<PAGE>
[front cover]
STATE STREET RESEARCH
----------------------
GOVERNMENT INCOME FUND
----------------------
SEMIANNUAL REPORT
April 30, 1999
-------------
WHAT'S INSIDE
-------------
Investment Update
About the Fund,
economy and markets
Fund Information
Facts and figures
Plus, Complete Portfolio Holdings
and Financial Statements
[Dalbar award:
DALBAR KEY HONORS
COMMITMENT TO:
INVESTORS
1998]
For Excellence
in
Shareholder Service
[Anniversary seal:
STATE STREET RESEARCH
75
YEARS
LASTING VALUES
LEADING IDEAS]
STATE STREET RESEARCH FUNDS
<PAGE>
STATE STREET RESEARCH GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
INVESTMENT UPDATE
- --------------------------------------------------------------------------------
INVESTMENT ENVIRONMENT
The Economy
o Americans continued to reap the benefits of a healthy economy. Inflation
remained low, unemployment hovered at about 4%, and wages rose.
o Favorable economic factors stimulated retail sales through the holiday season
and into the first quarter of 1999. Lower energy costs and declining
mortgage rates translated into additional income for many consumers.
However, energy costs rebounded in 1999, erasing some of the gains.
o The nation's savings rate fell below zero in the last quarter of 1998. Debate
flared over the significance of that figure, however, because the Bureau of
Economic Analysis recently changed the way it computes savings rates.
The Markets
o The U.S. bond market benefited from three quick interest rate cuts late in
1998. However, the yield on the long-term Treasury bond climbed from 5.0%
back up to 5.7% by the end of the period, reflecting fears that strong
economic growth could ignite inflation.
o Early in the period, investors sought bonds of the highest quality in the
wake of market turmoil initiated by a currency crisis in Russia.
o The S&P 500, a broad measure of common stock performance, gained 22.31% for
the six-month period.(1) Gains were concentrated in a narrow band of large,
high-quality growth and technology stocks. Small and medium-sized company
stocks lagged the market.
THE FUND
Over the past six months
o For the six months ended April 30, 1999, Class A shares of Government Income
Fund returned 0.06% [does not reflect sales charge].(2) The Lipper general
U.S. government funds average return was lower at -0.60%, along with the
Merrill Lynch Government Master Index at -0.88% for the period.(1)
o As Treasury bonds rallied during the stock market correction in late summer
1998, mortgage-backed securities became relatively inexpensive. The manager
moved assets significantly into those higher-yielding "spread" investments.
At the same time, he shortened the duration of Treasury holdings, reducing
some of the risk of rising interest rates in the portfolio.
Current Strategy
o The Fund continued to emphasize investments in the mortgage sector, with
one-half of portfolio assets in those securities with higher potential
yields. This positioning was a cost-effective strategy for high-quality
fixed-income investing.
o Treasury holdings were underweighted relative to the market averages.
o Modest-size foreign investments were confined to government securities of New
Zealand and Greece.
April 30, 1999
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 S&P 500 (officially the "Standard and Poor's 500 Composite Stock Price
Index") is an unmanaged index of 500 U.S. stocks. The Merrill Lynch Government
Master Index is comprised of fixed-rate U.S. Treasury and agency securities.
The indices do not take transaction charges into consideration. It is not
possible to invest directly in the indices.
(2)-0.46% for Class B(1) shares; -0.31% for Class B shares; -0.38% for Class C
shares; 0.19% for Class S shares.
(3)Keep in mind that past performance is no guarantee of future results. The
Fund's share price, yield and return will fluctuate, and you may have a gain or
loss when you sell your shares. All returns assume reinvestment of capital gain
distributions and income dividends at net asset value. Performance reflects a
maximum 4.5% Class A share front-end sales charge, or 5% Class B(1) or Class B
share or 1% Class C share contingent deferred sales charge, where applicable.
Performance for Class B(1) reflects Class B performance through December 31,
1998. Class B(1) was introduced on January 1, 1999.
(4)Class S shares, offered without a sales charge, are available through certain
employee benefit plans and special programs.
(5)The fund's returns include performance before the creation of share classes.
If this performance reflected the share classes' current 12b-1 fees, the fund's
returns may have been lower.
- --------------------------------------------------------------------------------
FUND INFORMATION (all data are for periods ended April 30, 1999, except where
noted)
- --------------------------------------------------------------------------------
Average Annual Total Return
for periods ended 3/31/99
(at maximum applicable sales charge)(3),(4),(5)
<TABLE>
<CAPTION>
=============================================
10 Years 5 Years 1 Year
- ---------------------------------------------
<S> <C> <C> <C>
Class A 8.19% 6.30% 1.72%
- ---------------------------------------------
Class B(1) 8.18% 6.12% 0.59%
- ---------------------------------------------
Class B 8.19% 6.16% 0.75%
- ---------------------------------------------
Class C 8.19% 6.47% 4.66%
- ---------------------------------------------
Class S 8.84% 7.54% 6.79%
=============================================
</TABLE>
Average Annual Total Return
(at maximum applicable sales charge)(3),(4),(5)
<TABLE>
<CAPTION>
================================================
10 Years 5 Years 1 Year
- ------------------------------------------------
<S> <C> <C> <C>
Class A 8.03% 6.54% 1.67%
- ------------------------------------------------
Class B(1) 8.02% 6.38% 0.53%
- ------------------------------------------------
Class B 8.03% 6.41% 0.70%
- ------------------------------------------------
Class C 8.03% 6.72% 4.61%
- ------------------------------------------------
Class S 8.69% 7.79% 6.74%
================================================
</TABLE>
Yield(5)
<TABLE>
<S> <C>
====================
Class A 4.98%
- --------------------
Class B(1) 4.26%
- --------------------
Class B 4.49%
- --------------------
Class C 4.45%
- --------------------
Class S 5.51%
====================
</TABLE>
Yield is based on the net investment income produced for the 30 days ended
April 30, 1999.
[pie chart]
Asset Allocation
(by percentage of net assets)
<TABLE>
<S> <C>
U.S. Agency mortgage 48%
U.S. Treasury 35%
Other mortgages 8%
Foreign government 4%
Trust certificates/other 3%
Cash 1%
U.S. Agency 1%
</TABLE>
[end pie chart]
<PAGE>
STATE STREET RESEARCH GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
- --------------------------------------------------------------------------------
April 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
Principal Maturity Value
Amount Date (Note 1)
------------------- ------------------- ----------------
<S> <C> <C> <C>
U.S. GOVERNMENT SECURITIES 84.2%
U.S. Treasury 35.1%
U.S. Treasury Bond, 10.75% ..................................... $30,000,000 5/15/2003 $35,835,900
U.S. Treasury Bond, 13.75% ..................................... 11,225,000 8/15/2004 15,488,704
U.S. Treasury Bond, 11.625% .................................... 39,400,000 11/15/2004 51,004,482
U.S. Treasury Bond, 10.75% ..................................... 9,500,000 8/15/2005 12,167,410
U.S. Treasury Bond, 12.00% ..................................... 8,600,000 8/15/2013 12,502,250
U.S. Treasury Bond, 9.875% ..................................... 8,500,000 11/15/2015 12,047,390
U.S. Treasury Bond, 9.25% ...................................... 17,000,000 2/15/2016 23,011,030
U.S. Treasury Bond, 8.125% ..................................... 13,575,000 8/15/2021 17,231,698
U.S. Treasury Bond, 6.625% ..................................... 20,075,000 2/15/2027 22,079,288
U.S. Treasury Bond, 6.125% ..................................... 14,525,000 11/15/2027 15,035,699
U.S. Treasury Bond, 5.25% ...................................... 7,075,000 11/15/2028 6,546,568
U.S. Treasury Bond, 5.25% ...................................... 14,650,000 2/15/2029 13,752,688
U.S. Treasury STRIPS, 0.00% .................................... 9,375,000 11/15/2001 8,156,250
-----------
244,859,357
-----------
U.S. Agency Mortgage 48.3%
Federal Home Loan Mortgage
Corp., 9.00% ................................................. 3,521,126 12/01/2009 3,690,211
Federal Housing Administration
Charles River Project,
9.625% ....................................................... 9,402,589 12/01/2033 10,037,263
Federal Housing Administration
Court Yard Project, 10.75% ................................... 6,450,683 8/01/2032 6,970,770
Federal Housing Administration
East Bay Manor Project,
10.00% ....................................................... 6,716,623 3/01/2033 7,190,984
Federal National Mortgage
Association, 8.50% ........................................... 10,000,000 2/01/2005 10,237,500
Federal National Mortgage
Association, 6.96% ........................................... 27,525,000 4/02/2007 29,236,780
Federal National Mortgage
Association, 8.00% ........................................... 2,883,174 4/01/2008 2,992,446
Federal National Mortgage
Association, 6.00% ........................................... 5,475,000 5/15/2008 5,524,604
Federal National Mortgage
Association, 8.00% ........................................... 4,087,906 6/01/2008 4,251,423
Federal National Mortgage
Association, 8.50% ........................................... 5,265,151 2/01/2009 5,554,102
Federal National Mortgage
Association, 9.00% ........................................... 4,954,153 5/01/2009 5,247,637
Federal National Mortgage
Association, 5.50% ........................................... 12,003,475 3/01/2014 11,643,371
Federal National Mortgage
Association, 9.00% ........................................... 1,165,172 4/01/2016 1,257,500
Federal National Mortgage
Association, 6.50% ........................................... 13,722,600 9/01/2028 13,632,443
</TABLE>
<TABLE>
<CAPTION>
Principal Maturity Value
Amount Date (Note 1)
------------------- ------------------- ----------------
<S> <C> <C> <C>
Federal National Mortgage
Association, 6.50% ........................................... $34,984,029 11/01/2028 $34,754,183
Federal National Mortgage
Association, 6.50% ........................................... 14,110,079 12/01/2028 14,017,375
Federal National Mortgage
Association, 6.50% ........................................... 10,627,977 12/01/2028 10,299,147
Federal National Mortgage
Association, 6.00% ........................................... 13,900,021 2/01/2029 13,469,954
Federal National Mortgage
Association, 6.00% ........................................... 14,337,122 3/01/2029 13,893,531
Federal National Mortgage
Association TBA, 6.50% ....................................... 22,500,000 6/16/2029 22,338,281
Government National Mortgage
Association, 9.50% ........................................... 1,747,329 9/15/2009 1,866,538
Government National Mortgage
Association, 9.50% ........................................... 3,153,827 10/15/2009 3,374,167
Government National Mortgage
Association, 9.50% ........................................... 1,381,458 11/15/2009 1,476,098
Government National Mortgage
Association, 9.50% ........................................... 355,440 11/15/2017 381,938
Government National Mortgage
Association, 9.50% ........................................... 105,411 9/15/2019 113,244
Government National Mortgage
Association, 7.00% ........................................... 24,867,836 11/15/2028 25,232,896
Government National Mortgage
Association, 7.00% ........................................... 11,745,007 11/15/2028 11,667,843
Government National Mortgage
Association, 7.00% ........................................... 14,996,223 11/15/2028 14,522,792
Government National Mortgage
Association TBA, 6.50% ....................................... 21,075,000 5/24/2029 20,939,909
Government National Mortgage
Association TBA, 7.00% ....................................... 23,925,000 6/23/2029 24,276,219
U.S. Department of Veterans
Affairs REMIC 1998-3C,
6.50% ........................................................ 7,500,000 6/15/2021 7,467,150
-----------
337,558,299
-----------
U.S. Agency 0.8%
EXIM Vnesheconombank,
5.73%+ ....................................................... 5,600,000 1/15/2003 5,619,656
-----------
Total U.S. Government Securities (Cost $590,394,911) ................................................... 588,037,312
-----------
OTHER INVESTMENTS 14.6%
Trust Certificates 2.9%
Government Backed Trust Class
T-3, 9.625% .................................................. 5,147,614 5/15/2002 5,358,306
Government Trust Certificates
Class 2-E, 9.40% ............................................. 14,389,680 5/15/2002 14,989,874
-----------
20,348,180
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
STATE STREET RESEARCH GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO (cont'd)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Maturity Value
Amount Date (Note 1)
--------------- ------------ ----------------
<S> <C> <C> <C>
Foreign Government 3.7%
Greek Drachma
Republic of Greece,
8.80% ........................ 3,187,500,000 6/19/2007 $ 12,116,016
New Zealand Dollar
Government of New Zealand,
10.00% ....................... 11,625,000 3/15/2002 7,363,602
Government of New Zealand,
8.00% ........................ 10,000,000 11/15/2006 6,402,781
------------
25,882,399
------------
Finance/Mortgage 8.0%
Chase Commercial Mortgage
Securities Corp. 1996-2
Cl. A2, 6.90% ................ $4,675,000 9/19/2006 4,819,633
Chase Commercial Mortgage
Securities Corp. 1997-1
Cl. A1, 7.27% ................ 4,290,480 7/19/2004 4,426,066
Credit Suisse First Boston
97-C2 Cl. A2, 6.52% .......... 4,730,000 7/17/2007 4,741,825
First Union Commercial
Mortgage Trust,
1999-C1 A2, 6.07% ............ 4,750,000 10/15/2008 4,631,250
GMAC Commercial Mortgage
Security Inc., 1999-C1 A2,
6.175% ....................... 7,225,000 5/15/2033 7,373,470
GMAC Commercial Mortgage
Security Inc. 1997-C2 A,
6.55% ........................ 6,700,000 4/15/2029 6,775,375
LB Commercial Conduit
Mortgage Trust 97-LL1-A1,
6.79% ........................ 6,397,996 6/12/2004 6,527,955
LB Commercial Conduit
Mortgage Trust 98C1-A1,
6.33% ........................ 6,004,155 11/18/2004 6,037,928
Merrill Lynch Mortgage
Investments Inc. Series
1997-C2 Cl. A1, 6.46% ........ 3,065,403 12/10/2029 3,115,216
Merrill Lynch Mortgage
Investments Inc. Series
1998-C2 Cl. A1, 6.22% ........ 4,602,617 2/15/2030 4,646,917
</TABLE>
<TABLE>
<CAPTION>
Principal Maturity Value
Amount Date (Note 1)
--------------- ------------ ----------------
<S> <C> <C> <C>
Morgan Stanley Capital Inc.
98-A1, 6.19% ................. $2,684,308 1/15/2007 $ 2,685,147
------------
55,780,782
------------
Total Other Investments (Cost $102,724,970) ................. 102,011,361
------------
COMMERCIAL PAPER 10.0%
Federal Home Loan Bank,
4.68% ........................ 15,000,000 5/12/1999 14,978,596
Federal Home Loan Mortgage
Corp., 4.82% ................. 23,707,000 5/03/1999 23,700,652
Federal Home Loan Mortgage
Corp., 4.71% ................. 6,560,000 5/07/1999 6,554,861
Federal Home Loan Mortgage
Corp., 4.71% ................. 25,000,000 5/24/1999 24,925,090
------------
Total Commercial Paper (Cost $70,159,199) ................... 70,159,199
------------
Total Investments (Cost $763,279,080)--108.8% ............... 760,207,872
Cash and Other Assets, Less Liabilities--(8.8%) ............. (61,551,667)
------------
Net Assets--100.0% .......................................... $698,656,205
=============
</TABLE>
<TABLE>
<S> <C>
Federal Income Tax Information:
At April 30, 1999, the net unrealized depreciation of
investments based on cost for Federal income tax
purposes of $763,279,080 was as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of value
over tax cost ................................... $ 8,320,670
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax
cost over value ................................. (11,391,878)
-----------
$(3,071,208)
===========
</TABLE>
- --------------------------------------------------------------------------------
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, 1999 were $5,600,000 and $5,619,656 (0.80% of net assets),
respectively.
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
STATE STREET RESEARCH GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Futures contracts open at April 30, 1999, are as follows:
<TABLE>
<CAPTION>
Expiration Unrealized
Type Notional Amount Month Appreciation
- ----------------------------- ----------------- ------------ -------------
<S> <C> <C> <C>
30 year U.S. Treasury Bonds $8,100,000 June, 1999 $98,104
</TABLE>
Forward currency exchange contracts outstanding at April 30, 1999 are as
follows:
<TABLE>
<CAPTION>
Unrealized
Appreciation
Total Value Contract Price (Depreciation) Delivery Date
--------------------- ------------------ ---------------- --------------
<S> <C> <C> <C> <C>
Sell Euro currency, Buy U.S. dollars 855,532 EUR 1.06350 EUR $ 5,657 5/07/99
Sell Euro currency, Buy U.S. dollars 8,736,000 EUR 1.14030 EUR 715,905 5/28/99
Sell Euro currency, Buy U.S. dollars 1,028,000 EUR 1.07320 EUR 11,337 7/22/99
Buy Greek drachma, Sell U.S. dollars 278,775,000 GRD .00325 GRD (3,605) 5/07/99
Sell Greek drachma, Buy U.S. dollars 278,775,000 GRD .00327 GRD 7,974 5/07/99
Sell New Zealand dollars, Buy U.S. dollars 2,840,000 NZD .55490 NZD (15,205) 5/28/99
Sell New Zealand dollars, Buy U.S. dollars 10,310,000 NZD .55057 NZD (103,698) 7/22/99
Sell New Zealand dollars, Buy U.S. dollars 10,700,000 NZD .55050 NZD (108,424) 7/22/99
----------
$ 509,941
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
STATE STREET RESEARCH GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
April 30, 1999 (Unaudited)
<TABLE>
<S> <C>
Assets
Investments, at value (Cost $763,279,080) (Note 1) ................. $760,207,872
Cash ............................................................... 9,878
Receivable for securities sold ..................................... 46,902,339
Interest receivable ................................................ 10,717,110
Receivable for fund shares sold .................................... 1,713,893
Receivable for open forward contracts .............................. 740,873
Receivable for variation margin (Note 1) ........................... 164,531
Other assets ....................................................... 53,995
-------------
820,510,491
Liabilities
Payable for securities purchased ................................... 114,772,371
Payable for fund shares redeemed ................................... 3,993,348
Dividends payable .................................................. 1,723,374
Accrued transfer agent and shareholder services
(Note 2) ......................................................... 348,635
Accrued management fee (Note 2) .................................... 337,953
Accrued distribution and service fees (Note 3) ..................... 242,905
Payable for open forward contracts ................................. 230,932
Accrued trustees' fees (Note 2) .................................... 36,509
Other accrued expenses ............................................. 168,259
-------------
121,854,286
-------------
Net Assets $698,656,205
=============
Net Assets consist of:
Undistributed net investment income ............................... $ 2,757,981
Unrealized depreciation of investments ............................ (3,071,208)
Unrealized appreciation of forward contracts and
foreign currency ................................................ 477,965
Unrealized appreciation of futures contracts ...................... 98,104
Accumulated net realized loss ..................................... (15,550,756)
Paid-in capital ................................................... 713,944,119
-------------
$698,656,205
=============
Net Asset Value and redemption price per share of
Class A shares ($512,291,613 [divided by] 40,380,372 shares) $12.69
=======
Maximum Offering Price per share of Class A shares
($12.69 [divided by] .955) ....................................... $13.29
=======
Net Asset Value and offering price per share of Class
B(1) shares ($13,112,539 [divided by] 1,038,396 shares)* ......... $12.63
=======
Net Asset Value and offering price per share of Class
B shares ($121,795,115 [divided by] 9,631,866 shares)* ........... $12.65
=======
Net Asset Value and offering price per share of Class
C shares ($31,793,139 [divided by] 2,512,801 shares)* ............ $12.65
=======
Net Asset Value, offering price and redemption price
per share of Class S shares ($19,663,799 [divided by]
1,551,115 shares) ................................................ $12.68
=======
</TABLE>
- --------------------------------------------------------------------------------
* Redemption price per share for Class B(1), Class B and Class C is equal to
net asset value less any applicable contingent deferred sales charge.
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the six months ended April 30, 1999 (Unaudited)
<TABLE>
<S> <C>
Investment Income
Interest, net of foreign taxes of $32,230 (Note 1) ......... $23,833,048
Expenses
Management fee (Note 2) .................................... 2,040,641
Transfer agent and shareholder services (Note 2) ........... 449,696
Custodian fee .............................................. 128,148
Audit fee .................................................. 21,901
Service fee-Class A (Note 3) ............................... 643,775
Distribution and service fees-Class B(1) (Note 3) .......... 21,549
Distribution and service fees-Class B (Note 3) ............. 631,889
Distribution and service fees-Class C (Note 3) ............. 146,346
Registration fees .......................................... 21,358
Trustees' fees (Note 2) .................................... 18,643
Legal fees ................................................. 6,516
Miscellaneous .............................................. 13,946
-----------
4,144,408
Fees paid indirectly (Note 2) .............................. (26,413)
-----------
4,117,995
-----------
Net investment income ...................................... 19,715,053
-----------
Realized and Unrealized Gain (Loss) on
Investments, Forward Contracts,
Foreign Currency and Futures Contracts
Net realized gain on investments (Notes 1 and 4) ........... 6,371,772
Net realized loss on forward contracts and foreign
currency (Note 1) ........................................ (506,947)
Net realized gain on futures contracts (Note 1) ............ 132,925
-----------
Total net realized gain ................................... 5,997,750
-----------
Net unrealized depreciation of investments ................. (27,869,968)
Net unrealized appreciation of forward contracts and
foreign currency ......................................... 1,433,015
Net unrealized appreciation of futures contracts ........... 98,104
-----------
Total net unrealized depreciation ......................... (26,338,849)
-----------
Net loss on investments, forward contracts, foreign
currency and futures contracts ........................... (20,341,099)
-----------
Net decrease in net assets resulting from operations $ (626,046)
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
STATE STREET RESEARCH GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six months ended
Year ended April 30, 1999
October 31, 1998 (Unaudited)
------------------ -----------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations:
Net investment income ............... $ 39,866,401 $ 19,715,053
Net realized gain on
investments, forward
contracts, foreign currency
and futures contracts ............. 17,302,180 5,997,750
Net unrealized appreciation
(depreciation) of
investments, forward
contracts, foreign currency
and futures contracts ............. 4,812,247 (26,338,849)
------------ ------------
Net increase (decrease)
resulting from operations ......... 61,980,828 (626,046)
------------ ------------
Dividends from net
investment income:
Class A ............................ (31,530,438) (15,650,738)
Class B(1) ......................... -- (104,859)
Class B ............................ (5,721,251) (3,386,061)
Class C ............................ (998,658) (779,085)
Class S ............................ (1,982,171) (690,044)
------------ ------------
(40,232,518) (20,610,787)
------------ ------------
Net increase from fund share
transactions (Note 5) ............. 15,773,634 12,138,372
------------ ------------
Total increase (decrease) in
net assets ........................ 37,521,944 (9,098,461)
Net Assets
Beginning of period ................. 670,232,722 707,754,666
------------ ------------
End of period (including
undistributed net
investment income of
$3,653,715 and $2,757,981,
respectively) ..................... $707,754,666 $698,656,205
============ ============
</TABLE>
- --------------------------------------------------------------------------------
NOTES TO UNAUDITED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
April 30, 1999
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 Trust consists presently of five separate funds: State
Street Research Government Income Fund, State Street Research Strategic
Portfolios: Moderate, State Street Research Strategic Portfolios: Conservative,
State Street Research Strategic Portfolios: Aggressive and State Street
Research IntelliQuant Portfolios: Small-Cap Value.
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 five classes of 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. On January 1, 1999, the Fund began offering Class
B(1) shares, and continued offering Class B shares but only to current
shareholders. Class B(1) and Class B pay annual distribution and service fees
of 1.00% and both classes automatically convert into Class A shares (which pay
lower ongoing expenses) at the end of eight years. Class B(1) shares are
subject to a contingent deferred sales charge on certain redemptions made
within six years of purchase. Class B shares are subject to a contingent
deferred sales charge on certain redemptions made within five years of
purchase. Class C shares are subject to a contingent deferred sales charge of
1.00% on any shares redeemed within one year of their purchase. Class C shares
also pay annual distribution and service fees of 1.00%. Class S shares are only
offered through certain retirement accounts, advisory accounts of State Street
Research & Management Company (the "Adviser"), an indirect wholly owned
subsidiary of Metropolitan Life Insurance Company ("Metropolitan"), and special
programs. No sales charge is imposed at the time of purchase or redemption of
Class S shares. Class S shares do not pay any distribution or service fees. The
Fund's expenses are borne pro-rata by each class, except that each class bears
expenses, and has exclusive voting rights with respect to provisions of the
Plan of Distribution, related specifically to that class. The Trustees declare
separate dividends on each class of shares.
The following significant accounting policies are consistently followed by the
Fund in preparing its financial statements, and such policies are in conformity
with generally accepted accounting principles for investment companies.
A. Investment Valuation
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.
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
STATE STREET RESEARCH GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
NOTES (cont'd)
- --------------------------------------------------------------------------------
B. Security Transactions
Security transactions are accounted for on the trade date (date the order to buy
or sell is executed). Realized gains or losses are reported on the basis of
identified cost of securities delivered. Gains and losses that arise from
changes in exchange rates are not segregated from gains and losses that arise
from changes in market prices of investments.
C. Net Investment Income
Net investment income is determined daily and consists of interest accrued and
discount earned, less the estimated daily expenses of the Fund. Interest income
is accrued daily as earned. Accretion of discount is computed under the
effective yield method. The Fund is charged for expenses directly attributable
to it, while indirect expenses are allocated among all funds in the Trust.
