Specialty Chemicals AG* .................. 170 20,563
E.I. Du Pont De Nemours & Co. ................. 500 36,406
Thiokol Corp. ................................. 1,900 102,363
-----------
563,407
-----------
DIVERSIFIED 0.6%
Johnson Controls Inc. ......................... 1,000 59,375
Mark IV Industries Inc. ....................... 5,700 120,056
Ogden Corp. ................................... 1,700 52,275
-----------
231,706
-----------
ELECTRICAL EQUIPMENT 0.4%
Asia Pacific Wire & Cable Corp. Ltd.* ......... 3,800 22,800
General Electric Co. .......................... 1,300 110,663
Sony Corp.* ................................... 300 24,958
-----------
158,421
-----------
FOREST PRODUCT 0.5%
Abitibi-Consolidated Inc. ..................... 12,200 181,475
-----------
MACHINERY 1.0%
Harsco Corp. .................................. 500 23,000
Howmet International Inc.* .................... 6,000 99,000
Sundstrand Corp. .............................. 2,300 158,844
Tyco International Ltd. ....................... 1,900 103,550
-----------
384,394
-----------
METAL & MINING 0.6%
Kennametal Inc. ............................... 3,600 191,925
RTZ Corp.* .................................... 1,421 20,406
-----------
212,331
-----------
TRUCKERS 0.2%
CNF Transportation Inc. ....................... 1,300 50,212
-----------
Total Basic Industries ........................ 1,781,946
-----------
CONSUMER CYCLICAL 4.1%
AIRLINE 0.1%
Aeroporti Di Roma SPA* ........................ 3,000 42,002
-----------
AUTOMOTIVE 0.7%
Exide Corp. ................................... 5,900 113,944
Gencorp Inc. .................................. 2,200 66,963
Midas Inc.* ................................... 766 14,793
Renault SA* ................................... 1,000 46,415
-----------
242,115
-----------
HOTEL & RESTAURANT 0.7%
Harrah's Entertainment Inc.* .................. 5,500 143,343
MGM Grand Inc.* ............................... 700 23,625
Mirage Resorts Inc.* .......................... 4,700 103,694
-----------
270,662
-----------
RECREATION 0.8%
Cox Communications Inc. Cl. A* ................ 1,000 44,625
GTech Holdings Corp.* ......................... 1,800 64,575
International Game Technology Inc. ............ 2,200 61,187
Mattel Inc. ................................... 1,200 45,975
US West Inc.* ................................. 2,600 98,150
-----------
314,512
-----------
RETAIL TRADE 1.8%
Cendant Corp.* ................................ 2,200 55,000
Dayton Hudson Corp. ........................... 700 61,119
Hannaford Brothers Co. ........................ 3,800 168,862
Home Depot Inc. ............................... 1,200 83,550
Kroger Co.* ................................... 1,800 75,375
Rite Aid Corp. ................................ 2,900 93,163
Wal-Mart Stores, Inc. ......................... 1,600 80,900
Wolters Kluwer NV* ............................ 300 39,280
-----------
657,249
-----------
Total Consumer Cyclical ....................... 1,526,540
-----------
CONSUMER STAPLE 5.3%
Business Service 0.8%
A.C. Nielson Corp.* ........................... 5,700 159,600
Apollo Group Inc. Cl. A* ...................... 1,350 46,238
HBO & Co. ..................................... 1,400 83,737
-----------
289,575
-----------
AIRPORT 0.5%
Ball Corp. .................................... 5,000 193,125
-----------
DRUG 0.8%
Bristol-Myers Squibb Co. ...................... 600 63,525
Pfizer Inc. ................................... 800 91,050
Schering-Plough Corp. ......................... 500 40,063
Warner-Lambert Co. ............................ 600 113,512
-----------
308,150
-----------
FOOD & BEVERAGE 1.0%
Coca-Cola Co. ................................. 800 60,700
H.J. Heinz Co. ................................ 500 27,250
Hussmann International Inc.* .................. 2,400 41,700
Keebler Foods Co.* ............................ 800 22,800
PepsiCo Inc. .................................. 1,100 43,656
Sara Lee Corp. ................................ 1,500 89,344
Whitman Corp. ................................. 4,700 91,944
-----------
377,394
-----------
HOSPITAL SUPPLY 0.7%
Guidant Corp. ................................. 800 53,500
Johnson & Johnson ............................. 400 28,550
Quorum Health Group Inc.* ..................... 3,200 102,800
U.S. Surgical Corp. ........................... 1,900 59,850
-----------
244,700
-----------
PRINTING & PUBLISHING 1.4%
Hollinger International, Inc. Cl. A* .......... 12,200 189,100
Prosieben Media AG* ........................... 1,000 51,545
Torstar Corp. Cl. B* .......................... 3,200 108,535
Valassis Communications Inc. .................. 4,800 188,400
-----------
537,580
-----------
TOBACCO 0.1%
Dimon Inc. .................................... 3,200 46,800
-----------
Total Consumer Staple ......................... 1,997,324
-----------
ENERGY 1.3%
OIL 1.2%
Anadarko Petroleum Corp. ...................... 400 29,300
British Petroleum Co. PLC* .................... 2,100 33,195
Energy Africa Ltd.* ........................... 9,200 44,598
