[LOGO] STATE STREET RESEARCH
International Equity Fund
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Semiannual Report to Shareholders
April 30, 2000
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In this Report Investment
-------------- Update
[GRAPHIC]
plus
The Fund at a Glance
Fund Portfolio and Financials
<PAGE>
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Contents
2 6 Month Review
A look at the fund and its market environment over the past 6 months
4 The Fund in Detail
Portfolio holdings, financials and notes
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From the Chairman
[PHOTO]
Gerard P. Maus
It would be nice if there were a compass to point investors in the right
direction in a volatile market. But if you have an anchor to keep you grounded,
you won't have to worry about what to do next. Focus on your plan, continue to
invest regularly, and don't let short-term factors derail your long-term goals.
Pay attention to the recent rumblings about inflation, rising interest rates and
concerns about valuation. But consider the opportunities yet to be mined in a
robust economy with prospects for continued innovation in technology,
telecommunications, biotechnology and elsewhere. Read up on how your mutual
funds have performed, what your fund manager thinks and how that affects the
fund's performance. That's what you'll find in these pages. With our new report
format, they are easier to follow. No compass required.
Sincerely,
/s/ Gerard P. Maus
Gerard P. Maus
Chief Executive Officer
State Street Research Funds
[GRAPHIC]
6 Month Review Part 1
How State Street Research
International Equity Fund Performed
It was an outstanding period for State Street Research International Equity
Fund. The fund returned 30.08%(1) for the 6-month period ended April 30, 2000.
That was significantly higher than the 6.72% return on the Morgan Stanley
Capital International EAFE Index2 for the same period. Astute stock selection
accounted for a significant portion of the fund's outperformance.
Reasons for the Fund's Performance
Despite a volatile spring, technology stocks drove performance for the global
stock markets over the period and figured strongly into International Equity
Fund's gains. Our investments in telecommunications produced positive results,
especially Ericsson and China Telecom. However, some of our disappointments were
also in the technology sector -- Softbank, for example, a Japanese company that
has invested around the world in computer and Internet-related enterprises.
Late in the period we trimmed our technology weighting and shifted some of the
proceeds into smaller cyclical and energy stocks on the belief that these
sectors could benefit from worldwide economic recovery. However, we continue to
maintain a high commitment to technology companies because of our confidence in
the long-term earnings capabilities of leading technology companies.
Looking Ahead
In recent months, international markets have become more volatile despite
economic recovery in most parts of the world. In fact, it appears that Asian and
European markets are moving in sympathy with the U.S. market. We remain
committed to companies with the potential to generate earnings growth above
market expectations. We will continue to emphasize technology and energy stocks
and underweight financial stocks until the interest rate picture brightens.
Because financial markets and mutual fund strategies are constantly evolving,
it's possible that the fund's holdings, market stance, outlook for various
industries or securities and other matters discussed in this report have changed
since this information was prepared. Portfolio changes should not be considered
recommendations for action by individual investors.
Class A Shares(1)
30.08%
"We continue to maintain a high commitment to technology companies."
[PHOTO]
Tom Moore
Portfolio Manager,
State Street Research International Equity Fund
Morgan Stanley
Capital International
EAFE Index(2)
6.72%
2 State Street Research International Equity Fund
<PAGE>
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[GRAPHIC] The Fund at a Glance as of 4/30/00
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State Street Research International Equity Fund invests in the stocks of
foreign companies.
Ericsson
Ericsson is a world leader in cellular phone technology. As demand continued to
exceed the expectations of most Wall Street analysts, the stock doubled over the
past six months. Recently we have taken some profits and reduced its weight in
the fund.
[GRAPHIC]
Hits
&
Misses
[GRAPHIC]
Softbank
Softbank, a Japanese company that invests in many internet ventures, was a mixed
blessing during the period. While it posted a gain for the six months ended
April 2000, it has declined substantially from its highs, the result of general
market skepticism as well as the fact that Softbank has announced that earnings
going forward may be less than in the past. As a result, we sold our position
Total Net Assets: $89 Million
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Top 10 Holdings
Issuer/Security % of fund assets
(1) Fujisawa Pharmaceutical 6.2%
(2) Takara Shuzo 6.0%
(3) Saipem 4.6%
(4) L.M. Ericsson Telephone 4.4%
(5) Total Fina 3.4%
(6) Kyocera 3.2%
(7) Royal Dutch Petroleum 3.1%
(8) Gulf Canada Resources 3.0%
(9) Nokia 2.7%
(10) Vodafone AirTouch 2.6%
Total 39.2%
See page 7 for more detail.
Performance
Fund average annual total return as of 4/30/00(1,3)
Life of Fund
Share Class 1 Year 3 Years 5 Years (1/22/92)
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Class A 48.05% 21.70% 12.32% 12.25%
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Class B(1) 47.02% 20.81% 11.46% 11.64%
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Class B 46.88% 20.81% 11.46% 11.64%
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Class C 46.99% 20.85% 11.48% 11.64%
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Class S 48.30% 22.01% 12.59% 12.48%
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Fund average annual total return as of 3/31/00(3,4)
Life of Fund
Share Class 1 Year 3 Years 5 Years (1/22/92)
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Class A 46.40% 19.47% 12.05% 11.83%
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Class B(1) 49.12% 20.26% 12.27% 12.02%
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Class B 49.22% 20.28% 12.29% 12.02%
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Class C 53.21% 20.94% 12.54% 12.01%
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Class S 55.77% 22.16% 13.66% 12.86%
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5 Largest Country Positions
by % of fund assets
April 30, 1999 April 30, 2000
United Kingdom 16.0% Japan 27.5%
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Sweden 11.4% Sweden 9.0%
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France 8.7% United Kingdom 7.3%
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Germany 7.3% France 7.3%
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Netherlands 6.7% Netherlands 7.2%
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Ticker Symbols
State Street Research International Equity Fund
Class A: SSIEX Class B(1): SSNPX* Class B: SSNBX Class C: SSNDX Class S: SSNCX
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(1) Does not reflect sales charge.
(2) The Morgan Stanley Capital International EAFE (MSCI EAFEIndex) Index is
comprised of stocks from Europe, Australasia, and the Far East. The index
is unmanaged and does not take sales charges into consideration. It is not
possible to invest directly in the index.
(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 gains distributions and income dividends at net asset value.
(4) Performance reflects a maximum 5.75% Class A share front end sales charge,
or 5% Class B or B(1), or 1% Class C share contingent deferred sales
charge where applicable.
* Proposed.
3
<PAGE>
[GRAPHIC]
The Fund in Detail
The following pages describe the fund in detail as of the date of this report.
They provide a "snapshot" of the fund's holdings at one moment in time (the
report date), describe the financial dimensions of its operations for six months
leading up to the report date and give a summary of operations on a per share
basis for the past five fiscal years. There's also an overview of the fund and
its business structure, as well as information on the accounting policies the
fund uses in arriving at the figures it presents here.
[PHOTO]
Together, the words and numbers in this section offer a comprehensive picture of
the fund and its recent activities. In fact, the text and notes on pages 5 to 16
are an integral part of the financial statements, which wouldn't be complete
without them.
For more information about the fund's strategies, risks and expenses, check the
fund's prospectus; you'll need to read it before making any investments. The
prospectus also has more details on the fund's share classes and its policies
for shareholder accounts. To get a copy of any State Street Research prospectus,
see the back cover of this report.
Keep in mind that in annual reports, the portfolio holdings and financial
statements are audited, while in semiannual reports they are unaudited.
4 State Street Research International Equity Fund
<PAGE>
About the Fund
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Business structure
State Street Research International Equity Fund is a mutual fund. A mutual fund
allows shareholders to pool their assets for investment in a portfolio of
securities. This fund is a series of State Street Research Financial Trust, a
Massachusetts business trust and is an open-end management investment company.
Four entities administer the fund's main business functions:
o The board of trustees oversees the fund with its shareholders' interests
in mind and have ultimate responsibility for the fund's activities.
o The investment manager, State Street Research & Management Company, is
responsible for the fund's investment and business activities and receives
the management fee as compensation.
o The distributor, State Street Research Investment Services, Inc., sells
shares of the fund, handles investor inquiries and transaction orders and
provides other shareholder services.
o The custodian, State Street Bank and Trust Company, holds fund securities,
provides data on their market value and handles related services.
The investment manager and the distributor are subsidiaries of MetLife, Inc.
State Street Bank and Trust Company is not affiliated with MetLife (the
similarity among its name and the names of the investment manager and
distributor is coincidental). A majority of the trustees consists of people who
are not affiliated with MetLife or any of its subsidiaries. The distributor pays
a portion of its fees to MetLife for services it provides, including maintaining
the accounts of some investors who hold shares through their firm's employee
benefit plans and other sponsored arrangements.
Goal and strategy
The fund seeks to provide long-term growth of capital by investing primarily in
common stocks and equity-related securities of non-U.S. companies.
Share classes
The fund generally offers four share classes, each with its own sales charge and
expense structure. The fund also offers an additional class of shares (Class B)
but only to current Class B shareholders through reinvestment of dividends and
distributions or through exchanges from existing Class B accounts of other State
Street Research funds.
Class A shares are subject to an initial sales charge of up to 5.75% and paid a
service fee equal to 0.25% of average daily net assets. Class B(1) and Class B
shares 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) and Class B shares are subject to a
contingent deferred sales charge on certain redemptions made within six years
and five years of purchase, respectively. Class C shares are subject to a
contingent deferred sales charge of 1.00% on any shares redeemed within one year
of their purchase and also pay annual distribution and service fees of 1.00%.
Class S shares are only offered through certain retirement accounts, advisory
accounts of the investment manager 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 text and notes are an integral part of the financial statements.
5
<PAGE>
The Fund's Accounting Policies
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In keeping with accounting principles generally accepted in the United States,
the fund has used the following policies in preparing the portfolio holdings and
financial statements in this report:
The fund values all portfolio securities as of the date of this report (or, if
that day wasn't a business day, then the most recent business day). The fund
uses the following methods for determining the values of various types of
securities:
o Listed securities -- The fund uses the price of the last sale on a
national securities exchange that was quoted before the close of the
New York Stock Exchange.
o Over-the-counter securities -- The fund uses the closing prices
quoted on the Nasdaq system. If a security hasn't traded that day,
or if it is not quoted on the Nasdaq system, the value is set at
halfway between the closing bid and asked quotations.
o Securities maturing within sixty days -- The fund adjusts the value
of these securities daily, moving them closer to the amount due on
maturity as the maturity date approaches.
o Other securities -- The fund prices these securities at fair value
under procedures established and supervised by the trustees.
The fund accounts for each purchase and sale of portfolio securities on the
trade date. In calculating realized gains or losses, the fund takes as its cost
basis the identified cost of securities sold.
The fund records investment income from portfolio securities as follows:
o Interest -- The fund accrues interest daily as it earns it.
o Cash dividends -- The fund accrues these on the ex-dividend date.
The fund may use forward foreign currency exchange contracts for hedging
purposes, attempting to offset a potential loss in one position by establishing
an interest in an opposite position. The fund accounts for forward contracts by
recording their total principal in its accounts and then marking them to market.
The fund may seek additional income by lending portfolio securities to qualified
institutions. The fund will receive cash or securities as collateral in the
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 or losses. If the
borrower fails to return the securities and the collateral has declined in
value, the fund could lose money. The fund accounts for income from the lending
of its securities by including it in interest income.
The fund distributes its net earnings to its shareholders. The fund calculates
these distributions using federal income tax regulations. As a result, they may
be different than if the fund used accounting principles generally accepted in
the United States. The fund distributes its earnings on the following schedule:
o Dividends from net investment income -- The fund ordinarily declares
and pays these annually, if any.
o Net realized capital gains -- The fund distributes these annually,
if any.
If the fund has no earnings to distribute, it won't make a distribution.
The fund does not intend to pay federal income tax. This is because it has
elected to be exempt from taxes under Subchapter M of the Internal Revenue Code,
in part because it makes distributions as described above.
The fund pays expenses as follows:
o Expenses attributed to the fund-- The fund pays these directly.
Examples of these expenses include the management fee, transfer
agent fee, custodian fee and distribution and service fees.
o Expenses attributed to the trust of which the fund is a series --
These expenses are divided up among all funds in the trust. Each
fund pays a proportional share. Examples of these expenses include
the legal fees and trustees fees.
The fund has used certain estimates and assumptions in preparing this report.
Although they are necessary in order to follow generally accepted accounting
principles, these estimates and assumptions affect several key areas, including
the reported amounts of assets and liabilities and income and expenses. Actual
results could differ from those estimates.
The fund's securities and investment practices carry certain risks.
The text and notes are an integral part of the financial statements.
6 State Street Research International Equity Fund
<PAGE>
Portfolio Holdings April 30, 2000 (unaudited)
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The listings that begin on this page detail the fund's investment holdings as of
the report date. We have grouped the holdings by asset class and by smaller
sub-groups as well. For example, we have grouped this fund's stocks by country
of incorporation.
The solid colored circles (1) show the fund's ten largest holdings, with the
number in the circle showing where the holding ranks in the top ten.
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Notes about specific elements of the financials are called out in boxes such as
this.
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Key to symbols
* Denotes a security which has not paid a dividend during the last year.
+ Denotes an American Depositary Receipt or a Global Depositary Receipt, a
form of ownership of foreign securities that is traded in the United
States and denominated in U.S. dollars.
Market
Issuer Shares Value
--------------------------------------------------------------------------
Common Stocks 90.9% of net assets
Australia 0.6%
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Rio Tinto Ltd. 12,950 $ 192,375
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Woodside Petroleum Ltd.*+ 56,300 348,191
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540,566
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Belgium 1.8%
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UCB (GROUPE) 46,100 1,550,652
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--------------------------------------------------------------------------
Canada 3.3%
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AMR Technologies Inc. 133,000 224,526
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(8) Gulf Canada Resources Ltd. 654,100 2,694,314
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2,918,840
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China 2.3%
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Petrochina Co. Ltd. 12,947,400 2,011,292
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Denmark 0.3%
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ISS International Service Systems SA Cl. B 4,000 252,887
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Finland 5.0%
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F Secure Corp. 75,000 954,555
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(9) Nokia AB Oy 42,400 2,432,242
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Stora Enso Oy 103,000 1,039,650
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--------------------------------------------------------------------------
4,426,447
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France 7.3%
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Alcatel Alsthom 2,475 573,756
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Aventis SA 4,388 242,140
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France Telecom SA 3,792 586,732
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Lafarge SA 3,887 321,917
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Sanofi Synthelabo SA 13,340 497,830
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Societe Generale de France SA 6,000 1,242,558
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(5) Total Fina SA Cl. B 19,693 2,987,995
----------
--------------------------------------------------------------------------
6,452,928
----------
Germany 3.7%
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Infineon Technologies AG 22,900 1,576,993
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Siemens AG 11,800 1,748,563
----------
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3,325,556
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Hong Kong 4.8%
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China Telecom Ltd. * 198,000 1,417,155
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Giordano International Ltd. 630,000 1,031,236
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Johnson Electric Holdings 231,900 1,860,749
----------
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4,309,140
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The text and notes are an integral part of the financial statements.
7
<PAGE>
Portfolio Holdings April 30, 2000 CONTINUED
Market
Issuer Shares Value
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Italy 5.7%
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Assicuraziono Generali SPA 13,650 388,408
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ENI SPA+ 64,000 318,258
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Montedison SPA 146,380 246,187
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(3) Saipem SPA 822,000 4,065,204
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5,018,057
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Japan 27.5%
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Amada Co. Ltd. 900 8,199
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(1) Fujisawa Pharmaceutical Co. Ltd. 148,000 5,549,229
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Hoya Corp. 14,000 1,425,728
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(6) Kyocera Corp. 16,800 2,810,499
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Nikon Corp. 61,000 2,145,998
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Nippon Express Co. Ltd. 250,000 1,578,484
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Nippon Telephone & Telegraph 110 1,364,625
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Ricoh Co. Ltd. 99,000 2,089,710
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Shionogi & Co. Ltd. 54,000 834,884
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(2) Takara Shuzo Co. Ltd. 249,000 5,348,146
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Toshiba Corp. 139,000 1,348,628
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24,504,130
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Korea 0.4%
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Samsung Electronics Ltd.+ 1,339 361,973
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Malaysia 1.4%
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Malayan Banking BHD 215,000 893,947
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Telekom Malaysia BHD 105,000 364,737
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1,258,684
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Netherlands 7.2%
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Akzo Nobel NV 6,272 256,755
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CompleTel Europe NV 9,400 164,929
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Heineken NV 10,800 598,915
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ING Groep NV 11,358 619,740
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Philips Electronics NV 45,632 2,035,622
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(7) Royal Dutch Petroleum Co. 47,500 2,737,755
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6,413,716
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Norway 1.2%
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Norsk Hydro ASA 22,000 804,264
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Petroleum Geo Services ASA 18,100 282,860
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1,087,124
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Spain 1.2%
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Repsol SA 22,000 450,004
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Terra Networks SA 10,000 618,188
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1,068,192
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Sweden 9.0%
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Electrolux AB 20,000 337,943
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(4) L.M. Ericsson Telephone Co. Cl. B 43,600 3,875,664
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NetCom Systems AB * 29,500 2,095,862
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Skandia Foersaekrings AB 23,550 1,126,807
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Skanska AB Cl. B 15,600 568,949
----------
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8,005,225
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Switzerland 1.0%
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CS Holding AG 1,424 257,213
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Schweiz Ruckversicher AG 124 199,243
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UBS AG 1,831 448,579
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905,035
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United Kingdom 7.3%
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Barclays PLC 15,800 404,175
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British Telecom PLC 59,650 1,068,030
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Enterprise Oil PLC 58,500 429,905
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HSBC Holdings PLC 61,650 681,501
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Reckitt & Benckiser 31,500 324,058
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RTZ Corp. 52,600 818,956
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(10) Vodafone AirTouch PLC+ 50,100 2,354,700
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Zeneca Group PLC 10,080 422,641
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6,503,966
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Total Common Stocks 80,914,410(1)
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(1) The fund paid a total of $54,071,608 for these securities.
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Equity-Related Securities 1.4% of net assets
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Samsung Electronics Ltd. Pfd. 9,500 1,275,513
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Total Equity-Related Securities 1,275,513(2)
----------
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(2) The fund paid a total of $125,965 for these securities.
-----------------------------------------------------------------------------
Short-Term Investments 2.6% of net assets
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AIM Liquid Assets Portfolio 2,346,181 2,346,181
----------
Total Short-Term Investments 2,346,181(3)
----------
-----------------------------------------------------------------------------
(3) The fund paid a total of $2,346,181 for these securities.
-----------------------------------------------------------------------------
The text and notes are an integral part of the financial statements.