D. Dividends
Dividends are declared daily based upon projected net investment income and are
paid or reinvested monthly. Net realized capital gains, if any, are distributed
annually, unless additional distributions are required for compliance with
applicable tax regulations.
Income dividends and capital gain distributions are determined in accordance
with Federal income tax regulations which may differ from generally accepted
accounting principles. The difference is primarily due to differing treatments
for foreign currency transactions.
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, 1998, the Fund had a
capital loss carryforward of $21,336,108 available, to the extent provided in
regulations, to offset future capital gains, if any, of which $17,196,293 and
$4,139,815 expire on October 31, 2002 and 2004, respectively. 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 expire 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. 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. During the
six months ended April 30, 1999, income from securities lending amounted to
$10,852 and is included in interest income. At April 30, 1999, there were no
loaned securities.
I. Futures Contracts
The Fund may enter into future contracts as a hedge against unfavorable market
conditions and to enhance income. The Fund will limit its risks by entering
into a futures position only if it appears to be a liquid investment.
Upon entering into a futures contract, the Fund deposits with the selling
broker sufficient cash or U.S. Government securities to meet the minimum
"initial margin" requirements. Thereafter, the Fund receives from or pays to
the broker cash or U.S. Government securities equal to the daily fluctuation in
value of the contract ("variation margin"), which is recorded as unrealized
gain or loss. When the contract is closed, the Fund records a realized gain or
loss equal to the difference between the value of the contract at the time it
was opened and the value at the time it was closed.
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 first $500 million
of net assets, annually, 0.55% of the next $500 million, and 0.50% of any
amount over $1 billion. 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, 1999, the
fees pursuant to such agreement amounted to $2,040,641.
State Street Research Service Center, a division of State Street Research
Investment Services, Inc., the Trust's principal underwriter (the
7
<PAGE>
STATE STREET RESEARCH GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
"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, 1999, the amount of such expenses was $274,582.
The Fund has entered into an agreement with its transfer agent whereby credits
realized as a result of uninvested cash balances were used to reduce a portion
of the Fund's expenses. During the six months ended April 30, 1999 the Fund's
transfer agent fees were reduced by $26,413 under this agreement.
The fees of the Trustees not currently affiliated with the Adviser amounted to
$18,643 during the six months ended April 30, 1999.
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, 1999,
fees pursuant to such plan amounted to $643,775, $631,889 and $146,346 for
Class A, Class B and Class C shares, respectively. For the period January 1,
1999 (commencement of share class) to April 30, 1999, fees pursuant to such
plan amounted to $21,549 for Class B(1) shares.
The Fund has been informed that the Distributor and MetLife Securities, Inc., a
wholly owned subsidiary of Metropolitan, earned initial sales charges
aggregating $183,094 and $871,036, respectively, on sales of Class A shares of
the Fund during the six months ended April 30, 1999, and that MetLife
Securities, Inc. earned commissions aggregating $1,066,803 on sales of Class B
shares, and that the Distributor collected contingent deferred sales charges
aggregating $142,867 and $2,119 on redemptions of Class B and Class C shares,
respectively, during the same period. MetLife Securities, Inc. earned
commissions aggregating $16,053 on sales and the Distributor collected
contingent deferred sales charges aggregating $5,587 on redemptions of Class
B(1) shares during the period January 1, 1999 (commencement of share class) to
April 30, 1999.
Note 4
For the six months ended April 30, 1999, purchases and sales of securities,
exclusive of short-term obligations, aggregated $692,967,428 and $667,774,698
(including $690,468,404 and $656,400,469 of U.S. Government obligations),
respectively.
8
<PAGE>
STATE STREET RESEARCH GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
NOTES (cont'd)
- --------------------------------------------------------------------------------
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, 1999,
Metropolitan owned 430,989 Class S shares of the Fund.
Share transactions were as follows:
<TABLE>
<CAPTION>
Six months ended
Year ended April 30, 1999
October 31, 1998 (Unaudited)
------------------------------- ------------------------------
Class A Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ................................... 3,586,515 $ 46,086,161 8,996,613 $ 116,137,244
Issued upon reinvestment of dividends ......... 1,385,176 17,717,475 729,644 9,384,361
Shares repurchased ............................ (6,762,852) (86,341,586) (9,015,439) (116,160,429)
---------- ------------- ---------- --------------
Net increase (decrease) ....................... (1,791,161) $ (22,537,950) 710,818 $ 9,361,176
========== ============= ========== ==============
Class B(1)* Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------------
Shares sold ................................... -- -- 1,126,324 $ 14,361,986
Issued upon reinvestment of dividends ......... -- -- 6,579 83,096
Shares repurchased ............................ -- -- (94,507) (1,195,259)
---------- ------------- ---------- --------------
Net increase .................................. -- -- 1,038,396 $ 13,249,823
========== ============= ========== ==============
Class B Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------------
Shares sold ................................... 4,159,555 $ 53,455,262 1,479,832 $ 19,128,522
Issued upon reinvestment of dividends ......... 301,432 3,848,414 187,244 2,400,866
Shares repurchased ............................ (2,197,432) (28,041,070) (2,008,452) (25,807,109)
---------- ------------- ---------- --------------
Net increase (decrease) ....................... 2,263,555 $ 29,262,606 (341,376) $ (4,277,721)
========== ============= ========== ==============
Class C Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------------
Shares sold ................................... 1,161,428 $ 14,905,734 869,801 $ 11,179,324
Issued upon reinvestment of dividends ......... 51,157 654,285 15,250 195,308
Shares repurchased ............................ (382,734) (4,857,752) (493,417) (6,341,144)
---------- ------------- ---------- --------------
Net increase .................................. 829,851 $ 10,702,267 391,634 $ 5,033,488
========== ============= ========== ==============
Class S Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------------
Shares sold ................................... 570,184 $ 7,285,127 251,772 $ 3,259,207
Issued upon reinvestment of dividends ......... 53,615 686,273 32,075 412,162
Shares repurchased ............................ (755,120) (9,624,689) (1,141,789) (14,899,763)
---------- ------------- ---------- --------------
Net decrease .................................. (131,321) $ (1,653,289) (857,942) $ (11,228,394)
========== ============= ========== ==============
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
*January 1, 1999 (commencement of share class) to April 30, 1999.
9
<PAGE>
STATE STREET RESEARCH GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
For a share outstanding throughout each period:
<TABLE>
<CAPTION>
Class A
-----------------------------------------------------------
Years ended October 31
-----------------------------------------------------------
1994(a) 1995(a) 1996(a) 1997(a) 1998(a)
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ($) 12.92 11.68 12.58 12.43 12.65
------ ------ ----- ------ ------
Net investment income ($) 0.81 0.83 0.81 0.80 0.78
Net realized and unrealized gain (loss) on investments,
options, forward contracts and foreign currency ($) (1.26) 0.88 (0.17) 0.22 0.43
------- ------ ------ ------ ------
Total from investment operations ($) (0.45) 1.71 0.64 1.02 1.21
------- ------ ------ ------ ------
Dividends from net investment income ($) (0.79) (0.81) (0.79) (0.80) (0.79)
------- ------- ------ ------- -------
Total distributions ($) (0.79) (0.81) (0.79) (0.80) (0.79)
------- ------- ------ ------- -------
Net asset value, end of period ($) 11.68 12.58 12.43 12.65 13.07
======= ======= ====== ======= =======
Total return(b)(%) (3.58) 15.07 5.28 8.52 9.85
Ratios/supplemental data:
Net assets at end of period ($ thousands) 638,418 655,045 584,313 524,565 518,651
Ratio of operating expenses to average net assets (%) 1.07 1.10 1.09 1.08 1.09
Ratio of net investment income to average net assets (%) 6.54 6.83 6.50 6.44 6.11
Portfolio turnover rate (%) 134.41 105.57 88.79 124.95 160.89
<CAPTION>
Class A Class B(1)
------------------ ------------------
Six months ended Period ended
April 30, 1999 April 30, 1999
(Unaudited)(a) (Unaudited)(a)(c)
------------------ ------------------
<S> <C> <C>
Net asset value, beginning of period ($) 13.07 12.97
----- -----
Net investment income ($) 0.37 0.20
Net realized and unrealized gain (loss) on investments,
options, forward contracts and foreign currency ($) (0.36) (0.32)
------ ------
Total from investment operations ($) 0.01 (0.12)
------ ------
Dividends from net investment income ($) (0.39) (0.22)
------ ------
Total distributions ($) (0.39) (0.22)
------ ------
Net asset value, end of period ($) 12.69 12.63
====== ======
Total return(b)(%) 0.06(d) (0.96)(d)
Ratios/supplemental data:
Net assets at end of period ($ thousands) 512,292 13,113
Ratio of operating expenses to average net assets (%) 1.03(e) 1.72(e)
Ratio of net investment income to average net assets (%) 5.82(e) 4.75(e)
Portfolio turnover rate (%) 99.61 99.61
</TABLE>
<TABLE>
<CAPTION>
Class B
-------------------------------------------------------
Years ended October 31
-------------------------------------------------------
1994(a) 1995(a) 1996(a) 1997(a) 1998(a)
---------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ($) 12.91 11.66 12.55 12.40 12.61
------ ------ ----- ------ ------
Net investment income ($) 0.72 0.73 0.71 0.70 0.68
Net realized and unrealized gain (loss) on investments,
options, forward contracts and foreign currency ($) (1.27) 0.87 (0.16) 0.22 0.43
------- ------ ------ ------ ------
Total from investment operations ($) (0.55) 1.60 0.55 0.92 1.11
------- ------ ------ ------ ------
Dividends from net investment income ($) (0.70) (0.71) (0.70) (0.71) (0.69)
------- ------- ------ ------- -------
Total distributions ($) (0.70) (0.71) (0.70) (0.71) (0.69)
------- ------- ------ ------- -------
Net asset value, end of period ($) 11.66 12.55 12.40 12.61 13.03
======= ======= ====== ======= =======
Total return(b)(%) (4.38) 14.15 4.51 7.66 9.07
Ratios/supplemental data:
Net assets at end of period ($ thousands) 52,319 87,908 95,218 97,253 129,976
Ratio of operating expenses to average net assets (%) 1.82 1.85 1.84 1.83 1.84
Ratio of net investment income to average net assets (%) 5.86 6.01 5.75 5.68 5.33
Portfolio turnover rate (%) 134.41 105.57 88.79 124.95 160.89
<CAPTION>
Class B
-----------------
Six months ended
April 30, 1999
(Unaudited)(a)
-----------------
<S> <C> <C>
Net asset value, beginning of period ($) 13.03
-----
Net investment income ($) 0.32
Net realized and unrealized gain (loss) on investments,
options, forward contracts and foreign currency ($) (0.36)
------
Total from investment operations ($) (0.04)
------
Dividends from net investment income ($) (0.34)
------
Total distributions ($) (0.34)
------
Net asset value, end of period ($) 12.65
======
Total return(b)(%) (0.31)(d)
Ratios/supplemental data:
Net assets at end of period ($ thousands) 121,795
Ratio of operating expenses to average net assets (%) 1.78(e)
Ratio of net investment income to average net assets (%) 5.07(e)
Portfolio turnover rate (%) 99.61
</TABLE>
- --------------------------------------------------------------------------------
(a) Per-share figures have been calculated using the average shares method.
(b) Does not reflect any front-end or contingent deferred sales charges.
(c) January 1, 1999 (commencement of share class) to April 30, 1999.
(d) Not annualized.
(e) Annualized.
10
<PAGE>
STATE STREET RESEARCH GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class C
------------------------------------------------------
Years ended October 31
------------------------------------------------------
1994(a) 1995(a) 1996(a) 1997(a) 1998(a)
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ($) 12.91 11.66 12.56 12.41 12.62
------ ------ ----- ------ ------
Net investment income ($) 0.72 0.74 0.71 0.70 0.67
Net realized and unrealized gain (loss) on investments,
options, forward contracts and foreign currency ($) (1.27) 0.87 (0.16) 0.22 0.44
------- ------ ------ ------ ------
Total from investment operations ($) (0.55) 1.61 0.55 0.92 1.11
------- ------ ------ ------ ------
Dividends from net investment income ($) (0.70) (0.71) (0.70) (0.71) (0.69)
------- ------- ------ ------- -------
Total distributions ($) (0.70) (0.71) (0.70) (0.71) (0.69)
------- ------- ------ ------- -------
Net asset value, end of period ($) 11.66 12.56 12.41 12.62 13.04
======= ======= ====== ======= =======
Total return(b)(%) (4.38) 14.24 4.51 7.65 9.06
Ratios/supplemental data:
Net assets at end of period ($ thousands) 13,425 13,033 14,473 16,301 27,659
Ratio of operating expenses to average net assets (%) 1.82 1.85 1.84 1.83 1.84
Ratio of net investment income to average net assets (%) 5.84 6.08 5.76 5.68 5.28
Portfolio turnover rate (%) 134.41 105.57 88.79 124.95 160.89
<CAPTION>
Class C
-----------------
Six months ended
April 30, 1999
(Unaudited)(a)
-----------------
<S> <C>
Net asset value, beginning of period ($) 13.04
-----
Net investment income ($) 0.32
Net realized and unrealized gain (loss) on investments,
options, forward contracts and foreign currency ($) (0.37)
------
Total from investment operations ($) (0.05)
------
Dividends from net investment income ($) (0.34)
------
Total distributions ($) (0.34)
------
Net asset value, end of period ($) 12.65
======
Total return(b)(%) (0.38)(d)
Ratios/supplemental data:
Net assets at end of period ($ thousands) 31,793
Ratio of operating expenses to average net assets (%) 1.78(e)
Ratio of net investment income to average net assets (%) 5.08(e)
Portfolio turnover rate (%) 99.61
</TABLE>
<TABLE>
<CAPTION>
Class S
---------------------------------------------------------------------
Years ended October 31 Six months ended
--------------------------------------------------- April 30, 1999
1994(a) 1995(a) 1996(a) 1997(a) 1998(a) (Unaudited)(a)
--------- --------- --------- ---------- ---------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ($) 12.92 11.67 12.57 12.42 12.64 13.06
------ ------ ----- ------ ------ ------
Net investment income ($) 0.84 0.90 0.84 0.80 0.81 0.37
Net realized and unrealized gain (loss) on investments,
options, forward contracts and foreign currency ($) (1.27) 0.84 (0.17) 0.25 0.43 (0.35)
------ ------ ----- ------ ------ ------
Total from investment operations ($) (0.43) 1.74 0.67 1.05 1.24 0.02
------ ------ ----- ------ ------ ------
Dividends from net investment income ($) (0.82) (0.84) (0.82) (0.83) (0.82) (0.40)
------ ------ ----- ------ ------ ------
Total distributions ($) (0.82) (0.84) (0.82) (0.83) (0.82) (0.40)
------ ------ ----- ------ ------ ------
Net asset value, end of period ($) 11.67 12.57 12.42 12.64 13.06 12.68
====== ====== ===== ====== ====== ======
Total return(b)(%) (3.42) 15.37 5.55 8.80 10.13 0.19(d)
Ratios/supplemental data:
Net assets at end of period ($ thousands) 203 5,036 7,767 32,115 31,468 19,664
Ratio of operating expenses to average net assets (%) 0.82 0.85 0.84 0.82 0.84 0.78(e)
Ratio of net investment income to average net assets (%) 8.01 6.79 6.78 6.66 6.38 5.75(e)
Portfolio turnover rate (%) 134.41 105.57 88.79 124.95 160.89 99.61
</TABLE>
- --------------------------------------------------------------------------------
(a) Per-share figures have been calculated using the average shares method.
(b) Does not reflect any front-end or contingent deferred sales charges.
(c) January 1, 1999 (commencement of share class) to April 30, 1999.
(d) Not annualized.
(e) Annualized.
11
<PAGE>
STATE STREET RESEARCH GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
REPORT ON SPECIAL MEETING OF SHAREHOLDERS
- --------------------------------------------------------------------------------
A Special Meeting of Shareholders of the State Street Research Government
Income Fund ("Fund"), along with shareholders of other series of State Street
Research Financial Trust ("Trust"), was convened on April 6, 1999 ("Meeting"),
and continued thereafter. The results of the Meeting are set forth below.
<TABLE>
<CAPTION>
Votes (millions of
shares)
(Combined for All
Series of the Trust)
--------------------
Action on Proposal For Withheld
- ----------------------------------------------- --------- ---------
<S> <C> <C>
The following persons were elected as Trustees:
Bruce R. Bond ................................. 40.9 0.7
Steve A. Garban ............................... 40.9 0.7
Malcolm T. Hopkins ............................ 40.9 0.7
Susan M. Phillips ............................. 40.9 0.7
</TABLE>
12
<PAGE>
STATE STREET RESEARCH GOVERNMENT INCOME FUND
- --------------------------------------------------------------------------------
FUND INFORMATION, OFFICERS AND TRUSTEES OF STATE STREET RESEARCH FINANCIAL TRUST
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Fund Information Officers Trustees
<S> <C> <C>
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 Bruce R. Bond
One Financial Center John H. Kallis Chairman of the Board,
Boston, MA 02111 Vice President Chief Executive Officer and
President, PictureTel Corporation
Distributor Thomas P. Moore, Jr.
State Street Research Vice President Steve A. Garban
Investment Services, Inc. Former Senior Vice President
One Financial Center E.K. Easton Ragsdale, Jr. for Finance and Operations and
Boston, MA 02111 Vice President Treasurer, The Pennsylvania
State University
Shareholder Services Thomas A. Shively
State Street Research Vice President Malcolm T. Hopkins
Service Center Former Vice Chairman of the
P.O. Box 8408 James M. Weiss Board and Chief Financial
Boston, MA 02266-8408 Vice President Officer, St. Regis Corp.
1-800-562-0032
Gerard P. Maus Dean O. Morton
Custodian Treasurer Former Executive Vice President
State Street Bank and Chief Operating Officer
Trust Company Joseph W. Canavan and Director, Hewlett-Packard
225 Franklin Street Assistant Treasurer Company
Boston, MA 02110
Douglas A. Romich Susan M. Phillips
Legal Counsel Assistant Treasurer Dean, School of Business and
Goodwin, Procter & Hoar LLP Public Management, George
Exchange Place Francis J. McNamara, III Washington University; former
Boston, MA 02109 Secretary and General Counsel Member of the Board of Governors
of the Federal Reserve System
Darman A. Wing and Chairman and Commissioner
Assistant Secretary and of the Commodity Futures
Assistant General Counsel Trading Commission
Amy L. Simmons Toby Rosenblatt
Assistant Secretary 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>
13
<PAGE>
[back cover]
State Street Research Government Income Fund
One Financial Center
Boston, MA 02111
------------
Bulk Rate
U.S. Postage
PAID
Permit #6
Hartford, CT
------------
Questions? Comments?
Call us at 1-800-562-0032
[hearing-impaired 1-800-676-7876]
[Chinese and Spanish-speaking 1-888-638-3193]
Write us at:
State Street Research
Service Center
P.O. Box 8408
Boston, MA 02266-8408
E-mail us at:
[email protected]
Internet site:
www.ssrfunds.com
[logo: State Street Research]
This report is prepared for the general information of current shareholders.
This report must be accompanied or preceded by a current State Street Research
Government Income Fund prospectus. When used after June 30, 1999, this report
must be accompanied by a current Quarterly Performance Update.
Portfolio changes should not be considered recommendations for action by
individual investors.
The Dalbar awards recognize quality shareholder service and should not be
considered a rating of fund performance. The survey included mutual fund
complexes that volunteered or were otherwise selected to participate and was not
industry-wide.
CONTROL NUMBER: (exp1299)SSR-LD GI-763F-0699
<PAGE>
- -------------------------------------------------------------------------------
STATE STREET RESEARCH
- -------------------------------------------------------------------------------
STRATEGIC PORTFOLIOS: MODERATE
----------------------------------
SEMIANNUAL REPORT
April 30, 1999
--------------------
WHAT'S INSIDE
--------------------
INVESTMENT UPDATE
About the Fund,
economy and markets
FUND INFORMATION
Facts and figures
PLUS, COMPLETE PORTFOLIO HOLDINGS
AND FINANCIAL STATEMENTS
STATE STREET RESEARCH
- ---------------------- ---------------------
DALBAR
HONORS COMMITMENT TO: 75 YEARS
INVESTORS
1998 ---------------------
- ---------------------- LASTING VALUES
---------------------
For Excellence LEADING IDEAS
in
Shareholder Service
STATE STREET RESEARCH FUNDS
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT ENVIRONMENT
- --------------------------------------------------------------------------------
THE ECONOMY
o Americans continued to reap the benefits of a healthy economy. Inflation
remained low, unemployment hovered at about 4%, and wages rose.
o Favorable economic factors stimulated retail sales through the holiday season
and into the first quarter of 1999. Lower energy costs and declining mortgage
rates translated into additional income for many consumers. However, energy
costs rebounded in 1999, erasing some of the gains.
o The nation's savings rate fell below zero in the last quarter of 1998. Debate
flared over the significance of that figure, however, because the Bureau of
Economic Analysis has recently changed the way it computes savings rates.
THE MARKETS
o The S&P 500, a broad measure of common stock performance, gained 22.31% for
the six-month period(1). Gains were concentrated in a narrow band of large,
high-quality growth and technology stocks. Small and medium-sized company
stocks lagged the market.
o The U.S. bond market benefited from three quick interest rate cuts late in
1998. However, the yield on the long-term Treasury benchmark climbed from 5.0%
back up to 5.7% by the end of the period, reflecting fears that strong
economic growth could ignite inflation. High-yield bonds were weak during the
first half of the period, as investors sought the quality of the U.S. Treasury
market, but those same "junk" bonds picked up again in 1999 as investors
regained confidence.
THE FUND
OVER THE PAST SIX MONTHS
o For the six months ended April 30, 1999, Strategic Portfolios: Moderate Class
S shares returned 9.93%. That was lower than the Lipper balanced funds average
total return of 11.67% over the same period.
o The Fund's investments in stocks, 50% of total net assets at the end of the
period, helped performance in an absolute sense, but was below the peer group
average. o Large-cap growth was the best performing sector of the portfolio
over the entire six months.
CURRENT STRATEGY
o No significant changes are being made to the portfolio. The Fund is designed
to offer broad diversification among different asset classes and investment
styles. Volatility in world financial markets and the high valuation of the
U.S. stock market have caused us to reduce our normal holdings of stocks in
favor of bonds.
o Over the long term, our approach should help cushion investors against market
volatility, and so we are sticking to our discipline. We believe that many
areas of the market that were beaten down are positioned to rebound as
investors begin to look for better values.
o Small-cap growth and mid-cap value have begun to perform better in recent
weeks, enhancing the Fund's total return.
April 30, 1999
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 S&P 500 (officially the "Standard and Poor's 500 Composite Stock Price
Index") is an unmanaged index of 500 U.S. stocks. The index does not take
transaction charges into consideration. It is not possible to invest
directly in the index.
(2) Keep in mind that past performance is no guarantee of future results. The
Fund's share price, yield and return will fluctuate and you may have a gain
or loss when you sell your shares. All returns assume reinvestment of
capital gain distributions and income dividends at net asset value.
(3) Class S shares, offered without a sales charge, are available through
certain employee benefit plans and special programs.