Exxon Corp. ................................... 600 43,763
Fletcher Challenge Ltd.* ...................... 6,600 22,511
Oryx Energy Co. ............................... 4,100 107,112
PTT Exploration & Production Public Co. Ltd.* . 2,100 22,168
Seagull Energy Corp.* ......................... 4,800 81,900
Total SA Cl. B ADR ............................ 1,400 82,250
-----------
466,797
-----------
OIL SERVICE 0.1%
Schlumberger Ltd. ............................. 400 33,150
-----------
Total Energy .................................. 499,947
-----------
FINANCE 4.4%
BANK 1.8%
Banc One Corp. ................................ 1,290 75,868
BankAmerica Corp. ............................. 900 76,500
Canadian Imperial Bank of Commerce ............ 4,100 145,294
Chase Manhattan Corp. ......................... 500 69,281
Fleet Financial Group Inc. .................... 900 77,737
National Bank of Canada ....................... 7,500 154,726
U.S. Bancorp .................................. 500 63,500
-----------
662,906
-----------
FINANCIAL SERVICE 0.1%
Federal National Mortgage Association ......... 600 35,925
-----------
Insurance 2.5%
Ace Ltd. ...................................... 8,300 314,362
AMBAC Inc. .................................... 3,300 187,069
Mid Ocean Ltd. ................................ 2,500 188,438
Transamerica Corp. ............................ 200 23,253
Travelers Group Inc. .......................... 1,100 67,306
UNUM Corp. .................................... 2,700 145,125
-----------
925,553
-----------
Total Finance ................................. 1,624,384
-----------
SCIENCE & TECHNOLOGY 4.3%
COMPUTER SOFTWARE & SERVICE 1.6%
Cisco Systems Inc.* ........................... 1,900 139,175
EMC Corp.* .................................... 900 41,512
Microsoft Corp.* .............................. 800 72,100
Nintendo Co. Ltd.* ............................ 1,400 128,427
Sema Group PLC* ............................... 1,600 57,889
TT Tieto Oy Cl. B* ............................ 500 91,800
WM-Data AB Cl. B* ............................. 2,700 81,258
-----------
612,161
-----------
ELECTRONIC COMPONENTS 0.9%
Lernout & Hauspie Speech Products NV ADR* ..... 2,600 165,750
Rohm Co.* ..................................... 1,000 112,891
Texas Instruments Inc. ........................ 1,100 70,469
-----------
349,110
-----------
ELECTRONIC EQUIPMENT 0.9%
L.M. Ericsson Telephone Co. Cl. B* ............ 2,568 135,333
Lucent Technologies Inc. ...................... 1,600 121,800
Nokia AB Oy Cl. K* ............................ 400 26,585
Teradyne Inc.* ................................ 1,300 47,450
-----------
331,168
-----------
OFFICE EQUIPMENT 0.9%
Lexmark International Group Inc. Cl. A* ....... 1,100 63,663
Unisys Corp. .................................. 7,800 175,012
Xerox Corp. ................................... 800 90,800
-----------
329,475
-----------
Total Science & Technology .................... 1,621,914
-----------
UTILITY 2.7%
ELECTRIC 1.6%
Allegheny Energy Inc.* ........................ 900 27,563
Edison International Corp. .................... 3,900 116,269
GPU Inc. ...................................... 2,000 79,250
Illinova Corp. ................................ 1,000 30,563
Montana Power Co. ............................. 900 33,469
OGE Energy Corp. .............................. 2,200 120,862
Pinnacle West Capital Corp. ................... 3,000 132,750
Western Resources Inc. ........................ 1,400 54,687
-----------
595,413
-----------
NATURAL GAS 0.6%
TransTexas Gas Corp.* ......................... 2,500 29,531
Williams Companies Inc. ....................... 6,027 190,604
-----------
220,135
-----------
TELEPHONE 0.5%
AirTouch Communications Inc.* ................. 1,000 53,125
Telecom Italia SPA* ........................... 5,300 39,645
WorldCom Inc.* ................................ 2,300 98,397
-----------
191,167
-----------
Total Utility ................................. 1,006,715
-----------
Total Equity Securities (Cost $7,873,838) ..... 10,058,770
-----------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
PRINCIPAL MATURITY VALUE
AMOUNT DATE (NOTE 1)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FIXED INCOME SECURITIES 70.9%
U.S. TREASURY 20.2%
U.S. Treasury Bond, 12.00% .......................... $ 200,000 8/15/2013 293,094
U.S. Treasury Bond, 8.75% ........................... 1,350,000 5/15/2017 1,764,072
U.S. Treasury Bond, 8.50% ........................... 775,000 2/15/2020 1,003,749
U.S. Treasury Bond, 8.125% .......................... 875,000 8/15/2021 1,099,630
U.S. Treasury Bond, 6.875% .......................... 500,000 8/15/2025 555,705
U.S. Treasury Bond, 6.625% .......................... 175,000 2/15/2027 189,410
U.S. Treasury Note, 7.50% ........................... 150,000 2/15/2005 164,672
U.S. Treasury Note, 6.50% ........................... 575,000 8/15/2005 600,156
U.S. Treasury TIPS, 3.625% .......................... 125,259 1/15/2008 123,888
U.S. Treasury TIPS, 3.625% .......................... 125,116 4/15/2028 124,334