8 State Street Research International Equity Fund
<PAGE>
<TABLE>
<CAPTION>
Coupon Maturity Amount of Market
Issuer Rate Date Principal Value
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<S> <C> <C> <C> <C>
Commercial Paper 8.7% of net assets
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American Express Credit Corp. 5.94% 5/02/2000 $2,627,000 $ 2,627,000
------------------------------------------------------------------------------------------------------------------------
American Express Credit Corp. 5.99% 5/02/2000 1,091,000 1,091,000
------------------------------------------------------------------------------------------------------------------------
Household Finance Corp. 6.00% 5/01/2000 3,978,000 3,978,000
------------
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Total Commercial Paper 7,696,000(1)
------------
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(1) The fund paid a total of $7,696,000 for these securities.
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<CAPTION>
% of
Net Assets
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Summary of Portfolio Assets
------------------------------------------------------------------------------------------------------------------------
Total Investments 103.6% $ 92,232,104
------------------------------------------------------------------------------------------------------------------------
Cash and Other Assets, Less Liabilities (3.6%) (3,190,367)
----- ------------
------------------------------------------------------------------------------------------------------------------------
Net Assets 100.0% $ 89,041,737(2)
===== ============
</TABLE>
--------------------------------------------------------------------------------
(2) The fund paid a total of $64,239,754 for these securities.
--------------------------------------------------------------------------------
Federal Income Tax Information
At April 30, 2000, the net unrealized appreciation of
investments based on cost for Federal income tax purposes of
$64,255,783 was as follows:
Aggregate gross unrealized appreciation for all investments in
which there is an excess of value over tax cost $30,707,472
Aggregate gross unrealized depreciation for all investments in
which there is an excess of tax cost over value (2,731,151)
-----------
$27,976,321
===========
The text and notes are an integral part of the financial statements.
9
<PAGE>
Statement of
Assets and Liabilities April 30, 2000 (unaudited)
--------------------------------------------------------------------------------
This is the fund's balance sheet as of the report date. It shows the fund's
total assets, its liabilities and, by subtraction, its net assets. It also shows
the share price for share class as of the report date.
Assets
Investments, at market value $ 92,232,104(1)
Foreign currency, at market value 218,575
Cash 16,928
Dividends and interest receivable 157,128
Foreign tax receivable 73,060
Receivable for fund shares sold 65,874
Receivable from Distributor 33,409
Other assets 26,224
------------
92,823,302
Liabilities
Payable for collateral received on securities loaned 2,346,182
Payable for securities purchased 832,403
Accrued management fee 140,596
Accrued distribution and service fees 78,119
Accrued transfer agent and shareholder services 48,179
Accrued trustees' fees 45,780
Other accrued expenses 290,306
------------
3,781,565
------------
Net Assets $ 89,041,737
============
Net Assets consist of:
Unrealized appreciation of investments $ 27,992,350
Unrealized depreciation of foreign currency (8,703)
Accumulated net realized gain 6,625,872
Paid-in capital 54,432,218
------------
$ 89,041,737(2)
============
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(1) The fund paid a total of $64,239,754 for these securities.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(2) Net Asset Value (NAV) of Each Share Class
--------------------------------------------------------------------------------
Except where noted, the NAV is the offering and the redemption price for each
class.
Net Assets / Number of Shares = NAV
A $34,024,183 2,097,601 $16.22*
B(1) $6,128,292 393,191 $15.59**
B $26,623,400 1,707,590 $15.59**
C $2,899,348 185,530 $15.63**
S $19,366,514 1,175,947 $16.47
* Maximum offering price per share $17.21 ($16.22 / .9425)
** When you sell Class B(1), Class B or Class C shares, you receive the net
asset value minus deferred sales charge, if any.
--------------------------------------------------------------------------------
The text and notes are an integral part of the financial statements.
10 State Street Research International Equity Fund
<PAGE>
Statement of
Operations For the six months ended April 30, 2000 (unaudited)
--------------------------------------------------------------------------------
This shows what the fund earned and lost over the report period, and what its
expenses were.
Investment Income
Dividends $ 413,682(1)
Interest 181,150
------------
594,832
Expenses
Management fee 374,986(2)
Transfer agent and shareholder services 127,443(3)
Custodian fee 110,000
Reports to shareholders 53,750
Registration fees 34,125
Service fee-Class A 36,800(4)
Distribution and service fees-Class B(1) 21,962(4)
Distribution and service fees-Class B 123,659(4)
Distribution and service fees-Class C 13,021(4)
Legal fees 28,250
Audit fee 15,375
Trustees' fees 7,500(5)
Miscellaneous 8,100
------------
954,971
Expenses borne by the distributor (103,794)(6)
Fees paid indirectly (4,443)(7)
------------
846,734
------------
Net investment loss (251,902)
------------
Realized and Unrealized Gain (Loss)
on Investments, Foreign Currency and
Forward Contracts
Net realized gain on investments 8,214,389(8)
Net realized loss on foreign currency
and forward contracts (1,293,241)
------------
Total net realized gain 6,921,148
------------
Net unrealized appreciation of investments 10,371,160
Net unrealized appreciation of foreign
currency and forward contracts 1,254,785
------------
Total net unrealized appreciation 11,625,945
------------
Net gain on investments, foreign currency
and forward contracts 18,547,093
------------
Net increase in net assets resulting
from operations $ 18,295,191
============
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(1) The fund paid foreign taxes of $60,329.
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--------------------------------------------------------------------------------
(2) The management fee is 0.95% of fund net assets, annually.
--------------------------------------------------------------------------------
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(3) Includes a total of $78,190 paid to the distributor for the services it
provided and to MetLife for similar services it provided, including
maintaining the accounts of some investors who hold shares through that
firm's employee benefit plans and other sponsored arrangements.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(4) Payments made to the distributor under the fund's 12b-1 plans. The fees
cover personal services and the maintenance of shareholder accounts. The
fees also cover distribution and marketing expenditures for the sale of
fund shares.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(5) Paid only to trustees who aren't currently affiliated with the adviser
(the fund doesn't pay trustees' fees to affiliated trustees).
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(6) Represents the share of expenses that the fund's distributor and its
affiliates paid voluntarily.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(7) Represents transfer agent credits earned from uninvested cash balances.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(8) To earn this, the fund sold $37,329,380 of securities. During this same
period, the fund also bought $42,535,889 worth of securities. These
figures don't include short-term obligations or U.S. government
securities.
--------------------------------------------------------------------------------
The text and notes are an integral part of the financial statements.
11
<PAGE>
Statement of
Changes in Net Assets
--------------------------------------------------------------------------------
This shows how the fund's size changed over the report period, including changes
that resulted from investment performance as well as those that resulted from
shareholders buying and selling fund shares.
<TABLE>
<CAPTION>
Six months ended
Year ended April 30, 2000
October 31, 1999 (unaudited)
------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations:
Net investment loss $ (418,931) $ (251,902)
Net realized gain on investments, foreign
currency and forward contracts 4,848,994 6,921,148
Net unrealized appreciation of investments,
foreign currency and forward contracts 9,070,789 11,625,945
-------------------------------------
Net increase resulting
from operations 13,500,852 18,295,191
-------------------------------------
Dividend from net investment income:
Class A (292,925) --
Class B (244,476) --
Class C (276,150) --
Class S (15,769) --
-------------------------------------
(829,320) --
-------------------------------------
Distribution from net realized gains:
Class A -- (765,082)
Class B(1) -- (104,100)
Class B -- (723,766)
Class C -- (65,499)
-------------------------------------
Class S -- (494,397)
-------------------------------------
-- (2,152,844)
Net increase (decrease)
from fund share transactions (3,314,527) 12,000,339(1)
-------------------------------------
Total increase in net assets 9,357,005 28,142,686
-------------------------------------
Net Assets
Beginning of period 51,542,046 60,899,051
-------------------------------------
End of period $ 60,899,051 $ 89,041,737
=====================================
</TABLE>
The text and notes are an integral part of the financial statements.
12 State Street Research International Equity Fund
<PAGE>
--------------------------------------------------------------------------------
(1) These transactions break down by share class as follows:
<TABLE>
<CAPTION>
Six months ended
Year ended April 30, 2000
October 31, 1999 (unaudited)
--------------------------------------------------------------
Class A Shares Amount Shares Amount
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 12,204,470 $ 136,019,145 1,458,777 $ 22,108,950*
Issued upon reinvestment of:
Dividend from net investment income 27,110 290,733 -- --
Distribution from net realized gains -- -- 49,646 736,846
Shares redeemed (11,933,749) (133,507,842) (1,174,214) (17,371,171)
--------------------------------------------------------------
Net increase 297,831 $ 2,802,036 334,209 $ 5,474,625
==============================================================
<CAPTION>
Class B(1) Shares (a) Amount (a) Shares Amount
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 200,533 $ 2,219,325 233,157 $ 3,539,567**
Issued upon reinvestment of distribution
from net realized gains -- -- 7,248 104,414
Shares redeemed (4,603) (49,182) (43,143) (669,043)***
--------------------------------------------------------------
Net increase 195,930 $ 2,170,143 197,262 $ 2,974,938
==============================================================
<CAPTION>
Class B Shares Amount Shares Amount
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 196,958 $ 2,142,564 290,925 $ 4,410,608**
Issued upon reinvestment of:
Dividend from net investment income 22,009 229,109 -- --
Distribution from net realized gains -- -- 47,643 682,088
Shares redeemed (740,587) (7,898,039) (230,769) (3,489,777)***
--------------------------------------------------------------
Net increase (decrease) (521,620) ($ 5,526,366) 107,799 $ 1,602,919
==============================================================
<CAPTION>
Class C Shares Amount Shares Amount
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 918,627 $ 10,353,880 782,777 $ 11,648,954**
Issued upon reinvestment of:
Dividend from net investment income 908 9,484 -- --
Distribution from net realized gains -- -- 3,986 57,113
Shares redeemed (903,008) (10,171,596) (789,222) (11,740,115)****
--------------------------------------------------------------
Net increase (decrease) 16,527 $ 191,768 (2,459) ($ 34,048)
==============================================================
<CAPTION>
Class S Shares Amount Shares Amount
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 227,729 $ 2,532,707 518,133 $ 8,117,010
Issued upon reinvestment of:
Dividend from net investment income 24,820 269,057 -- --
Distribution from net realized gains -- -- 32,335 486,654
Shares redeemed (513,083) (5,753,872) (417,829) (6,621,759)
--------------------------------------------------------------
Net increase (decrease) (260,534) ($ 2,952,108) 132,639 $ 1,981,905
==============================================================
------------------------------------------------------------------------------------------------------------
</TABLE>
The trustees have the authority to issue an unlimited number of fund
shares, with a $.001 par value per share. MetLife owned 48,527 Class B(1)
shares.
* Sales charges of $24,708 and $29,144 were collected by the distributor and
MetLife on sales of these shares.
** Like all broker-dealers, MetLife received commissions that were calculated
as a percentage of these sales but the commissions of $49,337, $262 and
$360 for Class B(1), Class B, and Class C were paid by the distributor,
not the fund.
*** Includes $9,017 and $23,235 in deferred sales charges collected by the
distributor for Class B(1) and Class B.
**** Includes $30 in deferred sales charges collected by the distributor.
(a) January 1, 1999 (commencement of share class) to October 31, 1999.
--------------------------------------------------------------------------------
The text and notes are an integral part of the financial statements.
13
<PAGE>
Financial Highlights
--------------------------------------------------------------------------------
These provide a summary of each share class's financial performance.
<TABLE>
<CAPTION>
Class A
-------------------------------------------------------------------
Years ended October 31 Six months ended
------------------------------------------------ April 30, 2000
Per Share Data 1995 (a) 1996 (a) 1997 (a) 1998 (a) 1999 (a) (unaudited) (a)
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ($) 10.98 9.34 9.22 9.42 10.31 12.85
------ ------ ------ ------ ------ ------
Net investment loss ($)* (0.08) (0.04) (0.02) (0.01) (0.06) (0.03)
Net realized and unrealized gain (loss) on investments,
foreign currency and forward contracts ($) (1.04) (0.08) 0.22 0.90 2.81 3.85
------ ------ ------ ------ ------ ------
Total from investment operations ($) (1.12) (0.12) 0.20 0.89 2.75 3.82
------ ------ ------ ------ ------ ------
Dividend from net investment income ($) -- -- -- -- (0.21) --
Distributions from capital gains ($) (0.52) -- -- -- -- (0.45)
------ ------ ------ ------ ------ ------
Total distributions ($) (0.52) -- -- -- (0.21) (0.45)
------ ------ ------ ------ ------ ------
Net asset value, end of period ($) 9.34 9.22 9.42 10.31 12.85 16.22
====== ====== ====== ====== ====== ======
Total return (%) (b) (10.38) (1.28) 2.17 9.45 27.02 30.08(d)
Ratios/Supplemental Data
------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period ($ thousands) 22,497 21,116 16,346 15,104 22,667 34,024
Expense ratio (%)* 1.90 1.90 1.90 1.90 1.92 1.91(e)
Expense ratio after expense reductions (%)* 1.90 1.90 1.90 1.90 1.90 1.90(e)
Ratio of net investment loss to average net assets (%)* (0.82) (0.37) (0.18) (0.20) (0.54) (0.37)(e)
Portfolio turnover rate (%) 100.68 132.36 174.69 116.28 78.04 49.75
*Reflects voluntary reduction of expenses
per share of these amounts ($) 6.00 0.05 0.04 0.04 0.05 0.02
<CAPTION>
Class B(1)
-------------------------------------
Period ended Six months ended
October 31, April 30, 2000
Per Share Data 1999 (a) (c) (Unaudited) (a)
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period ($) 10.63 12.42
----- -----
Net investment loss ($)* (0.11) (0.07)
Net realized and unrealized gain on investments,
foreign currency and forward contracts ($) 1.90 3.69
----- -----
Total from investment operations ($) 1.79 3.62
----- -----
Distributions from capital gains ($) -- (0.45)
----- -----
Total distributions ($) -- (0.45)
----- =====
Net asset value, end of period ($) 12.42 15.59
===== =====
Total return (%) (b) 16.84(d) 29.50(d)
Ratios/Supplemental Data
-------------------------------------------------------------------------------------------------------
Net assets at end of period ($ thousands) 2,433 6,128
Expense ratio (%)* 2.67(e) 2.66(e)
Expense ratio after expense reductions (%)* 2.65(e) 2.65(e)
Ratio of net investment loss to average net assets (%)* (1.29)(e) (1.00)(e)
Portfolio turnover rate (%) 78.04 49.75
*Reflects voluntary reduction of expenses
per share of these amounts ($) 0.01 0.02
</TABLE>
The text and notes are an integral part of the financial statements.
14 State Street Research International Equity Fund
<PAGE>
<TABLE>
<CAPTION>
Class B
---------------------------------------------------------------------
Years ended October 31 Six months ended
------------------------------------------------ April 30, 2000
Per Share Data 1995 (a) 1996 (a) 1997 (a) 1998 (a) 1999 (a) (unaudited) (a)
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ($) 10.93 9.22 9.04 9.16 9.95 12.42
------ ------ ------ ------ ------ ------
Net investment loss ($)* (0.15) (0.11) (0.09) (0.05) (0.14) (0.09)
Net realized and unrealized gain (loss) on
investments, foreign currency and forward contracts ($) (1.04) (0.07) 0.21 0.84 2.73 3.71
------ ------ ------ ------ ------ ------
Total from investment operations ($) (1.19) (0.18) 0.12 0.79 2.59 3.62
------ ------ ------ ------ ------ ------
Dividend from net investment income ($) -- -- -- -- (0.12) --
Distributions from capital gains ($) (0.52) -- -- -- -- (0.45)
------ ------ ------ ------ ------ ------
Total distributions ($) (0.52) -- -- -- (0.12) (0.45)
------ ------ ------ ------ ------ ------
Net asset value, end of period ($) 9.22 9.04 9.16 9.95 12.42 15.59
====== ====== ====== ====== ====== ======
Total return (%) (b) (11.09) (1.95) 1.33 8.62 26.30 29.50(d)
Ratios/Supplemental Data
--------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period ($ thousands) 27,614 28,971 21,914 21,117 19,865 26,623
Expense ratio (%)* 2.65 2.65 2.65 2.65 2.67 2.66(e)
Expense ratio after expense reductions (%)* 2.65 2.65 2.65 2.65 2.65 2.65(e)
Ratio of net investment loss to average net assets (%)* (1.54) (1.13) (0.94) (0.88) (1.28) (1.18)(e)
Portfolio turnover rate (%) 100.68 132.36 174.69 116.28 78.04 49.75
*Reflects voluntary reduction of expenses
per share of these amounts ($) 0.06 0.05 0.04 0.04 0.05 0.02
<CAPTION>
Class C
--------------------------------------------------------------------
Years ended October 31 Six months ended
------------------------------------------------ April 30, 2000
Per Share Data 1995 (a) 1996 (a) 1997 (a) 1998 (a) 1999 (a) (unaudited) (a)
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ($) 10.93 9.22 9.03 9.16 9.95 12.44
------ ------ ------ ------ ------ ------
Net investment loss ($)* (0.15) (0.11) (0.09) (0.05) (0.14) (0.08)
Net realized and unrealized gain (loss) on investments,
foreign currency and forward contracts ($) (1.04) (0.08) 0.22 0.84 2.73 3.72
------ ------ ------ ------ ------ ------
Total from investment operations ($) (1.19) (0.19) 0.13 0.79 2.59 3.64
------ ------ ------ ------ ------ ------
Dividend from net investment income ($) -- -- -- -- (0.10) --
Distributions from capital gains ($) (0.52) -- -- -- -- (0.45)
------ ------ ------ ------ ------ ------
Total distributions ($) (0.52) -- -- -- (0.10) (0.45)
------ ------ ------ ------ ------ ------
Net asset value, end of period ($) 9.22 9.03 9.16 9.95 12.44 15.63
====== ====== ====== ====== ====== ======
Total return (%) (b) (11.09) (2.06) 1.44 8.62 26.17 29.62(d)
Ratios/Supplemental Data
-------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period ($ thousands) 5,674 5,324 2,469 1,706 2,339 2,899
Expense ratio (%)* 2.65 2.65 2.65 2.65 2.67 2.66(e)
Expense ratio after expense reductions (%)* 2.65 2.65 2.65 2.65 2.65 2.65(e)
Ratio of net investment loss to average net assets ($)* (1.55) (1.10) (0.97) (0.90) (1.29) (1.07)(e)
Portfolio turnover rate (%) 100.68 132.36 174.69 116.28 78.04 49.75
* Reflects voluntary reduction of expenses
per share of these amounts ($) 0.06 0.05 0.04 0.04 0.04 0.02
</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 October 31, 1999.