- --------------------------------------------------------------------------------
FUND INFORMATION (all data are for periods ended April 30, 1999, except where
noted)
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
FOR PERIODS ENDED 3/31/99(2)(3)
- --------------------------------------------------------------------------------
LIFE OF FUND
(since 9/28/93) 5 YEARS 1 YEAR
- --------------------------------------------------------------------------------
Class S 10.50% 12.36% 3.63%
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN(2)(3)
- --------------------------------------------------------------------------------
LIFE OF FUND
(since 9/28/93) 5 YEARS 1 YEAR
- --------------------------------------------------------------------------------
Class S 10.92% 12.97% 5.97%
- --------------------------------------------------------------------------------
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)
Stocks 50%
Bonds 48%
Cash 2%
<PAGE>
<TABLE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: MODERATE
- -----------------------------------------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------
April 30, 1999 (Unaudited)
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
VALUE
SHARES (NOTE 1)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
EQUITY SECURITIES 50.1%
AUTOMOBILES & TRANSPORTATION 0.3%
AIR TRANSPORT 0.3%
Mesa Air Group, Inc.* ............................................................... 2,400 $ 16,200
UAL Corp.* .......................................................................... 700 56,525
US Airways Group Inc. ............................................................... 700 38,107
------------
110,832
------------
AUTOMOTIVE PARTS 0.0%
Gentex Corp.* ....................................................................... 500 15,031
------------
Total Automobiles & Transportation .................................................. 125,863
------------
CONSUMER DISCRETIONARY 10.4%
ADVERTISING AGENCIES 1.4%
Lamar Advertising Co. Cl. A ......................................................... 1,100 36,988
TMP Worldwide Inc.* ................................................................. 200 13,450
Valassis Communications Inc.* ....................................................... 9,200 515,200
Young & Rubicam Inc.* ............................................................... 1,800 71,662
------------
637,300
------------
CASINOS/GAMBLING, HOTEL/MOTEL 1.1%
GTech Holdings Corp.* ............................................................... 3,000 78,188
Harrah's Entertainment Inc.* ........................................................ 11,300 248,600
Mirage Resorts Inc.* ................................................................ 8,600 192,962
Motels of America Inc.*+ ............................................................ 75 506
------------
520,256
------------
COMMERCIAL SERVICES 3.3%
A.C. Nielson Corp.* ................................................................. 14,300 398,612
Abacus Direct Corp.* ................................................................ 600 44,400
Allied Waste Industries Inc.* ....................................................... 1,800 31,838
America Online Inc.* ................................................................ 3,000 428,250
Casella Waste Systems Inc. Cl. A* ................................................... 1,700 42,500
Cheap Tickets Inc.* ................................................................. 400 15,400
Copart Inc.* ........................................................................ 1,900 34,437
Corporate Executive Board Co.* ...................................................... 300 8,438
Critical Path Inc.* ................................................................. 100 9,950
GeoCities* .......................................................................... 200 23,300
Maximus Inc.* ....................................................................... 1,500 39,000
ProBusiness Services Inc.* .......................................................... 900 32,288
Steiner Leisure Ltd.* ............................................................... 2,300 73,025
Usweb Corp.* ........................................................................ 700 15,706
VerticalNet Inc.* ................................................................... 100 11,350
Waste Connections Inc.* ............................................................. 1,300 34,287
Waste Management Inc.* .............................................................. 3,500 197,750
Worldgate Communications Inc.* ...................................................... 300 8,550
Ziff-Davis Inc.* .................................................................... 1,100 38,775
------------
1,487,856
------------
COMMUNICATIONS, MEDIA & ENTERTAINMENT 1.0%
CBS Corp.* .......................................................................... 2,800 127,575
Chancellor Media Corp. .............................................................. 1,200 65,850
Cinar Films Inc. Cl. B* ............................................................. 2,200 45,925
Time Warner Inc. .................................................................... 2,600 182,000
Valley Media Inc.* .................................................................. 900 22,613
------------
443,963
------------
CONSUMER ELECTRONICS 0.1%
Abovenet Communications Inc.* ....................................................... 300 25,667
TheGlobe.com, Inc.* ................................................................. 300 18,037
------------
43,704
------------
CONSUMER SERVICES 0.2%
Bright Horizons Family Solutions Corp.* ............................................. 1,100 23,650
DeVry Inc.* ......................................................................... 1,700 44,837
ITT Educational Services Inc.* ...................................................... 300 7,369
Miningco.com Inc.* .................................................................. 200 13,100
------------
88,956
------------
HOUSEHOLD FURNISHINGS 0.3%
Black & Decker Corp. ................................................................ 2,100 119,175
------------
PRINTING & PUBLISHING 0.7%
Hollinger International, Inc. Cl. A* ................................................ 24,200 340,313
------------
RESTAURANTS 0.4%
McDonald's Corp. .................................................................... 4,200 177,975
------------
RETAIL 1.8%
Aviation Sales Co.* ................................................................. 700 28,000
CSK Auto Corp.* ..................................................................... 1,400 35,000
Federated Department Stores Inc.* ................................................... 2,400 112,050
Global Imaging Systems, Inc.* ....................................................... 1,900 27,312
Guitar Center Inc.* ................................................................. 1,100 17,188
Home Depot Inc. ..................................................................... 2,200 131,862
Jones Apparel Group Inc.* ........................................................... 1,400 46,200
Linens 'n Things Inc.* .............................................................. 600 27,450
Men's Wearhouse, Inc.* .............................................................. 700 19,163
Saks Inc.* .......................................................................... 1,450 41,053
Staples Inc.* ....................................................................... 4,850 145,500
Venator Group Inc. .................................................................. 2,000 19,375
Wal-Mart Stores, Inc. ............................................................... 4,000 184,000
------------
834,153
------------
SHOES 0.1%
Stride Rite Corp. ................................................................... 2,400 28,050
------------
Total Consumer Discretionary ........................................................ 4,721,701
------------
CONSUMER STAPLES 2.3%
BEVERAGES 0.5%
Anheuser-Busch Companies,Inc ........................................................ 2,900 212,062
------------
DRUG & GROCERY STORE CHAINS 0.9%
Duane Reade Inc.* ................................................................... 1,200 32,175
Hannaford Brothers Co. .............................................................. 4,900 213,763
Kroger Co.* ......................................................................... 1,300 70,606
Rite Aid Corp. ...................................................................... 1,300 30,306
Safeway Inc. ........................................................................ 1,500 80,906
------------
427,756
------------
FOODS 0.1%
Keebler Foods Co.* .................................................................. 1,500 48,188
------------
HOUSEHOLD PRODUCTS 0.6%
Dial Corp. .......................................................................... 1,300 44,200
Procter & Gamble Co. ................................................................ 2,300 215,769
------------
259,969
------------
TOBACCO 0.2%
RJR Nabisco Holdings Corp.* ......................................................... 1,400 36,050
UST Inc. ............................................................................ 1,800 50,175
------------
86,225
------------
Total Consumer Staples .............................................................. 1,034,200
------------
FINANCIAL SERVICES 6.2%
BANKS & SAVINGS & LOAN 1.5%
Astoria Financial Corp.* ............................................................ 800 40,100
Chase Manhattan Corp. ............................................................... 1,300 107,575
City National Corp.* ................................................................ 500 19,313
Golden State Bancorp Inc. ........................................................... 1,000 24,562
Golden West Financial Corp. ......................................................... 800 80,100
Mercantile Bankshares Corp. ......................................................... 2,500 92,500
One Valley Bancorp Inc.* ............................................................ 400 15,400
Peoples Heritage Financial Group* ................................................... 8,600 166,625
Saint Paul Bancorp, Inc.* ........................................................... 700 16,975
Southtrust Corp. .................................................................... 1,800 71,719
TCF Financial Corp. ................................................................. 600 17,400
Telebanc Financial Corp.* ........................................................... 300 31,087
------------
683,356
------------
FINANCIAL DATA PROCESSING SERVICES & SYSTEMS 0.3%
Bisys Group Inc.* ................................................................... 200 10,150
International Telecommunication Data Systems, Inc.* ................................. 1,000 11,313
Nova Corp.* ......................................................................... 2,400 62,400
Profit Recovery Group International Inc.* ........................................... 700 25,550
------------
109,413
------------
INSURANCE 1.8%
Ace Ltd. ............................................................................ 7,000 211,750
American International Group Inc. ................................................... 1,100 129,181
Mutual Risk Management Ltd. ......................................................... 732 28,457
Saint Paul Companies, Inc. .......................................................... 1,500 43,031
Terra Nova Holdings Ltd. Cl. A* ..................................................... 1,000 22,438
UNUM Corp. .......................................................................... 3,600 196,650
XL Capital Ltd. Cl. A ............................................................... 3,288 199,540
------------
831,047
------------
MISCELLANEOUS FINANCIAL 1.8%
AMBAC Inc. .......................................................................... 5,400 326,025
Capital One Financial Corp. ......................................................... 1,100 191,056
Capital Re Corp. .................................................................... 500 9,781
Citigroup, Inc. ..................................................................... 2,300 173,075
CMAC Investment Corp. ............................................................... 600 27,525
Finet Holding Corp.* ................................................................ 1,900 16,684
Heller Financial Inc. Cl. A ......................................................... 1,200 32,550
Metris Companies Inc. ............................................................... 600 36,675
T & W Financial Corp.* .............................................................. 1,800 14,738
------------
828,109
------------
REAL ESTATE INVESTMENT TRUSTS 0.1%
First Industrial Realty Trust Inc. .................................................. 500 13,437
Golf Trust of America Inc.* ......................................................... 400 8,875
IndyMac Mortgage Holdings Inc. ...................................................... 1,400 23,100
Liberty Property Trust .............................................................. 500 12,063
------------
57,475
------------
RENTAL & LEASING SERVICES: COMMERCIAL 0.1%
United Rentals Inc.* ................................................................ 1,500 44,719
------------
SECURITIES BROKERAGE & SERVICES 0.6%
Bear Stearns Company Inc. ........................................................... 1,995 93,017
Knight/Trimark Group, Inc. Cl. A* ................................................... 1,000 153,187
------------
246,204
------------
Total Financial Services ............................................................ 2,800,323
------------
HEALTH CARE 3.2%
DRUGS & BIOTECHNOLOGY 2.4%
Abbott Laboratories Inc. ............................................................ 2,600 125,938
Axogen Ltd.* ........................................................................ 900 27,450
Baxter International Inc. ........................................................... 2,000 126,000
Biovail Corp.* ...................................................................... 3,300 115,706
Elan Corp. PLC* ..................................................................... 600 17,100
Intelligent Polymers Ltd.* .......................................................... 4,200 130,200
Pfizer Inc. ......................................................................... 900 103,556
Pharmacia & Upjohn Inc. ............................................................. 3,000 168,000
Pharmacia & Upjohn Inc. SDR ......................................................... 500 27,735
PharmaPrint Inc.* ................................................................... 1,400 13,563
Quintiles Transnational Corp.* ...................................................... 816 33,107
Schering-Plough Corp. ............................................................... 3,200 154,600
Spiros Development Corp.* ........................................................... 2,500 25,156
------------
1,068,111
------------
HEALTH CARE FACILITIES 0.3%
Healthsouth Corp.* .................................................................. 1,806 24,268
Total Renal Care Holdings Inc.* ..................................................... 8,300 115,162
------------
139,430
------------
HEALTH CARE SERVICES 0.5%
Covance Inc.* ....................................................................... 1,000 21,938
Healtheon Corp.* .................................................................... 500 22,625
NCS Healthcare Inc. Cl. A* .......................................................... 1,700 22,100
Quorum Health Group Inc.* ........................................................... 9,800 121,275
Wesley Jessen VisionCare Inc.* ...................................................... 1,500 45,937
------------
233,875
------------
Total Health Care ................................................................... 1,441,416
------------
INTEGRATED OILS 1.0%
INTEGRATED DOMESTIC 0.5%
KCS Energy Inc. ..................................................................... 2,000 2,750
Kerr-McGee Corp. .................................................................... 2,878 121,964
Unocal Corp. ........................................................................ 2,800 116,375
------------
241,089
------------
INTEGRATED INTERNATIONAL 0.5%
Exxon Corp. ......................................................................... 1,700 141,206
Total SA Cl. B ADR .................................................................. 1,200 81,600
------------
222,806
------------
Total Integrated Oils ............................................................... 463,895
------------
MATERIALS & PROCESSING 2.8%
CHEMICALS 1.2%
Agrium Inc. ......................................................................... 16,700 151,344
Cabot Corp. ......................................................................... 9,900 267,300
Cambrex Corp. ....................................................................... 800 20,500
Dow Chemical Co. .................................................................... 700 91,831
------------
530,975
------------
CONTAINERS & PACKAGING 0.2%
Smurfit Stone Container Corp.* ...................................................... 3,400 79,475
------------
DIVERSIFIED MANUFACTURING 1.0%
Ball Corp. .......................................................................... 8,200 450,487
------------
FOREST PRODUCTS 0.2%
Boise Cascade Corp. ................................................................. 1,000 40,250
Champion International Corp. ........................................................ 900 49,219
------------
89,469
------------
PAPER & FOREST PRODUCTS 0.1%
Bowater Inc. ........................................................................ 1,400 75,075
------------
STEEL 0.1%
Harsco Corp. ........................................................................ 1,600 52,500
------------
Total Materials & Processing ........................................................ 1,277,981
------------
NON-US EQUITIES 7.5%
Appliedtheory Corp. ................................................................. 100 2,050
Asia Pacific Wire & Cable Corp. Ltd.* ............................................... 13,600 39,950
Banco Di Roma ....................................................................... 56,300 92,782
BHF Bank AG ......................................................................... 1,800 67,694
British Petroleum Co. PLC* .......................................................... 7,500 142,370
Clearnet Communications Inc. Wts.* .................................................. 495 2,475
Continental AG ...................................................................... 2,100 52,133
Energy Africa Ltd.* ................................................................. 23,300 45,183
Gulfstream Resources Ltd. ........................................................... 4,200 11,090
IXOS Software AG .................................................................... 300 61,166
L.M. Ericsson Telephone Co. Cl. B* .................................................. 2,000 52,507
Lernout & Hauspie Speech Products NV ADR* ........................................... 2,600 101,725
National Bank of Canada ............................................................. 12,500 201,461
Nokia Ab Oy ......................................................................... 1,400 107,890
Post Energy Corp.* .................................................................. 3,900 14,978
Prosieben Media AG* ................................................................. 3,200 150,431
PTT Exploration & Production Public Co. Ltd.* ....................................... 7,500 69,194
QP Corp. ............................................................................ 17,500 135,551
Renaissance Energy Ltd. ............................................................. 10,000 151,224
Sema Group PLC* ..................................................................... 10,200 98,617
Shaw Communications Inc. Cl. B ...................................................... 3,800 153,900
Snow Brand Milk Co. ................................................................. 26,200 136,024
Societe Generale .................................................................... 300 53,686
Softbank Corp. ...................................................................... 2,500 332,650
Suncor Energy Inc ................................................................... 1,000 39,949
Takara Shuzo Co. .................................................................... 36,000 252,621
Talisman Energy Inc ................................................................. 5,000 132,021
Telecom Italia SPA* ................................................................. 18,700 198,930
Tieto Corp. ......................................................................... 3,600 143,375
Valeo SA ............................................................................ 700 59,158
Valeo SA Wts.* ...................................................................... 700 2,366
WM Data AB Cl. B* ................................................................... 3,200 117,577
Wolters Kluwer ...................................................................... 3,600 156,685
------------
Total Non-US Equities ............................................................... 3,379,413
------------
OTHER 2.5%
MULTI-SECTOR 2.5%
AlliedSignal Inc. ................................................................... 2,800 164,500
Gencorp Inc. ........................................................................ 5,900 136,437
General Electric Co. ................................................................ 2,300 242,650
Johnson Controls Inc. ............................................................... 600 43,763
Ogden Corp. ......................................................................... 7,500 193,594
Raytheon Co. Cl. B .................................................................. 1,800 126,450
Teleflex Inc. ....................................................................... 500 21,781
Tyco International Ltd. ............................................................. 2,500 203,125
------------
Total Other ......................................................................... 1,132,300
------------
OTHER ENERGY 1.8%
GAS PIPELINES 1.0%
Columbia Energy Group ............................................................... 400 19,225
Williams Companies Inc. ............................................................. 8,887 419,911
------------
439,136
------------
OFFSHORE DRILLING 0.0%
Atwood Oceanics Inc.* ............................................................... 400 13,950
------------
OIL & GAS PRODUCERS 0.4%
Abacan Resource Corp.* .............................................................. 11,300 1,942
Maxx Petroleum Ltd.* ................................................................ 4,500 12,375
Ocean Energy Inc.* .................................................................. 14,412 134,212
Plains Resources Inc.* .............................................................. 800 13,650
Talisman Energy Inc. ................................................................ 370 9,828
------------
172,007
------------
OIL WELL EQUIPMENT & SERVICES 0.4%
Calpine Corp.* ...................................................................... 1,200 51,150
Halliburton Co. ..................................................................... 3,000 127,875
------------
179,025
------------
Total Other Energy .................................................................. 804,118
------------
PRODUCER DURABLES 1.8%
AEROSPACE 0.1%
Heico Corp. Cl. A* .................................................................. 1,400 29,487
------------
ELECTRICAL EQUIPMENT & COMPONENTS 0.6%
Mark IV Industries Inc. ............................................................. 15,300 273,487
------------
ELECTRONICS: INDUSTRIAL 0.0%
Mettler Toledo International Inc.* .................................................. 1,100 28,738
------------
MACHINERY 0.5%
Helix Technology Corp.* ............................................................. 700 12,359
Howmet International Inc.* .......................................................... 12,900 206,400
------------
218,759
------------
OFFICE FURNITURE & BUSINESS EQUIPMENT 0.4%
Xerox Corp. ......................................................................... 3,400 199,750
------------
PRODUCTION TECHNOLOGY EQUIPMENT 0.1%
Cymer Inc.* ......................................................................... 900 16,425
Dupont Photomasks Inc.* ............................................................. 300 13,125
Novellus Systems Inc.* .............................................................. 200 9,450
------------
39,000
------------
TELECOMMUNICATIONS EQUIPMENT 0.1%
L-3 Communications Holding Corp.* ................................................... 600 29,288
------------
Total Producer Durables ............................................................. 818,509
------------
TECHNOLOGY 6.0%
COMMUNICATIONS TECHNOLOGY 1.0%
American Tower Corp. Cl. A* ......................................................... 1,400 29,663
Covad Communications Group Inc.* .................................................... 200 19,200
Digital Microwave Corp.* ............................................................ 3,280 41,820
Lucent Technologies Inc. ............................................................ 2,500 150,312
MMC Networks Inc.* .................................................................. 1,100 27,019
NCR Corp. ........................................................................... 2,000 82,000
Network Solutions Inc. Cl. A* ....................................................... 300 23,325
Remec Inc.* ......................................................................... 4,450 57,572
------------
430,911
------------
COMPUTER SOFTWARE 1.1%
Acxiom Corp.* ....................................................................... 500 12,625
Answerthink Consulting Group, Inc.* ................................................. 800 17,750
Cadence Design Systems Inc.* ........................................................ 2,000 27,125
Ceridian Corp.* ..................................................................... 2,800 102,550
Check Point Software Technologies Ltd.* ............................................. 400 14,100
Earthweb Inc.* ...................................................................... 200 10,625
Microsoft Corp.* .................................................................... 2,800 227,675
Mpath Interactive Inc. .............................................................. 200 7,875
Novell Inc.* ........................................................................ 1,600 35,600
Platinum Technology Inc.* ........................................................... 1,800 45,900
Transaction Systems Architects Inc. Cl. A* .......................................... 500 16,219
USinternetworking Inc.* ............................................................. 100 5,112
Walker Interactive Systems, Inc.* ................................................... 2,800 8,925
------------
532,081
------------
COMPUTER TECHNOLOGY 3.0%
Cisco Systems Inc.* ................................................................. 2,875 327,930
Dell Computer Corp.* ................................................................ 2,400 98,850
EMC Corp.* .......................................................................... 2,500 272,344
Extreme Networks Inc.* .............................................................. 200 11,087
Fore Systems Inc.* .................................................................. 1,000 33,750
International Business Machines Corp. ............................................... 800 167,350
Radiant Systems Inc.* ............................................................... 2,400 27,300
Rhythms Netconnections Inc.* ........................................................ 100 8,250
Seagate Technology, Inc.* ........................................................... 1,200 33,450
Silicon Graphics Inc.* .............................................................. 14,800 188,700
Sportsline USA Inc.* ................................................................ 100 4,000
Unisys Corp. ........................................................................ 1,500 47,156
Verio Inc.* ......................................................................... 1,000 71,000
Wang Laboratories Inc.* ............................................................. 1,100 27,569
Zebra Technologies Corp. Cl. A* ..................................................... 800 26,600
------------
1,345,336
------------
ELECTRONICS 0.3%
Aeroflex Inc.* ...................................................................... 4,900 71,663
SLI Inc.* ........................................................................... 1,731 47,494
------------
119,157
------------
ELECTRONICS: SEMI-CONDUCTORS/COMPONENTS 0.6%
Analog Devices Inc.* ................................................................ 3,300 115,912
Cypress Semiconductor Corp.* ........................................................ 5,400 55,350
Integrated Circuit Systems Inc.* .................................................... 1,000 20,250
Intel Corp. ......................................................................... 1,600 97,900
------------
289,412
------------
Total Technology .................................................................... 2,716,897
------------
UTILITIES 4.3%
CABLE TELEVISION & RADIO 0.4%
Cox Communications Inc. Cl. A* ...................................................... 2,000 158,750
------------
ELECTRICAL 1.7%
Consolidated Edison Inc. ............................................................ 1,000 45,438
DQE, Inc. ........................................................................... 2,100 86,494
Illinova Corp. ...................................................................... 8,000 210,000
OGE Energy Corp. .................................................................... 7,500 177,656
Pinnacle West Capital Corp. ......................................................... 7,000 271,687
------------
791,275
------------
GAS DISTRIBUTION 0.1%
Nicor Inc. .......................................................................... 500 18,187
Questar Corp. ....................................................................... 1,300 23,644
------------
41,831
------------
TELECOMMUNICATIONS 2.1%
Alltel Corp. ........................................................................ 2,600 175,338
Bellsouth Corp. ..................................................................... 1,600 71,600
MCI WorldCom Inc.* .................................................................. 3,800 312,312
MediaOne Group Inc.* ................................................................ 1,500 122,344
Qwest Communications International Inc.* ............................................ 2,200 187,962
RCN Corp.* .......................................................................... 900 43,763
RSL Communications Ltd. Cl. A* ...................................................... 1,100 36,025
Viatel Inc. Pfd.( ) ................................................................. 24 5,953
------------
955,297
------------
Total Utilities ..................................................................... 1,947,153
------------
Total Equity Securities (Cost $17,659,712) .......................................... 22,663,769
------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
PRINCIPAL MATURITY
AMOUNT DATE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FIXED INCOME SECURITIES 47.8%
U.S. TREASURY 7.4%
U.S. Treasury Bond, 8.125% ....................... $ 50,000 5/15/2021 63,399
U.S. Treasury Bond, 12.00% ....................... 150,000 8/15/2013 218,062
U.S. Treasury Bond, 8.125% ....................... 300,000 8/15/2021 380,811
U.S. Treasury Bond, 6.625% ....................... 575,000 2/15/2027 632,408
U.S. Treasury Bond, 6.125% ....................... 125,000 11/15/2027 129,395
U.S. Treasury Bond, 5.25% ........................ 175,000 11/15/2028 161,929
U.S. Treasury Bond, 5.25% ........................ 325,000 2/15/2029 305,094
U.S. Treasury Note, 6.625% ....................... 275,000 7/31/2001 283,723
U.S. Treasury Note, 5.875% ....................... 425,000 9/30/2002 433,763
U.S. Treasury STRIPS, 0.00% ...................... 450,000 5/15/2003 364,766
U.S. Treasury STRIPS, 0.00% ...................... 300,000 5/15/2007 193,182
U.S. Treasury TIPS, 3.875% ....................... 200,122 4/15/2029 200,684
------------
3,367,216
------------
U.S. AGENCY MORTGAGE 14.9%
Federal Home Loan Mortgage Corp. TBA, 6.50% ...... 375,000 6/16/2029 372,889
Federal National Mortgage Association, 9.50% ..... 79,380 10/01/2003 82,380
Federal National Mortgage Association, 7.00% ..... 103,236 12/01/2007 105,065
Federal National Mortgage Association, 8.00% ..... 126,511 4/01/2008 131,306
Federal National Mortgage Association, 5.50% ..... 150,000 2/01/2014 145,500
Federal National Mortgage Association, 5.50% ..... 423,394 3/01/2014 410,693
Federal National Mortgage Association, 6.50% ..... 215,915 9/01/2028 214,497
Federal National Mortgage Association, 6.50% ..... 563,810 11/01/2028 560,106
Federal National Mortgage Association, 6.50% ..... 564,403 12/01/2028 560,695
Federal National Mortgage Association, 6.00% ..... 393,629 2/01/2029 381,450
Federal National Mortgage Association TBA, 6.50% . 200,000 6/16/2029 198,686
Government National Mortgage Association, 6.50% .. 73,292 2/15/2009 74,188
Government National Mortgage Association, 6.50% .. 158,077 5/15/2009 160,010
Government National Mortgage Association, 7.00% .. 104,823 1/15/2025 106,593
Government National Mortgage Association, 6.50% .. 679,463 11/15/2028 674,999
Government National Mortgage Association, 7.00% .. 93,693 11/15/2028 95,068
Government National Mortgage Association, 6.00% .. 374,347 3/15/2029 362,529
Government National Mortgage Association TBA,
6.50% .......................................... 875,000 5/24/2029 869,391
Government National Mortgage Association TBA,
7.00% .......................................... 1,225,000 6/23/2029 1,242,983
------------
6,749,028
------------
CANADIAN-YANKEE 1.5%
British Sky Broadcasting Group Inc. Note, 6.875% . 100,000 2/23/2009 99,359
Province of Quebec, Deb. 5.75% ................... 375,000 2/15/2009 362,070
Transcanada Pipelines Ltd. Note, 6.43% ........... 100,000 3/15/2004 101,210
Woodside Finance Ltd. Note, 6.60%+ ............... 100,000 4/15/2008 95,181
------------
657,820
------------
FOREIGN GOVERNMENT 4.0%
Greek Drachma
Republic of Greece, 8.80% ........................ 210,000,000 6/19/2007 798,232
New Zealand Dollar
Government of New Zealand, 10.00% ................ 675,000 3/15/2002 427,564
Government of New Zealand, 8.00% ................. 875,000 11/15/2006 560,243
------------
1,786,039
------------
FINANCE/MORTGAGE 9.9%
AT&T Capital Corp. Note, 7.50% ................... $ 100,000 11/15/2000 102,399
AT&T Capital Corp. Note, 6.75% ................... 100,000 2/04/2002 101,886
Arcadia Automobile Trust 97-C A5, 6.55% .......... 100,000 6/15/2005 101,218
Capital One Bank Note, 6.15% ..................... 150,000 6/01/2001 150,390
Capital One Bank Note, 7.08% ..................... 150,000 10/30/2001 153,342
Capital One Bank Note, 6.62% ..................... 200,000 8/04/2003 202,034
Chase Commercial Mortgage Securities Corp. Note
98-2A1, 6.025% ................................. 97,271 8/18/2007 96,694
Discover Card Master Trust 98 Cl. A, 5.60% ....... 200,000 5/16/2006 197,438
DLJ Commercial Mortgage Corp. 98-2, 6.24% ........ 150,000 11/12/2031 148,031
ERAC USA Finance Co. Note, 6.75%+ ................ 250,000 5/15/2007 244,707
Finova Capital Corp. Sr. Note, 6.125% ............ 200,000 3/15/2004 198,800
First Union Commercial Mortgage Trust 99-C1 Cl.