U.S. Treasury STRIPS, 0.00% ......................... 550,000 11/15/2001 451,269
U.S. Treasury STRIPS, 0.00% ......................... 1,025,000 5/15/2003 772,973
U.S. Treasury STRIPS, 0.00% ......................... 675,000 5/15/2007 400,302
-----------
7,543,254
-----------
U.S. AGENCY MORTGAGE 17.5%
Federal Home Loan Mortgage Corp., 7.50% ............. 581,042 2/01/2027 595,748
Federal Home Loan Mortgage Corp. Gold, 7.00% ........ 744,074 6/01/2024 754,766
Federal Home Loan Mortgage Corp. Gold, 7.50% ........ 433,707 8/01/2024 444,819
Federal Home Loan Mortgage Corp. TBA, 6.00% ......... 450,000 5/18/2013 444,094
Federal Home Loan Mortgage Corp. TBA, 7.00% ......... 725,000 5/18/2013 738,593
Federal National Mortgage Association Remic 93-102-H
PAC, 6.80% ........................................ 125,000 9/25/2022 127,148
Federal National Mortgage Association TBA, 6.50% .... 775,000 5/13/2028 767,015
Federal National Mortgage Association TBA, 7.00% .... 500,000 5/13/2028 505,469
Government National Mortgage Association, 6.50% ..... 110,003 2/15/2009 111,206
Government National Mortgage Association, 6.50% ..... 54,066 6/15/2009 54,657
Government National Mortgage Association, 6.50% ..... 249,192 7/15/2009 251,916
Government National Mortgage Association, 7.50% ..... 297,001 12/15/2010 306,837
Government National Mortgage Association, 8.00% ..... 106,364 10/15/2017 112,014
Government National Mortgage Association, 8.00% ..... 54,109 11/15/2017 56,983
Government National Mortgage Association, 6.50% ..... 78,907 12/15/2023 78,513
Government National Mortgage Association, 6.50% ..... 405,466 7/15/2024 403,516
Government National Mortgage Association, 7.00% ..... 278,509 1/15/2025 282,598
Government National Mortgage Association, 7.50% ..... 339,143 11/15/2025 348,466
Government National Mortgage Association, 7.50% ..... 162,937 4/15/2026 167,365
-----------
6,551,723
-----------
CANADIAN-YANKEE 3.3%
British Aerospace Finance Inc. Note, 7.50%+ ......... 125,000 7/01/2027 135,074
DR Investments Sr. Note, 7.10%+ ..................... 125,000 5/15/2002 128,227
Petroliam Nasional BHD, 7.125%+ ..................... 125,000 8/15/2005 117,869
Petroliam Nasional BHD Note, 6.875%+ ................ 175,000 7/01/2003 166,890
Province of Quebec, 7.125% .......................... 75,000 2/09/2024 78,353
Transcanada Pipelines Ltd. Note, 6.43% .............. 125,000 3/15/2004 125,795
Usinor Sacilor ADR Note, 7.25% ...................... 350,000 8/01/2006 357,952
Woodside Finance Ltd. Note, 6.60%+ .................. 125,000 4/15/2008 122,938
-----------
1,233,098
-----------
TRUST CERTIFICATES 0.6%
Cooperative Utility Trust Certificates, 10.70% ...... 225,000 9/15/2017 236,340
-----------
FOREIGN GOVERNMENT 3.1%
Australian Dollar
Commonwealth of Australia, 8.75% .................... 275,000 8/15/2008 218,525
New Zealand Dollar
Government of New Zealand, 10.00% ................... 400,000 3/15/2002 241,118
Government of New Zealand, 8.00% .................... 300,000 11/15/2006 177,874
Pound Sterling
United Kingdom Treasury, 8.50% ...................... 275,000 12/07/2005 532,010
-----------
1,169,527
-----------
FINANCE/MORTGAGE 20.3%
American Express Credit Account Master Trust 97-1A,
6.40% ............................................. 125,000 4/15/2005 126,835
American Express Credit Account Master Trust 96-1A,
6.80% ............................................. 250,000 12/15/2003 256,015
Arcadia Automobile Trust 97-B A5, 6.70% ............. 125,000 2/15/2005 126,953
Arcadia Automobile Trust 97-C A5, 6.55% ............. 125,000 6/15/2005 126,968
Associates Corp. of North America Sr. Note, 6.70% ... 250,000 5/29/2001 254,498
Associates Corp. of North America Sr. Note, 6.45% ... 125,000 10/15/2001 126,021
Bank of New York Institutional Capital Trust, 7.78%+ 175,000 12/01/2026 179,883
Capital One Bank Note, 6.28% ........................ 250,000 2/20/2001 249,652
Chase Manhattan Master Trust 96-3A, 7.04% ........... 275,000 2/15/2005 282,906
Cigna Corp. Deb., 7.875% ............................ 175,000 5/15/2027 191,685
CIT Group Holdings Inc. Sr. Note, 6.80% ............. 250,000 4/17/2000 253,485
Commercial Credit Group Inc. Note, 6.45% ............ 250,000 7/01/2002 251,722
Commercial Credit Group Inc. Sr. Note, 5.55% ........ 250,000 2/15/2001 246,265
Countrywide Funding Corp. Note, 6.58% ............... 200,000 9/21/2001 201,680
Countrywide Funding Corp. Note, 6.28% ............... 200,000 1/15/2003 198,974
CS First Boston 97-C2 A2, 6.52% ..................... 250,000 7/17/2007 251,484
DLJ Mortgage Acceptance Corp. 97-CF2 A1A, 6.55%+ .... 121,485 11/15/2006 122,965
DMARC Corp. 98-1 C1 A1, 6.22% ....................... 199,200 6/15/2031 201,441
DMARC Corp. 98-C1 A2, 6.54% ......................... 200,000 6/15/2031 204,500
First Union Lehman Brothers Commercial 97-C2 A2,
6.60% ............................................. 125,000 11/18/2029 125,938
First USA Credit Card Master Trust Series 1997-6A,
6.42% ............................................. 250,000 3/17/2005 253,662
Florida Windstorm Underwriting Association Sr. Sec.