(d) Not annualized.
(e) Annualized.
The text and notes are an integral part of the financial statements.
15
<PAGE>
Financial Highlights CONTINUED
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class S
------------------------------------------------------------------
Years ended October 31 Six months ended
---------------------------------------------- April 30, 2000
Per Share Data 1995 (a) 1996 (a) 1997 (a) 1998 (a) 1999 (a) (unaudited) (a)
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ($) 11.01 9.39 9.29 9.51 10.44 13.03
------ ------ ------ ------ ------ ------
Net investment income gain (loss) ($)* (0.05) (0.02) 0.01 0.00 (0.03) (0.01)
Net realized and unrealized gain (loss) on investments,
foreign currency and forward contracts ($) (1.05) (0.08) 0.21 0.93 2.85 3.90
------ ------ ------ ------ ------ ------
Total from investment operations ($) (1.10) (0.10) 0.22 0.93 2.82 3.89
------ ------ ------ ------ ------ ------
Dividend from net investment income ($) -- -- -- -- (0.23) --
Distributions from capital gains ($) (0.52) -- -- -- -- (0.45)
------ ------ ------ ------ ------ ------
Total distributions ($) (0.52) -- -- -- (0.23) (0.45)
------ ------ ------ ------ ------ ------
Net asset value, end of period ($) 9.39 9.29 9.51 10.44 13.03 16.47
====== ====== ====== ====== ====== ======
Total return (%) (b) (10.16) (1.06) 2.37 9.78 27.48 30.21(d)
Ratios/Supplemental Data
-----------------------------------------------------------------------------------------------------------------------------
Net assets at end of period ($ thousands) 33,883 26,649 21,230 13,615 13,595 19,367
Expense ratio (%)* 1.65 1.65 1.65 1.65 1.67 1.66(e)
Expense ratio after expense reductions (%)* 1.65 1.65 1.65 1.65 1.65 1.65(e)
Ratio of net investment income (loss) to
average net assets (%)* (0.51) (0.16) 0.06 0.06 (0.28) (0.17)(e)
Portfolio turnover rate (%) 100.68 132.36 174.69 116.28 78.04 49.75
* Reflects voluntary reduction of expenses
per share of these amounts ($) 0.06 0.05 0.04 0.04 0.05 0.02
</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 October 31, 1999.
(d) Not annualized.
(e) Annualized.
The text and notes are an integral part of the financial statements.
16 State Street Research International Equity Fund
<PAGE>
Board of Trustees
Gerard P. Maus
Chief Financial Officer,
Chief Administrative Officer,
Director and Interim Chief Operating Officer,
State Street Research & Management Company
Bruce R. Bond
Former Chairman of the Board,
Chief Executive Officer and President,
PictureTel Corporation
Steve A. Garban
Former Senior Vice President
for Finance and Operations and Treasurer,
The Pennsylvania State University
Dean O. Morton
Former Executive Vice President,
Chief Operating Officer and Director,
Hewlett-Packard Company
Susan M. Phillips
Dean, School of Business and Public Management,
George Washington University; former Member of the
Board of Governors of the Federal Reserve System and
Chairman and Commissioner of the Commodity
Futures Trading Commission
Toby Rosenblatt
President, Founders Investments Ltd.
President, The Glen Ellen Company
Michael S. Scott Morton
Jay W. Forrester Professor of Management,
Sloan School of Management,
Massachusetts Institute of Technology
State Street Research International Equity Fund
--------------------------------------------------------------------------------
Report on Special Meeting of Shareholders
A Special Meeting of Shareholders of the State Street Research International
Equity Fund ("Fund"), a series of State Street Research Financial Trust, was
convened on February 25, 2000 ("Meeting"). The results of the Meeting are set
forth below.
Votes (millions of shares)
Action on Proposal For Against Abstain
--------------------------------------------------------------------------------
Class A Shares
The Fund's current Rule 12b-1
Distribution Plan was amended to
increase the amount that may be
expended for the distribution
of Class A shares 0.8 0.2 0.1
Class B Shares
The Fund's current Rule 12b-1
Distribution Plan was amended to
increase the amount that may be
expended for the distribution
of Class A shares 0.7 0.1 0.1
Class B(1) Shares
The Fund's current Rule 12b-1
Distribution Plan was amended to
increase the amount that may be
expended for the distribution
of Class A shares 0.1 0.0 0.0
17
<PAGE>
Glossary
12b-1 fees -- Fees paid from mutual fund assets for personal services and
for the maintenance of shareholder accounts and distribution and marketing
expenses. The fees are named after the SEC rule that permits them.
Average Shares Method -- The practice of basing a fund's calculations for
a given period on the average number of shares that were outstanding
during that period.
Nasdaq -- The stock price quotation system operated by the National
Association of Securities Dealers. The Nasdaq system operates as a
clearing house for transaction data about stocks that are traded "over the
counter" around the U.S.
New York Stock Exchange -- The largest stock exchange in the United
States, and the place where many of the largest company stocks are listed.
Unlike the Nasdaq system, the NYSE is a physical exchange, with all
trading occurring on the exchange's trading floor on Wall Street.
Principal Amount -- With bonds and certain other debt securities, the
amount of the underlying principal of the security. When the security
matures, the issuer is obligated to repay this amount to the holder of the
security. Also called "face value" or "par value."
18 State Street Research International Equity Fund
<PAGE>
19
<PAGE>
[LOGO] STATE STREET RESEARCH ---------------
One Financial Center o Boston, MA 02111 Bulk Rate
U.S. Postage
PAID
Canton, MA
Permit #313
---------------
Contact Information for
Investor Services
--------------------------------------------------------------------------------
New accounts
[HANDS] contact your financial
professional for assistance
[PHONE] phone
1-87-SSR-FUNDS (1-877-773-8637)
Hearing-impaired:
1-800-676-7876
Chinese and Spanish-speaking:
1-888-638-3193
[MAILBOX] mail
State Street Research Service Center
P.O. Box 8408
Boston, MA 02266-8408
State Street Research
Spectrum of Funds
<TABLE>
<CAPTION>
Income Growth & Income Growth
--------------------------------------------------------------------------------------------------
CONSERVATIVE AGGRESSIVE
--------------------------------------------------------------------------------------------------
<S> <C> <C>
High Income Fund Argo Fund Global Resources Fund
Strategic Income Fund Investment Trust Emerging Growth Fund
New York Tax-Free Fund Alpha Fund Mid-Cap Growth Fund
Tax-Exempt Fund Strategic Growth & Income Fund Aurora Fund
Government Income Fund Strategic Income Plus Fund Concentrated International Fund
Money Market Fund International Equity Fund
Concentrated Growth Fund
Growth Fund
Galileo Fund
Legacy Fund
</TABLE>
Mutual fund purchases, exchanges and
account information
[INTERNET] internet
www.ssrfunds.com
[COMPUTER] e-mail
[email protected]
[PHONE] phone
1-87-SSR-FUNDS (1-877-773-8637)
7 days a week, 24 hours a day
Hearing-impaired:
1-800-676-7876
Chinese and Spanish-speaking:
1-888-638-3193
[FAX] fax
1-617-737-9722
(request confirmation number
first from Service Center:
1-87-SSR-FUNDS)
[MAILBOX] mail
State Street Research Service Center
P.O. Box 8408
Boston, MA 02266-8408
---------------------------
[LOGO]
DALBAR
HONORS COMMITMENT TO:
INVESTORS
1999
---------------------------
for Excellence in Service
For 24-hour Automated Access to Your Account
[INTERNET] www.ssrfunds.com
[PHONE] 1-87-SSR-FUNDS
OverView
--------------------------------------------------------------------------------
For more information on the products and services mentioned in OverView, our
shareholder newsletter, visit our Web site at www.ssrfunds.com
State Street Research
FYI
o Did you know that you can give a State Street Research mutual fund as
a gift? Call a service center representative at 1-87-SSR-FUNDS
(1-877-773-8673), Monday through Friday, 8am - 6pm Eastern Time, to
learn more.
--------------------------------------------------------------------------------
This report must be accompanied or preceded by a current State Street Research
International Equity prospectus and a current Quarterly Performance Update.
To obtain a prospectus on any State Street Research fund call 1-87-SSR-FUNDS
(1-877-773-8637). The prospectus contains more complete information, including
sales charges and expenses. Please read the prospectus carefully before
investing or sending money.
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.
(C)2000 State Street Research Investment Services, Inc., One Financial Center,
Boston, MA 02111
Control Number:(exp0601)SSR-LD
IE-1892-0600
<PAGE>
[LOGO] STATE STREET RESEARCH
Government Income Fund
--------------------------------------------------------------------------------
Semiannual Report to Shareholders
April 30, 2000
In this Report Investment
Update
[GRAPHIC]
plus
The Fund at a Glance
Fund Portfolio and Financials
<PAGE>
--------------------------------------------------------------------------------
Contents
2 6 Month Review
A look at the fund and its market
environment over the past 6 months
4 The Fund in Detail
Portfolio holdings, financials and notes
--------------------------------------------------------------------------------
From the Chairman
[PHOTO]
Gerard P. Maus
It would be nice if there were a compass to point investors in the right
direction in a volatile market. But if you have an anchor to keep you grounded,
you won't have to worry about what to do next. Focus on your plan, continue to
invest regularly, and don't let short-term factors derail your long-term goals.
Pay attention to the recent rumblings about inflation, rising interest rates and
concerns about valuation. But consider the opportunities yet to be mined in a
robust economy with prospects for continued innovation in technology,
telecommunications, biotechnology and elsewhere. Read up on how your mutual
funds have performed, what your fund manager thinks and how that affects the
fund's performance. That's what you'll find in these pages. With our new report
format, they are easier to follow. No compass required.
Sincerely,
/s/ Gerard P. Maus
Gerard P. Maus
Chief Executive Officer
State Street Research Funds
[GRAPHIC]
6 Month Review
How State Street Research
Government Income Fund Performed
It was another challenging period for the bond market. State Street Research
Government Income Fund returned 1.37%(1) for the six-month period ended April
30, 2000. That was less than the Merrill Lynch Government Master Index, which
gained 2.30%(2) for the same period.
Reasons for the Fund's Performance
Higher interest rates created downward pressure on nearly all segments of the
bond market as the Federal Reserve Board raised short-term interest rates by 3/4
percent in three 1/4 percent hits during the period. That resulted in a total of
five interest rate increases in the past 10 months. Mortgage bonds held up
better than other segments because fewer homeowners are prepaying their
mortgages. 30-year U.S. Treasury bonds rose late in the period in reaction to
the federal government's buy-back of bonds and the Fed's interest rate hikes,
reflecting confidence that it would be successful in slowing the economy and
curbing inflation. That helped the fund, which had more than 42% of the
portfolio invested in U.S. Treasuries and agency bonds.
Changes in the Portfolio
During the period we added to the fund's investment in agency bonds, which
presented an attractive buying opportunity. We also underweighted the short-end
of the Treasury market on the expectation that interest rates would continue to
rise.
Outlook
Although this has been a difficult period for bonds, we believe that the fund is
positioned to withstand the next cycle of short-term interest rate increases,
which we fully expect to occur. And, because we have taken advantage of the
opportunity to buy certain segments of the market when spreads were attractive,
we believe that the fund is positioned to benefit when rates go down.
Class A Shares(1)
1.37%
"We believe the
fund is positioned
to withstand the
next interest rate
increases."
[PHOTO]
Jack Kallis
Portfolio Manager,
State Street Research
Government Income
Fund
Merrill Lynch
Government
Master Index(2)
2.30%
Because financial markets and mutual fund strategies are constantly evolving,
it's possible that the fund's holdings, market stance, outlook for various
industries or securities and other matters discussed in this report have changed
since this information was prepared. Portfolio changes should not be considered
recommendations for action by individual investors.
2 State Street Research Government Income Fund
<PAGE>
[GRAPHIC] The Fund at a Glance as of 4/30/00
State Street Research Government Income Fund is a bond fund focusing on
U.S. government securities.
Long-Term
U.S. Treasury Bonds
Our investment in long-term U.S. Treasury bonds did well as interest rates on
the long-end of the yield curve came down while rates on the short-end rose
substantially.
[GRAPHIC]
Hits
&
Misses
[GRAPHIC]
Non-dollar Bonds
Our investment in foreign bonds was a drag on the fund's performance during the
six-month period.
Total Net Assets: $606 million
--------------------------------------------------------------------------------
Asset Allocation
[GRAPHIC OF PIE CHART]
o U.S. Agency Mortgages 53%
o U.S. Treasury 32%
o Other Mortgage 9%
o Foreign Government 3%
o Trust Certificates/Other 2%
o Cash 1%
--------------------------------------------------------------------------------
Total Net Assets 100%
See page 7 for more detail.
Performance
Fund average annual total return as of 4/30/00(3)
(does not reflect sales charge)
Life of Fund
Share Class 1 Year 5 Years 10 Years (3/23/87)
--------------------------------------------------------------------------------
Class A 0.45% 6.35% 7.90% 7.22%
--------------------------------------------------------------------------------
Class B(1) -0.37% 5.50% 7.30% 6.77%
--------------------------------------------------------------------------------
Class B -0.30% 5.54% 7.32% 6.79%
--------------------------------------------------------------------------------
Class C -0.21% 5.56% 7.33% 6.79%
--------------------------------------------------------------------------------
Class S 0.71% 6.60% 8.08% 7.36%
--------------------------------------------------------------------------------
Fund average annual total return as of 3/31/00(3, 4)
(at maximum applicable sales charge)
Life of Fund
Share Class 1 Year 5 Years 10 Years (3/23/87)
--------------------------------------------------------------------------------
Class A -3.56% 5.66% 7.25% 6.90%
--------------------------------------------------------------------------------
Class B(1) -4.66% 5.46% 7.14% 6.82%
--------------------------------------------------------------------------------
Class B -4.51% 5.53% 7.18% 6.85%
--------------------------------------------------------------------------------
Class C -0.72% 5.83% 7.18% 6.84%
--------------------------------------------------------------------------------
Class S 1.15% 6.89% 7.92% 7.41%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Bond Yields
November 30, 1999 to April 30, 2000
[THE FOLLOWING INFORMATION WAS REPRESENTED AS A LINE CHART IN THE PRINTED
MATERIAL]
11/99 5.295 6.187 6.289
12/99 5.312 6.435 6.479
1/00 5.687 6.665 6.492
2/00 5.776 6.414 6.146
3/00 5.886 6.015 5.837
4/00 5.813 6.216 5.963
o 90-day U.S. Treasury Securities o 10-year U.S. Treasury Securities
o 30-year U.S. Treasury Securities
Source: Bloomberg, 2000
--------------------------------------------------------------------------------
Ticker Symbols
State Street Research Government Income Fund
Class A: SSGIX Class B(1): SGIPX Class B: SSGBX Class C: SGIDX Class S: SGICX*
--------------------------------------------------------------------------------
1 Does not reflect sales charge.
2 Merrill Lynch Government Master Indices are commonly used measures of bond
market performance. The Lehman Brothers Aggregate Bond Index is a
market-value weighted index of fixed-rate debt issues, including U.S.
Treasury, agency, and corporate bond issues, and mortgage-backed
securities. The index is unmanaged and does not take sales charges into
consideration. It is not possible to invest directly in the indices.
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 gains distributions and income dividends at net asset value.
4 Performance reflects maximum 4.5% Class A front end sales charge, or 5%
Class B or B(1), or 1% Class C share contingent deferred sales charge
where applicable.
* Proposed.
3
<PAGE>
[GRAPHIC]
The Fund in Detail
[GRAPHIC]
The following pages describe the fund in detail as of the date of this report.
They provide a "snapshot" of the fund's holdings at one moment in time (the
report date), describe the financial dimensions of its operations for the six
months leading up to the report date and give a summary of operations on a per
share basis for the past five fiscal years. There's also an overview of the fund
and its business structure, as well as information on the accounting policies
the fund uses in arriving at the figures it presents here.
Together, the words and numbers in this section offer a comprehensive picture of
the fund and its recent activities. In fact, the text and notes on pages 5 to 18
are an integral part of the financial statements, which wouldn't be complete
without them.
For more information about the fund's strategies, risks and expenses, check the
fund's prospectus; you'll need to read it before making any investments. The
prospectus also has more details on the fund's share classes and its policies
for shareholder accounts. To get a copy of any State Street Research prospectus,
see the back cover of this report.
Keep in mind that in annual reports, the portfolio holdings and financial
statements are audited, while in semiannual reports they are unaudited.
4 State Street Research Government Income Fund
<PAGE>
About the Fund
--------------------------------------------------------------------------------
Business structure
State Street Research Government Income Fund is a mutual fund. A mutual fund
allows shareholders to pool their assets for investment in a portfolio of
securities. This fund is a series of State Street Research Financial Trust, a
Massachusetts business trust and is an open-end management investment company.
Four entities administer the fund's main business functions:
o The board of trustees oversee the fund with its shareholders' interests in
mind and have ultimate responsibility for the fund's activities.
o The investment manager, State Street Research & Management Company, is
responsible for the fund's investment and business activities and receives
the management fee as compensation.
o The distributor, State Street Research Investment Services, Inc., sells
shares of the fund, handles investor inquiries and transaction orders and
provides other shareholder services.
o The custodian, State Street Bank and Trust Company, holds fund securities,
provides data on their market value and handles related services.
The investment manager and the distributor are subsidiaries of MetLife, Inc.
State Street Bank and Trust Company is not affiliated with MetLife (the
similarity between its name and the names of the investment manager and
distributor is coincidental). A majority of the trustees consists of people who
are not affiliated with MetLife or any of its subsidiaries. The distributor pays
a portion of its fees to MetLife for services it provides, including maintaining
the accounts of some investors who hold shares through their firm's employee
benefit plans and other sponsored arrangements.
Goal and strategy
The fund seeks to provide high current income. Under normal market conditions,
the fund invests at least 65% of total assets in U.S. government securities.
Share classes
The fund generally offers four share classes, each with its own sales charge and
expense structure. The fund also offers an additional class of shares (Class B)
but only to current Class B shareholders through reinvestment of dividends and
distributions or through exchanges from existing Class B accounts of other State
Street Research funds.
Class A shares are subject to an initial sales charge of up to 4.50% and pay a
service fee equal to 0.25% of average daily net assets. Class B(1) and Class B
shares 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) and Class B shares are subject to a
contingent deferred sales charge on certain redemptions made within six years
and five years of purchase, respectively. Class C shares are subject to a
contingent deferred sales charge of 1.00% on any shares redeemed within one year
of their purchase and also pay annual distribution and service fees of 1.00%.
Class S shares are only offered through certain retirement accounts, advisory
accounts of the investment manager, 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 text and notes are an integral part of the financial statements.