A2, 6.07% ...................................... 135,000 10/15/2008 131,625
Ford Motor Credit Co. Note, 5.75% ................ 200,000 2/23/2004 197,318
Ford Motor Credit Co. Note, 5.80% ................ 175,000 1/12/2009 166,957
GE Global Insurance Holding Corp. Note, 7.00% .... 200,000 2/15/2026 204,152
GMAC Commercial Mortgage Security Inc. 97-C2 Cl.
A, 6.45% ....................................... 93,743 12/15/2004 94,564
GMAC Commercial Mortgage Security Inc. 99-C1 Cl.
A2, 6.175% ..................................... 200,000 5/15/2033 204,110
GS Mortgage Securities Corp. Note Series 97-1,
6.86% .......................................... 200,000 7/13/2030 205,630
Household Finance Co. Sr. Note, 6.75% ............ 100,000 6/01/2000 101,181
LB Commercial Conduit Mortgage Trust 97-LL1-A1,
6.79% .......................................... 193,147 6/12/2004 197,070
LB Commercial Conduit Mortgage Trust 98-C4 Cl. A1,
6.21% .......................................... 50,000 10/15/2008 49,078
LB Commercial Conduit Mortgage Trust 98-C1-A1,
6.33% .......................................... 89,614 11/18/2004 90,118
MBNA Corp. Sr. Note, 6.875% ...................... 100,000 11/15/2002 101,295
MBNA Corp. Sr. Note, 6.15% ....................... 250,000 10/01/2003 248,210
MBNA Master Credit Card Trust Series 98-JA, 5.25% 100,000 2/15/2006 97,843
MBNA Master Credit Card Trust Series 99-BA, 5.90% 100,000 8/15/2011 97,594
Morgan Stanley Capital Inc. 98-A1, 6.22% ......... 95,440 5/03/2005 95,708
Morgan Stanley Capital Inc. 98-A1, 6.19% ......... 86,591 1/15/2007 86,618
Prime Credit Card Master Trust Series 1995-1A,
6.75% .......................................... 125,000 11/15/2005 127,929
Prime Credit Card Master Trust Series 1996-1A,
6.70% .......................................... 100,000 7/15/2004 101,843
Sears Credit Account Master Trust Series 1998-2A,
5.25% .......................................... 200,000 10/16/2008 194,436
------------
4,490,218
------------
CORPORATE 10.1%
Allied Waste North America Inc. Sr. Note, 7.875% . 50,000 1/01/2009 48,875
Archibald Candy Corp. Sr. Sec. Note, 10.25% ...... 125,000 7/01/2004 128,125
Atlantic Richfield Co. Note, 5.90% ............... 150,000 4/15/2009 147,983
California Infrastructure & Economic Note 97-1 Cl.
A5, 6.28% ...................................... 175,000 9/25/2005 177,460
California Infrastructure & Economic Note 97-1 Cl.
A6, 6.32% ...................................... 75,000 9/25/2005 76,620
California Infrastructure Development Series 1997-
A7, 6.42% ...................................... 100,000 9/25/2008 102,738
Charter Communications Holdings Inc. Sr. Note,
8.625%+ ........................................ 30,000 4/01/2009 30,900
Chevron Corp. Profit Sharing Note, 8.11% ......... 82,667 12/01/2004 88,030
CMS Panhandle Holding Co. Note, 6.50%+ ........... 125,000 7/15/2009 124,250
Coca-Cola Enterprises Inc. Deb., 6.75% ........... 150,000 9/15/2028 146,625
Columbia/HCA Healthcare Corp. Note, 6.91% ........ 150,000 6/15/2005 136,864
Columbia/HCA Healthcare Corp. Note, 7.69% ........ 100,000 6/15/2025 82,269
Columbia/HCA Healthcare Corp. Note, 7.75% ........ 100,000 7/15/2036 83,941
Edison Mission Energy Funding Corp. Series A Note,
6.77%+ ......................................... 159,443 9/15/2003 161,437
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 175,000
First Wave Marine Inc. Sr. Note, 11.00% .......... 150,000 2/01/2008 142,500
Fisher Scientific International Inc. Sr. Sub.
Note, 9.00% .................................... 50,000 2/01/2008 50,000
Fort James Corp. Note, 6.23% ..................... 75,000 3/15/2001 74,783
GTE Corp. Deb., 6.94% ............................ 100,000 4/15/2028 100,132
Harrahs Operating Inc. Sr. Sub. Note, 7.875% ..... 100,000 12/15/2005 101,000
Healthsouth Corp. Sr. Note, 6.875% ............... 100,000 6/15/2005 95,683
Hyperion Telecommunications Sr. Sub. Note, 12.00%+ 40,000 11/01/2007 42,200
J.B. Poindexter Inc. Sr. Note, 12.50% ............ 50,000 5/15/2004 48,250
Lucent Technologies Inc. Deb., 6.45% ............. 175,000 3/15/2029 168,490
Mohegan Tribal Gaming Authority Inc. Sr. Sub.
Note, 8.75%+ ................................... 50,000 1/01/2009 51,500
New York State Power Authority, Revenue Bonds,
Series D, 6.17% ................................ 150,000 2/15/2001 151,514
News America Holdings Inc. Deb., 7.375% .......... 200,000 10/17/2008 211,030
News America Inc. Sr. Deb., 7.125% ............... 100,000 4/08/2028 97,515
Norcal Waste Systems Inc. Series B Sr. Note,
13.50% ......................................... 200,000 11/15/2005 225,500
Ocean Energy Inc. Series B Sr. Note, 7.625% ...... 50,000 7/01/2005 47,875
Peco Energy Transport Trust Series 99-A Cl. A7,
6.13% .......................................... 200,000 3/01/2009 199,284
Pepsi Bottling Holdings Inc. Note, 5.625%+ ....... 200,000 2/17/2009 190,738
RSL Communications Ltd. Sr. Note, 12.25% ......... 100,000 11/15/2006 111,000
Spanish Broadcasting Systems Inc. Sr. Note, 12.50% 100,000 6/15/2002 113,000
Union Pacific Resources Group Inc. Note, 7.30% ... 100,000 4/15/2009 99,087
United States West Capital Funding Inc. Deb.,
6.875% ......................................... 100,000 7/15/2028 98,720
Viatel Inc. Sr. Note, 11.25% ..................... 50,000 4/15/2008 52,000
Westpoint Stevens Inc. Sr. Note, 7.875% .......... 200,000 6/15/2008 204,500
Wisconsin Central Transportation Corp. Note,
6.625% ......................................... 100,000 4/15/2008 98,879
Xerox Corp. Note, 5.50% .......................... 100,000 11/15/2003 98,672
------------
4,584,969
------------
Total Fixed Income Securities (Cost $21,743,691) ......................................... 21,635,290
------------
COMMERCIAL PAPER 8.1%
American Express Credit Corp., 4.65% ............. 880,000 5/03/1999 880,000
Ford Motor Credit Co., 4.83% ..................... 1,000,000 5/07/1999 1,000,000
Ford Motor Credit Co., 4.86% ..................... 124,000 5/07/1999 124,000
General Electric Capital Corp., 4.75% ............ 937,000 5/03/1999 937,000
Household Finance Corp., 4.78% ................... 735,000 5/17/1999 735,000
------------
Total Commercial Paper (Cost $3,676,000) ................................................. 3,676,000
------------
- -----------------------------------------------------------------------------------------------------------------
SHARES
- -----------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS 14.8%
State Street Navigator Securities
Lending Prime Portfolio .................................................. 6,684,250 6,684,250
------------
Total Short-Term Investments (Cost $6,684,450) ........................................... 6,684,250
------------
Total Investments (Cost $49,763,653) - 120.8% ............................................ 54,659,309
Cash and Other Assets, Less Liabilities - (20.8%) ........................................ (9,406,407)
------------
Net Assets - 100.0% ...................................................................... $ 45,252,902
============
Federal Income Tax Information:
At April 30, 1999, the net unrealized appreciation of investments based on cost for
Federal income tax purposes of $49,834,761 was as follows:
Aggregate gross unrealized appreciation for all investments in which there is an excess of
value over tax cost .................................................................... $ 6,127,242
Aggregate gross unrealized depreciation for all investments in which there is an excess of
tax cost over value .................................................................... (1,302,695)
------------
$ 4,824,547
============
- -------------------------------------------------------------------------------------------------------------------
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.
( ) Payments of income may be made in cash or in the form of 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, 1999 were $956,975 and $941,419 (2.08% of net assets), respectively.
Futures contracts open at April 30, 1999, are as follows:
EXPIRATION UNREALIZED
TYPE NOTIONAL AMOUNT MONTH APPRECIATION
- ----------------------------------------------------------------------------
30 year U.S. Treasury Bonds $200,000 June, 1999 $ 2,423
Forward currency exchange contracts outstanding at April 30, 1999, are as follows:
<CAPTION>
UNREALIZED
CONTRACT APPRECIATION DELIVERY
TOTAL VALUE PRICE (DEPRECIATION) DATE
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sell Euro currency, Buy U.S. dollars 163,428 EUR 1.04514 EUR $(1,919) 5/07/99
Sell Euro currency, Buy U.S. dollars 343,000 EUR 1.14030 EUR 28,108 5/28/99
Sell Euro currency, Buy U.S. dollars 196,000 EUR 1.07320 EUR 2,161 7/22/99
Buy Greek drachma, Sell U.S. dollars 53,253,000 GRD .00327 GRD (1,523) 5/07/99
Buy Greek drachma, Sell U.S. dollars 53,253,000 GRD .00320 GRD 2,312 5/07/99
Sell Japanese yen, Buy U.S. dollars 39,602,500 JPY .00884 JPY 7,134 12/30/99
Sell Japanese yen, Buy U.S. dollars 28,257,500 JPY .00885 JPY 5,355 12/30/99
Sell New Zealand dollars, Buy U.S. dollars 827,000 NZD .55490 NZD (4,428) 5/28/99
Sell New Zealand dollars, Buy U.S. dollars 450,000 NZD .55050 NZD (4,560) 7/22/99
Sell New Zealand dollars, Buy U.S. dollars 430,000 NZD .55058 NZD (4,325) 7/22/99
-------
$28,315
=======
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, 1999 (Unaudited)
ASSETS
Investments, at value (Cost $49,763,653) (Note 1) ............. $54,659,309
Cash .......................................................... 668
Receivable for securities sold ................................ 1,956,299
Interest and dividends receivable ............................. 314,751
Receivable for open forward contracts ......................... 45,070
Receivable from Distributor (Note 3) .......................... 32,929
Receivable for variation margin ............................... 4,063
Receivable for fund shares sold ............................... 3,474
Other assets .................................................. 25,523
-----------
57,042,086
LIABILITIES
Payable for collateral received on securities loaned .......... 6,684,250
Payable for securities purchased .............................. 4,699,063
Payable for fund shares redeemed .............................. 124,204
Accrued transfer agent and shareholder services
(Note 2) .................................................... 92,580
Accrued management fee (Note 2) ............................... 24,165
Payable for open forward contracts ............................ 16,755
Accrued trustees' fees (Note 2) ............................... 7,575
Other accrued expenses ........................................ 140,592
-----------
11,789,184
-----------
NET ASSETS $45,252,902
===========
Net Assets consist of:
Undistributed net investment income ......................... $ 512,442
Unrealized appreciation of investments ...................... 4,895,656
Unrealized appreciation of forward contracts and
foreign currency .......................................... 25,840
Unrealized appreciation of futures contracts ................ 2,423
Accumulated net realized gain ............................... 30,174
Paid-in capital ............................................. 39,786,367
-----------
$45,252,902
===========
Net Asset Value, offering price and redemption
price per share of Class S shares
($45,252,902 / 4,207,148 shares) ............................ $10.76
======
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, 1999 (Unaudited)
INVESTMENT INCOME
Interest, net of foreign taxes of $1,888 (Note 1) .............. $ 793,549
Dividends, net of foreign taxes of $2,632 ...................... 102,878
-----------
896,427
EXPENSES
Management fee (Note 2) ........................................ 144,733
Transfer agent and shareholder services (Note 2) ............... 92,580
Custodian fee .................................................. 75,027
Registration fees .............................................. 17,533
Audit fee ...................................................... 12,615
Trustees' fees (Note 2) ........................................ 7,575
Reports to shareholders ........................................ 6,684
Miscellaneous .................................................. 4,027
-----------
360,774
Expenses borne by the Distributor (Note 3) ..................... (143,333)
-----------
217,441
-----------
Net investment income .......................................... 678,986
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
FORWARD CONTRACTS, FOREIGN CURRENCY AND
FUTURES CONTRACTS
Net realized gain on investments (Notes 1 and 4) ............... 256,576
Net realized loss on forward contracts and foreign
currency (Note 1) ............................................ (145,905)
Net realized gain on futures contracts (Note 1) ................ 8,535
-----------
Total net realized gain ...................................... 119,206
-----------
Net unrealized appreciation of investments ..................... 3,220,371
Net unrealized appreciation of forward contracts and
foreign currency ............................................. 208,434
Net unrealized depreciation of futures contracts ............... (264)
-----------
Total net unrealized appreciation ............................ 3,428,541
-----------
Net gain on investments, forward contracts, foreign currency
and futures contracts ........................................ 3,547,747
-----------
Net increase in net assets resulting from operations ........... $ 4,226,733
===========
The accompanying notes are an integral part of the financial statements
<PAGE>
<TABLE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: MODERATE
- -------------------------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS ENDED
YEAR END APRIL 30, 1999
OCTOBER 31, 1998 (UNAUDITED)
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income ...................................... $ 1,583,035 $ 678,986
Net realized gain on investments, forward contracts, foreign
currency and futures contracts ........................... 4,860,621 119,206
Net unrealized appreciation (depreciation) of investments,
forward contracts, foreign currency and futures contracts (3,034,202) 3,428,541
------------ -----------
Net increase resulting from operations ..................... 3,409,454 4,226,733
------------ -----------
Dividends from net investment income -- Class S ............ (1,562,753) (830,240)
------------ -----------
Distributions from net realized gains -- Class S ........... (5,543,465) (4,706,431)
------------ -----------
Class S share transactions (Note 6):
Proceeds from sale of shares ............................. 7,459,681 2,027,670
Net asset value of shares issued in payment of:
Dividends from net investment income ................... 790,394 462,169
Distributions from net realized gains .................. 5,543,456 4,706,404
Cost of shares repurchased ............................... (19,024,501) (5,203,302)
------------ -----------
Net increase (decrease) from fund share transactions ....... (5,230,970) 1,992,941
------------ -----------
Total increase (decrease) in net assets .................... (8,927,734) 683,003
NET ASSETS
Beginning of period ........................................ 53,497,633 44,569,899
------------ -----------
End of period (including undistributed net investment income
of $663,696 and $512,442, respectively) .................. $ 44,569,899 $45,252,902
============ ===========
Number of Class S shares:
Sold ..................................................... 649,043 188,402
Issued upon reinvestment of:
Dividends from net investment income ................... 72,139 45,099
Distributions from net realized gains .................. 520,024 462,319
Repurchased .............................................. (1,681,422) (477,399)
------------ -----------
Net increase (decrease) in fund shares ................... (440,216) 218,421
============ ===========
The accompanying notes are an integral part of the financial statements
</TABLE>
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: MODERATE
- --------------------------------------------------------------------------------
NOTES TO UNAUDITED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
April 30, 1999
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 Trust consists presently of five separate funds: State
Street Research Strategic Portfolios: Moderate, State Street Research
Government Income Fund, State Street Research Strategic Portfolios:
Conservative, State Street Research Strategic Portfolios: Aggressive and State
Street Research IntelliQuant Portfolios: Small-Cap Value.
The investment objective of the Fund is to provide both current income and
capital appreciation, consistent with the preservation of capital and
reasonable investment risk.
The Fund is authorized to issue four classes of shares. Only Class 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
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. 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 exchange 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. 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, 1999, the value of the securities loaned and the value of
collateral were $6,462,258 and $6,684,250, respectively. During the six months
ended April 30, 1999, income from securities lending amounted to $16,246 and
is included in interest income.
I. FUTURES CONTRACTS
The Fund may enter into futures contracts as a hedge against unfavorable
market conditions and to enhance income. The Fund will limit its risks by
entering into a futures position only if it appears to be a liquid investment.
Upon entering into a futures contract, the Fund deposits with the selling
broker sufficient cash or U.S. Government securities to meet the minimum
"initial margin" requirements. Thereafter, the Fund receives from or pays to
the broker cash or U.S. Government securities equal to the daily fluctuation
in value of the contract ("variation margin"), which is recorded as unrealized
gain or loss. When the contract is closed, the Fund records a realized gain or
loss equal to the difference between the value of the contract at the time it
was opened and the value at the time it was closed.
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, 1999, the fees
pursuant to such agreement amounted to $144,733.
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, 1999, the amount of such expenses was $30,151.
The fees of the Trustees not currently affiliated with the Adviser amounted to
$7,575 during the six months ended April 30, 1999.
NOTE 3
The Distributor and its affiliates may from time to time and in varying
amounts voluntarily assume some portion of fees or expenses relating to the
Fund. During the six months ended April 30, 1999, the amount of such expenses
assumed by the Distributor and its affiliates was $143,333.
NOTE 4
For the six months ended April 30, 1999, purchases and sales of securities,
exclusive of short-term obligations, aggregated $38,598,443 and $40,133,627
(including $24,205,803 and $25,031,447 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, $.001 par value per share.
At April 30, 1999, Metropolitan owned 1,908,637 Class S shares of the Fund.
<TABLE>
- --------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------------------------------------
For a Class S share outstanding throughout each period:
<CAPTION>
YEARS ENDED OCTOBER 31 SIX MONTHS ENDED
----------------------------------------------------- APRIL 30, 1999
1994 1995(a) 1996(a) 1997(a) 1998(a) (UNAUDITED)(a)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD ($) 9.57 9.18 10.26 11.28 12.08 11.17
----- ----- ----- ----- ----- -----
Net investment income ($)* 0.28 0.36 0.35 0.35 0.36 0.16
Net realized and unrealized
gain (loss) on investments,
forward contracts, foreign
currency and futures
contracts ($) (0.45) 1.01 1.07 1.53 0.34 0.86
----- ----- ----- ----- ----- -----
TOTAL FROM INVESTMENT OPERATIONS ($) (0.17) 1.37 1.42 1.88 0.70 1.02
----- ----- ----- ----- ----- -----
Dividends from net investment
income ($) (0.22) (0.29) (0.40) (0.39) (0.36) (0.21)
Distributions from net
realized gains ($) -- -- -- (0.69) (1.25) (1.22)
----- ----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS ($) (0.22) (0.29) (0.40) (1.08) (1.61) (1.43)
----- ----- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD ($) 9.18 10.26 11.28 12.08 11.17 10.76
===== ===== ===== ===== ===== =====
Total return(b) (%) (1.81) 15.24 14.08 17.83 6.53 9.93(c)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period
($ thousands) 28,494 39,821 44,989 53,498 44,570 45,253
Ratio of operating expenses to
average net assets (%)* 1.00 1.00 1.00 1.00 1.00 1.00(d)
Ratio of net investment income
to average net assets (%)* 3.05 3.68 3.23 3.03 3.17 3.05(d)
Portfolio turnover rate (%) 142.86 120.62 127.59 136.17 150.05 88.60
*Reflects voluntary reduction of
expenses per share of these
amounts (Note 3) ($) 0.05 0.07 0.05 0.07 0.08 0.03
- -------------------------------------------------------------------------------------------------------------
(a) Per-share figures have been calculated using the average shares method.
(b) Does not reflect front-end or contingent deferred sales charges. Total return would be lower if the
Distributor and its affiliates had not voluntarily reduced a portion of the Fund's expenses.
(c) Not annualized.
(d) Annualized.
</TABLE>
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: MODERATE
- --------------------------------------------------------------------------------
REPORT ON SPECIAL MEETING OF SHAREHOLDERS
- --------------------------------------------------------------------------------
A Special Meeting of Shareholders of State Street Research Strategic
Portfolios: Moderate ("Fund"), along with shareholders of other series of
State Street Research Financial Trust ("Trust"), was convened on April 6, 1999
("Meeting"), and continued thereafter. The results of the Meeting are set
forth below.
VOTES (MILLIONS OF SHARES)
(COMBINED FOR ALL SERIES OF THE TRUST)
-------------------------------------
ACTION ON PROPOSAL FOR WITHHELD
- --------------------------------------------------------------------------------
The following persons were elected as Trustees:
Bruce R. Bond ................................. 40.9 0.7
Steve A. Garban ............................... 40.9 0.7
Malcolm T. Hopkins ............................ 40.9 0.7
Susan M. Phillips ............................. 40.9 0.7
<PAGE>
<TABLE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: MODERATE
- -----------------------------------------------------------------------------------------------------------------
FUND INFORMATION, OFFICERS AND TRUSTEES OF STATE STREET RESEARCH FINANCIAL TRUST
- -----------------------------------------------------------------------------------------------------------------
<CAPTION>
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 BRUCE R. BOND
One Financial Center JOHN H. KALLIS Chairman of the Board
Boston, MA 02111 Vice President Chief Executive Officer and
President,
DISTRIBUTOR THOMAS P. MOORE, JR. PictureTel Corporation
State Street Research Vice President
Investment Services, Inc. STEVE A. GARBAN
One Financial Center E.K. EASTON RAGSDALE, JR. Former Senior Vice President
Boston, MA 02111 Vice President for Finance and Operations and
Treasurer, The Pennsylvania
SHAREHOLDER SERVICES THOMAS A. SHIVELY State University
State Street Research Vice President
Service Center MALCOLM T. HOPKINS
P.O. Box 8408 JAMES M. WEISS Former Vice Chairman of the
Boston, MA 02266-8408 Vice President Board and Chief Financial
1-800-562-0032 Officer, St. Regis Corp.
GERARD P. MAUS
CUSTODIAN Treasurer DEAN O. MORTON
State Street Bank and Former Executive Vice President,
Trust Company JOSEPH W. CANAVAN Chief Operating Officer and
225 Franklin Street Assistant Treasurer Director, Hewlett-Packard
Boston, MA 02110 Company
DOUGLAS A. ROMICH
LEGAL COUNSEL Assistant Treasurer SUSAN M. PHILLIPS
Goodwin, Procter & Hoar LLP Dean, School of Business and
Exchange Place FRANCIS J. MCNAMARA, III Public Management, George
Boston, MA 02109 Secretary and General Counsel Washington University; former
Member of the Board of Governors
DARMAN A. WING of the Federal Reserve System and
Assistant Secretary and Chairman and Commissioner of
Assistant General Counsel the Commodity Futures Trading
Commission
AMY L. SIMMONS
Assistant Secretary 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 -------------------
Boston, MA 02111 Bulk Rate
U.S. Postage
PAID
Permit #6
Hartford, CT
-------------------
QUESTIONS? COMMENTS?
Call us at 1-800-562-0032
[hearing-impaired 1-800-676-7876]
[Chinese and Spanish-speaking 1-888-638-3193]
WRITE us at:
State Street Research
Service Center
P.O. Box 8408
Boston, MA 02266-8408
E-MAIL us at:
[email protected]
INTERNET site:
www.ssrfunds.com
[logo] STATE STREET RESEARCH
This report is prepared for the general information of current shareholders.
This report must be accompanied or preceded by a current State Street
Research Strategic Portfolios: Moderate prospectus. When used after June 30,
1999, this report must be accompanied by a current Quarterly Performance Update.
Portfolio changes should not be considered recommendations for action by
individual investors.
The Dalbar awards recognize quality shareholder service and should not be
considered a rating of fund performance. The survey included mutual fund
complexes that volunteered or were otherwise selected to participate and was not
industry-wide.
SP-766F-0699
CONTROL NUMBER: (exp 1200)SSR-LD
<PAGE>
- -------------------------------------------------------------------------------
STATE STREET RESEARCH
- -------------------------------------------------------------------------------
STRATEGIC PORTFOLIOS: AGGRESSIVE
--------------------------------
SEMIANNUAL REPORT
April 30, 1999
--------------------
WHAT'S INSIDE
--------------------
INVESTMENT UPDATE
About the Fund,
economy and markets
FUND INFORMATION
Facts and figures
PLUS, COMPLETE PORTFOLIO HOLDINGS
AND FINANCIAL STATEMENTS
STATE STREET RESEARCH
- ---------------------- ---------------------
DALBAR
HONORS COMMITMENT TO: 75 YEARS
INVESTORS
1998 ---------------------
- ---------------------- LASTING VALUES
---------------------
For Excellence LEADING IDEAS
in
Shareholder Service
STATE STREET RESEARCH FUNDS
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: AGGRESSIVE
- --------------------------------------------------------------------------------
INVESTMENT UPDATE
- --------------------------------------------------------------------------------
INVESTMENT ENVIRONMENT
THE ECONOMY
o Americans continued to reap the benefits of a healthy economy. Inflation
remained low, unemployment hovered at about 4%, and wages rose.
o Favorable economic factors stimulated retail sales through the holiday
season and into the first quarter of 1999. Lower energy costs and declining
mortgage rates translated into additional income for many consumers.