Note Series 1997, MBIA Insured, 6.85%+ ............ 125,000 8/25/2007 128,183
Ford Credit Auto Loan Master Trust Series 95-1, 6.50% 250,000 8/15/2002 252,342
Ford Credit Auto Owner Trust 1996 A A3, 6.50% ....... 221,670 11/15/1999 222,225
Ford Credit Auto Owner Trust Series 1997B-A3, 6.05% . 150,000 4/15/2001 150,656
GE Global Insurance Holding Corp. Note, 7.00% ....... 150,000 2/15/2026 156,251
GMAC Commercial Mortgage Security Inc. 97-C2-A, 6.45% 123,095 12/15/2004 124,249
GMAC Commercial Mortgage Security Inc. 98-C1 A1,
6.41% ............................................. 125,000 11/15/2007 125,623
Household Finance Co. Note, 6.75% ................... 125,000 6/01/2000 126,579
LB Commercial Conduit Mortgage Trust 98-C1 A1, 6.33% 123,445 11/18/2004 122,211
MBNA Corp. Sr. Note, 6.875% ......................... 175,000 11/15/2002 177,671
Morgan Stanley Capital Inc. 98-A1, 6.19% ............ 124,367 1/15/2007 126,785
Morgan Stanley Capital Inc. 97-WF1-1A, 6.83%+ ....... 117,774 10/15/2006 120,350
Prime Credit Card Master Trust Series 1995-1A, 6.75% 125,000 11/15/2005 127,656
Prudential Home Mortgage Securities Co. Series 93-29
A-6 PAC, 6.75% .................................... 155,584 8/25/2008 156,117
Prudential Home Mortgage Securities Co. Series 93-47
1-11 PAC, 6.10% ................................... 275,000 12/25/2023 267,866
Railcar Leasing LLC Sr. Sec. Note, 6.75%+ ........... 107,960 7/15/2006 109,407
Sears Credit Account Master Trust Series 1997-1A,
6.20% ............................................. 125,000 7/16/2007 125,850
Structured Asset Securities Corp. Note, 6.79% ....... 247,256 6/12/2004 253,051
World Omni Automobile Lease Trust 97-B Cl. A3, 6.18% 250,000 11/25/2003 250,702
Zurich Capital Trust, 8.38%+ ........................ 200,000 6/01/2037 217,782
-----------
7,575,088
-----------
CORPORATE 5.9%
Arizona Public Service Co. Note, 6.25% .............. 250,000 1/15/2005 244,060
Cargill Inc. Sr. Note, 6.875%+ ...................... 125,000 5/01/2028 131,387
Chevron Corp. Note, 8.11% ........................... 161,000 12/01/2004 172,027
CIT Group Holdings Inc. Sr. Note, 6.20% ............. 500,000 10/20/2000 501,785
Columbia/HCA Healthcare Corp. Note, 6.87% ........... 150,000 9/15/2003 142,797
Columbia/HCA Healthcare Corp. Deb., 7.50% ........... 125,000 12/15/2023 116,870
Columbia/HCA Healthcare Corp. Note, 8.12% ........... 125,000 8/04/2003 127,374
Columbia/HCA Healthcare Corp. Note, 7.69% ........... 125,000 6/15/2025 119,351
Edison Mission Energy Funding Corp. Series A Note,
6.77%+ ............................................ 145,548 9/15/2003 147,281
Electronic Data Systems Corp. Note, 6.85%+ .......... 250,000 5/15/2000 254,240
Ingersoll-Rand Co. Sr. Note, 6.26% .................. 250,000 2/15/2001 250,380
-----------
2,207,552
-----------
Total Fixed Income Securities (Cost $26,120,079) ........................................ 26,516,582
-----------
COMMERCIAL PAPER 8.0%
American Express Credit Corp., 5.51% ................ 500,000 5/07/1998 500,000
CIT Group Holdings Inc., 5.52% ...................... 1,009,000 5/13/1998 1,009,000
General Electric Capital Corp., 5.30% ............... 1,500,000 5/01/1998 1,500,000
-----------
Total Commercial Paper (Cost $3,009,000) ................................................ 3,009,000
-----------
</TABLE>
- --------------------------------------------------------------------------------
SHARES
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS 10.5%
Navigator Securities Lending Prime Portfolio ..... 3,940,873 3,940,873
-----------
Total Short-Term Investments (Cost $3,940,873) .............. 3,940,873
-----------
Total Investments (Cost $40,943,790) - 116.3% ............... 43,525,225
Other Assets, Less Liabilities - (16.3%) .................... (6,100,274)
-----------
Net Assets - 100.0% ......................................... $37,424,951
===========
Federal Income Tax Information:
At April 30, 1998, the net unrealized appreciation of
investments based on cost for Federal income tax purposes
of $40,999,320 was as follows:
Aggregate gross unrealized appreciation for all investments
in which there is an excess of value over tax cost ....... $ 2,922,225
Aggregate gross unrealized depreciation for all investments
in which there is an excess of tax cost over value ....... (396,320)
-----------
$ 2,525,905
===========
- ------------------------------------------------------------------------------
ADR Stands for American Depositary Receipt, representing ownership of foreign
securities.
* Nonincome-producing securities.
+ 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, 1998 were $2,037,969 and $2,082,476 (5.56% of net
assets), respectively.
TBA 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 1%.
The accompanying notes are an integral part of the financial statements
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: CONSERVATIVE
- -------------------------------------------------------------------------------
Forward currency exchange contracts outstanding at April 30, 1998, 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 31,000 AUD .67830 AUD $ 803 5/13/98
Sell Australian dollars, Buy U.S. dollars 55,000 AUD .68109 AUD 1,560 6/10/98