5
<PAGE>
The Fund's Accounting Policies
--------------------------------------------------------------------------------
In keeping with accounting principles generally accepted in the United States,
the fund has used the following policies in preparing the portfolio holdings and
financial statements in this report:
The fund values all portfolio securities as of the date of this report (or, if
that day wasn't a business day, then the most recent business day). The fund
uses the following methods for determining the values of various types of
securities:
o Fixed income securities -- The fund uses a pricing service that the fund's
trustees have approved.
o Securities maturing within sixty days -- The fund adjusts the value of
these securities daily, moving them closer to the amount due on maturity
as the maturity date approaches.
The fund accounts for each purchase and sale of portfolio securities on the
trade date. In calculating realized gains or losses, the fund takes as its cost
basis the identified cost of securities sold.
The fund records investment income from portfolio securities as follows:
o Interest -- The fund accrues interest daily as it earns it.
The fund may use forward foreign currency exchange contracts and futures
contracts for hedging purposes, attempting to offset a potential loss in one
position by establishing an interest in an opposite position. The fund accounts
for forward contracts by recording their total principal in its accounts and
then marking them to market. The fund accounts for futures contracts by
recording the variation margin, which is the daily change in the value of the
contract.
The fund may seek additional income by lending portfolio securities to qualified
institutions. The fund will receive cash or securities as collateral in the
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 or losses. If the
borrower fails to return the securities and the collateral has declined in
value, the fund could lose money. The fund accounts for income from the lending
of its securities by including it in interest income.
The fund distributes its net earnings to its shareholders. The fund calculates
these distributions using federal income tax regulations. As a result, they may
be different than if the fund used generally accepted accounting principles. The
fund distributes its earnings on the following schedule:
o Dividends from net investment income-- The fund declares dividends daily
and pays them monthly.
o Net realized capital gains -- The fund distributes these annually, if any.
If the fund has no earnings to distribute, it won't make a distribution.
The fund does not intend to pay federal income tax. This is because it has
elected to be exempt from taxes under Subchapter M of the Internal Revenue Code,
in part because it makes distributions as described above.
The fund pays expenses as follows:
o Expenses attributed to the fund-- The fund pays these directly. Examples
of these expenses include the management fee, transfer agent fee,
custodian fee and distribution and service fees.
o Expenses attributed to the trust of which the fund is a series -- These
expenses are divided up among all funds in the trust. Each fund pays a
proportional share. Examples of these expenses include the legal fees and
trustees fees.
The fund has used certain estimates and assumptions in preparing this report.
Although they are necessary in order to follow generally accepted accounting
principles, these estimates and assumptions affect several key areas, including
the reported amounts of assets and liabilities and income and expenses. Actual
results could differ from those estimates.
The fund's securities and investment practices carry certain risks.
The text and notes are an integral part of the financial statements.
6 State Street Research Government Income Fund
<PAGE>
Portfolio Holdings April 30, 2000 (unaudited)
--------------------------------------------------------------------------------
The listings that begin on this page detail the fund's investment holdings as of
the report date. We have grouped the holdings by asset class and by smaller
sub-groups as well.
--------------------------------------------------------------------------------
Notes about specific elements of the financials are called out in boxes such as
this.
--------------------------------------------------------------------------------
KEY TO SYMBOLS
* Denotes a 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.
<TABLE>
<CAPTION>
Coupon Maturity Amount Market
Issuer Rate Date of Principal Value
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Government Securities 84.2% of net assets
U.S. Treasury 31.7%
------------------------------------------------------------------------------------------------------------
U.S. Treasury Bond 13.75% 8/15/2004 $11,225,000 $14,138,224
------------------------------------------------------------------------------------------------------------
U.S. Treasury Bond 11.63% 11/15/2004 39,400,000 46,953,768
------------------------------------------------------------------------------------------------------------
U.S. Treasury Bond 10.75% 8/15/2005 9,500,000 11,214,465
------------------------------------------------------------------------------------------------------------
U.S. Treasury Bond 12.00% 8/15/2013 8,600,000 11,493,126
------------------------------------------------------------------------------------------------------------
U.S. Treasury Bond 11.25% 2/15/2015 5,500,000 8,047,160
------------------------------------------------------------------------------------------------------------
U.S. Treasury Bond 9.88% 11/15/2015 8,500,000 11,433,860
------------------------------------------------------------------------------------------------------------
U.S. Treasury Bond 9.25% 2/15/2016 11,500,000 14,797,280
------------------------------------------------------------------------------------------------------------
U.S. Treasury Bond 8.88% 2/15/2019 4,750,000 6,075,535
------------------------------------------------------------------------------------------------------------
U.S. Treasury Bond 7.88% 2/15/2021 9,325,000 11,031,195
------------------------------------------------------------------------------------------------------------
U.S. Treasury Bond 8.13% 5/15/2021 4,350,000 5,276,420
------------------------------------------------------------------------------------------------------------
U.S. Treasury Bond 8.13% 8/15/2021 23,000,000 27,934,190
------------------------------------------------------------------------------------------------------------
U.S. Treasury Bond 6.75% 8/15/2026 1,525,000 1,628,883
------------------------------------------------------------------------------------------------------------
U.S. Treasury Bond 6.38% 8/15/2027 6,825,000 6,968,939
------------------------------------------------------------------------------------------------------------
U.S. Treasury Bond 6.25% 5/15/2030 2,575,000 2,676,378
------------------------------------------------------------------------------------------------------------
U.S. Treasury STRIPS 0.00% 11/15/2001 9,375,000 8,474,063
------------------------------------------------------------------------------------------------------------
U.S. Treasury STRIPS 0.00% 2/15/2021 14,150,000 4,024,260
------------
192,167,746
------------
</TABLE>
The text and notes are an integral part of the financial statements.
7
<PAGE>
Portfolio Holdings April 30, 2000 CONTINUED
<TABLE>
<CAPTION>
Coupon Maturity Amount Market
Issuer Rate Date of Principal Value
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Agency Mortgage 52.5%
-------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp. 9.00% 12/01/2009 $2,769,618 $2,818,778
-------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp. 6.75% 9/15/2029 8,325,000 7,854,138
-------------------------------------------------------------------------------------------------------------------
Federal Housing Administration Charles River Project 9.63% 12/01/2033 9,364,277 9,592,531
-------------------------------------------------------------------------------------------------------------------
Federal Housing Administration Court Yard Project 10.75% 8/01/2032 6,430,023 6,666,126
-------------------------------------------------------------------------------------------------------------------
Federal Housing Administration East Bay Manor Project 10.00% 3/01/2033 6,692,517 6,881,790
-------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Association 8.00% 4/01/2008 2,278,066 2,301,849
-------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Association 6.00% 5/15/2008 5,475,000 5,042,147
-------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Association 8.00% 6/01/2008 3,243,641 3,260,053
-------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Association 5.25% 1/15/2009 12,200,000 10,587,282
-------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Association 8.50% 2/01/2009 4,176,007 4,254,474
-------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Association 9.00% 5/01/2009 3,780,815 3,871,176
-------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Association 6.38% 6/15/2009 5,975,000 5,604,371
-------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Association 6.63% 9/15/2009 14,400,000 13,736,304
-------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Association 9.00% 4/01/2016 930,463 971,310
-------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Association 6.50% 9/01/2028 12,891,464 12,041,530
-------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Association 6.50% 11/01/2028 32,181,910 30,065,993
-------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Association 6.50% 12/01/2028 16,017,593 14,679,544
-------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Association 6.00% 2/01/2029 13,211,294 11,960,317
-------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Association 6.50% 5/01/2029 6,945,357 6,487,449
-------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Association 7.50% 7/01/2029 11,435,156 11,209,998
-------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Association 7.00% 12/01/2029 52,630,344 50,344,082
-------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Association* 8.00% 12/31/2030 9,150,000 9,124,265
-------------------------------------------------------------------------------------------------------------------
Federal National Mortgage Association* 7.50% 12/31/2030 15,725,000 15,388,328
-------------------------------------------------------------------------------------------------------------------
Government National Mortgage Association 9.50% 9/15/2009 1,370,467 1,439,183
-------------------------------------------------------------------------------------------------------------------
Government National Mortgage Association 9.50% 10/15/2009 2,451,790 2,580,278
-------------------------------------------------------------------------------------------------------------------
Government National Mortgage Association 9.50% 11/15/2009 1,128,997 1,186,775
-------------------------------------------------------------------------------------------------------------------
Government National Mortgage Association 9.50% 11/15/2017 267,299 282,266
-------------------------------------------------------------------------------------------------------------------
Government National Mortgage Association 9.50% 9/15/2019 52,755 55,682
-------------------------------------------------------------------------------------------------------------------
Government National Mortgage Association 7.00% 11/15/2028 22,493,848 21,636,157
-------------------------------------------------------------------------------------------------------------------
Government National Mortgage Association 6.50% 11/15/2028 10,930,890 10,240,932
-------------------------------------------------------------------------------------------------------------------
Government National Mortgage Association* 8.00% 12/31/2030 19,375,000 19,375,000
-------------------------------------------------------------------------------------------------------------------
Government National Mortgage Association* 7.00% 12/31/2030 10,925,000 10,505,043
-------------------------------------------------------------------------------------------------------------------
U.S. Department of Veterans Affairs REMIC 1998-3C 6.50% 6/15/2021 7,500,000 6,855,450
------------
318,900,601
------------
Total U.S. Government Securities 511,068,347(1)
------------
</TABLE>
--------------------------------------------------------------------------------
(1) The fund paid a total of $529,648,370 for these securities.
--------------------------------------------------------------------------------
The text and notes are an integral part of the financial statements.
8 State Street Research Government Income Fund
<PAGE>
<TABLE>
<CAPTION>
Coupon Maturity Amount Market
Issuer Rate Date of Principal Value
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Other Investments 14.2% of net assets
Trust Certificates 2.0%
--------------------------------------------------------------------------------------------------------------------------
Government Backed Trust Class T-3 9.63% 5/15/2002 $2,965,639 $2,934,411
--------------------------------------------------------------------------------------------------------------------------
Government Trust Certificates Class 2-E 9.40% 5/15/2002 9,225,240 9,392,770
-----------
12,327,181
-----------
Foreign Government 3.0%
--------------------------------------------------------------------------------------------------------------------------
Government of New Zealand 8.00% 4/15/2004 4,700,000 NZD 2,357,461
--------------------------------------------------------------------------------------------------------------------------
Government of New Zealand 8.00% 11/15/2006 13,675,000 NZD 6,973,220
--------------------------------------------------------------------------------------------------------------------------
Republic of Greece 8.80% 6/19/2007 2,728,100,000 GRD 8,493,147
-----------
17,823,828
-----------
Finance/Mortgage 9.2%
--------------------------------------------------------------------------------------------------------------------------
Chase Commercial Mortgage Securities Corp. 1996-2 Cl. A2 6.90% 9/19/2006 $4,675,000 $4,495,307
--------------------------------------------------------------------------------------------------------------------------
Chase Commercial Mortgage Securities Corp. 1997-1 Cl. A1 7.27% 7/19/2004 3,250,103 3,220,649
--------------------------------------------------------------------------------------------------------------------------
Credit Suisse First Boston 97-C2 Cl. A2 6.52% 7/17/2007 4,730,000 4,484,608
--------------------------------------------------------------------------------------------------------------------------
First Union Lehman Brothers Bank Series 1998-C2 Cl. A1 6.28% 6/18/2007 13,500,737 12,960,708
--------------------------------------------------------------------------------------------------------------------------
GMAC Commercial Mortgage Security Inc. 1997-C2 A 6.55% 4/15/2029 6,700,000 6,247,750
--------------------------------------------------------------------------------------------------------------------------
GMAC Commercial Mortgage Security Inc. 99-C1 Cl. A2 6.18% 5/15/2033 4,550,000 4,117,750
--------------------------------------------------------------------------------------------------------------------------
LB Commercial Conduit Mortgage Trust 97-LL1-A1 6.79% 6/12/2004 6,231,040 6,129,786
--------------------------------------------------------------------------------------------------------------------------
LB Commercial Conduit Mortgage Trust 98C1-A1 6.33% 11/18/2004 5,532,479 5,338,842
--------------------------------------------------------------------------------------------------------------------------
Merrill Lynch Mortgage Investments Inc. Series 1997-C2 Cl. A1 6.46% 12/10/2029 2,832,962 2,735,578
--------------------------------------------------------------------------------------------------------------------------
Merrill Lynch Mortgage Investments Inc. Series 1998-C2 Cl. A1 6.22% 2/15/2030 4,180,194 3,999,923
--------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Capital Inc. 98-A1 6.19% 1/15/2007 2,299,153 2,197,487
-----------
55,928,388
-----------
Total Other Investments 86,079,397(1)
-----------
Commercial Paper 9.6% of net assets
--------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Bank 5.88% 5/01/2000 33,803,000 33,803,000
--------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Bank 5.81% 5/02/2000 5,000,000 4,999,194
--------------------------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp. 5.90% 5/02/2000 19,250,000 19,246,851
-----------
Total Commercial Paper 58,049,045(2)
-----------
</TABLE>
--------------------------------------------------------------------------------
(1) The fund paid a total of $90,724,106 for these securities.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(2) The fund paid a total of $58,049,045 for these securities.
--------------------------------------------------------------------------------
The text and notes are an integral part of the financial statements.
9
<PAGE>
<TABLE>
<CAPTION>
Market
Issuer Shares Value
-------------------------------------------------------------------------------------------------
Short-Term Investments 22.2% of net assets
<S> <C> <C>
State Street Navigator Securities Lending Prime Portfolio 134,759,419 $134,759,419
-------------
Total Short-Term Investments 134,759,419(1)
-------------
</TABLE>
--------------------------------------------------------------------------------
(1) The fund paid a total of $134,759,419 for these securities.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
% of
Net Assets
-------------------------------------------------------------------------------------------------
<S> <C> <C>
Summary of Portfolio Assets
-------------------------------------------------------------------------------------------------
Total Investments 130.2% 789,956,208(1)
-------------------------------------------------------------------------------------------------
Cash and Other Assets, Less Liabilities (30.2%) (183,463,781)
------ -------------
Net Assets 100.0% $606,492,427
====== =============
</TABLE>
--------------------------------------------------------------------------------
(1) The fund paid a total of $813,180,940 for these securities.
--------------------------------------------------------------------------------
The text and notes are an integral part of the financial statements.
10 State Street Research Government Income Fund
<PAGE>
Futures contracts open at April 30, 2000 are as follows:
<TABLE>
<CAPTION>
Notional Expiration Unrealized
Type Amount Month Depreciation
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
----------------------------------------------------------------------------------------------------------------------------
5 year U.S. Treasury Notes $54,300,000 June, 2000 $(548,581)
----------------------------------------------------------------------------------------------------------------------------
10 year U.S. Treasury Notes $18,200,000 June, 2000 (33,488)
----------
----------------------------------------------------------------------------------------------------------------------------
$(582,069)
==========
</TABLE>
Forward currency exchange contracts that were outstanding at April 30, 2000:
<TABLE>
<CAPTION>
Unrealized
Contract Appreciation Delivery
Transaction Total Value Price (Depreciation) Date
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------
Sell Euro, Buy U.S. dollars 913,000 EUR 0.99120 EUR $73,750 5/18/00
-----------------------------------------------------------------------------------------------------------------
Sell Euro, Buy U.S. dollars 822,400 EUR 0.94745 EUR 26,951 7/26/00
-----------------------------------------------------------------------------------------------------------------
Sell Greek drachma, Buy U.S. dollars 128,910,000 GRD 0.00287 GRD 21,243 5/09/00
-----------------------------------------------------------------------------------------------------------------
Sell Greek drachma, Buy U.S. dollars 419,040,000 GRD 0.00286 GRD 66,648 5/09/00
-----------------------------------------------------------------------------------------------------------------
Sell Greek drachma, Buy U.S. dollars 827,269,000 GRD 0.00294 GRD 196,807 5/18/00
-----------------------------------------------------------------------------------------------------------------
Buy New Zealand dollars, Sell U.S. dollars 940,000 NZD 0.48837 NZD (2,613) 5/18/00
-----------------------------------------------------------------------------------------------------------------
Buy New Zealand dollars, Sell U.S. dollars 3,774,000 NZD 0.49630 NZD (40,419) 5/18/00
-----------------------------------------------------------------------------------------------------------------
Sell New Zealand dollars, Buy U.S. dollars 1,932,000 NZD 0.49023 NZD 8,964 5/18/00
-----------------------------------------------------------------------------------------------------------------
Sell New Zealand dollars, Buy U.S. dollars 7,646,000 NZD 0.49000 NZD 33,718 5/18/00
-----------------------------------------------------------------------------------------------------------------
Sell New Zealand dollars, Buy U.S. dollars 510,000 NZD 0.49538 NZD 4,993 5/18/00
-----------------------------------------------------------------------------------------------------------------
Sell New Zealand dollars, Buy U.S. dollars 3,053,000 NZD 0.49600 NZD 31,944 7/26/00
-----------------------------------------------------------------------------------------------------------------
Sell New Zealand dollars, Buy U.S. dollars 10,310,000 NZD 0.49535 NZD 101,174 7/26/00
---------
-----------------------------------------------------------------------------------------------------------------
$523,160
=========
</TABLE>
Federal Income Tax Information
At April 30, 2000, the net unrealized depreciation of
investments based on cost for Federal income tax purposes of
$813,414,346 was as follows:
Aggregate gross unrealized appreciation for all investments in
which there is an excess of value over tax cost $ 4,623,037
Aggregate gross unrealized depreciation for all investments in
which there is an excess of tax cost over value (28,081,175)
-------------
$(23,458,138)
=============
At October 31, 1999, the fund had a capital loss carryforward of $26,451,304, of
which $17,196,293, $4,139,815 and $5,115,196 expire on October 31, 2002, 2004
and 2007, respectively. Also, the fund has acquired in a merger a capital loss
carryforward of $5,100,777, of which $3,074,207 and $2,026,570 expire on October
31, 2001 and 2002.
The text and notes are an integral part of the financial statements.
11
<PAGE>
Statement of
Assets and Liabilities April 30, 2000 (unaudited)
--------------------------------------------------------------------------------
This is the fund's balance sheet as of the report date. It shows the fund's
total assets, its liabilities and, by subtraction, its net assets. It also shows
the price for share class as of the report date.