However, energy costs rebounded in 1999, erasing some of the gains.
o The nation's savings rate fell below zero in the last quarter of 1998.
Debate flared over the significance of that figure, however, because the
Bureau of Economic Analysis has recently changed the way it computes savings
rates.
THE MARKETS
o The S&P 500, a broad measure of common stock performance, gained 22.31% for
the six-month period(1). Gains were concentrated in a narrow band of large,
high-quality growth and technology stocks. Small and medium-sized company
stocks lagged the market.
o The U.S. bond market benefited from three quick interest rate cuts late in
1998. However, the yield on the long-term Treasury benchmark climbed from
5.0% back up to 5.7% by the end of the period, reflecting fears that strong
economic growth could ignite inflation. High-yield bonds were weak during
the first half of the period, as investors sought the quality of the U.S.
Treasury market, but those same "junk" bonds picked up again in 1999 as
investors regained confidence.
THE FUND
OVER THE PAST SIX MONTHS
o For the six months ended April 30, 1999, Strategic Portfolios: Aggressive
Class S shares returned 14.81%. That was higher than the Lipper flexible
portfolio funds average total return of 12.79% over the same period.
o The Fund's investments in stocks, 71% of total net assets at the end of the
period, accounted for its strong performance. o Large-cap growth was the
best performing sector over the entire six months.
CURRENT STRATEGY
o No significant changes are being made to the portfolio. The Fund is designed
to offer broad diversification among different asset classes and investment
styles. Volatility in world financial markets and the high valuation of the
U.S. stock market have caused us to reduce our normal level of holdings of
stocks in favor of bonds.
o Valuations are high for large-cap growth stocks. The balance of the market
is more reasonably priced, and we believe this offers opportunity for this
type of broadly-diversified portfolio.
o Small-cap growth and mid-cap value have begun to perform better in recent
weeks, enhancing the Fund's total return.
April 30, 1999
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 S&P 500 (officially the "Standard and Poor's 500 Composite Stock Price
Index") is an unmanaged index of 500 U.S. stocks. The index does not take
transaction charges into consideration. It is not possible to invest
directly in the index.
(2) Keep in mind that past performance is no guarantee of future results. The
Fund's share price, yield and return will fluctuate, and you may have a gain
or loss when you sell your shares. All returns assume reinvestment of
capital gain distributions and income dividends at net asset value.
(3) Class S shares, offered without a sales charge, are available through
certain employee benefit plans and special programs.
- -------------------------------------------------------------------------------
FUND INFORMATION (all data are for periods ended April 30, 1999, except where
noted)
- -------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
FOR PERIODS ENDED 3/31/99(2)(3)
- ---------------------------------------------------------------------------
LIFE OF FUND
(since 5/16/94) 1 YEAR
- ---------------------------------------------------------------------------
Class S 14.71% 1.16%
- ---------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN(2)(3)
- ---------------------------------------------------------------------------
LIFE OF FUND
(since 5/16/94) 1 YEAR
- ---------------------------------------------------------------------------
Class S 15.37% 4.37%
- ---------------------------------------------------------------------------
ASSET ALLOCATION
(by percentage of net assets)
Stocks 71%
Bonds 26%
Cash 3%
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: AGGRESSIVE
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
- --------------------------------------------------------------------------------
April 30, 1999 (Unaudited)
VALUE
SHARES (NOTE 1)
- -------------------------------------------------------------------------------
EQUITY SECURITIES 70.8%
AUTOMOBILES & TRANSPORTATION 0.4%
AIR TRANSPORT 0.3%
Mesa Air Group, Inc.* ....................... 6,000 $ 40,500
UAL Corp.* .................................. 1,100 88,825
US Airways Group Inc.* ...................... 1,200 65,325
------------
194,650
------------
AUTOMOTIVE PARTS 0.1%
Gentex Corp.* ............................... 1,400 42,088
------------
Total Automobiles & Transportation .......... 236,738
------------
CONSUMER DISCRETIONARY 14.8%
ADVERTISING AGENCIES 2.0%
Lamar Advertising Co. Cl. A* ................ 2,700 90,788
TMP Worldwide Inc.* ......................... 300 20,175
Valassis Communications Inc.* ............... 16,900 946,400
Young & Rubicam Inc.* ....................... 4,600 183,137
------------
1,240,500
------------
CASINOS/GAMBLING, HOTEL/MOTEL 1.5%
GTECH Holdings Corp.* ....................... 5,200 135,525
Harrah's Entertainment Inc.* ................ 19,500 429,000
Mirage Resorts Inc.* ........................ 14,900 334,319
Motels of America Inc.*+ .................... 175 1,181
------------
900,025
------------
COMMERCIAL SERVICES 4.8%
A.C. Nielson Corp.* ......................... 25,800 719,175
Abacus Direct Corp.* ........................ 1,400 103,600
Allied Waste Industries Inc.* ............... 4,600 81,362
America Online Inc.* ........................ 4,900 699,475
Casella Waste Systems Inc. Cl. A* ........... 3,900 97,500
Cheap Tickets Inc.* ......................... 1,000 38,500
Copart Inc.* ................................ 5,000 90,625
Corporate Executive Board Co.* .............. 800 22,500
Critical Path Inc.* ......................... 200 19,900
GeoCities* .................................. 400 46,600
Maximus Inc.* ............................... 3,900 101,400
Miningco.com Inc.* .......................... 400 26,200
ProBusiness Services Inc.* .................. 2,400 86,100
Steiner Leisure Ltd.* ....................... 5,650 179,387
USWeb Corp.* ................................ 1,800 40,388
VerticalNet Inc.* ........................... 200 22,700
Waste Connections Inc.* ..................... 3,000 79,125
Waste Management Inc.* ...................... 5,800 327,700
Worldgate Communications Inc.* .............. 800 22,800
Ziff-Davis Inc.* ............................ 2,900 102,225
------------
2,907,262
------------
COMMUNICATIONS, MEDIA & ENTERTAINMENT 1.4%
CBS Corp.* .................................. 4,700 214,144
Chancellor Media Corp.* ..................... 3,000 164,625
Cinar Films Inc. Cl. B* ..................... 5,700 118,987
Time Warner Inc.* ........................... 4,100 287,000
Valley Media Inc.* .......................... 2,300 57,788
------------
842,544
------------
CONSUMER ELECTRONICS 0.3%
Abovenet Communications Inc.* ............... 900 77,063
InfoSpace Common Inc.* ...................... 100 14,331
iVillage Inc.* .............................. 100 7,900
Multex Systems Inc.* ........................ 100 4,300
TheGlobe.com, Inc.* ......................... 800 48,100
Xoom.com, Inc.* ............................. 300 21,000
------------
172,694
------------
CONSUMER SERVICES 0.3%
Bright Horizons Family Solutions Corp.* ..... 2,800 60,200
DeVry Inc.* ................................. 4,200 110,775
ITT Educational Services Inc.* .............. 700 17,194
------------
188,169
------------
HOUSEHOLD FURNISHINGS 0.3%
Black & Decker Corp.* ....................... 3,500 198,625
------------
PRINTING & PUBLISHING 1.0%
Hollinger International, Inc. Cl. A* ........ 42,900 603,281
------------
RESTAURANTS 0.5%
McDonald's Corp.* ........................... 6,600 279,675
------------
RETAIL 2.6%
Aviation Sales Co.* ......................... 1,600 64,000
CSK Auto Corp.* ............................. 3,600 90,000
Federated Department Stores Inc.* ........... 4,200 196,087
Global Imaging Systems, Inc.* ............... 5,000 71,875
Guitar Center Inc.* ......................... 2,700 42,188
Home Depot Inc.* ............................ 3,700 221,769
Jones Apparel Group Inc.* ................... 3,600 118,800
Linens 'n Things Inc.* ...................... 1,500 68,625
Men's Wearhouse, Inc.* ...................... 1,700 46,537
Saks Inc.* .................................. 3,700 104,756
Staples Inc.* ............................... 8,100 243,000
Ticketmaster Online City Search, Inc. Cl. B* 400 12,650
Venator Group Inc.* ......................... 5,200 50,375
Wal-Mart Stores, Inc.* ...................... 6,200 285,200
------------
1,615,862
------------
SHOES 0.1%
Stride Rite Corp.* .......................... 5,800 67,788
------------
Total Consumer Discretionary ................ 9,016,425
------------
CONSUMER STAPLES 2.9%
BEVERAGES 0.6%
Anheuser-Busch Companies, Inc.* ............. 4,800 351,000
------------
DRUG & GROCERY STORE CHAINS 1.3%
Duane Reade Inc.* ........................... 3,000 80,437
Hannaford Brothers Co.* ..................... 8,600 375,175
Kroger Co.* ................................. 2,200 119,487
Rite Aid Corp.* ............................. 2,200 51,288
Safeway Inc.* ............................... 2,500 134,844
------------
761,231
------------
FOODS 0.1%
Keebler Foods Co.* .......................... 2,600 83,525
------------
HOUSEHOLD PRODUCTS 0.7%
Dial Corp.* ................................. 2,300 78,200
Procter & Gamble Co.* ....................... 3,900 365,869
------------
444,069
------------
TOBACCO 0.2%
RJR Nabisco Holdings Corp.* ................. 2,500 64,375
UST Inc.* ................................... 3,100 86,413
------------
150,788
------------
Total Consumer Staples ...................... 1,790,613
------------
FINANCIAL SERVICES 9.0%
BANKS & SAVINGS & LOAN 2.1%
Astoria Financial Corp.* .................... 1,400 70,175
Chase Manhattan Corp.* ...................... 2,300 190,325
City National Corp.* ........................ 1,200 46,350
Golden State Bancorp Inc.* .................. 2,900 71,231
Golden West Financial Corp.* ................ 1,300 130,162
Mercantile Bankshares Corp.* ................ 4,300 159,100
One Valley Bancorp Inc.* .................... 900 34,650
Peoples Heritage Financial Group* ........... 14,800 286,750
Saint Paul Bancorp, Inc.* ................... 1,800 43,650
Southtrust Corp.* ........................... 3,100 123,516
TCF Financial Corp.* ........................ 1,400 40,600
Telebanc Financial Corp.* ................... 1,100 113,988
------------
1,310,497
------------
FINANCIAL DATA PROCESSING SERVICES & SYSTEMS 0.5%
Bisys Group Inc.* ........................... 600 30,450
International Telecommunication Data Systems, Inc. 2,700 30,544
Nova Corp.* ................................. 6,400 166,400
Profit Recovery Group International Inc.* ... 1,900 69,350
------------
296,744
------------
INSURANCE 2.5%
Ace Ltd.* ................................... 15,800 477,950
American International Group Inc.* .......... 1,650 193,772
Mutual Risk Management Ltd.* ................ 1,832 71,219
Saint Paul Companies, Inc.* ................. 2,600 74,587
Terra Nova Holdings Ltd. Cl. A* ............. 2,500 56,094
UNUM Corp.* ................................. 6,000 327,750
XL Capital Ltd. Cl. A ....................... 5,650 342,884
------------
1,544,256
------------
MISCELLANEOUS FINANCIAL 2.5%
AMBAC Inc.* ................................. 9,300 561,487
Capital One Financial Corp.* ................ 1,800 312,637
Capital Re Corp.* ........................... 1,300 25,431
Citigroup, Inc.* ............................ 3,900 293,475
CMAC Investment Corp.* ...................... 1,400 64,225
Finet Holdings Corp.* ....................... 4,800 42,150
Heller Financial Inc. Cl. A* ................ 3,100 84,088
Metris Companies Inc. ....................... 1,400 85,575
T & W Financial Corp.* ...................... 5,000 40,938
------------
1,510,006
------------
REAL ESTATE INVESTMENT TRUSTS 0.3%
First Industrial Realty Trust Inc.* ......... 2,100 56,437
Golf Trust of America Inc.* ................. 1,000 22,188
IndyMac Mortgage Holdings Inc.* ............. 3,500 57,750
Liberty Property Trust* ..................... 1,400 33,775
------------
170,150
------------
RENTAL & LEASING SERVICES: COMMERCIAL 0.2%
United Rentals Inc.* ........................ 3,900 116,269
------------
SECURITIES BROKERAGE & SERVICES 0.9%
Bear Stearns Company Inc.* .................. 3,465 161,555
Knight/Trimark Group, Inc. Cl. A* ........... 2,500 382,969
------------
544,524
------------
Total Financial Services .................... 5,492,446
------------
HEALTH CARE 4.8%
DRUGS & BIOTECHNOLOGY 3.4%
Abbott Laboratories* ........................ 4,600 222,812
Axogen Ltd.* ................................ 2,100 64,050
Baxter International Inc.* .................. 3,400 214,200
Biovail Corp.* .............................. 8,600 301,537
Elan Corp. Plc* ............................. 1,700 48,450
Intelligent Polymers Ltd.* .................. 10,600 328,600
Pfizer Inc.* ................................ 1,400 161,088
Pharmacia & Upjohn Inc.* .................... 5,100 285,600
Pharma Print Inc.* .......................... 3,600 34,875
Quintiles Transnational Corp.* .............. 2,098 85,100
Schering-Plough Corp.* ...................... 5,200 251,225
Spiros Development Corp.* ................... 7,000 70,438
------------
2,067,975
------------
HEALTH CARE FACILITIES 0.6%
Healthsouth Corp.* .......................... 4,727 63,519
Total Renal Care Holdings Inc.* ............. 21,033 291,833
------------
355,352
------------
HEALTH CARE SERVICES 0.8%
Covance Inc.* ............................... 2,500 54,844
Healtheon Corp.* ............................ 1,200 54,300
NCS HealthCare Inc. Cl. A* .................. 4,400 57,200
Quorum Health Group Inc.* ................... 17,000 210,375
Wesley Jessen VisionCare Inc.* .............. 3,800 116,375
------------
493,094
------------
Total Health Care ........................... 2,916,421
------------
INTEGRATED OILS 1.3%
INTEGRATED DOMESTIC 0.7%
KCS Energy Inc.* ............................ 5,100 7,012
Kerr-McGee Corp.* ........................... 4,981 211,070
Unocal Corp.* ............................... 4,900 203,656
------------
421,738
------------
INTEGRATED INTERNATIONAL 0.6%
Exxon Corp.* ................................ 2,700 224,269
Total SA Cl. B ADR* ......................... 2,100 142,800
------------
367,069
------------
Total Integrated Oils ....................... 788,807
------------
MATERIALS & PROCESSING 3.6%
CHEMICALS 1.5%
Agrium Inc.* ................................ 28,800 261,000
Cabot Corp.* ................................ 17,200 464,400
Cambrex Corp.* .............................. 2,000 51,250
Dow Chemical Co.* ........................... 1,100 144,306
------------
920,956
------------
CONTAINERS & PACKAGING 0.2%
Smurfit Stone Container Corp.* .............. 6,000 140,250
------------
DIVERSIFIED MANUFACTURING 1.3%
Ball Corp.* ................................. 14,200 780,113
------------
FOREST PRODUCTS 0.2%
Boise Cascade Corp.* ........................ 1,700 68,425
Champion International Corp.* ............... 1,500 82,031
------------
150,456
------------
PAPER & FOREST PRODUCTS 0.2%
Bowater Inc.* ............................... 2,400 128,700
------------
STEEL 0.2%
Harsco Corp.* ............................... 2,800 91,875
------------
Total Materials & Processing ................ 2,212,350
------------
NON-U.S. EQUITIES 10.6%
Banco Di Roma* .............................. 117,800 194,133
BHF Bank AG* ................................ 3,800 142,910
British Petroleum Co. PLC* .................. 16,100 305,621
Clearnet Communications Inc. Wts.* .......... 990 4,950
Continental AG* ............................. 8,700 215,981
Energy Africa Ltd.* ......................... 57,400 111,310
Gulfstream Resources Ltd.* .................. 11,500 30,365
IXOS Software AG* ........................... 500 101,943
L.M. Ericsson Telephone Co. Cl. B* .......... 8,200 215,278
National Bank of Canada* .................... 21,600 348,124
Nokia AB OY* ................................ 3,600 277,432
Pharmacia & Upjohn Inc. SDR* ................ 700 38,829
Post Energy Corp.* .......................... 10,700 41,095
Prosieben Media AG* ......................... 6,200 291,461
PTT Exploration & Production Public Co. Ltd.* 16,100 148,535
Q.P. Corp.* ................................. 39,400 305,183
Renaissance Energy Ltd.* .................... 10,000 151,224
Sema Group PLC* ............................. 21,000 203,034
Shaw Communications Inc. Cl. B* ............. 7,800 315,900
Snow Brand Milk Co.* ........................ 54,500 282,951
Societe Generale* ........................... 1,200 214,745
Softbank Corp.* ............................. 5,200 691,911
Takara Shuzo Co.* ........................... 66,000 463,138
Telecom Italia SPA* ......................... 40,500 430,837
Tieto Corp.* ................................ 7,400 294,714
Valeo SA* ................................... 1,600 135,219
Valeo SA Wts.* .............................. 1,600 5,409
WM Data AB Cl. B* ........................... 6,600 242,503
Wolters Kluwer NV* .......................... 6,800 295,961
------------
Total Non-U.S. Equities ..................... 6,500,696
------------
OTHER 3.1%
MULTI-SECTOR 3.1%
AlliedSignal Inc.* .......................... 4,600 270,250
Gencorp Inc.* ............................... 10,200 235,875
General Electric Co.* ....................... 3,800 400,900
Johnson Controls Inc.* ...................... 1,000 72,937
Ogden Corp.* ................................ 13,000 335,562
Raytheon Co. Cl. B .......................... 3,000 210,750
Teleflex Inc.* .............................. 1,400 60,988
Tyco International Ltd.* .................... 3,800 308,750
------------
Total Other ................................. 1,896,012
------------
OTHER ENERGY 3.0%
GAS PIPELINES 1.2%
Columbia Energy Group* ...................... 700 33,644
Williams Companies Inc.* .................... 15,347 725,145
------------
758,789
------------
OFFSHORE DRILLING 0.1%
Atwood Oceanics Inc.* ....................... 1,000 34,875
------------
OIL & GAS PRODUCERS 1.1%
Abacan Resource Corp.* ...................... 30,200 5,191
Maxx Petroleum Ltd.* ........................ 11,500 31,625
Ocean Energy Inc.* .......................... 26,324 245,142
Plains Resources Inc.* ...................... 2,000 34,125
Suncor Energy Inc* .......................... 2,600 103,868
Talisman Energy Inc.* ....................... 9,090 240,187
------------
660,138
------------
OIL WELL EQUIPMENT & SERVICES 0.6%
Calpine Corp.* .............................. 3,200 136,400
Halliburton Co.* ............................ 5,000 213,125
------------
349,525
------------
Total Other Energy .......................... 1,803,327
------------
PRODUCER DURABLES 2.6%
AEROSPACE 0.1%
Heico Corp. Cl. A* .......................... 3,400 71,613
------------
ELECTRICAL EQUIPMENT & COMPONENTS 0.8%
Mark IV Industries Inc. ..................... 26,500 473,687
------------
ELECTRONICS: INDUSTRIAL 0.1%
Mettler Toledo International Inc.* .......... 2,700 70,538
------------
MACHINERY 0.6%
Helix Technology Corp.* ..................... 1,800 31,781
Howmet International Inc.* .................. 22,200 355,200
------------
386,981
------------
OFFICE FURNITURE & BUSINESS EQUIPMENT 0.5%
Xerox Corp.* ................................ 5,200 305,500
------------
PRODUCTION TECHNOLOGY EQUIPMENT 0.2%
Cymer Inc.* ................................. 2,400 43,800
Dupont Photomasks Inc.* ..................... 700 30,625
Novellus Systems Inc.* ...................... 400 18,900
------------
93,325
------------
TELECOMMUNICATIONS EQUIPMENT 0.3%
Asia Pacific Wire & Cable Corp. Ltd.* ....... 29,700 87,244
L-3 Communications Holding Corp.* ........... 1,600 78,100
------------
165,344
------------
Total Producer Durables ..................... 1,566,988
------------
TECHNOLOGY 9.1%
COMMUNICATIONS TECHNOLOGY 2.1%
American Tower Corp. Cl. A* ................. 3,600 76,275
Covad Communications Group Inc.* ............ 400 38,400
Digital Microwave Corp.* .................... 8,320 106,080
Extreme Networks Inc.* ...................... 700 38,806
Go2Net, Inc.* ............................... 500 76,750
Lernout & Hauspie Speech Products NV ADR* ... 5,400 211,275
Lucent Technologies Inc.* ................... 4,200 252,525
Marimba Inc. ................................ 100 2,000
MMC Networks Inc.* .......................... 2,900 71,231
NCR Corp.* .................................. 3,400 139,400
Network Solutions Inc. Cl. A* ............... 800 62,200
Razorfish Inc. Cl. A* ....................... 100 4,350
Remec Inc.* ................................. 11,250 145,547
Rhythms Netconnections Inc.* ................ 300 24,750
Sportsline USA Inc.* ........................ 400 16,000
Usinternetworking Inc.* ..................... 300 15,338
------------
1,280,927
------------
COMPUTER SOFTWARE 1.7%
Acxiom Corp.* ............................... 1,200 30,300
Answerthink Consulting Group, Inc.* ......... 2,100 46,594
Appliedtheory Corp.* ........................ 200 4,100
Cadence Design Systems Inc.* ................ 3,500 47,469
Ceridian Corp.* ............................. 4,600 168,475
Check Point Software Technologies Ltd.* ..... 1,000 35,250
Earthweb Inc.* .............................. 500 26,562
Microsoft Corp.* ............................ 4,800 390,300
Mpath Interactive Inc.* ..................... 500 19,687
Novell Inc.* ................................ 2,800 62,300
Platinum Technology Inc.* ................... 5,000 127,500
RoweCom Inc.* ............................... 100 2,875
Transaction Systems Architects Inc. Cl. A* .. 1,300 42,169
Walker Interactive Systems, Inc.* ........... 7,600 24,225
------------
1,027,806
------------
COMPUTER TECHNOLOGY 3.9%
Cisco Systems Inc.* ......................... 4,575 521,836
Dell Computer Corp.* ........................ 5,400 222,412
EMC Corp.* .................................. 3,900 424,856
Fore Systems Inc.* .......................... 2,600 87,750
International Business Machines Corp.* ...... 1,300 271,944
Radiant Systems Inc.* ....................... 7,300 83,038
Seagate Technology, Inc.* ................... 2,100 58,538
Silicon Graphics Inc.* ...................... 25,700 327,675
Unisys Corp.* ............................... 2,700 84,881
Verio Inc.* ................................. 2,400 170,400
Wang Laboratories Inc.* ..................... 2,900 72,681
Zebra Technologies Corp. Cl. A* ............. 2,000 66,500
------------
2,392,511
------------
ELECTRONICS 0.5%
Aeroflex Inc.* .............................. 13,100 191,587
SLI Inc.* ................................... 4,546 124,731
------------
316,318
------------
ELECTRONICS: SEMI-CONDUCTORS/COMPONENTS 0.9%
Analog Devices Inc.* ........................ 5,600 196,700
Cypress Semiconductor Corp.* ................ 10,400 106,600
Integrated Circuit Systems Inc.* ............ 2,500 50,625
Intel Corp. ................................. 2,800 171,325
------------
525,250
------------
Total Technology ............................ 5,542,812
------------
UTILITIES 5.6%
CABLE TELEVISION & RADIO 0.4%
Cox Communications Inc. Cl. A* .............. 3,300 261,938
------------
ELECTRICAL 2.3%
Consolidated Edison Inc.* ................... 1,700 77,244
DQE, Inc.* .................................. 3,700 152,394
Illinova Corp.* ............................. 13,800 362,250
OGE Energy Corp.* ........................... 12,900 305,568
Pinnacle West Capital Corp.* ................ 12,100 469,631
------------
1,367,087
------------
GAS DISTRIBUTION 0.1%
Nicor Inc.* ................................. 900 32,738
Questar Corp.* .............................. 2,200 40,012
------------
72,750
------------
TELECOMMUNICATIONS 2.8%
Alltel Corp.* ............................... 4,400 296,725
Bellsouth Corp.* ............................ 2,700 120,825
MCI WorldCom Inc.* .......................... 7,300 599,969
MediaOne Group Inc.* ........................ 2,500 203,906
Qwest Communications International Inc.* .... 3,500 299,031
RCN Corp.* .................................. 2,400 116,700
RSL Communications Ltd. Cl. A* .............. 1,900 62,225
Viatel Inc. Pfd.*( ) ........................ 52 12,896
------------
1,712,277
------------
Total Utilities ............................. 3,414,052
------------
Total Equity Securities (Cost $33,669,078) .. 43,177,687
------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
PRINCIPAL MATURITY
AMOUNT DATE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FIXED INCOME SECURITIES 26.0%
U.S. TREASURY 3.1%
U.S. Treasury Bond, 8.125% ...................... $ 25,000 5/15/2021 31,699
U.S. Treasury Bond, 8.125% ...................... 10,000 8/15/2021 12,694
U.S. Treasury Bond, 6.875% ...................... 50,000 8/15/2025 56,422
U.S. Treasury Bond, 6.625% ...................... 325,000 2/15/2027 357,448
U.S. Treasury Bond, 6.125% ...................... 50,000 11/15/2027 51,758
U.S. Treasury Bond, 5.25% ....................... 100,000 11/15/2028 92,531
U.S. Treasury Bond, 5.25% ....................... 155,000 2/15/2029 145,506
U.S. Treasury Note, 6.625% ...................... 175,000 7/31/2001 180,551
U.S. Treasury Note, 6.25% ....................... 50,000 2/28/2002 51,391
U.S. Treasury Note, 6.375% ...................... 150,000 8/15/2002 155,226
U.S. Treasury Note, 5.875% ...................... 150,000 9/30/2002 153,093
U.S. Treasury Note, 7.875% ...................... 75,000 11/15/2004 84,046
U.S. Treasury STRIPS, 0.00% ..................... 350,000 5/15/2003 283,706
U.S. Treasury STRIPS, 0.00% ..................... 175,000 5/15/2007 112,690
U.S. Treasury STRIPS, 0.00% ..................... 25,000 5/15/2018 7,959
U.S. Treasury TIPS, 3.875% ...................... 100,061 4/15/2029 100,342
-----------
1,877,062
-----------
U.S. AGENCY MORTGAGE 5.4%
Federal Home Loan Mortgage Corp. TBA, 6.50% ..... 200,000 6/16/2029 198,874
Federal National Mortgage Association, 5.50% .... 149,433 3/01/2014 144,950
Federal National Mortgage Association, 6.50% .... 95,963 9/01/2028 95,332
Federal National Mortgage Association, 6.50% .... 251,260 11/01/2028 249,609
Federal National Mortgage Association, 6.50% .... 282,202 12/01/2028 280,348
Federal National Mortgage Association, 6.00% .... 196,814 2/01/2029 190,725
Federal National Mortgage Association TBA, 6.50% 100,000 6/16/2029 99,343
Government National Mortgage Association, 6.50% . 29,317 2/15/2009 29,675
Government National Mortgage Association, 6.50% . 71,078 7/15/2009 71,947
Government National Mortgage Association, 6.50% . 88,897 11/15/2010 90,091
Government National Mortgage Association, 7.50% . 66,836 12/15/2010 69,071
Government National Mortgage Association, 7.00% . 18,127 1/15/2025 18,433
Government National Mortgage Association, 7.00% . 270,632 5/15/2028 274,605
Government National Mortgage Association, 6.50% . 145,599 11/15/2028 144,643
Government National Mortgage Association, 7.00% . 163,961 11/15/2028 166,368
Government National Mortgage Association, 7.00% . 70,116 11/15/2028 71,145
Government National Mortgage Association, 6.00% . 299,657 2/15/2029 290,197
Government National Mortgage Association, 6.00% . 199,652 3/15/2029 193,349
Government National Mortgage Association TBA,
6.50% ......................................... 425,000 5/24/2029 422,276
Government National Mortgage Association TBA,
7.00% ......................................... 225,000 6/23/2029 228,303
-----------
3,329,284
-----------
CANADIAN-YANKEE 0.4%
British Sky Broadcasting Group Inc. Note, 6.875% 75,000 2/23/2009 74,519
Province of Quebec Deb., 5.75% .................. 100,000 2/15/2009 96,552
Woodside Finance Ltd. Note, 6.60%+ .............. 50,000 4/15/2008 47,591
-----------
218,662
-----------
FOREIGN GOVERNMENT 3.3%
Greek Drachma
Republic of Greece, 8.80% ....................... 153,800,000 6/19/2007 584,609
New Zealand Dollar
Government of New Zealand, 10.00% ............... 700,000 3/15/2002 443,400
Government of New Zealand, 8.00% ................ 1,550,000 11/15/2006 992,431
-----------
2,020,440
-----------
FINANCE/MORTGAGE 3.6%
AT&T Capital Corp. Note, 7.50% .................. 50,000 11/15/2000 51,199
AT&T Capital Corp. Note, 6.75% .................. 100,000 2/04/2002 101,886
Arcadia Automobile Trust 97-C A5, 6.55% ......... 50,000 6/15/2005 50,609
Capital One Bank Note, 6.15% .................... 75,000 6/01/2001 75,195
Capital One Bank Note, 7.08% .................... 75,000 10/30/2001 76,671
Capital One Bank Note, 6.62% .................... 100,000 8/04/2003 101,017
Countrywide Funding Corp. Note,
6.58% ......................................... 75,000 9/21/2001 75,912
Discover Card Master Trust Series 1998-7A, 5.60% 100,000 5/16/2006 98,719
ERAC USA Finance Co. Note,
6.625%+ ....................................... 100,000 5/15/2006 99,610
Finova Capital Corp. Note, 6.375% ............... 50,000 5/15/2005 49,964
First Union Commercial Mortgage Trust Series
99-C1 A2, 6.07% ............................... 65,000 10/15/2008 63,375
Ford Motor Credit Co. Note, 5.75% ............... 100,000 2/23/2004 98,659
Ford Motor Credit Co. Note, 5.80% ............... 100,000 1/12/2009 95,404
GMAC Commercial Mortgage Security Inc. Series
99-C1A2, 6.175% ............................... 100,000 5/15/2033 102,055
GS Mortgage Securities Corp.