Sell Australian dollars, Buy U.S. dollars 296,000 AUD .66880 AUD 4,758 6/10/98
Buy Australian dollars, Sell U.S. dollars 31,000 AUD .66950 AUD (530) 5/13/98
Buy Australian dollars, Sell U.S. dollars 26,000 AUD .66125 AUD (222) 6/10/98
Sell British pounds, Buy U.S. dollars 310,000 GBP 1.67265 GBP 2,035 7/23/98
Sell Japanese yen, Buy U.S. dollars 27,557,000 JPY .00824 JPY 15,820 8/11/98
Sell New Zealand dollars, Buy U.S. dollars 110,000 NZD .58265 NZD 3,058 5/13/98
Sell New Zealand dollars, Buy U.S. dollars 590,000 NZD .55600 NZD 2,656 7/23/98
Sell New Zealand dollars, Buy U.S. dollars 50,000 NZD .55570 NZD 210 7/23/98
--------
$ 30,148
========
The accompanying notes are an integral part of the financial statements
</TABLE>
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: CONSERVATIVE
- -------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- -------------------------------------------------------------------------------
April 30, 1998 (Unaudited)
ASSETS
Investments, at value (Cost $40,943,790) (Note 1) ............... $43,525,225
Receivable for securities sold .................................. 591,763
Interest and dividends receivable ............................... 308,664
Receivable for open forward contracts ........................... 30,900
Receivable from Distributor (Note 3) ............................ 24,222
Receivable for fund shares sold ................................. 21,575
Deferred organization costs and other assets (Note 1) 32,789
-----------
44,535,138
LIABILITIES
Payable for collateral received on securities loaned ............ 3,940,873
Payable for securities purchased ................................ 2,933,111
Payable for fund shares redeemed ................................ 121,350
Accrued transfer agent and shareholder services
(Note 2) ...................................................... 22,762
Accrued management fee (Note 2) ................................. 18,488
Accrued trustees' fees (Note 2) ................................. 7,989
Payable to custodian ............................................ 2,496
Payable for open forward contracts .............................. 752
Other accrued expenses .......................................... 62,366
-----------
7,110,187
-----------
NET ASSETS $37,424,951
===========
Net Assets consist of:
Undistributed net investment income ........................... $ 248,260
Unrealized appreciation of investments ........................ 2,581,435
Unrealized appreciation of forward contracts and
foreign currency ............................................ 29,850
Accumulated net realized gain ................................. 1,293,866
Paid-in capital ............................................... 33,271,540
-----------
$37,424,951
===========
Net Asset Value, offering price and redemption price per share
of Class S shares ($37,424,951 / 3,412,189 shares) .......... $10.97
======
The accompanying notes are an integral part of the financial statements
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: CONSERVATIVE
- -------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- -------------------------------------------------------------------------------
For the six months ended April 30, 1998 (Unaudited)
INVESTMENT INCOME
Interest ......................................................... $ 930,921
Dividends, net of foreign taxes of $1,343 ........................ 59,592
----------
990,513
EXPENSES
Management fee (Note 2) .......................................... 112,893
Custodian fee .................................................... 51,182
Transfer agent and shareholder services (Note 2) ................. 35,039
Audit fee ........................................................ 10,860
Trustees' fees (Note 2) .......................................... 9,527
Reports to shareholders .......................................... 9,035
Registration fees ................................................ 6,188
Amortization of organization costs (Note 1) ...................... 3,711
Legal fees ....................................................... 742
Miscellaneous .................................................... 1,881
----------
241,058
Expenses borne by the Distributor (Note 3) ....................... (71,718)
----------
169,340
----------
Net investment income ............................................ 821,173
----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS,
FOREIGN CURRENCY AND FORWARD CONTRACTS
Net realized gain on investments (Notes 1 and 4) ................. 1,285,742
Net realized gain on forward contracts and foreign
currency (Note 1) .............................................. 82,096
----------
Total net realized gain ........................................ 1,367,838
----------
Net unrealized appreciation of investments ....................... 391,820
Net unrealized appreciation of forward contracts and
foreign currency ............................................... 21,288
----------
Total net unrealized appreciation .............................. 413,108
----------
Net gain on investments, foreign currency and forward
contracts ...................................................... 1,780,946