Assets
Investments, at market value $789,956,208(1)
Cash 1,429
Receivable for securities sold 32,409,917
Interest receivable 8,530,086
Receivable for fund shares sold 1,073,567
Receivable for open forward contracts 566,192
Receivable for variation margin 36,641
Other assets 91,231
-------------
832,665,271
Liabilities
Payable for collateral received on
securities loaned 134,759,419
Payable for securities purchased 87,196,050
Dividends payable 1,600,165
Payable for fund shares redeemed 1,065,946
Accrued management fee 601,095
Accrued distribution and service fees 424,030
Accrued transfer agent and shareholder services 337,421
Payable for open forward contracts 43,032
Other accrued expenses 145,686
-------------
226,172,844
-------------
Net Assets $606,492,427
=============
Net Assets consist of:
Undistributed net investment income $1,441,115
Unrealized depreciation of investments (23,224,732)
Unrealized appreciation of forward contracts
and foreign currency 435,024
Unrealized depreciation of futures contracts (582,069)
Accumulated net realized loss (31,734,410)
Paid-in capital 660,157,499
-------------
$606,492,427(2)
=============
--------------------------------------------------------------------------------
(1) The fund paid a total of $813,180,940 for these securities.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(2) Net Asset Value (NAV) of Each Share Class
Except where noted, the NAV is the offering and the redemption price for each
class.
Net Assets / Number of Shares = NAV
A $455,032,058 37,970,434 $11.98*
B(1) $27,710,688 2,326,965 $11.91**
B $89,613,302 7,504,413 $11.94**
C $20,250,236 1,694,437 $11.95**
S $13,886,143 1,160,033 $11.97
* Maximum offering price per share $12.54 ($11.98 / .955)
** When you sell Class B(1), Class B or Class C shares, you receive the net
asset value minus deferred sales charge, if any.
--------------------------------------------------------------------------------
The text and notes are an integral part of the financial statements.
12 State Street Research Government Income Fund
<PAGE>
Statement of
Operations For the six months ended April 30, 2000 (unaudited)
--------------------------------------------------------------------------------
This shows what the fund earned and lost over the report period, and what its
expenses were.
Investment Income
Interest, net of foreign taxes $22,936,372(1)
Expenses
Management fee 1,832,051(2)
Transfer agent and shareholder services 541,289(3)
Custodian fee 120,848
Service fee-Class A 574,280(4)
Distribution and service fees-Class B(1) 131,163(4)
Distribution and service fees-Class B 486,269(4)
Distribution and service fees-Class C 113,583(4)
Reports to shareholders 36,667
Registration fees 31,321
Audit fee 22,386
Legal fees 7,644
Miscellaneous 5,642
-----------
3,903,143
Fees paid indirectly (27,575)(5)
-----------
3,875,568
-----------
Net investment income 19,060,804
-----------
Realized and Unrealized Gain (Loss)
on Investments, Forward Contracts, Foreign
Currency and Futures Contracts
Net realized loss on investments (4,701,375)(6)
Net realized loss on forward contracts
and foreign currency (329,715)
Net realized gain on futures contracts 18,330
-----------
Total net realized loss (5,012,760)
-----------
Net unrealized depreciation of investments (5,701,852)
Net unrealized appreciation of forward contracts
and foreign currency 70,121
Net unrealized depreciation of futures contracts (619,009)
-----------
Total net unrealized depreciation (6,250,740)
-----------
Net loss on investments, forward contracts,
foreign currency and futures contracts (11,263,500)
-----------
Net increase in net assets resulting
from operations $7,797,304
===========
--------------------------------------------------------------------------------
(1) The fund paid foreign taxes of $3,685.
--------------------------------------------------------------------------------
Includes $82,654 in income from the lending of portfolio securities. As of
the report date, the fund had a total of $133,039,231 of securities out on
loan and was holding a total of $134,759,419 in collateral related to
those loans.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(2) The management fee is 0.60% of the first $500 million of fund assets,
annually, 0.55% of the next $500 million, and 0.50% of any amount over $1
billion.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(3) Includes a total of $320,702 paid to the distributor for the services it
provided and to MetLife for similar services it provided, including
maintaining the accounts of some investors who hold shares through that
firm's employee benefit plans and other sponsored arrangements.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(4) Payments made to the distributor under the fund's 12b-1 plans. The fees
cover personal services and the maintenance of shareholder accounts. The
fees also cover distribution and marketing expenditures for the sale of
fund shares.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(5) Represents transfer agent credits earned from uninvested cash balances.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(6) To earn this, the fund sold $429,556,632 of securities. During this same
period, the fund also bought $413,942,244 worth of securities. These
figures don't include short-term obligations.
--------------------------------------------------------------------------------
The text and notes are an integral part of the financial statements.
13
<PAGE>
Statement of
Changes in Net Assets
--------------------------------------------------------------------------------
This shows how the fund's size changed over the report period, including changes
that resulted from investments performing as well as those that resulted from
shareholders buying and selling fund shares.
<TABLE>
<CAPTION>
Six months ended
Year ended April 30, 2000
October 31, 1999 (unaudited)
-------------------------------------------------------------------------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations:
Net investment income $39,129,270 $19,060,804
Net realized loss on investments,
forward contracts, foreign currency
and futures contracts (5,885,622) (5,012,760)
Net unrealized depreciation of
investments, forward contracts, foreign
currency and futures contracts (40,964,747) (6,250,740)
--------------------------------
Net increase (decrease) resulting
from operations (7,721,099) 7,797,304
--------------------------------
Dividends from net investment income:
Class A (30,163,284) (15,071,183)
Class B(1) (584,095) (765,122)
Class B (6,293,781) (2,833,027)
Class C (1,534,694) (662,867)
Class S (1,279,031) (522,294)
--------------------------------
(39,854,885) (19,854,493)
--------------------------------
Net decrease from fund share
transactions (4,192,129) (37,436,937)(1)
--------------------------------
Total decrease in net assets (51,768,113) (49,494,126)
Net Assets
Beginning of period 707,754,666 655,986,553
--------------------------------
End of period $655,986,553 $606,492,427(2)
================================
</TABLE>
--------------------------------------------------------------------------------
(2) Includes undistributed net investment income of $2,234,804 and $1,441,115,
respectively.
--------------------------------------------------------------------------------
The text and notes are an integral part of the financial statements.
14 State Street Research Government Income Fund
<PAGE>
--------------------------------------------------------------------------------
(1) These transactions break down by share class as follows:
<TABLE>
<CAPTION>
Six months ended
Year ended April 30, 2000
October 31, 1999 (unaudited)
===============================================================================
Class A Shares Amount Shares Amount
=======================================================================================================================
<S> <C> <C> <C> <C>
Shares sold 18,496,573 $233,070,669 5,229,685 $62,878,000*
Issued upon reinvestment of dividends 1,452,763 18,264,542 1,011,755 12,351,782
Shares redeemed (20,253,359) (254,382,165) (7,636,537) (91,948,225)
--------------------------------------------------------------------------------
Net decrease (304,023) ($3,046,954) (1,395,097) ($16,718,443)
================================================================================
<CAPTION>
Class B(1) Shares (a) Amount (a) Shares Amount
=======================================================================================================================
<S> <C> <C> <C> <C>
Shares sold 2,235,815 $27,939,669 631,648 $7,570,209**
Issued upon reinvestment of dividends 40,538 497,196 55,612 664,331
Shares redeemed (278,249) (3,442,549) (358,399) (4,273,747)***
--------------------------------------------------------------------------------
Net increase 1,998,104 $24,994,316 328,861 $3,960,793
================================================================================
<CAPTION>
Class B Shares Amount Shares Amount
=======================================================================================================================
<S> <C> <C> <C> <C>
Shares sold 1,837,925 $23,525,800 146,603 $1,732,812**
Issued upon reinvestment of dividends 356,123 4,468,410 203,283 2,465,144
Shares redeemed (3,382,645) (42,650,050) (1,630,118) (19,561,899)***
--------------------------------------------------------------------------------
Net decrease (1,188,597) ($14,655,840) (1,280,232) ($15,363,943)
================================================================================
<CAPTION>
Class C Shares Amount Shares Amount
=======================================================================================================================
<S> <C> <C> <C> <C>
Shares sold 1,426,771 $17,998,565 524,937 $6,283,289**
Issued upon reinvestment of dividends 81,440 1,019,668 61,387 755,411
Shares redeemed (1,508,907) (18,757,082) (1,012,358) (12,147,904)****
--------------------------------------------------------------------------------
Net increase (decrease) (696) $261,151 (426,034) ($5,109,204)
================================================================================
<CAPTION>
Class S Shares Amount Shares Amount
=======================================================================================================================
<S> <C> <C> <C> <C>
Shares sold 691,706 $8,684,219 146,437 $1,754,805
Issued upon reinvestment of dividends 68,557 859,445 35,035 420,432
Shares redeemed (1,662,738) (21,288,466) (528,021) (6,381,377)
--------------------------------------------------------------------------------
Net decrease (902,475) ($11,744,802) (346,549) ($4,206,140)
================================================================================
</TABLE>
The trustees have the authority to issue an unlimited number of fund
shares, with a $.001 par value per share. MetLife owned 104,725 Class S
shares.
* Sales charges of $38,294 and $117,700 were collected by the distributor
and MetLife on sales of these shares.
** Like all broker-dealers, MetLife received commissions that were calculated
as a percentage of these sales but the commissions of $163,859, $127 and
$90 for Class B(1), Class B and Class C were paid by the distributor, not
the fund.
*** Includes $61,802 and $192,698 in deferred sales charges collected by the
distributor for Class B(1) and Class B.
**** Includes $16,788 in deferred sales charges collected by the distributor.
(a) January 1, 1999 (commencement of share class) to October 31, 1999.
--------------------------------------------------------------------------------
The text and notes are an integral part of the financial statements.
15
<PAGE>
Financial Highlights
--------------------------------------------------------------------------------
These provide a summary of each share class's financial performance.
<TABLE>
<CAPTION>
Class A
============================================================================
Years ended October 31 Six months ended
--------------------------------------------------------- April 30, 2000
Per Share Data 1995(a) 1996(a) 1997(a) 1998(a) 1999(a) (unaudited)(a)
===========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ($) 11.68 12.58 12.43 12.65 13.07 12.21
------- ------- ------- ------- ------- -------
Net investment income ($) 0.83 0.81 0.80 0.78 0.74 0.38
Net realized and unrealized gain (loss) on
investments, options, forward contracts,
foreign currency and futures contratcts ($) 0.88 (0.17) 0.22 0.43 (0.85) (0.22)
------- ------- ------- ------- ------- -------
Total from investment operations ($) 1.71 0.64 1.02 1.21 (0.11) 0.16
------- ------- ------- ------- ------- -------
Dividends from net investment income ($) (0.81) (0.79) (0.80) (0.79) (0.75) (0.39)
------- ------- ------- ------- ------- -------
Total distributions ($) (0.81) (0.79) (0.80) (0.79) (0.75) (0.39)
------- ------- ------- ------- ------- -------
Net asset value, end of period ($) 12.58 12.43 12.65 13.07 12.21 11.98
======= ======= ======= ======= ======= =======
Total return (%) (b) 15.07 5.28 8.52 9.85 (0.84) 1.37(d)
Ratios/Supplemental Data
===========================================================================================================================
Net assets at end of period ($ thousands) 655,045 584,313 524,565 518,651 480,643 455,032
Expense ratio (%) 1.10 1.09 1.08 1.09 1.05 1.09(e)
Expense ratio after expense reductions (%) 1.10 1.09 1.08 1.09 1.04 1.08(e)
Ratio of net investment income to
average net assets (%) 6.83 6.50 6.44 6.11 5.86 6.30(e)
Portfolio turnover rate (%) 105.57 88.79 124.95 160.89 213.70 67.69
</TABLE>
<TABLE>
<CAPTION>
Class B(1)
=======================================
Six months ended
Period ended April 30, 2000
Per Share Data October 31,1999(a)(c) (Unaudited)(a)
=========================================================================================================
<S> <C> <C>
Net asset value, beginning of period ($) 12.97 12.14
------ ------
Net investment income ($) 0.52 0.33
Net realized and unrealized loss on investments, options,
forward contracts, foreign currency and futures contracts ($) (0.82) (0.21)
------ ------
Total from investment operations ($) (0.30) 0.12
------ ------
Dividends from net investment income ($) (0.53) (0.35)
------ ------
Total distributions ($) (0.53) (0.35)
------ ------
Net asset value, end of period ($) 12.14 11.91
====== ======
Total return (%) (b) (2.31)(d) 1.00(d)
Ratios/Supplemental Data
=========================================================================================================
Net assets at end of period ($ thousands) 24,250 27,711
Expense ratio (%) 1.80(e) 1.84(e)
Expense ratio after expense reductions (%) 1.79(e) 1.83(e)
Ratio of net investment income to
average net assets (%) 5.01(e) 5.51(e)
Portfolio turnover rate (%) 213.70 67.69
</TABLE>
The text and notes are an integral part of the financial statements.
16 State Street Research Government Income Fund
<PAGE>
<TABLE>
<CAPTION>
Class B
==============================================================================
Years ended October 31 Six months ended
----------------------------------------------------------- April 30, 2000
Per Share Data 1995(a) 1996(a) 1997(a) 1998(a) 1999(a) (unaudited)(a)
==============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ($) 11.66 12.55 12.40 12.61 13.03 12.17
------ ------ ------ ------- ------- ------
Net investment income ($) 0.73 0.71 0.70 0.68 0.64 0.33
Net realized and unrealized gain (loss)
on investments, options, forward contracts,
foreign currency and futures contracts ($) 0.87 (0.16) 0.22 0.43 (0.84) (0.21)
------ ------ ------ ------- ------- ------
Total from investment operations ($) 1.60 0.55 0.92 1.11 (0.20) 0.12
------ ------ ------ ------- ------- ------
Dividends from net investment income ($) (0.71) (0.70) (0.71) (0.69) (0.66) (0.35)
------ ------ ------ ------- ------- ------
Total distributions ($) (0.71) (0.70) (0.71) (0.69) (0.66) (0.35)
------ ------ ------ ------- ------- ------
Net asset value, end of period ($) 12.55 12.40 12.61 13.03 12.17 11.94
====== ====== ====== ======= ======= ======
Total return (%) (b) 14.15 4.51 7.66 9.07 (1.58) 1.00(d)
Ratios/Supplemental Data
==============================================================================================================================
Net assets at end of period ($ thousands) 87,908 95,218 97,253 129,976 106,902 89,613
Expense ratio (%) 1.85 1.84 1.83 1.84 1.80 1.84(e)
Expense ratio after expense reductions (%) 1.85 1.84 1.83 1.84 1.79 1.83(e)
Ratio of net investment income to
average net assets (%) 6.01 5.75 5.68 5.33 5.12 5.54(e)
Portfolio turnover rate (%) 105.57 88.79 124.95 160.89 213.70 67.69
</TABLE>
<TABLE>
<CAPTION>
Class C
=============================================================================
Years ended October 31 Six months ended
----------------------------------------------------------- April 30, 2000
Per Share Data 1995(a) 1996(a) 1997(a) 1998(a) 1999(a) (unaudited)(a)
=============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ($) 11.66 12.56 12.41 12.62 13.04 12.18
------ ------ ------ ------ ------ ------
Net investment income ($) 0.74 0.71 0.70 0.67 0.64 0.33
Net realized and unrealized gain (loss)
on investments, options, forward contracts,
foreign currency and futures contracts ($) 0.87 (0.16) 0.22 0.44 (0.84) (0.21)
------ ------ ------ ------ ------ ------
Total from investment operations ($) 1.61 0.55 0.92 1.11 (0.20) 0.12
------ ------ ------ ------ ------ ------
Dividends from net investment income ($) (0.71) (0.70) (0.71) (0.69) (0.66) (0.35)
------ ------ ------ ------ ------ ------
Total distributions ($) (0.71) (0.70) (0.71) (0.69) (0.66) (0.35)
------ ------ ------ ------ ------ ------
Net asset value, end of period ($) 12.56 12.41 12.62 13.04 12.18 11.95
====== ====== ====== ====== ====== ======
Total return (%) (b) 14.24 4.51 7.65 9.06 (1.58) 1.00(d)
Ratios/Supplemental Data
=============================================================================================================================
Net assets at end of period ($ thousands) 13,033 14,473 16,301 27,659 25,818 20,250
Expense ratio (%) 1.85 1.84 1.83 1.84 1.80 1.84(e)
Expense ratio after expense reductions (%) 1.85 1.84 1.83 1.84 1.79 1.83(e)
Ratio of net investment income to
average net assets (%) 6.08 5.76 5.68 5.28 5.11 5.56(e)
Portfolio turnover rate (%) 105.57 88.79 124.95 160.89 213.70 67.69
</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 October 31, 1999.
(d) Not annualized.
(e) Annualized.
The text and notes are an integral part of the financial statements.
17
<PAGE>
Financial Highlights CONTINUED
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class S
==============================================================================
Years ended October 31 Six months ended
----------------------------------------------------------------------------------------------------------- April 30, 2000
Per Share Data 1995(a) 1996(a) 1997(a) 1998(a) 1999(a) (unaudited)(a)
==============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ($) 11.67 12.57 12.42 12.64 13.06 12.20
------ ------ ------ ------ ------ ------
Net investment income ($) 0.90 0.84 0.80 0.81 0.75 0.39
Net realized and unrealized gain (loss)
on investments, options, forward contracts,
foreign currency and futures contracts ($) 0.84 (0.17) 0.25 0.43 (0.83) (0.21)
------ ------ ------ ------ ------ ------
Total from investment operations ($) 1.74 0.67 1.05 1.24 (0.08) 0.18
------ ------ ------ ------ ------ ------
Dividends from net investment income ($) (0.84) (0.82) (0.83) (0.82) (0.78) (0.41)
------ ------ ------ ------ ------ ------
Total distributions ($) (0.84) (0.82) (0.83) (0.82) (0.78) (0.41)
------ ------ ------ ------ ------ ------
Net asset value, end of period ($) 12.57 12.42 12.64 13.06 12.20 11.97
====== ====== ====== ====== ====== ======
Total return (%) (b) 15.37 5.55 8.80 10.13 (0.60) 1.50(d)
Ratios/Supplemental Data
==============================================================================================================================
Net assets at end of period ($ thousands) 5,036 7,767 32,115 31,468 18,373 13,886
Expense ratio (%) 0.85 0.84 0.82 0.84 0.80 0.84(e)
Expense ratio after expense reductions (%) 0.85 0.84 0.82 0.84 0.79 0.83(e)
Ratio of net investment income to
average net assets (%) 6.79 6.78 6.66 6.38 5.94 6.37(e)
Portfolio turnover rate (%) 105.57 88.79 124.95 160.89 213.70 67.69
</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 October 31, 1999.
(d) Not annualized.
(e) Annualized.
The text and notes are an integral part of the financial statements.