Series 97-CL1-A2, 6.86% ....................... 100,000 7/13/2030 102,815
Household Finance Corp. Sr. Note, 6.125% ........ 50,000 7/15/2002 50,406
LB Commercial Conduit Mortgage Trust 97-LL1-A1,
6.79% ......................................... 96,574 6/12/2004 98,535
LB Commercial Conduit Mortgage Trust Series
98C1-A1, 6.33% ................................ 89,612 11/18/2004 90,116
MBNA Corp. Sr. Note, 6.12% ...................... 100,000 8/13/2001 99,660
MBNA Corp. Sr. Note, 6.875% ..................... 100,000 11/15/2002 101,295
MBNA Master Credit Card Trust Series 98-JA, 5.25% 90,000 2/15/2006 88,059
MBNA Master Credit Card Trust Series 99-B, 5.90% 50,000 8/15/2011 48,797
Morgan Stanley Capital Inc. 98-A1, 6.22% ........ 47,720 5/03/2005 47,854
Morgan Stanley Capital Inc. 98-A1, 6.19% ........ 30,307 1/15/2007 30,316
New Jersey Economic Development Authority, 7.425% 50,000 2/15/2029 54,711
Prime Credit Card Master Trust Series 1995-1A,
6.75% ......................................... 50,000 11/15/2005 51,171
Prime Credit Card Master Trust Series 1996-1A,
6.70% ......................................... 50,000 7/15/2004 50,922
Sears Credit Account Master Trust Series 1998-2A,
5.25% ......................................... 100,000 10/16/2008 97,218
Textron Finance Corp. Note, 6.125%+ ............. 25,000 3/15/2001 25,105
-----------
2,177,255
-----------
CORPORATE 10.2%
Advanstar Communications Inc. Sr. Sub. Note,
9.25% ......................................... 150,000 5/01/2008 154,875
Allied Waste North America Inc. Sr. Note, 7.875% 80,000 1/01/2009 78,200
American Lawyer Media Inc. Sr. Sub. Note Series
B, 9.75% ...................................... 250,000 12/15/2007 259,375
Archibald Candy Corp. Sr. Sec. Note, 10.25% ..... 125,000 7/01/2004 128,125
Arizona Public Service Co. Note, 6.25% .......... 75,000 1/15/2005 75,445
Atlantic Richfield Co. Note, 5.90% .............. 100,000 4/15/2009 98,655
California Infrastructure Development Series
1997-A7, 6.42% ................................ 150,000 9/25/2008 154,107
Charter Communications Holdings Inc. Sr. Note,
8.625%+ ....................................... 125,000 4/01/2009 128,750
CMS Panhandle Holding Co. Note, 6.50%+ .......... 50,000 7/15/2009 49,700
Coca-Cola Enterprises Inc. Deb., 6.75% .......... 50,000 9/15/2028 48,875
Columbia/HCA Healthcare Corp. Note, 8.12% ....... 100,000 8/04/2003 99,087
Columbia/HCA Healthcare Corp. Note, 7.69% ....... 50,000 6/15/2025 41,135
Columbia/HCA Healthcare Corp. Note, 7.75% ....... 50,000 7/15/2036 41,970
Dover Corp. Deb., 6.65% ......................... 100,000 6/01/2028 95,228
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 175,000
Envirosource Inc. Note, 9.75% ................... 500,000 6/15/2003 473,750
First Wave Marine Inc. Sr. Note, 11.00% ......... 100,000 2/01/2008 95,000
Fisher Scientific International Inc. Sr. Sub.
Note, 9.00% ................................... 50,000 2/01/2008 50,000
Fort James Corp. Note, 6.234% ................... 50,000 3/15/2001 49,855
Harrah's Operating Inc. Sr. Sub. Note, 7.875% ... 100,000 12/15/2005 101,000
Healthsouth Corp. Sr. Note, 6.875% .............. 50,000 6/15/2005 47,842
Hyperion Telecommunications Inc. Sr. Sub. Note,
12.00%+ ....................................... 110,000 11/01/2007 116,050
International Shipholding Corp. Sr. Note Series
B, 7.75% ...................................... 100,000 10/15/2007 96,750
J.B. Poindexter Inc. Sr. Note, 12.50% ........... 100,000 5/15/2004 96,500
Lucent Technologies Inc. Deb., 6.45% ............ 100,000 3/15/2029 96,280
Mohegan Tribal Gaming Authority Inc. Sr. Sub.
Note, 8.75%+ .................................. 120,000 1/01/2009 123,600
News America Holdings Inc. Deb., 7.375% ......... 75,000 10/17/2008 79,136
News America Inc. Sr. Deb., 7.125% .............. 50,000 4/08/2028 48,758
Norcal Waste Systems Inc. Series B Sr. Note,
13.50% ........................................ 250,000 11/15/2005 281,875
Ocean Energy Inc. Series B Sr. Note, 7.625% ..... 100,000 7/01/2005 95,750
Owens-Illinois Inc. Sr. Deb., 7.50% ............. 50,000 5/15/2010 49,179
Packaging Resources Inc. Sr. Sec. Note, 11.625% . 250,000 5/01/2003 260,000
Peco Energy Transport Trust Series 99-A Cl. A7,
6.13% ......................................... 100,000 3/01/2009 99,642
Pepsi Bottling Holdings Inc. Note, 5.625%+ ...... 100,000 2/17/2009 95,369
Pool Energy Services Co. Sr. Sub. Note, 8.625% .. 150,000 4/01/2008 154,875
Prime Succession Inc. Sr. Sub. Note, 10.75% ..... 150,000 8/15/2004 108,000
Rose Hills Co. Sr. Sub. Note, 9.50% ............. 250,000 11/15/2004 225,000
RSL Communications Ltd. Sr. Note, 12.25% ........ 250,000 11/15/2006 277,500
Simonds Industries Inc. Sr. Sub. Note, 10.25% ... 50,000 7/01/2008 51,000
Solutia Inc. Note, 6.50% ........................ 100,000 10/15/2002 99,856
Spanish Broadcasting Systems Inc. Sr. Note,
12.50% ........................................ 250,000 6/15/2002 282,500
Stena AB Sr. Note, 8.75% ........................ 250,000 6/15/2007 235,625
Tyco International Group SA, 6.25% .............. 100,000 6/15/2003 100,689
U.S. West Capital Funding Inc., 6.875% .......... 100,000 7/15/2028 98,720
Union Pacific Resources Group Inc. Note, 7.30% .. 50,000 4/15/2009 49,543
Viatel Inc. Sr. Note, 11.25% .................... 100,000 4/15/2008 104,000
Vintage Petroleum Inc. Sr. Sub. Note, 9.75%+ .... 120,000 6/30/2009 123,900
Westpoint Stevens Inc. Sr. Note, 7.875% ......... 300,000 6/15/2008 306,750
Winstar Communications Inc. Sr. Exch. Note,
14.50% ........................................ 10,000 10/15/2005 13,400
-----------
6,216,221
-----------
Total Fixed Income Securities (Cost $15,916,486) ........................................ 15,838,924
-----------
COMMERCIAL PAPER 4.6%
American Express Credit Corp., 4.88% 142,000 5/04/1999 142,000
Ford Motor Credit Co., 4.82% .................... 116,000 5/04/1999 116,000
Ford Motor Credit Co., 4.85% .................... 2,020,000 5/04/1999 2,020,000
Ford Motor Credit Co., 4.77% .................... 500,000 5/17/1999 500,000
-----------
Total Commercial Paper (Cost $2,778,000) ................................................ 2,778,000
-----------
- -----------------------------------------------------------------------------------------------------------------
SHARES
- -----------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS 15.3%
State Street Navigator Securities Lending Prime
Portfolio ..................................... 9,349,351 9,349,351
-----------
Total Short-Term Investments (Cost $9,349,351) .......................................... 9,349,351
-----------
Total Investments (Cost $61,712,915) - 116.7% ........................................... 71,143,962
Cash and Other Assets, Less Liabilities - (16.7%) ....................................... (10,197,812)
-----------
Net Assets - 100.0% ..................................................................... $60,946,150
===========
Federal Income Tax Information:
At April 30, 1999, the net unrealized appreciation of investments based on cost for Federal
income tax purposes of $61,845,914 was as follows:
Aggregate gross unrealized appreication for all investments in which there is an excess
of value over tax cost ................................................................. $11,680,162
Aggregate gross unrealized depreciation for all investments in which there is an excess
of tax cost over value ................................................................. (2,382,114)
-----------
$ 9,298,048
===========
ADR Stands for American Depositary Receipt, representing ownership of foreign securities.
* Non-income-producing securities.
( ) Payments of income may be made in cash or in the form of additional 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, 1999
were $811,078 and $810,856 (1.33% of net assets), respectively.
Futures contracts open at April 30, 1999, are as follows:
<CAPTION>
EXPIRATION UNREALIZED
TYPE NOTIONAL AMOUNT MONTH APPRECIATION
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
30 year U.S. Treasury Bonds $100,000 June, 1999 $1,212
Forward currency exchange contracts outstanding at April 30, 1999, are as follows:
<CAPTION>
UNREALIZED
CONTRACT APPRECIATION DELIVERY
TOTAL VALUE PRICE (DEPRECIATION) DATE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sell Euro currency, Buy U.S. dollars 155,550 EUR 1.06350 EUR $ 1,029 5/07/99
Sell Euro currency, Buy U.S. dollars 172,000 EUR 1.14031 EUR 14,097 5/28/99
Sell Euro currency, Buy U.S. dollars 200,688 EUR .93179 EUR (26,166) 7/22/99
Buy Greek drachma, Sell U.S. dollars 50,686,000 GRD .00325 GRD (656) 5/07/99
Sell Greek drachma, Buy U.S. dollars 50,686,000 GRD .00327 GRD 1,450 5/07/99
Sell Japanese yen, Buy U.S. dollars 79,205,000 JPY .00884 JPY 14,267 12/30/99
Sell Japanese yen, Buy U.S. dollars 56,515,000 JPY .00885 JPY 10,710 12/30/99
Sell New Zealand dollars, Buy U.S. dollars 1,150,000 NZD .55490 NZD (6,157) 5/28/99
Sell New Zealand dollars, Buy U.S. dollars 1,335,000 NZD .55050 NZD (13,527) 7/22/99
---------
$ (4,953)
=========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: AGGRESSIVE
- -------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- -------------------------------------------------------------------------------
April 30, 1999 (Unaudited)
ASSETS
Investments, at value (Cost $61,712,915) (Note 1) ............ $71,143,962
Cash ......................................................... 4,334
Receivable for securities sold ............................... 889,858
Interest and dividends receivable ............................ 357,014
Receivable for open forward contracts ........................ 41,553
Receivable from Distributor (Note 3) ......................... 26,879
Receivable for fund shares sold .............................. 6,441
Receivable for variation margin (Note 1) ..................... 2,031
Deferred organization costs and other assets (Note 1) 48,273
-----------
72,520,345
LIABILITIES
Payable for collateral received on securities loaned ......... 9,349,351
Payable for securities purchased ............................. 1,993,085
Accrued transfer agent and shareholder services
(Note 2) ................................................... 50,019
Payable for open forward contracts ........................... 46,506
Accrued management fee (Note 2) .............................. 37,000
Accrued trustees' fees (Note 2) .............................. 7,984
Payable for fund shares redeemed ............................. 5,845
Other accrued expenses ....................................... 84,405
-----------
11,574,195
-----------
NET ASSETS $60,946,150
===========
Net Assets consist of:
Undistributed net investment income ........................ $ 786,675
Unrealized appreciation of investments ..................... 9,431,047
Unrealized depreciation of forward contracts and
foreign currency ......................................... (6,052)
Unrealized appreciation of futures contracts ............... 1,212
Accumulated net realized loss .............................. (258)
Paid-in capital ............................................ 50,733,526
-----------
$60,946,150
===========
Net Asset Value, offering price and redemption
price per share of Class S shares
($60,946,150 / 5,420,539 shares) ........................... $11.24
======
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: AGGRESSIVE
- ---------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- ----------------------------------------------------------------------------
For the six months ended April 30, 1999 (Unaudited)
INVESTMENT INCOME
Interest, net of foreign taxes of $2,207 (Note 1) ............. $ 675,598
Dividends, net of foreign taxes of $5,134 ..................... 183,861
-----------
859,459
EXPENSES
Management fee (Note 2) ....................................... 216,787
Custodian fee ................................................. 73,008
Transfer agent and shareholder services (Note 2) .............. 51,165
Audit fee ..................................................... 12,199
Reports to shareholders ....................................... 10,336
Legal fees .................................................... 9,106
Trustees' fees (Note 2) ....................................... 7,984
Registration fees ............................................. 7,358
Amortization of organization costs (Note 1) ................... 3,711
Miscellaneous ................................................. 4,209
-----------
395,863
Expenses borne by the Distributor (Note 3) .................... (74,966)
-----------
320,897
-----------
Net investment income ......................................... 538,562
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
FOREIGN CURRENCY, FORWARD CONTRACTS AND FUTURES CONTRACTS
Net realized gain on investments (Notes 1 and 4) .............. 461,296
Net realized loss on foreign currency and
forward contracts (Note 1) .................................. (317,533)
Net realized gain on futures contracts (Note 1) ............... 1,641
-----------
Total net realized gain ..................................... 145,404
-----------
Net unrealized appreciation of investments .................... 7,080,683
Net unrealized appreciation of foreign currency and
forward contracts ........................................... 328,432
Net unrealized appreciation of futures contracts .............. 1,212
-----------
Total net unrealized appreciation ........................... 7,410,327
-----------
Net gain on investments, foreign currency, forward
contracts and futures contracts ............................. 7,555,731
-----------
Net increase in net assets resulting from operations .......... $ 8,094,293
===========
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: AGGRESSIVE
<TABLE>
- -----------------------------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED APRIL 30, 1999
OCTOBER 31, 1998 (UNAUDITED)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income ..................................... $ 1,165,743 $ 538,562
Net realized gain on investments, foreign currency, forward
contracts and futures contracts ......................... 8,199,201 145,404
Net unrealized appreciation (depreciation) of investments,
foreign currency, forward contracts and futures contracts (7,077,127) 7,410,327
------------ -----------
Net increase resulting from
operations .............................................. 2,287,817 8,094,293
------------ -----------
Dividends from net investment income - Class S ............ (1,317,557) (335,232)
------------ -----------
Distributions from net realized gains - Class S ........... (11,099,159) (8,002,009)
------------ -----------
Class S share transactions (Note 6):
Proceeds from sale of shares ............................ 9,214,900 3,063,243
Net asset value of shares issued in payment of:
Dividends from net investment income .................. 449,769 134,783
Distributions from net realized gains ................. 11,099,149 8,001,998
Cost of shares repurchased .............................. (32,540,040) (5,858,825)
------------ -----------
Net increase (decrease) from fund share transactions ...... (11,776,222) 5,341,199
------------ -----------
Total increase (decrease) in net
assets .................................................. (21,905,121) 5,098,251
NET ASSETS
Beginning of period ....................................... 77,753,020 55,847,899
------------ -----------
End of period (including undistributed
net investment income of $583,345
and $786,675, respectively) ............................. $ 55,847,899 $60,946,150
============ ===========
Number of Class S shares:
Sold .................................................... 770,407 275,878
Issued upon reinvestment of:
Dividends from net investment income .................. 39,840 13,124
Distributions from net realized gains ................. 1,012,696 779,162
Repurchased ............................................. (2,843,995) (527,304)
------------ -----------
Net increase (decrease) in fund shares .................. (1,021,052) 540,860
============ ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: AGGRESSIVE
- --------------------------------------------------------------------------------
NOTES TO UNAUDITED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
April 30, 1999
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 Trust consists presently of five separate funds: State
Street Research Strategic Portfolios: Aggressive, State Street Research
Government Income Fund, State Street Research Strategic Portfolios: Moderate,
State Street Research Strategic Portfolios: Conservative and State Street
Research IntelliQuant Portfolios: Small-Cap Value.
The investment objective of the Fund is to provide high total return from,
primarily, growth of capital and secondarily, current income, consistent with
reasonable investment risk.
The Fund is authorized to issue four classes of shares. Only Class 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 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 exchange 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, 1999, the value of the securities loaned and the value of
collateral were $8,989,463 and $9,349,351, respectively. During the six months
ended April 30, 1999, income from securities lending amounted to $25,684 and
is included in interest income.
J. FUTURES CONTRACTS
The Fund may enter into futures contracts as a hedge against unfavorable
market conditions and to enhance income. The Fund will limit its risks by
entering into a futures position only if it appears to be a liquid investment.
Upon entering into a futures contract, the Fund deposits with the selling
broker sufficient cash or U.S. Government securities to meet the minimum
"initial margin" requirements. Thereafter, the Fund receives from or pays to
the broker cash or U.S. Government securities equal to the daily fluctuation
in value of the contract ("variation margin"), which is recorded as unrealized
gain or loss. When the contract is closed, the Fund records a realized gain or
loss equal to the difference between the value of the contract at the time it
was opened and the value at the time it was closed.
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, 1999, the fees
pursuant to such agreement amounted to $216,787.
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, 1999, the amount of such expenses was $30,872.
The fees of the Trustees not currently affiliated with the Adviser amounted to
$7,984 during the six months ended April 30, 1999.
NOTE 3
The Distributor and its affiliates may from time to time and in varying
amounts voluntarily assume some portion of fees or expenses relating to the
Fund. During the six months ended April 30, 1999, the amount of such expenses
assumed by the Distributor and its affiliates was $74,966.
NOTE 4
For the six months ended April 30, 1999, purchases and sales of securities,
exclusive of short-term obligations, aggregated $31,146,713 and $32,799,048
(including $11,336,182 and $12,125,726 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, $.001 par value per share. At April 30, 1999,
Metropolitan owned 3,329,462 Class S shares of the Fund.
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: AGGRESSIVE
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------------------------------------------------------------
For a share outstanding throughout each period:
<CAPTION>
CLASS A
------------------------------------------------------------------
YEARS ENDED OCTOBER 31
------------------------------------------ NOVEMBER 1, 1996
1994(b) 1995(a) 1996(a) TO MARCH 27, 1997(a)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD ($) 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($) 9.74 10.93 12.45 11.35
==== ===== ===== =====
Total return(c) (%) 2.41(d) 14.49 18.05 4.18(d)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period ($
thousands) 50,999 39,555 623 --
Ratio of operating expenses to
average net assets (%)* 1.35(e) 1.35 1.35 1.35(e)
Ratio of net investment income
to average net assets (%)* 2.01(e) 1.98 1.43 1.69(e)
Portfolio turnover rate (%) 37.75 127.44 145.59 136.48
*Reflects voluntary reduction
of expenses per share of
these amounts (Note 3) ($) 0.01 0.02 0.01 0.02
<CAPTION>
CLASS S
---------------------------------------------------------------------------------------------------
YEARS ENDED OCTOBER 31 SIX MONTHS ENDED
---------------------------------------------------------------------------- APRIL 30, 1999
1994(b) 1995(a) 1996(a) 1997(a) 1998(a) (UNAUDITED)(a)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD ($) 9.55 9.74 10.94 12.43 13.18 11.44
---- ---- ----- ----- ----- -----
Net investment income ($)* 0.10 0.22 0.22 0.22 0.21 0.10
Net realized and unrealized
gain on investments,
foreign currency and
forward contracts ($) 0.14 1.20 1.74 2.27 0.17 1.44
---- ---- ----- ----- ----- -----
TOTAL FROM INVESTMENT
OPERATIONS ($) 0.24 1.42 1.96 2.49 0.38 1.54
---- ---- ----- ----- ----- -----
Dividends from net
investment income ($) (0.05) (0.22) (0.23) (0.26) (0.24) (0.07)
Distributions from net
realized gains ($) -- -- (0.24) (1.48) (1.88) (1.67)
---- ---- ----- ----- ----- -----
TOTAL DISTRIBUTIONS ($) (0.05) (0.22) (0.47) (1.74) (2.12) (1.74)
---- ---- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD ($) 9.74 10.94 12.43 13.18 11.44 11.24
==== ===== ===== ===== ===== =====
Total return(c) (%) 2.50(d) 14.85 18.37 22.54 3.69 14.81(d)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period
($ thousands) 102 20,809 63,272 77,753 55,848 60,946
Ratio of operating expenses to
average net assets (%)* 1.10(e) 1.10 1.10 1.10 1.10 1.10(e)
Ratio of net investment income
to average net assets (%)* 2.26(e) 2.13 1.78 1.79 1.81 1.86(e)
Portfolio turnover rate (%) 37.75 127.44 145.59 136.48 124.15 55.49
*Reflects voluntary reduction
of expenses per share of
these amounts (Note 3) ($) 0.01 0.02 0.03 0.02 0.02 0.01
- -----------------------------------------------------------------------------------------------------------------------------
(a) Per-share figures have been calculated using the average shares method.