----------
Net increase in net assets resulting from operations ............. $2,602,119
==========
The accompanying notes are an integral part of the financial statements
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: CONSERVATIVE
- -------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED APRIL 30, 1998
OCTOBER 31, 1997 (UNAUDITED)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income ....................................... $ 1,591,879 $ 821,173
Net realized gain on investments, foreign currency and
forward contracts ......................................... 2,789,109 1,367,838
Net unrealized appreciation of investments, foreign currency
and forward contracts ..................................... 300,710 413,108
------------ ------------
Net increase resulting from operations ...................... 4,681,698 2,602,119
------------ ------------
Dividends from net investment income:
Class A ................................................... (9,655) --
Class S ................................................... (1,610,768) (1,031,703)
------------ ------------
(1,620,423) (1,031,703)
------------ ------------
Distributions from net realized gains:
Class A ................................................... (27,562) --
Class S ................................................... (1,688,429) (2,735,915)
------------ ------------
(1,715,991) (2,735,915)
------------ ------------
Net increase from fund share
transactions (Note 6) ..................................... 3,367,965 89,751
------------ ------------
Total increase (decrease) in net assets ..................... 4,713,249 (1,075,748)
NET ASSETS
Beginning of period ......................................... 33,787,450 38,500,699
------------ ------------
End of period (including undistributed net investment income
of $458,790 and $248,260, respectively) ................... $ 38,500,699 $ 37,424,951
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: CONSERVATIVE
- ----------------------------------------------------------------------------
NOTES TO UNAUDITED FINANCIAL STATEMENTS
- ----------------------------------------------------------------------------
April 30, 1998
NOTE 1
State Street Research Strategic Portfolios: Conservative (the "Fund"), is a
series of State Street Research 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. Before November 1,
1997, Class S shares were designated Class C. Only Class S shares are
presently available for purchase. Class A, Class B and Class C shares are not
being offered at this time. Effective March 27, 1997, the Fund discontinued
offering Class A shares. Class A shares are subject to an initial sales charge
of up to 4.50% and an annual service fee 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 subject to a contingent
deferred sales charge of 1.00% on any shares redeemed within one year of their
purchase. Class C shares also pay annual distribution and service fees of
1.00%. Class S shares are only offered through certain retirement accounts,
advisory accounts of State Street Research & Management Company (the
"Adviser"), an indirect wholly owned subsidiary of Metropolitan Life Insurance
Company ("Metropolitan"), and special programs. No sales charge is imposed at
the time of purchase or redemption of Class S shares. Class S shares do not
pay any distribution or service fees. The Fund's expenses are borne pro-rata
by each class, except that each class bears expenses, and has exclusive voting
rights with respect to provisions of the Plan of Distribution, related
specifically to that class. The Trustees declare separate dividends on each
class of shares.
The following significant accounting policies are consistently followed by the
Fund in preparing its financial statements, and such policies are in
conformity with generally accepted accounting principles for investment
companies.
A. INVESTMENT VALUATION
Values for listed equity securities reflect final sales on national securities
exchanges quoted prior to the close of the New York Stock Exchange. Over-the-
counter securities quoted on the National Association of Securities Dealers
Automated Quotation ("NASDAQ") system are valued at closing prices supplied
through such system. If not quoted on the NASDAQ system, such securities are
valued at prices obtained from brokers. In the absence of recorded sales,
valuations are at the mean of the closing bid and asked quotations. Fixed
income securities are valued by a pricing service, which utilizes market
transactions, quotations from dealers, and various relationships among
securities in determining value. Short-term securities maturing within sixty
days are valued at amortized cost. Securities quoted in foreign currencies are
translated into U.S. dollars at the current exchange rate.
B. SECURITY TRANSACTIONS
Security transactions are accounted for on the trade date (date the order to
buy or sell is executed). Realized gains or losses are reported on the basis
of identified cost of securities delivered. Gains and losses that arise from
changes in exchange rates are not segregated from gains and losses that arise
from changes in market prices of investments.