18 State Street Research Government Income Fund
<PAGE>
Board of Trustees
Gerard P. Maus
Chief Financial Officer,
Chief Administrative Officer,
Director and Interim Chief Operating Officer,
State Street Research & Management Company
Bruce R. Bond
Former Chairman of the Board,
Chief Executive Officer and President,
PictureTel Corporation
Steve A. Garban
Former Senior Vice President
for Finance and Operations and Treasurer,
The Pennsylvania State University
Dean O. Morton
Former Executive Vice President,
Chief Operating Officer and Director,
Hewlett-Packard Company
Susan M. Phillips
Dean, School of Business and Public Management,
George Washington University; former Member of
the Board of Governors of the Federal Reserve
System and Chairman and Commissioner of the
Commodity Futures Trading Commission
Toby Rosenblatt
President, Founders Investments Ltd.
President, The Glen Ellen Company
Michael S. Scott Morton
Jay W. Forrester Professor of Management,
Sloan School of Management,
Massachusetts Institute of Technology
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"), a series of State Street Research Financial Trust, was convened
on February 25, 2000 ("Meeting"). The results of the Meeting are set forth
below.
Votes (millions of shares)
Action on Proposal For Against Abstain
--------------------------------------------------------------------------------
Class A Shares
The Fund's current Rule 12b-1
Distribution Plan was amended to
increase the amount that may be
expended for the distribution
of Class A shares 16.4 3.2 1.2
Class B Shares
The Fund's current Rule 12b-1
Distribution Plan was amended to
increase the amount that may be
expended for the distribution
of Class A shares 4.3 0.4 0.4
Class B(1) Shares
The Fund's current Rule 12b-1
Distribution Plan was amended to
increase the amount that may be
expended for the distribution
of Class A shares 0.9 0.1 0.1
19
<PAGE>
[LOGO] STATE STREET RESEARCH
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---------------
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Permit #313
---------------
Contact Information for
Investor Services
--------------------------------------------------------------------------------
New accounts
[HANDS] contact your financial
professional for assistance
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[MAILBOX] mail
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P.O. Box 8408
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State Street Research
Spectrum of Funds
<TABLE>
<CAPTION>
Income Growth & Income Growth
--------------------------------------------------------------------------------------------------
CONSERVATIVE AGGRESSIVE
--------------------------------------------------------------------------------------------------
<S> <C> <C>
High Income Fund Argo Fund Global Resources Fund
Strategic Income Fund Investment Trust Emerging Growth Fund
New York Tax-Free Fund Alpha Fund Mid-Cap Growth Fund
Tax-Exempt Fund Strategic Growth & Income Fund Aurora Fund
Government Income Fund Strategic Income Plus Fund Concentrated International Fund
Money Market Fund Concentrated Growth Fund
Growth Fund
Galileo Fund
Legacy Fund
</TABLE>
Mutual fund purchases, exchanges and
account information
[INTERNET] internet
www.ssrfunds.com
[COMPUTER] e-mail
[email protected]
[PHONE] phone
1-87-SSR-FUNDS (1-877-773-8637)
7 days a week, 24 hours a day
Hearing-impaired:
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1-888-638-3193
[FAX] fax
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(request confirmation number
first from Service Center:
1-87-SSR-FUNDS)
[MAILBOX] mail
State Street Research Service Center
P.O. Box 8408
Boston, MA 02266-8408
---------------------------
[LOGO]
DALBAR
HONORS COMMITMENT TO:
INVESTORS
1999
---------------------------
for Excellence in Service
For 24-hour Automated Access to Your Account
[INTERNET] www.ssrfunds.com
[PHONE] 1-87-SSR-FUNDS
OverView
--------------------------------------------------------------------------------
For more information on the products and services mentioned in OverView, our
shareholder newsletter, visit our Web site at www.ssrfunds.com
State Street Research
FYI
o Did you know that you can give a State Street Research mutual fund as a
gift? Call a service center representative at 1-87-SSR-FUNDS
(1-877-773-8673), Monday through Friday, 8am - 6pm Eastern Time, to learn
more.
--------------------------------------------------------------------------------
This report must be accompanied or preceded by a current State Street Research
Government Income Fund prospectus and a current Quarterly Performance Update.
To obtain a prospectus on any State Street Research fund call 1-87-SSR-FUNDS
(1-877-773-8637). The prospectus contains more complete information, including
sales charges and expenses. Please read the prospectus carefully before
investing or sending money.
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.
(C)2000 State Street Research Investment Services, Inc., One Financial Center,
Boston, MA 02111
Control Number:(exp0601)SSR-LD GI-1893-0600
<PAGE>
--------------------------
STATE STREET RESEARCH
--------------------------
STRATEGIC INCOME PLUS FUND
--------------------------
SEMIANNUAL REPORT
April 30, 2000
---------------------
WHAT'S INSIDE
---------------------
INVESTMENT UPDATE
About the fund,
economy and markets
FUND INFORMATION
Facts and figures
PLUS, COMPLETE PORTFOLIO HOLDINGS
AND FINANCIAL STATEMENTS
-------------------
[DALBAR LOGO]
-------------------
For Excellence
[logo] STATE STREET RESEARCH in
Service
<PAGE>
INVESTMENT ENVIRONMENT
THE ECONOMY
o The U.S. economy grew by an annualized rate of 7.3% in the fourth quarter of
1999, as measured by gross domestic product (GDP). Growth slowed to 5.4% in
the first quarter of 2000, but remains strong enough to raise concerns about
inflation.
o Inflation appears to be heating up. Core consumer inflation -- figured without
the impact of energy, food and tobacco -- advanced to 3.7% in March before
falling back to 3.0% in April.
o In an effort to dampen economic growth, the Federal Reserve Board raised
short-term interest rates three times during the period. The federal funds
rate closed out the first quarter at 6.0%, up from 5.25% six months ago.
THE MARKETS
o The S&P 500 ended 1999 up 21.03%.(1) However, interest rate increases and
soaring valuations became more than the stock market could bear. For the year
ended April 2000, the S&P 500 was down -0.79%.
o After losing ground early in the six-month period, bonds strengthened during
the first quarter of 2000 as the yield on 30-year Treasury bonds fell below
6.0% for the first time in more than a year.
THE FUND
OVER THE PAST SIX MONTHS
o Class A shares of State Street Research Strategic Income Plus Fund returned
3.88% [without sales charge](2) for the 6-month period ended April 30, 2000.
That was higher than the Lehman Brothers Aggregate Bond Index, which gained
1.42% during the same period.(1)
o The fund's investments in stocks -- less than 25% of the portfolio's assets --
helped performance. In particular, stocks of large-cap growth and
international companies did well.
o During the six-month period, the manager made a small reduction in the fund's
stock position. High stock prices made bonds relatively more attractive on a
risk/reward basis.
o The performance of the fund's bond holdings, which included both high-grade
and international debt, matched that of the Lehman Brothers Aggregate Bond
Index.
CURRENT STRATEGY
o The fund is positioned to anticipate a more moderate pace of economic growth
in the U.S. The manager looks for both economic and corporate profit growth to
slow in response to rising interest rates, and expects stocks to provide
modest returns for the remainder of the year.
o Foreign economies are expected to continue their economic recovery.
o The pressure on bond prices is expected to continue until interest rate
increases stop.
April 30, 2000
(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 Lehman Brothers
Aggregate Bond Index includes fixed rate debt issues rated investment grade
or higher. These indices do not take transaction charges into consideration.
It is not possible to invest directly in the indices.
(2) 3.49% for class B(1) shares; 3.49% for class B shares; 3.49% for class C
shares; 4.02% 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 gains distributions and income dividends at net asset value.
(4) Performance reflects a maximum 5.75% 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.
(5) Class S shares, offered without a sales charge, are available through
certain employee benefit plans and special programs.
(6) Performance for the period May 16, 1994 to March 27, 1997 reflects actual
performance of the fund prior to the liquidation of outstanding Class A
shares in 1997. Returns shown for all other periods, including periods prior
to the reintroduction of Class A shares in 1999, feflect performance of
Class S shares. Returns shown are for periods prior to the creation of the
class in 1999. They reflect performance of Class S shares, adjusted for
shareholder and annual fund operating expenses.
PLEASE NOTE THAT THE DISCUSSION THROUGHOUT THIS SHAREHOLDER REPORT IS DATED AS
INDICATED AND BECAUSE OF POSSIBLE CHANGES IN VIEWPOINT, DATA AND TRANSACTION,
SHOULD NOT BE RELIED UPON AS BEING CURRENT THEREAFTER.
--------------------------------------------------------------------------------
FUND INFORMATION (all data are for periods ended April 30, 2000, except where
noted)
--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
FOR PERIODS ENDED 3/31/00(3)(4)(5)(6)
------------------------------------------------------------------------------
LIFE OF FUND
(since 5/16/94) 5 YEARS 1 YEAR
------------------------------------------------------------------------------
Class A 8.61% 9.01% -0.98%
------------------------------------------------------------------------------
Class B(1) 8.78% 9.21% -0.72%
------------------------------------------------------------------------------
Class B 8.89% 9.21% -0.72%
------------------------------------------------------------------------------
Class C 8.89% 9.49% 3.28%
------------------------------------------------------------------------------
Class S 9.99% 10.59% 5.34%
------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN(3)(5)(6)
------------------------------------------------------------------------------
LIFE OF FUND
(since 5/16/94) 5 YEARS 1 YEAR
------------------------------------------------------------------------------
Class A 9.32% 9.59% 1.79%
------------------------------------------------------------------------------
Class B(1) 8.50% 8.77% 0.99%
------------------------------------------------------------------------------
Class B 8.50% 8.77% 0.99%
------------------------------------------------------------------------------
Class C 8.50% 8.77% 0.99%
------------------------------------------------------------------------------
Class S 9.59% 9.86% 2.04%
------------------------------------------------------------------------------
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 77%
Equities 22%
Cash 1%
<PAGE>
<TABLE>
STATE STREET RESEARCH STRATEGIC INCOME PLUS FUND
<CAPTION>
------------------------------------------------------------------------------------------------------------------
Investment Portfolio VALUE
April 30, 2000 (Unaudited) SHARES (NOTE 1)
------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
EQUITY SECURITIES 21.9%
AUTOMOBILES & TRANSPORTATION 0.2%
AUTOMOTIVE PARTS 0.1%
Delphi Automotive Systems Corp. .............................................. 1,700 $ 32,512
-----------
TRUCKERS 0.1%
CNF Transportation Inc. ...................................................... 800 22,350
-----------
Total Automobiles & Transportation ........................................... 54,862
-----------
CONSUMER DISCRETIONARY 2.6%
ADVERTISING AGENCIES 0.5%
Omnicom Group Inc. ........................................................... 640 58,280
Valassis Communications Inc.* ................................................ 3,300 112,406
-----------
170,686
-----------
CASINOS/GAMBLING, HOTEL/MOTEL 0.4%
GTech Holdings Corp.* ........................................................ 1,500 31,125
Harrah's Entertainment Inc.* ................................................. 3,335 68,576
International Game Technology Inc.* .......................................... 940 22,913
-----------
122,614
-----------
COMMERCIAL SERVICES 0.4%
A.C. Nielsen Corp.* .......................................................... 3,500 80,719
America Online Inc.* ......................................................... 1,000 59,812
-----------
140,531
-----------
COMMUNICATIONS, MEDIA & ENTERTAINMENT 0.2%
CBS Corp.* ................................................................... 1,140 66,975
-----------
PRINTING & PUBLISHING 0.4%
Hollinger International, Inc. Cl. A .......................................... 9,200 116,150
-----------
RESTAURANTS 0.1%
Darden Restaurants Inc. ...................................................... 1,000 18,438
-----------
RETAIL 0.5%
Circuit City Stores Inc. ..................................................... 1,140 67,046
Federated Department Stores Inc.* ............................................ 1,000 34,000
Home Depot Inc. .............................................................. 750 42,047
TJX Companies, Inc. .......................................................... 700 13,431
Wal-Mart Stores, Inc. ........................................................ 410 22,704
-----------
179,228
-----------
TOYS 0.1%
Mattel Inc. .................................................................. 1,400 17,150
-----------
Total Consumer Discretionary ................................................. 831,772
-----------
CONSUMER STAPLES 0.5%
BEVERAGES 0.1%
Anheuser-Busch Companies, Inc. ............................................... 370 26,108
-----------
DRUG & GROCERY STORE CHAINS 0.2%
CVS Corp. .................................................................... 800 34,800
Hannaford Brothers Co. ....................................................... 260 18,818
-----------
53,618
-----------
HOUSEHOLD PRODUCTS 0.1%
Colgate-Palmolive Co. ........................................................ 500 28,562
Dial Corp. ................................................................... 1,365 19,025
-----------
47,587
-----------
TOBACCO 0.1%
UST Inc. ..................................................................... 1,200 18,000
-----------
Total Consumer Staples ....................................................... 145,313
-----------
FINANCIAL SERVICES 2.1%
BANKS & SAVINGS & LOAN 0.5%
BankNorth Group Inc. ......................................................... 520 12,415
Golden West Financial Corp. .................................................. 900 30,712
Hudson City Bancorp Inc. ..................................................... 1,300 19,338
Hudson United Bancorp ........................................................ 400 9,025
Mercantile Bankshares Corp. .................................................. 400 11,400
North Fork BanCorp., Inc. .................................................... 700 11,331
Peoples Heritage Financial Group ............................................. 4,400 57,475
-----------
151,696
-----------
FINANCIAL DATA PROCESSING SERVICES & SYSTEMS 0.2%
First Data Corp. ............................................................. 1,400 68,163
-----------
INSURANCE 0.7%
Ace Ltd. ..................................................................... 3,800 90,962
Saint Paul Companies, Inc. ................................................... 1,700 60,563
XL Capital Ltd. Cl. A ........................................................ 1,453 69,199
-----------
220,724
-----------
MISCELLANEOUS FINANCIAL 0.7%
Ambac Financial Group, Inc. .................................................. 2,200 105,600
Citigroup, Inc. .............................................................. 1,100 65,381
Morgan Stanley Dean Witter & Co. ............................................. 860 66,005
-----------
236,986
-----------
SECURITIES BROKERAGE & SERVICES 0.0%
Bear Stearns Company Inc. .................................................... 103 4,416
-----------
Total Financial Services ..................................................... 681,985
-----------
HEALTH CARE 0.9%
DRUGS & BIOTECHNOLOGY 0.6%
Amgen Inc.* .................................................................. 1,000 56,000
Genetech, Inc.* .............................................................. 140 16,380
Pharmacia Corp. .............................................................. 700 34,956
Warner-Lambert Co. ........................................................... 700 79,669
-----------
187,005
-----------
HEALTH CARE FACILITIES 0.0%
Tenet Healthcare Corp.* ...................................................... 400 10,200
-----------
HEALTH CARE SERVICES 0.2%
Quorum Health Group Inc.* .................................................... 5,300 56,312
-----------
HOSPITAL SUPPLY 0.1%
Medtronic Inc. ............................................................... 600 31,163
-----------
Total Health Care ............................................................ 284,680
-----------
INTEGRATED OILS 0.5%
INTEGRATED DOMESTIC 0.1%
Unocal Corp. ................................................................. 1,500 48,469
-----------
INTEGRATED INTERNATIONAL 0.4%
BP Amoco PLC ADR ............................................................. 710 36,210
Suncor Energy Inc. ........................................................... 1,000 42,710
Total Fina SA ADR ............................................................ 600 45,375
-----------
124,295
-----------
Total Integrated Oils ........................................................ 172,764
-----------
MATERIALS & PROCESSING 1.7%
BUILDING & CONSTRUCTION 0.1%
York International Corp. ..................................................... 700 16,888
-----------
CHEMICALS 0.3%
Dow Chemical Co. ............................................................. 360 40,680
Omnova Solutions Inc. ........................................................ 1,080 6,480
Solutia Inc. ................................................................. 3,500 47,687
-----------
94,847
-----------
CONTAINERS & PACKAGING 0.3%
American National Can Group Inc. ............................................. 4,080 68,595
Smurfit Stone Container Corp.* ............................................... 2,600 39,650
-----------
108,245
-----------
DIVERSIFIED MANUFACTURING 0.3%
Ball Corp. ................................................................... 2,800 88,200
-----------
FERTILIZERS 0.1%
Agrium Inc. .................................................................. 4,000 37,500
-----------
FOREST PRODUCTS 0.0%
Champion International Corp. ................................................. 100 6,575
-----------
PAPER & FOREST PRODUCTS 0.3%
Fort James Corp. ............................................................. 2,590 61,998
Westvaco Corp. ............................................................... 1,400 43,225
-----------
105,223
-----------
STEEL 0.3%
Alaska Steel Holding Corp. ................................................... 3,116 34,471
Harsco Corp. ................................................................. 1,500 44,531
-----------
79,002
-----------
Total Materials & Processing ................................................. 536,480
-----------
OTHER 0.8%
MULTI-SECTOR 0.8%
Gencorp Inc. ................................................................. 2,300 23,144
General Electric Co. ......................................................... 570 89,632
Grant Pride Inc. ............................................................. 400 7,700
Honeywell International Inc.* ................................................ 600 33,600
Ogden Corp. .................................................................. 4,900 48,081
Tyco International Ltd. ...................................................... 1,140 52,369
-----------
Total Other .................................................................. 254,526
-----------
OTHER ENERGY 1.7%
GAS PIPELINES 0.7%
Columbia Energy Group ........................................................ 200 12,550