(b) May 16,1994 (commencement of operations) to October 31, 1994.
(c) 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 reduced a portion of the Fund's expenses.
(d) Not annualized.
(e) Annualized.
</TABLE>
<PAGE>
A Special Meeting of Shareholders of State Street Research Strategic
Portfolios: Aggressive ("Fund"), along with shareholders of other series of
State Street Research Financial Trust ("Trust"), was convened on April 6, 1999
("Meeting"), and continued thereafter. The results of the Meeting are set
forth below.
VOTES (MILLIONS OF SHARES)
(COMBINED FOR ALL SERIES OF THE TRUST)
-------------------------------------
ACTION ON PROPOSAL FOR WITHHELD
- --------------------------------------------------------------------------------
The following persons were elected as Trustees:
Bruce R. Bond ............................... 40.9 0.7
Steve A. Garban ............................. 40.9 0.7
Malcolm T. Hopkins .......................... 40.9 0.7
Susan M. Phillips ........................... 40.9 0.7
<PAGE>
<TABLE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: AGGRESSIVE
- -----------------------------------------------------------------------------------------------------------------
FUND INFORMATION, OFFICERS AND TRUSTEES OF STATE STREET RESEARCH FINANCIAL TRUST
- -----------------------------------------------------------------------------------------------------------------
<CAPTION>
FUND INFORMATION OFFICERS TRUSTEES
<S> <C> <C>
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 BRUCE R. BOND
One Financial Center JOHN H. KALLIS Chairman of the Board
Boston, MA 02111 Vice President Chief Executive Officer and
President, PictureTel Corporation
DISTRIBUTOR THOMAS P. MOORE, JR.
State Street Research Vice President STEVE A. GARBAN
Investment Services, Inc. Former Senior Vice President
One Financial Center E.K. EASTON RAGSDALE, JR. for Finance and Operations and
Boston, MA 02111 Vice President Treasurer, The Pennsylvania
State University
SHAREHOLDER SERVICES THOMAS A. SHIVELY
State Street Research Vice President MALCOLM T. HOPKINS
Service Center Former Vice Chairman of the
P.O. Box 8408 JAMES M. WEISS Board and Chief Financial
Boston, MA 02266-8408 Vice President Officer, St. Regis Corp.
1-800-562-0032
GERARD P. MAUS DEAN O. MORTON
CUSTODIAN Treasurer Former Executive Vice President,
State Street Bank and Chief Operating Officer and
Trust Company JOSEPH W. CANAVAN Director, Hewlett-Packard
225 Franklin Street Assistant Treasurer Company
Boston, MA 02110
DOUGLAS A. ROMICH SUSAN M. PHILLIPS
LEGAL COUNSEL Assistant Treasurer Dean, School of Business and
Goodwin, Procter & Hoar LLP Public Management, George
Exchange Place FRANCIS J. MCNAMARA, III Washington University; former
Boston, MA 02109 Secretary and General Counsel Member of the Board of Governors
of the Federal Reserve System and
DARMAN A. WING Chairman and Commissioner of
Assistant Secretary and the Commodity Futures Trading
Assistant General Counsel Commission
AMY L. SIMMONS TOBY ROSENBLATT
Assistant Secretary 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 -------------------
Boston, MA 02111 Bulk Rate
U.S. Postage
PAID
Permit #6
Hartford, CT
-------------------
QUESTIONS? COMMENTS?
Call us at 1-800-562-0032
[hearing-impaired 1-800-676-7876]
[Chinese and Spanish-speaking 1-888-638-3193]
WRITE us at:
State Street Research
Service Center
P.O. Box 8408
Boston, MA 02266-8408
E-MAIL us at:
[email protected]
INTERNET site:
www.ssrfunds.com
[logo] STATE STREET RESEARCH
This report is prepared for the general information of current shareholders.
This report must be accompanied or preceded by a current State Street
Research Strategic Portfolios: Moderate prospectus. When used after June 30,
1999, this report must be accompanied by a current Quarterly Performance Update.
Portfolio changes should not be considered recommendations for action by
individual investors.
The Dalbar awards recognize quality shareholder service and should not be
considered a rating of fund performance. The survey included mutual fund
complexes that volunteered or were otherwise selected to participate and was not
industry-wide.
SP-765F-0699
CONTROL NUMBER: (exp 1200)SSR-LD
<PAGE>
- -------------------------------------------------------------------------------
STATE STREET RESEARCH
- -------------------------------------------------------------------------------
STRATEGIC PORTFOLIOS: CONSERVATIVE
--------------------------------------
SEMIANNUAL REPORT
April 30, 1999
--------------------
WHAT'S INSIDE
--------------------
INVESTMENT UPDATE
About the Fund,
economy and markets
FUND INFORMATION
Facts and figures
PLUS, COMPLETE PORTFOLIO HOLDINGS
AND FINANCIAL STATEMENTS
STATE STREET RESEARCH
- ---------------------- ---------------------
DALBAR
HONORS COMMITMENT TO: 75 YEARS
INVESTORS
1998 ---------------------
- ---------------------- LASTING VALUES
---------------------
For Excellence LEADING IDEAS
in
Shareholder Service
STATE STREET RESEARCH FUNDS
<PAGE>
INVESTMENT ENVIRONMENT
THE ECONOMY
o Americans continued to reap the benefits of a healthy economy. Inflation
remained low, unemployment hovered at about 4%, and wages rose.
o Favorable economic factors stimulated retail sales through the holiday season
and into the first quarter of 1999. Lower energy costs and declining mortgage
rates translated into additional income for many consumers. However, energy
costs rebounded in 1999, erasing some of the gains.
o The nation's savings rate fell below zero in the last quarter of 1998. Debate
flared over the significance of that figure, however, because the Bureau of
Economic Analysis has recently changed the way it computes savings rates.
THE MARKETS
o The S&P 500, a broad measure of common stock performance, gained 22.3% for the
six-month period(1). Gains were concentrated in a narrow band of large,
high-quality growth and technology stocks. Small and medium-sized company
stocks lagged the market.
o The U.S. bond market benefited from three quick interest rate cuts late in
1998. However, the yield on the long-term Treasury benchmark climbed from 5.0%
back up to 5.7% by the end of the period, reflecting fears that strong
economic growth could ignite inflation. High-yield bonds were weak during the
first half of the period, as investors sought the quality of the U.S. Treasury
market, but those same "junk" bonds picked up again in 1999 as investors
regained confidence.
THE FUND
OVER THE PAST SIX MONTHS
o For the six months ended April 30, 1999, Strategic Portfolios: Conservative
Class S shares returned 4.84%. That was higher than the Lipper flexible income
funds average total return of 3.85% over the same period.
o The Fund's investments in stocks, 28% of total net assets at the end of the
period, accounted for its above-average performance.
o Large-cap growth was the best performing sector of the portfolio over the
entire six months.
CURRENT STRATEGY
o No significant changes are being made to the portfolio. The Fund is designed
to offer broad diversification among different asset classes and investment
styles. Volatility in world financial markets and the high valuation of the
U.S. stock market have caused us to reduce our normal level of holdings of
stocks in favor of bonds.
o Over the long term, our approach should help cushion investors against market
volatility, and so we are sticking to our discipline. We believe that many
areas of the market that were beaten down are positioned to rebound as
investors begin to look for better values.
o Mid-cap value has begun to perform better in recent weeks, enhancing the
Fund's total return.
April 30, 1999
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 S&P 500 (officially the "Standard and Poor's 500 Composite Stock Price
Index") is an unmanaged index of 500 U.S. stocks. The index does not take
transaction charges into consideration. It is not possible to invest
directly in the index.
(2) Keep in mind that past performance is no guarantee of future results. The
Fund's share price, yield and return will fluctuate, and you may have a gain
or loss when you sell your shares. All returns assume reinvestment of
capital gain distributions and income dividends at net asset value.
(3) Class S shares, offered without a sales charge, are available through
certain employee benefit plans and special programs.
- --------------------------------------------------------------------------------
FUND INFORMATION (all data are for periods ended April 30, 1999, except where
noted)
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
FOR PERIODS ENDED 3/31/99(2)(3)
- -------------------------------------------------------------------------------
LIFE OF FUND
(since 5/16/94) 1 YEAR
- -------------------------------------------------------------------------------
Class S 10.97% 5.41%
- -------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN(2)(3)
- -------------------------------------------------------------------------------
LIFE OF FUND
(since 5/16/94) 1 YEAR
- -------------------------------------------------------------------------------
Class S 11.19% 6.28%
- -------------------------------------------------------------------------------
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 69%
Stocks 28%
Cash 3%
<PAGE>
<TABLE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: CONSERVATIVE
- -----------------------------------------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------
April 30, 1999 (Unaudited)
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
VALUE
SHARES (NOTE 1)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
EQUITY SECURITIES 28.0%
AUTOMOBILES & TRANSPORTATION 0.1%
AIR TRANSPORT 0.1%
UAL Corp. ........................................................................... 400 $ 32,300
US Airways Group Inc.* .............................................................. 400 21,775
-----------
54,075
-----------
Total Automobiles & Transportation .................................................. 54,075
-----------
CONSUMER DISCRETIONARY 5.1%
ADVERTISING AGENCIES 0.8%
Valassis Communications Inc. ........................................................ 5,000 280,000
-----------
CASINOS/GAMBLING, HOTEL/MOTEL 0.9%
GTech Holdings Corp.* ............................................................... 1,900 49,519
Harrah's Entertainment Inc.* ........................................................ 7,000 154,000
Mirage Resorts Inc.* ................................................................ 5,400 121,162
-----------
324,681
-----------
COMMERCIAL SERVICES 1.4%
A.C. Nielson Corp.* ................................................................. 8,400 234,150
America Online Inc.* ................................................................ 1,300 185,575
Waste Management Inc.* .............................................................. 1,600 90,400
-----------
510,125
-----------
COMMUNICATIONS, MEDIA & ENTERTAINMENT 0.4%
CBS Corp.* .......................................................................... 1,300 59,231
Time Warner Inc. .................................................................... 1,200 84,000
-----------
143,231
-----------
HOUSEHOLD FURNISHINGS 0.1%
Black & Decker Corp. ................................................................ 900 51,075
-----------
PRINTING & PUBLISHING 0.5%
Hollinger International, Inc. Cl. A* ................................................ 14,300 201,094
-----------
RESTAURANTS 0.2%
McDonald's Corp. .................................................................... 1,800 76,275
-----------
RETAIL 0.8%
Federated Department Stores Inc.* ................................................... 1,500 70,031
Fletcher Challenge Ltd.* ............................................................ 6,600 15,822
Home Depot Inc. ..................................................................... 1,000 59,938
Staples Inc.* ....................................................................... 2,200 66,000
Wal-Mart Stores, Inc. ............................................................... 1,600 73,600
-----------
285,391
-----------
Total Consumer Discretionary .................................... 1,871,872
-----------
CONSUMER STAPLES 1.4%
BEVERAGES 0.3%
Anheuser-Busch Companies, Inc. ...................................................... 1,300 95,062
-----------
DRUG & GROCERY STORE CHAINS 0.6%
Hannaford Brothers Co. .............................................................. 3,100 135,237
Kroger Co.* ......................................................................... 600 32,588
Rite Aid Corp. ...................................................................... 800 18,650
Safeway Inc. ........................................................................ 700 37,756
-----------
224,231
-----------
FOODS 0.1%
Keebler Foods Co.* .................................................................. 900 28,913
-----------
HOUSEHOLD PRODUCTS 0.3%
Dial Corp. .......................................................................... 800 27,200
Procter & Gamble Co. ................................................................ 1,000 93,812
-----------
121,012
-----------
TOBACCO 0.1%
RJR Nabisco Holdings Corp. .......................................................... 900 23,175
UST Inc. ............................................................................ 1,100 30,663
-----------
53,838
-----------
Total Consumer Staples .............................................................. 523,056
-----------
FINANCIAL SERVICES 3.4%
BANKS & SAVINGS & LOAN 0.9%
Astoria Financial Corp.* ............................................................ 500 25,063
Chase Manhattan Corp. ............................................................... 600 49,650
Golden West Financial Corp. ......................................................... 500 50,063
Mercantile Bankshares Corp. ......................................................... 1,500 55,500
Peoples Heritage Financial Group* ................................................... 5,300 102,687
Southtrust Corp. .................................................................... 1,100 43,828
-----------
326,791
-----------
INSURANCE 1.3%
Ace Ltd. ............................................................................ 5,400 163,350
American International Group Inc. ................................................... 500 58,719
Saint Paul Companies, Inc. .......................................................... 1,000 28,688
UNUM Corp. .......................................................................... 1,900 103,787
XL Capital Ltd. Cl. A ............................................................... 2,053 124,591
-----------
479,135
-----------
MISCELLANEOUS FINANCIAL 1.0%
AMBAC Inc. .......................................................................... 3,400 205,275
Capital One Financial Corp. ......................................................... 500 86,844
Citigroup, Inc. ..................................................................... 1,000 75,250
-----------
367,369
-----------
SECURITIES BROKERAGE & SERVICES 0.2%
Bear Stearns Company Inc. ........................................................... 1,260 58,747
-----------
Total Financial Services ............................................................ 1,232,042
-----------
HEALTH CARE 1.2%
DRUGS & BIOTECHNOLOGY 1.0%
Abbott Laboratories Inc. ............................................................ 1,200 58,125
Baxter International Inc. ........................................................... 900 56,700
Pfizer Inc. ......................................................................... 400 46,025
Pharmacia & Upjohn Inc. ............................................................. 1,400 78,400
Pharmacia & Upjohn Inc. SDR ......................................................... 1,200 66,564
Schering-Plough Corp. ............................................................... 1,400 67,637
-----------
373,451
-----------
HEALTH CARE SERVICES 0.2%
Quorum Health Group Inc.* ........................................................... 6,100 75,488
-----------
Total Health Care ................................................................... 448,939
-----------
INTEGRATED OILS 0.7%
INTEGRATED DOMESTIC 0.4%
Kerr-McGee Corp. .................................................................... 1,808 76,618
Unocal Corp. ........................................................................ 1,800 74,813
-----------
151,431
-----------
INTEGRATED INTERNATIONAL 0.3%
Exxon Corp. ......................................................................... 700 58,144
Total SA Cl. B ADR .................................................................. 600 40,800
-----------
98,944
-----------
Total Integrated Oils ............................................................... 250,375
-----------
MATERIALS & PROCESSING 2.1%
CHEMICALS 0.8%
Agrium Inc. ......................................................................... 10,400 94,250
Cabot Corp. ......................................................................... 6,200 167,400
Dow Chemical Co. .................................................................... 300 39,356
-----------
301,006
-----------
CONTAINERS & PACKAGING 0.1%
Smurfit Stone Container Corp.* ...................................................... 2,200 51,425
-----------
DIVERSIFIED MANUFACTURING 0.8%
Ball Corp. .......................................................................... 5,100 280,181
-----------
FOREST PRODUCTS 0.2%
Boise Cascade Corp. ................................................................. 600 24,150
Champion International Corp. ........................................................ 600 32,812
-----------
56,962
-----------
PAPER & FOREST PRODUCTS 0.1%
Bowater Inc. ........................................................................ 900 48,263
-----------
STEEL 0.1%
Harsco Corp. ........................................................................ 1,000 32,813
-----------
Total Materials & Processing ........................................................ 770,650
-----------
NON-U.S. EQUITIES 4.8%
Banco Di Roma ....................................................................... 20,100 33,124
BHF Bank AG ......................................................................... 700 26,325
British Petroleum Co. PLC* .......................................................... 2,100 39,864
Continental AG ...................................................................... 1,100 27,308
Giordano International Ltd. ......................................................... 2,000 929
Hirose Electric Co. ................................................................. 500 46,475
IXOS Software AG .................................................................... 100 20,389
Joshin Denki Co. .................................................................... 13,000 41,802
L.M. Ericsson Telephone Co. Cl. B* .................................................. 1,836 48,201
Lernout & Hauspie Speech Products NV ADR* ........................................... 1,900 74,337
Metro AG ............................................................................ 1,000 72,258
National Bank of Canada ............................................................. 7,800 125,712
NGK Spark Plug Co.* ................................................................. 4,000 42,036
Nokia AB Oy ......................................................................... 800 61,651
Novartis AG* ........................................................................ 30 43,908
Prosieben Media AG* ................................................................. 1,000 47,010
PTT Exploration & Production Public Co. Ltd.* ....................................... 2,100 19,374
QP Corp. ............................................................................ 7,100 54,995
Renaissance Energy Ltd. ............................................................. 6,000 90,735
Roche Holdings AG* .................................................................. 5 58,793
RTZ Corp.* .......................................................................... 1,421 24,803
Sema Group PLC* ..................................................................... 4,100 39,640
Shaw Communications Inc. Cl. B ...................................................... 1,400 56,700
Snow Brand Milk Co. ................................................................. 9,300 48,283
Societe Generale .................................................................... 100 17,895
Softbank Corp. ...................................................................... 1,000 133,060
Suncor Energy Inc. .................................................................. 1,000 39,949
Takara Shuzo Co. .................................................................... 12,000 84,207
Talisman Energy Inc. ................................................................ 3,500 92,415
Telecom Italia SPA* ................................................................. 5,300 56,381
Tieto Corp. ......................................................................... 1,400 55,757
Toshiba Corp. ....................................................................... 5,000 33,495
Valeo SA ............................................................................ 300 25,354
Valeo SA Wts.* ...................................................................... 300 1,014
WM-Data AB Cl. B* ................................................................... 1,100 40,417
Wolters Kluwer NV ................................................................... 1,200 52,228
-----------
Total Non-U.S. Equities ............................................................. 1,776,824
-----------
OTHER 1.5%
MULTI-SECTOR 1.5%
AlliedSignal Inc. ................................................................... 1,200 70,500
Gencorp Inc. ........................................................................ 3,700 85,562
General Electric Co. ................................................................ 1,000 105,500
Johnson Controls Inc. ............................................................... 400 29,175
Ogden Corp. ......................................................................... 4,700 121,319
Raytheon Co. Cl. B* ................................................................. 800 56,200
Tyco International Ltd. ............................................................. 1,100 89,375
-----------
Total Other ......................................................................... 557,631
-----------
OTHER ENERGY 1.1%
GAS PIPELINES 0.7%
Columbia Energy Group ............................................................... 300 14,419
Williams Companies Inc. ............................................................. 5,527 261,150
-----------
275,569
-----------
OIL & GAS PRODUCERS 0.2%
Ocean Energy Inc. ................................................................... 7,800 72,638
-----------
OIL WELL EQUIPMENT & SERVICES 0.2%
Halliburton Co. ..................................................................... 1,400 59,675
-----------
Total Other Energy .................................................................. 407,882
-----------
PRODUCER DURABLES 1.1%
ELECTRICAL EQUIPMENT & COMPONENTS 0.5%
Mark IV Industries Inc. ............................................................. 9,600 171,600
-----------
MACHINERY 0.4%
Howmet International Inc.* .......................................................... 8,000 128,000
-----------
OFFICE FURNITURE & BUSINESS EQUIPMENT 0.2%
Xerox Corp. ......................................................................... 1,400 82,250
-----------
TELECOMMUNICATIONS EQUIPMENT 0.0%
Asia Pacific Wire & Cable Corp. Ltd.* ............................................... 3,800 11,163
-----------
Total Producer Durables ............................................................. 393,013
-----------
TECHNOLOGY 2.7%
COMMUNICATIONS TECHNOLOGY 0.3%
Lucent Technologies Inc. ............................................................ 1,100 66,138
NCR Corp. ........................................................................... 1,200 49,200
-----------
115,338
-----------
COMPUTER SOFTWARE 0.5%
Cadence Design Systems Inc.* ........................................................ 1,300 17,631
Ceridian Corp.* ..................................................................... 1,200 43,950
Microsoft Corp.* .................................................................... 1,200 97,575
Novell Inc.* ........................................................................ 1,000 22,250
-----------
181,406
-----------
COMPUTER TECHNOLOGY 1.5%
Cisco Systems Inc.* ................................................................. 1,200 136,875
Dell Computer Corp.* ................................................................ 1,400 57,662
EMC Corp.* .......................................................................... 1,000 108,937
International Business Machines Corp. ............................................... 300 62,756
Seagate Technology, Inc.* ........................................................... 700 19,513
Silicon Graphics Inc.* .............................................................. 9,300 118,575
Unisys Corp. ........................................................................ 1,000 31,438
-----------
535,756
-----------
ELECTRONICS: SEMI-CONDUCTORS/COMPONENTS 0.4%
Analog Devices Inc.* ................................................................ 2,000 70,250
Cypress Semiconductor Corp.* ........................................................ 2,500 25,625
Intel Corp.* ........................................................................ 800 48,950
-----------
144,825
-----------
Total Technology .................................................................... 977,325
-----------
UTILITIES 2.8%
CABLE TELEVISION & RADIO 0.2%
Cox Communications Inc. Cl. A* ...................................................... 900 71,437
-----------
ELECTRICAL 1.3%
Consolidated Edison Inc. ............................................................ 600 27,262
DQE Inc. ............................................................................ 1,300 53,544
Illinova Corp. ...................................................................... 5,000 131,250
OGE Energy Corp. .................................................................... 4,700 111,331
Pinnacle West Capital Corp. ......................................................... 4,400 170,775
-----------
494,162
-----------
GAS DISTRIBUTION 0.1%
Nicor Inc. .......................................................................... 300 10,913
Questar Corp. ....................................................................... 800 14,550
-----------
25,463
-----------
TELECOMMUNICATIONS 1.2%
Alltel Corp. ........................................................................ 1,200 80,925
Bellsouth Corp. ..................................................................... 700 31,325
MCI WorldCom Inc.* .................................................................. 1,900 156,156
MediaOne Group Inc.* ................................................................ 700 57,094
Qwest Communications International Inc.* ............................................ 900 76,894
RSL Communications Ltd. Cl. A* ...................................................... 700 22,925
-----------
425,319
-----------
Total Utilities ..................................................................... 1,016,381
-----------
Total Equity Securities (Cost $8,035,966) ........................................... 10,280,065
-----------
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
PRINCIPAL MATURITY
AMOUNT DATE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FIXED INCOME SECURITIES 68.9%
U.S. TREASURY 10.6%
U.S. Treasury Bond, 12.00% ....................... $ 200,000 8/15/2013 290,750
U.S. Treasury Bond, 8.125% ....................... 325,000 5/15/2021 412,090
U.S. Treasury Bond, 8.125% ....................... 150,000 8/15/2021 190,405
U.S. Treasury Bond, 6.875% ....................... 245,000 8/15/2025 276,468
U.S. Treasury Bond, 6.625% ....................... 575,000 2/15/2027 632,408
U.S. Treasury Bond, 5.25% ........................ 225,000 11/15/2028 208,195
U.S. Treasury Bond, 5.25% ........................ 425,000 2/15/2029 398,969
U.S. Treasury Note, 6.625% ....................... 175,000 7/31/2001 180,551
U.S. Treasury Note, 7.875% ....................... 325,000 11/15/2004 364,202
U.S. Treasury STRIPS, 0.00% ...................... 200,000 11/15/2001 175,850
U.S. Treasury STRIPS, 0.00% ...................... 250,000 5/15/2003 202,648
U.S. Treasury STRIPS, 0.00% ...................... 475,000 5/15/2007 305,871
U.S. Treasury TIPS, 3.875% ....................... 250,153 4/15/2029 250,855
-----------
3,889,262
-----------
U.S. AGENCY MORTGAGE 22.7%
Federal Home Loan Mortgage Corp. TBA, 6.50% ...... 500,000 6/16/2029 497,185
Federal National Mortgage Association, 5.50% ..... 100,000 2/01/2014 97,000
Federal National Mortgage Association, 5.50% ..... 348,678 3/01/2014 338,218
Federal National Mortgage Association, 6.50% ..... 263,896 9/01/2028 262,162
Federal National Mortgage Association, 6.50% ..... 743,462 11/01/2028 738,577
Federal National Mortgage Association, 6.50% ..... 705,504 12/01/2028 700,869
Federal National Mortgage Association, 6.00% ..... 516,638 2/01/2029 500,653
Federal National Mortgage Association, 6.00% ..... 523,617 3/01/2029 507,416
Federal National Mortgage Association TBA, 6.50% . 250,000 6/16/2029 248,357
Government National Mortgage Association, 6.50% .. 87,950 2/15/2009 89,026
Government National Mortgage Association, 6.50% .. 45,095 6/15/2009 45,646
Government National Mortgage Association, 6.50% .. 199,016 7/15/2009 201,450
Government National Mortgage Association, 7.50% .. 200,509 12/15/2010 207,213
Government National Mortgage Association, 7.00% .. 229,711 1/15/2025 233,588
Government National Mortgage Association, 7.00% .. 69,307 10/15/2025 70,412
Government National Mortgage Association, 6.50% .. 873,596 11/15/2028 867,856
Government National Mortgage Association, 7.00% .. 163,604 11/15/2028 166,006
Government National Mortgage Association TBA,
6.50% .......................................... 1,125,000 5/24/2029 1,117,789
Government National Mortgage Association TBA,
7.00% .......................................... 1,425,000 6/23/2029 1,445,919
-----------
8,335,342
-----------
CANADIAN-YANKEE 2.1%
British Sky Broadcasting Group Inc.