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. The difference is primarily due to differing treatments
for foreign currency transactions.
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.
I. SECURITIES LENDING
The Fund may seek additional income by lending portfolio securities to
qualified institutions. The Fund will receive cash or securities as collateral
in an amount equal to at least 100% of the current market value of any loaned
securities plus accrued interest. By reinvesting any cash collateral it
receives in these transactions, the Fund could realize additional gains and
losses. If the borrower fails to return the securities and the value of the
collateral has declined during the term of the loan, the Fund will bear the
loss. At April 30, 1998, the value of the securities loaned and the value of
collateral were $3,883,504 and $3,940,873, respectively.
NOTE 2
The Trust and the Adviser have entered into an agreement under which the
Adviser earns monthly fees at an annual rate of 0.60% 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, 1998, the fees
pursuant to such agreement amounted to $112,893.
State Street Research Service Center, a division of State Street Research
Investment Services, Inc., the Trust's principal underwriter (the
"Distributor"), an indirect wholly owned subsidiary of Metropolitan, provides
certain shareholder services to the Fund such as responding to inquiries and
instructions from investors with respect to the purchase and redemption of
shares of the Fund. 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, 1998, the amount of such expenses was $29,251.
The fees of the Trustees not currently affiliated with the Adviser amounted to
$9,527 during the six months ended April 30, 1998.
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, 1998, the amount of such expenses
assumed by the Distributor and its affiliates was $71,718.
NOTE 4
For the six months ended April 30, 1998, purchases and sales of securities,
exclusive of short-term obligations, aggregated $29,395,207 and $31,415,692
(including $19,289,526 and $20,478,539 of U.S. Government obligations),
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 C shares. In addition, the
Fund will pay annual distribution fees of 0.75% of average daily net assets
for Class B and Class C shares. The Distributor uses such payments for
personal service and/or the maintenance or servicing of shareholder accounts,
to compensate or 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, 1998,
Metropolitan owned 2,392,390 Class S shares of the Fund.
Share transactions were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED APRIL 30, 1998
OCTOBER 31, 1997 (UNAUDITED)
------------------------------- -------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares repurchased .................. (50,023) $ (528,933) -- $ --
------- ------------ --------- ------------
Net decrease ........................ (50,023) $ (528,933) -- $ --
======= ============ ========= ============
<CAPTION>
CLASS S (FORMERLY CLASS C) SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ......................... 473,499 $ 5,172,822 227,071 $ 2,490,758
Issued upon reinvestment of:
Dividends from net investment
income .......................... 47,885 512,492 33,048 348,308
Distributions from net realized
gains ........................... 161,263 1,688,429 262,816 2,735,915
Shares repurchased .................. (320,767) (3,476,845) (512,448) (5,485,230)
------- ------------ --------- ------------
Net increase ........................ 361,880 $ 3,896,898 10,487 $ 89,751
======= ============ ========= ============
</TABLE>
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: CONSERVATIVE
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For a share outstanding throughout each period:
CLASS A
-----------------------------------------------------------------------------
YEARS ENDED OCTOBER 31
----------------------------------------------------- NOVEMBER 1, 1996
1994(2) 1995(1) 1996(1) TO MARCH 27, 1997(1)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD ($) 9.55 9.56 10.56 11.03
----- ----- ----- -----
Net investment income ($)* 0.20 0.47 0.42 0.21
Net realized and unrealized
gain (loss) on investments,
foreign currency and forward
contracts ($) (0.09) 1.00 0.66 0.08
----- ----- ----- -----
TOTAL FROM INVESTMENT OPERATIONS ($) 0.11 1.47 1.08 0.29
----- ----- ----- -----
Dividends from net investment
income ($) (0.10) (0.47) (0.36) (0.19)
Distributions from net
realized gains ($) -- -- (0.25) (0.55)
----- ----- ----- -----
TOTAL DISTRIBUTIONS ($) (0.10) (0.47) (0.61) (0.74)
----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD ($) 9.56 10.56 11.03 10.58
===== ===== ===== =====
Total return(3) (%) 1.15(4) 15.84 10.55 2.67(4)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period ($
thousands) 25,014 27,637 552 --
Ratio of operating expenses to
average net assets (%)* 1.15(5) 1.15 1.15 1.15(5)
Ratio of net investment income
to average net assets (%)* 4.48(5) 4.74 4.35 4.18(5)
Portfolio turnover rate (%) 70.35 132.50 126.41 117.66
*Reflects voluntary assumption
of fees or expenses per share
in each period (Note 3) ($) 0.03 0.05 0.07 0.03