Dynegy Inc. Cl. A ............................................................ 1,420 92,921
Williams Companies Inc. ...................................................... 2,627 98,020
-----------
203,491
-----------
OIL & GAS PRODUCERS 0.7%
Anadarko Petroleum Corp. ..................................................... 800 34,598
Burlington Resources Inc. .................................................... 700 27,519
Ocean Energy Inc.* ........................................................... 6,200 80,212
Union Pacific Resources Group Inc. ........................................... 4,325 82,986
-----------
225,315
-----------
OIL WELL EQUIPMENT & SERVICES 0.3%
Baker Hughes Inc. ............................................................ 900 28,631
Halliburton Co. .............................................................. 500 22,094
Valero Energy Corp. .......................................................... 1,300 37,700
Weatherford International Inc.* .............................................. 400 16,250
-----------
104,675
-----------
Total Other Energy ........................................................... 533,481
-----------
PRODUCER DURABLES 1.3%
ELECTRICAL EQUIPMENT & COMPONENTS 0.5%
Mark IV Industries Inc. ...................................................... 4,700 99,581
Nortel Networks Corp. ........................................................ 600 67,950
-----------
167,531
-----------
MACHINERY 0.3%
Howmet International Inc.* ................................................... 4,700 99,581
-----------
MISCELLANEOUS EQUIPMENT 0.2%
Thomas & Betts Corp. ......................................................... 1,945 59,931
-----------
PRODUCTION TECHNOLOGY EQUIPMENT 0.3%
Teradyne Inc.* ............................................................... 700 77,000
-----------
Total Producer Durables ...................................................... 404,043
-----------
TECHNOLOGY 2.6%
COMMUNICATIONS TECHNOLOGY 0.9%
Cisco Systems Inc.* .......................................................... 1,280 88,740
General Motors Corp. Cl. H* .................................................. 200 19,262
Inktomi Corp.* ............................................................... 150 23,091
Lernout & Hauspie Speech Products NV ADR* .................................... 1,300 125,775
NCR Corp.* ................................................................... 1,200 46,350
-----------
303,218
-----------
COMPUTER SOFTWARE 0.2%
Microsoft Corp.* ............................................................. 710 49,523
-----------
COMPUTER TECHNOLOGY 0.7%
Electronic Data Systems Corp. ................................................ 570 39,188
EMC Corp.* ................................................................... 460 63,911
International Business Machines Corp. ........................................ 360 40,185
Silicon Graphics Inc.* ....................................................... 4,400 31,625
Sun Microsystems Inc.* ....................................................... 600 55,162
Unisys Corp.* ................................................................ 400 9,275
-----------
239,346
-----------
ELECTRONICS 0.4%
Nokia Corp. ADR .............................................................. 1,420 80,762
Solectron Corp.* ............................................................. 860 40,259
-----------
121,021
-----------
ELECTRONICS: SEMI-CONDUCTORS/COMPONENTS 0.4%
Cypress Semiconductor Corp.* ................................................. 745 38,693
Intel Corp. .................................................................. 300 38,044
Texas Instruments Inc. ....................................................... 300 48,863
-----------
125,600
-----------
Total Technology ............................................................. 838,708
-----------
UTILITIES 1.6%
ELECTRICAL 0.9%
CMP Group Inc. ............................................................... 1,300 37,619
DQE, Inc. .................................................................... 800 30,600
Energy East Corp. ............................................................ 1,800 37,575
Niagara Mohawk Holdings Inc.* ................................................ 1,200 16,650
OGE Energy Corp. ............................................................. 2,000 39,625
Pinnacle West Capital Corp. .................................................. 2,800 98,350
Scana Corp. .................................................................. 1,900 49,162
-----------
309,581
-----------
GAS DISTRIBUTION 0.2%
National Fuel Gas Co. ........................................................ 500 23,719
Nicor Inc. ................................................................... 500 16,937
Questar Corp. ................................................................ 800 15,050
-----------
55,706
-----------
TELECOMMUNICATIONS 0.5%
AT&T Corp.* .................................................................. 300 9,544
Broadwing Inc.* .............................................................. 400 11,325
MCI WorldCom Inc.* ........................................................... 600 27,262
Nextel Communications Inc. Cl. A* ............................................ 150 16,416
Qwest Communications International Inc.* ..................................... 1,290 55,954
RSL Communications Ltd. Cl. A* ............................................... 2,400 33,450
-----------
153,951
-----------
Total Utilities .............................................................. 519,238
-----------
NON-U.S. EQUITIES 5.4%
BMCMedia.com Ltd.* ........................................................... 24,000 28,312
Nokia AB Oy .................................................................. 3,200 183,566
Technip ...................................................................... 700 79,864
Infineon Technologies AG* .................................................... 600 41,319
China Telecom Ltd.* .......................................................... 10,000 71,574
Petrochina Co. Ltd.* ......................................................... 325,300 50,533
Kyocera Corp. ................................................................ 300 50,187
Taiyo Yuden Co ............................................................... 1,000 70,824
Royal Dutch Petroleum Co. .................................................... 1,200 69,164
City Developments Ltd. ....................................................... 7,000 31,790
DBS Group Ltd. ............................................................... 2,000 27,542
Keppel Corp. ................................................................. 14,000 32,488
Singapore Airlines Ltd. ...................................................... 4,000 41,488
British Telecom PLC .......................................................... 2,500 44,762
Banco Di Roma ................................................................ 20,100 21,251
BHF Bank AG .................................................................. 700 24,819
BP Amoco PLC* ................................................................ 4,200 36,260
Corus Entertainment Inc.* .................................................... 466 12,587
Fletcher Challenge Ltd. ...................................................... 6,600 15,224
Giordano International Ltd. .................................................. 62,000 101,487
Hirose Electric Company Ltd. ................................................. 700 84,637
L.M. Ericsson Telephone Co. Cl. B ............................................ 936 83,202
PTT Exploration & Production Public Co. Ltd. ................................. 12,200 61,857
RTZ Corp. .................................................................... 3,921 61,048
Sema Group PLC ............................................................... 4,100 66,197
Societe Generale de France SA ................................................ 100 20,709
Takara Shuzo Co. Ltd. ........................................................ 4,000 85,914
Telecom Italia SPA ........................................................... 5,300 74,104
Toshiba Corp. ................................................................ 10,000 97,024
WM Data AB Cl. B ............................................................. 1,100 38,523
Wolters Kluwer ............................................................... 1,200 28,320
-----------
Total Non-U.S. Equities ...................................................... 1,736,576
-----------
Total Equity Securities (Cost $5,320,702) .................................... 6,994,428
-----------
<CAPTION>
------------------------------------------------------------------------------------------------------------------
PRINCIPAL MATURITY VALUE
AMOUNT DATE (NOTE 1)
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FIXED INCOME SECURITIES 76.8%
U.S. TREASURY 10.5%
U.S. Treasury Bond, 12.00% ............................ $ 425,000 8/15/2013 $ 567,974
U.S. Treasury Bond, 11.25% ............................ 275,000 2/15/2015 402,358
U.S. Treasury Bond, 8.875% ............................ 325,000 2/15/2019 415,694
U.S. Treasury Bond, 8.75% ............................. 150,000 5/15/2020 191,484
U.S. Treasury Bond, 8.75% ............................. 300,000 8/15/2020 383,577
U.S. Treasury Bond, 8.125% ............................ 325,000 5/15/2021 394,215
U.S. Treasury Bond, 8.125% ............................ 325,000 8/15/2021 394,722
U.S. Treasury Bond, 6.625% ............................ 175,000 2/15/2027 184,216
U.S. Treasury Bond, 6.25% ............................. 150,000 5/15/2030 155,906
U.S. Treasury TIPS, 3.875% ............................ 257,918 4/15/2029 258,483
-----------
3,348,629
-----------
U.S. AGENCY MORTGAGE 34.5%
Federal National Mortgage Association, 6.50% .......... 100,000 8/15/2004 97,315
Federal National Mortgage Association, 6.375% ......... 75,000 6/15/2009 70,348
Federal National Mortgage Association, 6.625% ......... 50,000 9/15/2009 47,695
Federal National Mortgage Association, 5.50% .......... 90,578 2/01/2014 82,935
Federal National Mortgage Association, 6.50% .......... 247,913 9/01/2028 231,568
Federal National Mortgage Association, 6.50% .......... 678,243 11/01/2028 633,527
Federal National Mortgage Association, 6.50% .......... 300,867 12/01/2028 281,310
Federal National Mortgage Association, 6.00% .......... 344,838 2/01/2029 312,185
Federal National Mortgage Association, 6.50% .......... 185,332 3/01/2029 173,113
Federal National Mortgage Association, 6.50% .......... 347,279 5/01/2029 324,382
Federal National Mortgage Association, 7.50% .......... 404,596 7/01/2029 396,629
Federal National Mortgage Association, 7.00% .......... 517,794 12/01/2029 495,301
Federal National Mortgage Association, 7.00% .......... 1,086,172 12/01/2029 1,038,988
Federal National Mortgage Association, 7.00% .......... 714,372 12/01/2029 683,340
Federal National Mortgage Association TBA, 7.00% ...... 1,250,000 5/15/2030 1,195,900
Federal National Mortgage Association TBA, 7.50% ...... 300,000 5/15/2030 293,577
Federal National Mortgage Association TBA, 8.00% ...... 375,000 6/14/2030 373,945
Government National Mortgage Association, 6.50% ....... 160,565 7/15/2009 155,702
Government National Mortgage Association, 7.50% ....... 151,668 12/15/2010 151,573
Government National Mortgage Association, 7.00% ....... 198,887 1/15/2025 192,174
Government National Mortgage Association, 7.00% ....... 57,007 10/15/2025 54,940
Government National Mortgage Association, 6.50% ....... 812,994 11/15/2028 761,678
Government National Mortgage Association, 7.00% ....... 147,986 11/15/2028 142,343
Government National Mortgage Association, 7.00% ....... 247,700 6/15/2029 238,179
Government National Mortgage Association TBA, 7.00% ... 925,000 5/22/2030 889,443
Government National Mortgage Association TBA, 7.50% ... 250,000 5/22/2030 245,860
Government National Mortgage Association TBA, 8.00% ... 1,450,000 6/22/2030 1,450,000
-----------
11,013,950
-----------
YANKEE 2.8%
British Sky Broadcasting Group Inc. Note, 6.875% ...... 75,000 2/23/2009 66,382
Province of Quebec Deb., 7.50% ........................ 125,000 9/15/2029 122,231
Republic of Greece, 6.95% ............................. 375,000 3/04/2008 361,894
Vodafone AirTouch PLC, 7.75%+ ......................... 100,000 2/15/2010 100,506
Vodafone AirTouch PLC, 7.875%+ ........................ 125,000 2/15/2030 122,404
Woodside Finance Ltd. Note, 6.60%+ .................... 125,000 4/15/2008 115,032
-----------
888,449
-----------
FOREIGN GOVERNMENT 2.7%
Greek Drachma
Republic of Greece, 8.80% ............................. 163,100,000 6/19/2007 507,765
New Zealand Dollar
Government of New Zealand, 8.00% ...................... 175,000 4/15/2004 87,778
Government of New Zealand, 8.00% ...................... 525,000 11/15/2006 267,710
-----------
863,253
-----------
FINANCE/MORTGAGE 14.2%
Arcadia Automobile Trust 97-B A5, 6.70% ............... 125,000 2/15/2005 124,852
Arcadia Automobile Trust 97-C A5, 6.55% ............... 125,000 6/15/2005 123,714
AT&T Capital Corp. Note, 6.875% ....................... 125,000 1/16/2001 124,696
Capital One Bank Note, 6.62% .......................... 250,000 8/04/2003 238,950
Chase Commercial Mortgage Securities Corp. 1997-1
Cl. A1, 7.27% ....................................... 100,467 7/19/2004 99,556
Commercial Credit Group Inc. Sr. Note, 5.55% .......... 250,000 2/15/2001 246,835
Conseco Inc. Note, 9.00% .............................. 175,000 10/15/2006 115,500
Countrywide Funding Corp. Note, 6.58% ................. 200,000 9/21/2001 197,216
Countrywide Funding Corp. Note, 6.28% ................. 200,000 1/15/2003 193,156
DLJ Commercial Mortgage Corp. 98-C2, 6.24% ............ 75,000 11/12/2031 68,320
DLJ Commercial Mortgage Corp. 98-C2 Cl. A1-A, 5.88% ... 173,653 11/12/2031 162,447
DLJ Commercial Mortgage Corp. 99-C1, 6.46% ............ 250,000 1/10/2009 231,016
Finova Capital Corp., 6.12% ........................... 250,000 5/28/2002 242,330
Florida Windstorm Underwriting Sr. Sec. Note, 7.125%+ . 125,000 2/25/2019 117,230
Ford Motor Credit Co., 7.375% ......................... 275,000 10/28/2009 265,820
Ford Motor Credit Co. Note, 7.50% ..................... 200,000 3/15/2005 197,462
GE Global Insurance Holding Corp. Note, 7.00% ......... 275,000 2/15/2026 248,988
General Motors Acceptance Corp., 6.40% ................ 125,000 9/21/2001 122,888
GMAC Commercial Mortgage Security Inc. 97-C2- A, 6.45% 105,951 12/15/2004 101,084
GMAC Commercial Mortgage Security Inc. 98-C1 A1, 6.41% 142,529 11/15/2007 136,360
GMAC Commercial Mortgage Security Inc. 99-C1 A2, 6.175% 150,000 5/15/2033 135,750
Heller Financial Inc. Note, 6.44% ..................... 75,000 10/06/2002 72,962
Household Finance Co. Sr. Note, 6.75% ................. 125,000 6/01/2000 124,979
Household Finance Corp., 7.875% ....................... 100,000 3/01/2007 98,966
LB Commercial Conduit Mortgage Trust 97-LL1-A1, 6.79% . 235,134 6/12/2004 231,313
LB Commercial Conduit Mortgage Trust 98-C1 A1, 6.33% .. 103,218 11/18/2004 99,605
LB Commercial Conduit Mortgage Trust 98-C4 Cl. A1,
5.87% ............................................... 115,183 8/15/2006 107,876
LB Commercial Conduit Mortgage Trust 98-C4 Cl. A1,
6.21% ............................................... 60,000 10/15/2008 54,656
MBNA Master Credit Card Trust Series 1999-J-A, 7.00% .. 100,000 2/15/2012 98,001
Morgan Stanley Capital Inc. 98- A1, 6.19% ............. 48,208 1/15/2007 46,076
Prime Credit Card Master Trust Series 1995-1A, 6.75% .. 125,000 11/15/2005 123,281
-----------
4,551,885
-----------
CORPORATE 12.1%
Albertsons Inc. Sr. Deb., 7.45% ....................... 125,000 8/01/2029 113,868
Arizona Public Service Co. Note, 6.25% ................ 250,000 1/15/2005 230,402
AT&T Corp. Note, 6.50% ................................ 325,000 3/15/2029 274,157
Atlantic Richfield Co. Note, 5.90% .................... 175,000 4/15/2009 156,124
Bell Atlantic Financial Services Inc., 7.60% .......... 175,000 3/15/2007 172,690
California Infrastructure Development Series
1997-A7, 6.42% ...................................... 125,000 9/25/2008 119,493
CK Witco Corp. Sr. Note, 8.50%+ ....................... 50,000 3/15/2005 49,871
Coca-Cola Enterprises Inc. Deb., 6.75% ................ 50,000 9/15/2028 43,291
Columbia/HCA Healthcare Corp. Note, 8.12% ............. 125,000 8/04/2003 119,950
Columbia/HCA Healthcare Corp. Note, 6.87% ............. 150,000 9/15/2003 139,875
Columbia/HCA Healthcare Corp. Note, 7.69% ............. 125,000 6/15/2025 101,875
Columbia/HCA Healthcare Corp. Note, 7.75% ............. 125,000 7/15/2036 106,562
Conseco Inc., 8.75% ................................... 225,000 2/09/2004 148,500
Dynergy Inc. Sr. Note, 6.875% ......................... 250,000 7/15/2002 244,337
Edison Mission Energy Funding Corp. Series A Note,
6.77%+ .............................................. 100,874 9/15/2003 98,445
El Paso Energy Corp. Sr. Note, 6.625% ................. 250,000 7/15/2001 246,982
Lockheed Martin Corp. Note, 7.95% ..................... 125,000 12/01/2005 122,445
Lucent Technologies Inc. Deb., 6.45% .................. 225,000 3/15/2029 194,647
News America Holdings Inc. Deb., 7.375% ............... 50,000 10/17/2008 46,964
News America Inc. Sr. Deb., 7.125% .................... 125,000 4/08/2028 106,050
Norfolk Southern Corp. Note, 7.35% .................... 125,000 5/15/2007 119,061
NRG Energy Inc. Note, 8.00% ........................... 125,000 11/01/2003 125,473
Pepsi Bottling Holdings Inc. Note, 5.625%+ ............ 250,000 2/17/2009 219,892
Raytheon Co. Note, 8.30%+ ............................. 200,000 3/01/2010 195,108
Service Master Co. Note, 8.45% ........................ 125,000 4/15/2005 123,228
United Technologies Corp. Deb., 7.50% ................. 125,000 9/15/2029 121,243
Wal-Mart Stores, Inc. Note, 7.55% ..................... 125,000 2/15/2030 125,541
-----------
3,866,074
-----------
Total Fixed Income Securities (Cost $25,467,120) ......................................... 24,532,240
-----------
COMMERCIAL PAPER 13.4%
American Express Credit Corp., 6.00% .................. $ 766,000 5/11/2000 $ 766,000
Citicorp, 6.02% ....................................... 920,000 5/08/2000 920,000
Exxon Corp., 5.85% .................................... 824,000 5/01/2000 824,000
General Electric Capital Corp., 6.01% ................. 619,000 5/22/2000 619,000
Norwest Financial Inc., 6.00% ......................... 1,151,000 5/22/2000 1,151,000
-----------
Total Commercial Paper (Cost $4,280,000) ................................................. 4,280,000
-----------
------------------------------------------------------------------------------------------------------------------
SHARES
------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS 13.2%
State Street Navigator Securities Lending Prime
Portfolio ........................................... 4,200,110 4,200,110
-----------
Total Short-Term Investments (Cost $4,200,110) ........................................... 4,200,110
-----------
Total Investments (Cost $39,267,932) - 125.3% ............................................ 40,006,778
Cash and Other Assets, Less Liabilities - (25.3%) ........................................ (8,077,088)
-----------
Net Assets - 100.0% ....................................................................... $31,929,690
===========
Federal Income Tax Information:
At April 30, 2000, the net unrealized appreciation of investments based on cost for
Federal income tax purposes of $39,402,907 was as follows:
Aggregate gross unrealized appreciation for all investments in which there is an excess
of value over tax cost ................................................................ $ 2,034,505
Aggregate gross unrealized depreciation for all investments in which there is an excess
of tax cost over value ................................................................ (1,430,634)
-----------
$ 603,871
===========
------------------------------------------------------------------------------------------------------------------
* 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, 2000 were $1,072,942 and $1,018,488 (3.19% of net assets), respectively.
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.