Note, 6.875% ................................... 125,000 2/23/2009 124,199
Province of Quebec Deb., 7.00% ................... 275,000 1/30/2007 288,549
Province of Quebec Deb., 5.75% ................... 250,000 2/15/2009 241,380
Woodside Finance Ltd. Note, 6.60%+ ............... 125,000 4/15/2008 118,976
-----------
773,104
-----------
FOREIGN GOVERNMENT 3.8%
Greek Drachma
Republic of Greece, 8.80% ........................ 187,500,000 6/19/2007 712,707
New Zealand Dollar
Government of New Zealand, 10.00% ................ 475,000 3/15/2002 300,878
Government of New Zealand, 8.00% ................. 600,000 11/15/2006 384,167
-----------
1,397,752
-----------
FINANCE/MORTGAGE 21.4%
A T & T Capital Corp. Note, 7.50% ................ $ 250,000 11/15/2000 255,997
A T & T Capital Corp. Note, 6.75% ................ 225,000 2/04/2002 229,244
Arcadia Automobile Trust 97-B A5, 6.70% .......... 125,000 2/15/2005 126,406
Arcadia Automobile Trust 97-C A5, 6.55% .......... 125,000 6/15/2005 126,523
Capital One Bank Note, 6.57% ..................... 100,000 1/27/2003 100,729
Capital One Bank Note, 6.28% ..................... 250,000 2/20/2001 251,163
Capital One Bank Note, 6.15% ..................... 125,000 6/01/2001 125,325
Capital One Bank Note, 6.62% ..................... 250,000 8/04/2003 252,542
Chase Commercial Mortgage Securities Corp. 1997-1
Cl. A1, 7.27% .................................. 132,626 7/19/2004 136,817
Chase Commercial Mortgage Securities Corp. 1998-2
Cl. A-1, 6.025% ................................ 121,589 8/18/2007 120,867
Chevron Corp. Note, 8.11% ........................ 144,667 12/01/2004 154,053
CIT Group Holdings Inc. Sr. Note, 6.80% .......... 250,000 4/17/2000 252,975
Citibank Credit Card Master Trust, 5.30% ......... 250,000 1/09/2006 243,573
Citigroup Inc. Note, 6.20% ....................... 250,000 3/15/2009 246,857
Commercial Credit Group Inc. Note, 6.45% ......... 250,000 7/01/2002 254,117
Commercial Credit Group Inc. Sr. Note, 5.55% ..... 250,000 2/15/2001 249,537
Countrywide Funding Corp. Note, 6.58% ............ 200,000 9/21/2001 202,432
Countrywide Funding Corp. Note, 6.28% ............ 200,000 1/15/2003 200,622
Discover Card Master Trust, 5.60% ................ 250,000 5/16/2006 246,797
DLJ Commercial Mortgage Corp. 98-C2, 6.24% ....... 75,000 11/12/2031 74,016
DLJ Commercial Mortgage Corp. 99-C1, 6.46% ....... 250,000 1/10/2009 250,312
ERAC USA Finance Co. Note, 6.75%+ ................ 250,000 5/15/2007 244,708
First Union Commercial Mortgage Trust, 6.07% ..... 175,000 10/15/2008 170,625
Florida Windstorm Underwriting Sr. Sec. Note,
7.125%+ ........................................ 125,000 2/25/2019 125,840
Ford Motor Credit Co. Note, 5.75% ................ 250,000 2/23/2004 246,647
Ford Motor Credit Co. Note, 5.80% ................ 250,000 1/12/2009 238,510
GE Global Insurance Holding Corp. Note, 7.00% .... 275,000 2/15/2026 280,709
GMAC Commercial Mortgage Security Inc. 97-C2-A,
6.45% .......................................... 117,179 12/15/2004 118,205
GMAC Commercial Mortgage Security Inc. 98-C1 A1,
6.41% .......................................... 159,575 11/15/2007 162,250
GMAC Commercial Mortgage Security Inc. 99-C1 A2,
6.175% ......................................... 250,000 5/15/2033 255,137
GS Mortgage Securities Corp. 97-G1, 6.86% ........ 125,000 7/13/2030 128,519
Household Finance Co. Note, 6.75% ................ 125,000 6/01/2000 126,476
LB Commercial Conduit Mortgage Trust 97-LL1-A1,
6.79% .......................................... 241,434 6/12/2004 246,338
LB Commercial Conduit Mortgage Trust 98-C1 A1,
6.33% .......................................... 112,018 11/18/2004 112,648
LB Commercial Conduit Mortgage Trust 98-C4 Cl. A1,
5.87% .......................................... 122,138 8/15/2006 120,687
LB Commercial Conduit Mortgage Trust 98-C4 Cl. A1,
6.21% .......................................... 60,000 10/15/2008 58,894
MBNA Master Credit Card Trust Series 98-JA, 5.25% 350,000 2/15/2006 342,450
MBNA Master Credit Card Trust Series 99-B, 5.90% . 125,000 8/15/2011 121,992
Morgan Stanley Capital Inc. 98-A1, 6.19% ......... 56,284 1/15/2007 56,302
New Jersey Economic Development Authority, 7.425% 200,000 2/15/2029 218,846
Prime Credit Card Master Trust Series 1995-1A,
6.75% .......................................... 125,000 11/15/2005 127,929
Sears Credit Account Master Trust Series 1998-2A,
5.25% .......................................... 250,000 10/16/2008 243,045
-----------
7,847,661
-----------
CORPORATE 8.3%
Arizona Public Service Co. Note, 6.25% ........... 250,000 1/15/2005 251,485
Atlantic Richfield Co. Note, 5.90% ............... 175,000 4/15/2009 172,646
California Infrastructure Development Series
1997-A7, 6.42% ................................. 125,000 9/25/2008 128,423
CMS Panhandle Holding Co. Note, 6.50% ............ 125,000 7/15/2009 124,250
Columbia/HCA Healthcare Corp. Note, 6.87% ........ 150,000 9/15/2003 139,605
Columbia/HCA Healthcare Corp. Note, 8.12% ........ 125,000 8/04/2003 123,859
Columbia/HCA Healthcare Corp. Note, 7.69% ........ 125,000 6/15/2025 102,836
Columbia/HCA Healthcare Corp. Note, 7.75% ........ 125,000 7/15/2036 104,926
Edison Mission Energy Funding Corp. Series A Note,
6.77%+ ......................................... 124,011 9/15/2003 125,562
GTE Corp. Deb., 6.94% ............................ 125,000 4/15/2028 125,165
Healthsouth Corp. Sr. Note, 6.875% ............... 175,000 6/15/2005 167,445
Lucent Technologies Inc. Deb., 6.45% ............. 225,000 3/15/2029 216,630
News America Holdings Inc. Deb., 7.375% .......... 250,000 10/17/2008 263,788
News America Inc. Sr. Deb., 7.125% ............... 125,000 4/08/2028 121,894
Peco Energy Transport Trust, 6.13% ............... 250,000 3/01/2009 249,105
Pepsi Bottling Holdings Inc. Note, 5.625%+ ....... 250,000 2/17/2009 238,423
U.S. West Communications Inc., 5.625% ............ 125,000 11/15/2008 119,021
Union Pacific Resources Group Inc. Note, 7.30% ... 125,000 4/15/2009 123,859
Xerox Corp. Note, 5.50% .......................... 125,000 11/15/2003 123,341
-----------
3,022,263
-----------
Total Fixed Income Securities (Cost $25,422,898) ......................................... 25,265,384
-----------
COMMERCIAL PAPER 11.3%
American Express Credit Corp., 4.72% ............. 150,000 5/03/1999 150,000
American Express Credit Corp., 4.81% ............. 1,254,000 5/06/1999 1,254,000
Commercial Credit Co., 4.77% ..................... 785,000 5/03/1999 785,000
Ford Motor Credit Co., 4.79% ..................... 1,000,000 5/21/1999 1,000,000
General Electric Capital Corp., 4.80% ............ 393,000 5/17/1999 393,000
Household Finance Corp., 4.78% ................... 565,000 5/17/1999 565,000
-----------
Total Commercial Paper (Cost $4,147,000) ................................................ 4,147,000
-----------
- -----------------------------------------------------------------------------------------------------------------
SHARES
- -----------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS 13.5%
State Street Navigator Securities Lending Prime Portfolio 4,936,339 4,936,339
-----------
Total Short-Term Investments (Cost $4,936,339) .......................................... 4,936,339
-----------
Total Investments (Cost $42,542,203) - 121.7% ........................................... 44,628,788
Cash and Other Assets, Less Liabilities - (21.7%) ....................................... (7,943,698)
-----------
Net Assets - 100.0% ..................................................................... $36,685,090
===========
Federal Income Tax Information:
At April 30, 1999, the net unrealized appreciation of investments based on cost for
Federal income tax purposes of $42,556,673 was as follows:
Aggregate gross unrealized appreciation for all investments in which there is an excess
of value over tax cost ................................................................ $ 2,689,088
Aggregate gross unrealized depreciation for all investments in which there is an excess
of tax cost over value ................................................................ (616,974)
-----------
$ 2,072,114
===========
- -----------------------------------------------------------------------------------------------------------------
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, 1999 were $871,129 and $853,509 (2.33% 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%.
Forward currency exchange contracts outstanding at April 30, 1999, are as follows:
<CAPTION>
UNREALIZED
CONTRACT APPRECIATION DELIVERY
TOTAL VALUE PRICE (DEPRECIATION) DATE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sell Euro currency, Buy U.S. dollars 624,000 EUR 1.14030 EUR $ 51,136 5/28/99
Sell Japanese yen, Buy U.S. dollars 22,630,000 JPY .00884 JPY 4,076 12/30/99
Sell Japanese yen, Buy U.S. dollars 16,954,500 JPY .00885 JPY 3,213 12/30/99
Sell New Zealand dollars, Buy U.S. dollars 550,000 NZD .55490 NZD (2,945) 5/28/99
Sell New Zealand dollars, Buy U.S. dollars 590,000 NZD .55050 NZD (5,978) 7/22/99
Sell New Zealand dollars, Buy U.S. dollars 50,000 NZD .55057 NZD (503) 7/22/99
--------
$ 48,999
========
Futures contracts open at April 30, 1999, are as follows:
<CAPTION>
EXPIRATION UNREALIZED
TYPE NOTIONAL AMOUNT MONTH APPRECIATION
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
30 year U.S. Treasury Bonds $300,000 June, 1999 $3,634
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, 1999 (Unaudited)
ASSETS
Investments, at value (Cost $42,542,203) (Note 1) ............. $44,628,788
Cash .......................................................... 219,277
Receivable for securities sold ................................ 2,245,920
Interest and dividends receivable ............................. 316,129
Receivable for open forward contracts ......................... 58,425
Receivable from Distributor (Note 3) .......................... 25,739
Receivable for variation margin (Note 1) ...................... 6,094
Receivable for fund shares sold ............................... 2,333
Deferred organization costs and other assets (Note 1) 30,584
-----------
47,533,289
LIABILITIES
Payable for securities purchased .............................. 5,771,552
Payable for collateral received on securities loaned .......... 4,936,339
Accrued transfer agent and shareholder services (Note 2) ...... 37,275
Accrued management fee (Note 2) ............................... 36,423
Payable for open forward contracts ............................ 9,426
Accrued trustees" fees (Note 2) ............................... 9,231
Payable for fund shares redeemed .............................. 1,254
Other accrued expenses ........................................ 46,699
-----------
10,848,199
-----------
NET ASSETS $36,685,090
===========
Net Assets consist of:
Undistributed net investment income ......................... $ 420,027
Unrealized appreciation of investments ...................... 2,086,585
Unrealized appreciation of futures contracts ................ 3,634
Unrealized appreciation of forward contracts and
foreign currency .......................................... 47,134
Accumulated net realized gain ............................... 61,495
Paid-in capital ............................................. 34,066,215
-----------
$36,685,090
===========
Net Asset Value, offering price and redemption
price per share of Class S shares
($36,685,090 / 3,497,971 shares) ............................ $10.49
======
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, 1999 (Unaudited)
INVESTMENT INCOME
Interest, net of foreign taxes of $458 (Note 1) ............... $ 849,135
Dividends, net of foreign taxes of $2,030 ..................... 56,188
----------
905,323
EXPENSES
Management fee (Note 2) ....................................... 108,318
Custodian fee ................................................. 53,757
Transfer agent and shareholder services (Note 2) .............. 35,657
Reports to shareholders ....................................... 11,584
Trustees" fees (Note 2) ....................................... 9,231
Audit fee ..................................................... 7,783
Registration fees ............................................. 7,602
Amortization of organization costs (Note 1) ................... 3,710
Miscellaneous ................................................. 3,890
----------
241,532
Expenses borne by the Distributor (Note 3) .................... (79,064)
----------
162,468
----------
Net investment income ......................................... 742,855
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
FOREIGN CURRENCY, FORWARD CONTRACTS AND FUTURES
CONTRACTS
Net realized gain on investments (Notes 1 and 4) .............. 208,229
Net realized gain on futures contracts (Note 1) ............... 15,437
Net realized loss on forward contracts and foreign
currency (Note 1) ........................................... (136,728)
----------
Total net realized gain ..................................... 86,938
----------
Net unrealized appreciation of investments .................... 715,444
Net unrealized depreciation of futures contracts .............. (1,741)
Net unrealized appreciation of forward contracts and foreign
currency .................................................... 181,639
----------
Total net unrealized appreciation ........................... 895,342
----------
Net gain on investments, foreign currency, forward
contracts and futures contracts ............................. 982,280
----------
Net increase in net assets resulting from operations .......... $1,725,135
==========
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: CONSERVATIVE
- ----------------------------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- ----------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED APRIL 30, 1999
OCTOBER 31, 1998 (UNAUDITED)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income ...................................... $ 1,620,490 $ 742,855
Net realized gain on investments, foreign currency, forward
contracts and futures contracts .......................... 2,442,165 86,938
Net unrealized appreciation (depreciation) of investments,
foreign currency, forward contracts and futures contracts (956,166) 895,342
----------- -----------
Net increase resulting from operations ..................... 3,106,489 1,725,135
----------- -----------
Dividends from net investment
income -- Class S ........................................ (1,703,599) (825,337)
----------- -----------
Distributions from net realized
gains -- Class S ........................................ (2,735,915) (2,273,855)
----------- -----------
Class S share transactions (Note 6):
Proceeds from sale of shares ............................. 4,079,645 1,265,868
Net asset value of shares issued in payment of:
Dividends from net investment income ................... 541,724 226,389
Distributions from net realized gains .................. 2,735,915 2,197,784
Cost of shares repurchased ............................... (8,288,868) (1,866,984)
----------- -----------
Net increase (decrease) from fund share transactions ....... (931,584) 1,823,057
----------- -----------
Total increase (decrease) in net assets (2,264,609) 449,000
NET ASSETS
Beginning of period ........................................ 38,500,699 36,236,090
----------- -----------
End of period (including undistributed net investment income
of $502,509 and $420,027, respectively) .................. $36,236,090 $36,685,090
=========== ===========
Number of Class S shares:
Sold ..................................................... 372,648 119,820
Issued upon reinvestment of:
Dividends from net investment income ................... 50,718 22,008
Distributions from net realized gains .................. 262,816 213,806
Repurchased .............................................. (768,832) (176,715)
----------- -----------
Net increase (decrease) from fund shares ................. (82,650) 178,919
=========== ===========
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: CONSERVATIVE
- --------------------------------------------------------------------------------
NOTES TO UNAUDITED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
April 30, 1999
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 Trust consists presently of five
separate funds: State Street Research Strategic Portfolios: Conservative,
State Street Research Government Income Fund, State Street Research Strategic
Portfolios: Moderate, State Street Research Strategic Portfolios: Aggressive
and State Street Research IntelliQuant Portfolios: Small-Cap Value.
The investment objective of the Fund is to provide, primarily, a high level of
current income and, secondarily, long term growth of capital, consistent with
the preservation of capital and reasonable investment risk.
The Fund is authorized to issue four classes of shares. Only Class 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
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 exchange 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, 1999, the value of the securities loaned and the value of
collateral were $4,792,198 and $4,936,339, respectively. During the six months
ended April 30, 1999, income from securities lending amounted to $10,884 and
is included in interest income.
J. FUTURES CONTRACTS
The Fund may enter into futures contracts as a hedge against unfavorable
market conditions and to enhance income. The Fund will limit its risks by
entering into a futures position only if it appears to be a liquid investment.
Upon entering into a futures contract, the Fund deposits with the selling
broker sufficient cash or U.S. Government securities to meet the minimum
"initial margin" requirements. Thereafter, the Fund receives from or pays to
the broker cash or U.S. Government securities equal to the daily fluctuation
in value of the contract ("variation margin"), which is recorded as unrealized
gain or loss. When the contract is closed, the Fund records a realized gain or
loss equal to the difference between the value of the contract at the time it
was opened and the value at the time it was closed.
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, 1999, the fees
pursuant to such agreement amounted to $108,318.
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, 1999, the amount of such expenses was $17,431.
The fees of the Trustees not currently affiliated with the Adviser amounted to
$9,231 during the six months ended April 30, 1999.
NOTE 3
The Distributor and its affiliates may from time to time and in varying
amounts voluntarily assume some portion of fees or expenses relating to the
Fund. During the six months ended April 30, 1999, the amount of such expenses
assumed by the Distributor and its affiliates was $79,064.
NOTE 4
For the six months ended April 30, 1999, purchases and sales of securities,
exclusive of short-term obligations, aggregated $36,384,306 and $36,457,099
(including $23,036,240 and $27,244,198 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, $.001 par value per share. At April 30, 1999,
Metropolitan owned 2,552,580 Class S shares of the Fund.
<PAGE>
<TABLE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: CONSERVATIVE
- --------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
For a share outstanding throughout each period:
CLASS A
-------------------------------------------------------------------------------------------------
YEARS ENDED OCTOBER 31
------------------------------------------ NOVEMBER 1, 1996
1994(b) 1995(a) 1996(a) TO MARCH 27, 1997(a)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD ($) 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 ($) 9.56 10.56 11.03 10.58
===== ===== ===== =====
Total return(c) (%) 1.15(d) 15.84 10.55 2.67(d)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period ($
thousands) 25,014 27,637 552 --
Ratio of operating expenses to
average net assets (%)* 1.15(e) 1.15 1.15 1.15(e)
Ratio of net investment income
to average net assets (%)* 4.48(e) 4.74 4.35 4.18(e)
Portfolio turnover rate (%) 70.35 132.50 126.41 117.66
*Reflects voluntary reduction
of expenses per share of
these amounts (Note 3) ($) 0.03 0.05 0.07 0.03
<CAPTION>
CLASS S
------------------------------------------------------------------------------------------------
YEARS ENDED OCTOBER 31 SIX MONTHS ENDED
---------------------------------------------------------------------------- APRIL 30, 1999
1994(b) 1995(a) 1996(a) 1997(a) 1998(a) (UNAUDITED)(a)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD ($) 9.55 9.56 10.56 10.93 11.32 10.92
----- ----- ----- ----- ----- -----
Net investment income ($)* 0.21 0.52 0.50 0.49 0.47 0.21
Net realized and unrealized
gain (loss) on
investments, foreign
currency, forward
contracts and futures
contracts ($) (0.09) 0.97 0.60 0.95 0.42 0.30
----- ----- ----- ----- ----- -----
TOTAL FROM INVESTMENT
OPERATIONS ($) 0.12 1.49 1.10 1.44 0.89 0.51
----- ----- ----- ----- ----- -----
Dividends from net
investment income ($) (0.11) (0.49) (0.48) (0.50) (0.50) (0.25)
Distributions from net
realized gains ($) -- -- (0.25) (0.55) (0.79) (0.69)
----- ----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS ($) (0.11) (0.49) (0.73) (1.05) (1.29) (0.94)
----- ----- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD ($) 9.56 10.56 10.93 11.32 10.92 10.49
===== ===== ===== ===== ===== =====
Total return(c) (%) 1.25(d) 16.11 10.82 14.11 8.60 4.84(d)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period ($
thousands) 100 1,433 33,236 38,501 36,236 36,685
Ratio of operating expenses to
average net assets (%)* 0.90(e) 0.90 0.90 0.90 0.90 0.90(e)
Ratio of net investment income
to average net assets (%)* 4.73(e) 4.91 4.50 4.47 4.35 4.11(e)
Portfolio turnover rate (%) 70.35 132.50 126.41 117.66 186.03 103.74
* Reflects voluntary reduction
of expenses per share of
these amounts (Note 3) ($) 0.03 0.05 0.06 0.05 0.04 0.02
- --------------------------------------------------------------------------------------------------------------------------------
(a) Per-share figures have been calculated using the average shares method.
(b) May 16, 1994 (commencement of operations) to October 31, 1994.
(c) 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.
(d) Not annualized.
(e) Annualized.
</TABLE>
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: CONSERVATIVE
- --------------------------------------------------------------------------------
REPORT OF SPECIAL MEETINGS OF SHAREHOLDERS
- --------------------------------------------------------------------------------
A Special Meeting of Shareholders of State Street Research Strategic
Portfolios: Conservative ("Fund"), along with shareholders of other series of
State Street Research Financial Trust ("Trust"), was convened on April 6, 1999
("Meeting"), and continued thereafter. The results of the Meeting are set
forth below.
VOTES (MILLIONS OF SHARES)
(COMBINED FOR ALL SERIES OF THE TRUST)
--------------------------------------
ACTION ON PROPOSAL FOR WITHHELD
- --------------------------------------------------------------------------------
The following persons were elected as Trustees:
Bruce R. Bond ...................................... 40.9 0.7
Steve A. Garban .................................... 40.9 0.7
Malcolm T. Hopkins ................................. 40.9 0.7
Susan M. Phillips .................................. 40.9 0.7
<PAGE>
<TABLE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: CONSERVATIVE
- -----------------------------------------------------------------------------------------------------------------
FUND INFORMATION, OFFICERS AND TRUSTEES OF STATE STREET RESEARCH FINANCIAL TRUST
- -----------------------------------------------------------------------------------------------------------------
<CAPTION>
FUND INFORMATION OFFICERS TRUSTEES
<S> <C> <C>
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 BRUCE R. BOND
One Financial Center JOHN H. KALLIS Chairman of the Board,
Boston, MA 02111 Vice President Chief Executive Officer and
President, PictureTel Corporation
DISTRIBUTOR THOMAS P. MOORE, JR.
State Street Research Vice President STEVE A. GARBAN
Investment Services, Inc. Former Senior Vice President
One Financial Center E.K. EASTON RAGSDALE, JR. for Finance and Operations and
Boston, MA 02111 Vice President Treasurer, The Pennsylvania
State University
SHAREHOLDER SERVICES THOMAS A. SHIVELY
State Street Research Vice President MALCOLM T. HOPKINS
Service Center Former Vice Chairman of the
P.O. Box 8408 JAMES M. WEISS Board and Chief Financial
Boston, MA 02266-8408 Vice President Officer, St. Regis Corp.
1-800-562-0032
GERARD P. MAUS DEAN O. MORTON
CUSTODIAN Treasurer Former Executive Vice President,
State Street Bank and Chief Operating Officer and
Trust Company JOSEPH W. CANAVAN Director, Hewlett-Packard
225 Franklin Street Assistant Treasurer Company
Boston, MA 02110
DOUGLAS A. ROMICH SUSAN M. PHILLIPS
LEGAL COUNSEL Assistant Treasurer Dean, School of Business and
Goodwin, Procter & Hoar LLP Public Management, George
Exchange Place FRANCIS J. MCNAMARA, III Washington University; former
Boston, MA 02109 Secretary and General Counsel Member of the Board of Governors
of the Federal Reserve System and
DARMAN A. WING Chairman and Commissioner of
Assistant Secretary and the Commodity Futures Trading
Assistant General Counsel Commission
AMY L. SIMMONS TOBY ROSENBLATT
Assistant Secretary 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 -------------------
Boston, MA 02111 Bulk Rate
U.S. Postage
PAID
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-------------------
QUESTIONS? COMMENTS?
Call us at 1-800-562-0032
[hearing-impaired 1-800-676-7876]
[Chinese and Spanish-speaking 1-888-638-3193]
WRITE us at:
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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.
This report must be accompanied or preceded by a current State Street
Research Strategic Portfolios: Moderate prospectus. When used after June 30,
1999, this report must be accompanied by a current Quarterly Performance Update.
Portfolio changes should not be considered recommendations for action by
individual investors.
The Dalbar awards recognize quality shareholder service and should not be
considered a rating of fund performance. The survey included mutual fund
complexes that volunteered or were otherwise selected to participate and was not
industry-wide.
SP-767F-0699
CONTROL NUMBER: (exp 1200)SSR-LD