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CLASS S (FORMERLY CLASS C)
----------------------------------------------------------------------------------------------
YEARS ENDED OCTOBER 31 SIX MONTHS ENDED
-------------------------------------------------------------------- APRIL 30, 1998
1994(2) 1995(1) 1996(1) 1997(1) (UNAUDITED)(1)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD ($) 9.55 9.56 10.56 10.93 11.32
----- ----- ----- ----- -----
Net investment income ($)* 0.21 0.52 0.50 0.49 0.24
Net realized and unrealized gain
(loss) on investments, foreign
currency and forward contracts ($) (0.09) 0.97 0.60 0.95 0.50
----- ----- ----- ----- -----
TOTAL FROM INVESTMENT OPERATIONS ($) 0.12 1.49 1.10 1.44 0.74
----- ----- ----- ----- -----
Dividends from net investment
income ($) (0.11) (0.49) (0.48) (0.50) (0.30)
Distributions from net realized
gains ($) -- -- (0.25) (0.55) (0.79)
----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS ($) (0.11) (0.49) (0.73) (1.05) (1.09)
----- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD ($) 9.56 10.56 10.93 11.32 10.97
===== ===== ===== ===== =====
Total return(3) (%) 1.25(4) 16.11 10.82 14.11 7.13(4)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period ($
thousands) 100 1,433 33,236 38,501 37,425
Ratio of operating expenses to
average net assets (%)* 0.90(5) 0.90 0.90 0.90 0.90(5)
Ratio of net investment income to
average net assets (%)* 4.73(5) 4.91 4.50 4.47 4.36(5)
Portfolio turnover rate (%) 70.35 132.50 126.41 117.66 80.18
*Reflects voluntary assumption of
fees or expenses per share in
each period (Note 3) ($) 0.03 0.05 0.06 0.05 0.02
- -----------------------------------------------------------------------------------------------------------------------------------
(1) Per-share figures have been calculated using the average shares method.
(2) May 16, 1994 (commencement of operations) to October 31, 1994.
(3) 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.
(4) Not annualized.
(5) Annualized.
</TABLE>
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: CONSERVATIVE
- -------------------------------------------------------------------------------
FUND INFORMATION, OFFICERS AND TRUSTEES OF STATE STREET RESEARCH FINANCIAL TRUST
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
FUND INFORMATION OFFICERS TRUSTEES
STATE STREET RESEARCH RALPH F. VERNI RALPH F. VERNI
STRATEGIC PORTFOLIOS: CONSERVATIVE Chairman of the Board, Chairman of the Board,
One Financial Center President and President, Chief Executive
Boston, MA 02111 Chief Executive Officer Officer and Director,
State Street Research &
INVESTMENT ADVISER PETER C. BENNETT Management Company
State Street Research & Vice President
Management Company
One Financial Center JOHN H. KALLIS STEVE A. GARBAN
Boston, MA 02111 Vice President Retired; formerly Senior Vice
President for Finance and
DISTRIBUTOR THOMAS A. SHIVELY Operations and Treasurer, The
State Street Research Vice President Pennsylvania State University
Investment Services, Inc.
One Financial Center GERARD P. MAUS
Boston, MA 02111 Treasurer MALCOLM T. HOPKINS
Former Vice Chairman of the
SHAREHOLDER SERVICES JOSEPH W. CANAVAN Board and Chief Financial
State Street Research Assistant Treasurer Officer, St. Regis Corp.
Service Center
P.O. Box 8408 DOUGLAS A. ROMICH
Boston, MA 02266-8408 Assistant Treasurer EDWARD M. LAMONT
1-800-562-0032 Formerly in banking
FRANCIS J. MCNAMARA, III (with an affiliate of
CUSTODIAN Secretary and General Counsel J.P. Morgan & Co. in New York);
State Street Bank and presently engaged in private
Trust Company DARMAN A. WING investments and civic affairs
225 Franklin Street Assistant Secretary and
Boston, MA 02110 Assistant General Counsel
ROBERT A. LAWRENCE
LEGAL COUNSEL AMY L. SIMMONS Formerly Partner, Saltonstall & Co.
Goodwin, Procter & Hoar LLP Assistant Secretary
Exchange Place
Boston, MA 02109 DEAN O. MORTON
Retired; formerly Executive
Vice President, Chief
Operating Officer and Director,
Hewlett-Packard 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
</TABLE>
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: CONSERVATIVE -------------------
One Financial Center Bulk Rate
Boston, MA 02111 U.S. Postage
PAID
Permit #6
Hartford, CT
-------------------
QUESTIONS? COMMENTS?
CALL us at 1-800-562-0032 or
WRITE us at:
State Street Research
Service Center
P.O. Box 8408
Boston, MA 02266-8408
E-MAIL us at:
[email protected]
INTERNET site:
WWW.SSRFUNDS.COM
[LOGO] STATE STREET RESEARCH
This report is prepared for the general information of current shareholders.
When used in the general solicitation of investors, this report must be
accompanied or preceded by a current State Street Research Money Market Fund
prospectus. When used after June 30, 1998, this report must be accompanied by a
current Quarterly Performance Update.
Portfolio changes should not be considered recommendations for action by
individual investors.
The Dalbar awards recognize quality shareholder service and should not be
considered a rating of fund performance. The survey included mutual fund
complexes that volunteered or were otherwise selected to participate and was not
industry-wide.
CONTROL NUMBER: 4997-980619(0799)SSR-LD
SP-172F-0698