Futures contracts open at April 30, 2000, are as follows:
<CAPTION>
EXPIRATION UNREALIZED
TYPE NOTIONAL AMOUNT MONTH APPRECIATION
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
10 year U.S. Treasury Notes $1,200,000 June, 2000 $6,010
Forward currency exchange contracts outstanding at April 30, 2000, are as follows:
<CAPTION>
UNREALIZED
CONTRACT APPRECIATION DELIVERY
TOTAL VALUE PRICE (DEPRECIATION) DATE
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sell Euro, Buy U.S. dollars 102,500 EUR .99120 EUR $ 8,279 5/18/00
Sell Greek drachma, Buy U.S. dollars 32,270,000 GRD .00286 GRD 5,133 5/09/00
Sell Greek drachma, Buy U.S. dollars 49,466,000 GRD .00294 GRD 11,768 5/18/00
Buy New Zealand dollars, Sell U.S. dollars 25,000 NZD .48837 NZD (70) 5/18/00
Buy New Zealand dollars, Sell U.S. dollars 128,000 NZD .49612 NZD (1,348) 5/18/00
Sell New Zealand dollars, Buy U.S. dollars 304,000 NZD .49023 NZD 1,411 5/18/00
Sell New Zealand dollars, Buy U.S. dollars 140,000 NZD .49000 NZD 617 5/18/00
Sell New Zealand dollars, Buy U.S. dollars 40,000 NZD .49538 NZD 392 5/18/00
Sell New Zealand dollars, Buy U.S. dollars 333,000 NZD .49600 NZD 3,484 7/26/00
Sell New Zealand dollars, Buy U.S. dollars 50,000 NZD .49535 NZD 491 7/26/00
-------
$30,157
=======
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATE STREET RESEARCH STRATEGIC INCOME PLUS FUND
--------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
--------------------------------------------------------------------------------
April 30, 2000 (Unaudited)
ASSETS
Investments, at value (Cost $39,267,932) (Note 1) ............... $40,006,778
Foreign currency, at value (Cost $915) .......................... 906
Cash ............................................................ 74,165
Receivable for securities sold .................................. 1,541,036
Interest and dividends receivable ............................... 293,767
Receivable from Distributor (Note 3) ............................ 57,156
Receivable for open forward contracts ........................... 31,575
Other assets .................................................... 95,295
-----------
42,100,678
LIABILITIES
Payable for securities purchased ................................ 5,897,045
Payable for collateral received on securities loaned ............ 4,200,110
Accrued management fee (Note 2) ................................. 32,270
Accrued transfer agent and shareholder services (Note 2) ........ 20,205
Payable for fund shares redeemed ................................ 3,571
Accrued trustees" fees (Note 2) ................................. 3,521
Payable for variation margin (Note 1) ........................... 1,858
Payable for open forward contracts .............................. 1,418
Other accrued expenses .......................................... 10,990
-----------
10,170,988
-----------
NET ASSETS ...................................................... $31,929,690
===========
Net Assets consist of:
Undistributed net investment income ........................... $ 371,596
Unrealized appreciation of investments ........................ 738,846
Unrealized appreciation of futures contracts .................. 6,010
Unrealized appreciation of forward contracts and foreign
currency .................................................... 24,849
Accumulated net realized gain ................................. 525,567
Paid-in capital ............................................... 30,262,822
-----------
$31,929,690
===========
Net Asset Value and redemption price per share of Class A
shares ($533,275 / 52,193 shares) ............................. $10.22
======
Maximum Offering Price per share of Class A
shares ($10.22 / .9425) ....................................... $10.84
======
Net Asset Value and offering price per share of
Class B(1) shares ($504,809 / 49,535 shares)* ................. $10.19
======
Net Asset Value and offering price per share of
Class B shares ($504,809 / 49,535 shares)* .................... $10.19
======
Net Asset Value and offering price per share of
Class C shares ($504,809 / 49,535 shares)* .................... $10.19
======
Net Asset Value, offering price and redemption
price per share of Class S shares
($29,881,988 / 2,923,641 shares) .............................. $10.22
======
-------------------------------------------------------------------------------
* Redemption price per share for Class B(1), Class B and Class C is equal to
net asset value less any applicable contingent deferred sales charge.
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATE STREET RESEARCH STRATEGIC INCOME PLUS FUND
-------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
-------------------------------------------------------------------------------
For the six months ended April 30, 2000 (Unaudited)
INVESTMENT INCOME
Interest (Note 1) ............................................... $ 902,396
Dividends, net of foreign taxes of $1,172 ....................... 41,341
-----------
943,737
EXPENSES
Management fee (Note 2) ......................................... 97,471
Custodian fee ................................................... 59,465
Registration fees ............................................... 27,174
Transfer agent and shareholder services (Note 2) ................ 24,722
Audit fee ....................................................... 14,154
Reports to shareholders ......................................... 9,191
Trustees" fees (Note 2) ......................................... 3,521
Service fee -- Class A (Note 5) ................................. 633
Distribution and service fees -- Class B(1) (Note 5) ............ 2,516
Distribution and service fees -- Class B (Note 5) ............... 2,516
Distribution and service fees -- Class C (Note 5) ............... 2,516
Legal fees ...................................................... 1,991
Miscellaneous ................................................... 6,016
-----------
251,886
Expenses borne by the Distributor (Note 3) ...................... (97,308)
Fees paid indirectly (Note 2) ................................... (500)
-----------
154,078
-----------
Net investment income ........................................... 789,659
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FOREIGN
CURRENCY, FORWARD CONTRACTS AND FUTURES CONTRACTS
Net realized gain on investments (Notes 1 and 4) ................ 755,141
Net realized loss on futures contracts (Note 1) ................. (19,252)
Net realized loss on forward contracts and foreign
currency (Note 1) ............................................. (65,470)
-----------
Total net realized gain ....................................... 670,419
-----------
Net unrealized depreciation of investments ...................... (255,820)
Net unrealized appreciation of futures contracts ................ 4,672
Net unrealized appreciation of forward contracts and foreign
currency ...................................................... 75,962
-----------
Total net unrealized depreciation ............................. (175,186)
-----------
Net gain on investments, foreign currency, forward
contracts and futures contracts ............................... 495,233
-----------
Net increase in net assets resulting from operations ............ $ 1,284,892
===========
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
STATE STREET RESEARCH STRATEGIC INCOME PLUS FUND
<CAPTION>
-----------------------------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
-----------------------------------------------------------------------------------------------------
SIX MONTHS ENDED
YEAR ENDED APRIL 30, 2000
OCTOBER 31, 1999 (UNAUDITED)
-----------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income ......................................... $ 1,463,692 $ 789,659
Net realized gain (loss) on investments, foreign currency,
forward contracts and futures contracts ..................... (143,033) 670,419
Net unrealized depreciation of investments, foreign
currency, forward contracts and futures contracts ........... (297,120) (175,186)
----------- -----------
Net increase resulting from operations ........................ 1,023,539 1,284,892
----------- -----------
Dividends from net investment income:
Class A ..................................................... (4,941) (12,728)
Class B(1) .................................................. (4,941) (11,774)
Class B ..................................................... (4,941) (11,774)
Class C ..................................................... (4,941) (11,774)
Class S ..................................................... (1,428,809) (813,421)
----------- -----------
(1,448,573) (861,471)
----------- -----------
Distributions from net realized gains:
Class A ..................................................... -- (1,136)
Class B(1) .................................................. -- (1,136)
Class B ..................................................... -- (1,136)
Class C ..................................................... -- (1,136)
Class S ..................................................... (2,273,855) (70,420)
----------- -----------
(2,273,855) (74,964)
----------- -----------
Net decrease from fund share transactions ..................... (249,691) (1,706,277)
----------- -----------
Total decrease in net assets .................................. (2,948,580) (1,357,820)
NET ASSETS
Beginning of period ........................................... 36,236,090 33,287,510
----------- -----------
End of period (including undistributed net investment income
of $443,408 and $371,596, respectively) ..................... $33,287,510 $31,929,690
=========== ===========
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
STATE STREET RESEARCH STRATEGIC INCOME PLUS FUND
-------------------------------------------------------------------------------
NOTES TO UNAUDITED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
April 30, 2000
NOTE 1
State Street Research Strategic Income Plus 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 six separate funds: State
Street Research Strategic Income Plus Fund, State Street Research Government
Income Fund, State Street Research Strategic Portfolios: Aggressive, State
Street Research IntelliQuant Portfolios: Small-Cap Value, State Street
Research Health Sciences Fund and State Street Research International Equity
Fund.
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 offers five classes of shares. Class A shares are subject to an initial
sales charge of up to 5.75% and an annual service fee of 0.25% of average daily
net assets. Class B shares are being offered only to current shareholders
through reinvestment of dividends and distributions or through exchanges from
existing Class B accounts of State Street Research funds. Class B(1) and Class B
pay annual distribution and service fees of 1.00% and both classes automatically
convert into Class A shares (which pay lower ongoing expenses) at the end of
eight years. Class B(1) shares are subject to a contingent deferred sales charge
on certain redemptions made within six years of purchase. Class B shares are
subject to a contingent deferred sales charge on certain redemptions made within
five years of purchase. Class C shares are subject to a contingent deferred
sales charge of 1.00% on any shares redeemed within one year of their purchase.
Class C shares also pay annual distribution and service fees of 1.00%. Class S
shares are only offered through certain retirement accounts, advisory accounts
of State Street Research & Management Company (the "Adviser"), an indirect
wholly owned subsidiary of MetLife, Inc. ("MetLife"), 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 plans 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 has
elected to qualify under Subchapter M of the Internal Revenue Code and its
policy is to distribute all of its taxable income, including net realized
capital gains, within the prescribed time periods.
F. 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.
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, 2000, the value of the securities loaned and the value of
collateral were $4,081,369 and $4,200,110, respectively. During the six months
ended April 30, 2000, income from securities lending amounted to $10,113 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 0.60% 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, 2000, the fees
pursuant to such agreement amounted to $97,471.
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 MetLife, 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, MetLife 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, 2000,
the amount of such expenses was $22,478.
The fees of the Trustees not currently affiliated with the Adviser amounted to
$3,521 during the six months ended April 30, 2000.
The Fund has entered into an arrangement with its transfer agent whereby
credits realized as a result of uninvested cash balances were used to reduce a
portion of the Fund's expense. During the six months ended April 30, 2000, the
Fund's transfer agent fees were reduced by $500 under this agreement.
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, 2000, the amount of such
expenses assumed by the Distributor and its affiliates was $97,308.
NOTE 4
For the six months ended April 30, 2000, purchases and sales of securities,
exclusive of short-term obligations, aggregated $28,895,759 and $31,033,411
(including $21,244,968 and $16,853,449 of U.S. Government obligations),
respectively.
NOTE 5
The Trust has adopted plans of distribution pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended. Under the plans, the Fund pays
annual service fees to the Distributor at a rate of 0.25% of average daily net
assets for Class A, Class B(1), Class B and Class C shares. In addition, the
Fund pays annual distribution fees of 0.75% of average daily net assets for
Class B(1), Class B and Class C shares. The Distributor uses such payments for
personal 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. For the six months ended April 30,
2000, fees pursuant to such plans amounted to $633, $2,516, $2,516 and $2,516
for Class A, Class B(1), Class B and Class C, respectively.
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, 2000, MetLife
owned 49,520 shares of each of Class A, Class B(1), Class B and Class C and
2,360,339 Class S shares of the Fund.
These transactions break down by share class as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED APRIL 30, 2000
OCTOBER 31, 1999 (UNAUDITED)
----------------------------- -------------------------------
CLASS A SHARES* AMOUNT* SHARES AMOUNT
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ......................... 49,422 $ 500,141 2,655 $ 27,125
Issued upon reinvestment of:
Dividend from net investment income -- -- 3 30
Distribution from net realized
gains ........................... -- -- 113 1,136
-------- ------------ -------- -----------
Net increase ........................ 49,422 $ 500,141 2,771 $ 28,291
======== ============ ======== ===========
<CAPTION>
CLASS B(1) SHARES* AMOUNT* SHARES AMOUNT
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ......................... 49,422 $ 500,150 -- --
Issued upon reinvestment of
distribution from net realized
gains ............................. -- -- 113 1,136
-------- ------------ -------- -----------
Net increase ........................ 49,422 $ 500,150 113 $ 1,136
======== ============ ======== ===========
<CAPTION>
CLASS B SHARES* AMOUNT* SHARES AMOUNT
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ......................... 49,422 $ 500,150 -- --
Issued upon reinvestment of
distribution from net realized
gains ............................. -- -- 113 1,136
-------- ------------ -------- -----------
Net increase......................... 49,422 $ 500,150 113 $ 1,136
======== ============ ======== ===========
<CAPTION>
CLASS C SHARES* AMOUNT* SHARES AMOUNT
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ......................... 49,422 $ 500,150 -- --
Issued upon reinvestment of
distribution from net realized
gains ............................. -- -- 113 1,136
-------- ------------ -------- -----------
Net increase......................... 49,422 $ 500,150 113 $ 1,136
======== ============ ======== ===========
<CAPTION>
CLASS S SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ......................... 203,903 $ 2,109,092 43,755 $ 447,189
Issued upon reinvestment of:
Dividends from net investment
income .......................... 30,849 315,412 17,447 177,044
Distributions from net realized
gains ........................... 213,806 2,197,784 7,007 70,420
Shares redeemed ..................... (672,928) (6,872,570) (239,250) (2,432,629)
-------- ------------ -------- -----------
Net decrease ........................ (224,370) $ (2,250,282) (171,041) $(1,737,976)
======== ============ ======== ===========
------------------------------------------------------------------------------------------------------
* September 30, 1999 (commencement of share class) to October 31, 1999.
</TABLE>
<PAGE>
STATE STREET RESEARCH STRATEGIC INCOME PLUS FUND
<TABLE>
----------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
For a share outstanding throughout each period:
CLASS A
--------------------------------------------------------------------------------------------------
YEARS ENDED OCTOBER 31 SIX MONTHS ENDED
------------------------------- NOVEMBER 1, 1996 PERIOD ENDED APRIL 30, 2000
1995(a) 1996(a) TO MARCH 27, 1997(a) OCTOBER 31, 1999(a)(e) (UNAUDITED)(a)
------------------------------------------------------------------------------------- --------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD ($) 9.56 10.56 11.03 10.12 10.11
---- ---- ---- ---- ----
Net investment income ($)* 0.47 0.42 0.21 0.04 0.24
Net realized and unrealized
gain on investments
foreign currency and
forward contracts ($) 1.00 0.66 0.08 0.05 0.15
---- ---- ---- ---- ----
TOTAL FROM INVESTMENT
OPERATIONS ($) 1.47 1.08 0.29 0.09 0.39
---- ---- ---- ---- ----
Dividends from net
investment income (0.47) (0.36) (0.19) (0.10) (0.26)
Distribution from capital
gains -- (0.25) (0.55) -- (0.02)
---- ---- ---- ---- ----
TOTAL DISTRIBUTIONS ($) (0.47) (0.61) (0.74) (0.10) (0.28)
---- ---- ---- ---- ----
NET ASSET VALUE, END OF
PERIOD 10.56 11.03 10.58 10.11 10.22
===== ===== ===== ===== =====
Total return (%)(b) 15.84 10.55 2.67 (c) 0.89 (c) 3.88 (c)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period
($ thousands) 27,637 552 -- 499 533
Expense ratio (%)* 1.15 1.15 1.15 (d) 1.15 (d) 1.15 (d)
Expense ratio after expense
reductions (%)* 1.15 1.15 1.15 (d) 1.15 (d) 1.15 (d)
Ratio of net investment
income to average net
assets (%)* 4.74 4.35 4.18 (d) 4.01 (d) 4.66 (d)
Portfolio turnover rate (%) 132.50 126.41 117.66 209.77 90.60
* Reflects voluntary reduction
of expenses per share of
these amounts (Note 3) ($) 0.05 0.07 0.03 0.00 0.03
<CAPTION>
CLASS B(1)
-----------------------------------
PERIOD ENDED SIX MONTHS ENDED
OCTOBER 31, APRIL 30, 2000
1999(a)(e) (UNAUDITED)(a)
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ($) 10.12 10.10
----- -----
Net investment income ($)* 0.03 0.20
Net realized and unrealized gain on investments, foreign currency, forward contracts
and futures contracts ($) 0.05 0.15
----- -----
TOTAL FROM INVESTMENT OPERATIONS ($) 0.08 0.35
----- -----
Dividends from net investment income ($) (0.10) (0.24)
Distribution from capital gains ($) -- (0.02)
----- -----
TOTAL DISTRIBUTIONS ($) (0.10) (0.26)
----- -----
NET ASSET VALUE, END OF PERIOD ($) 10.10 10.19
===== =====
Total return (%)(b) 0.79(c) 3.49(c)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period ($ thousands) 499 505
Expense ratio (%)* 1.90(d) 1.90(d)
Expense ratio after expense reductions (%)* 1.90(d) 1.90(d)
Ratio of investment income to average net assets (%)* 3.26(d) 3.91(d)
Portfolio turnover rate (%) 209.77 90.60
* Reflects voluntary reduction of expenses per share of these amounts (Note 3) ($) 0.00 0.03
----------------------------------------------------------------------------------------------------------------------------------
(a) Per-share figures have been calculated using the average shares method.
(b) Does not reflect any front-end or contingent deferred sales charges. Total return would be lower if the Distributor and
its affiliates had not voluntarily reduced the fund's expenses.
(c) Not annualized.
(d) Annualized.
(e) September 30, 1999 (commencement of share class) to October 31, 1999.
</TABLE>
<PAGE>
STATE STREET RESEARCH STRATEGIC INCOME PLUS FUND
<TABLE>
----------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (cont'd)
----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS B
---------------------------------
PERIOD ENDED SIX MONTHS ENDED
OCTOBER 31, APRIL 30, 2000
1999(a)(e) (UNAUDITED)(a)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ($) 10.12 10.10
----- -----
Net investment income ($)* 0.03 0.20
Net realized and unrealized gain on investments, foreign currency, forward contracts
and futures contracts ($) 0.05 0.15
----- -----
TOTAL FROM INVESTMENT OPERATIONS ($) 0.08 0.35
----- -----
Dividends from net investment income ($) (0.10) (0.24)
Distribution from capital gains ($) -- (0.02)
----- -----
TOTAL DISTRIBUTIONS ($) (0.10) (0.26)
----- -----
NET ASSET VALUE, END OF PERIOD ($) 10.10 10.19
===== =====
Total return (%)(b) 0.79(c) 3.49(c)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period ($ thousands) 499 505
Expense ratio (%)* 1.90(d) 1.90(d)
Expense ratio after expense reductions (%)* 1.90(d) 1.90(d)
Ratio of investment income to average net assets (%)* 3.26(d) 3.91(d)
Portfolio turnover rate (%) 209.77 90.60
* Reflects voluntary reduction of expenses per share of these amounts (Note 3) ($) 0.00 0.03
<CAPTION>
CLASS C
-----------------------------------
PERIOD ENDED SIX MONTHS ENDED
OCTOBER 31, APRIL 30, 2000
1999(a)(e) (UNAUDITED)(a)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ($) 10.12 10.10
----- -----
Net investment income ($)* 0.03 0.20
Net realized and unrealized gain on investments, foreign currency, forward contracts
and futures contracts ($) 0.05 0.15
----- -----
TOTAL FROM INVESTMENT OPERATIONS ($) 0.08 0.35
----- -----
Dividends from net investment income ($) (0.10) (0.24)
Distribution from capital gains ($) -- (0.02)
----- -----
TOTAL DISTRIBUTIONS ($) (0.10) (0.26)
----- -----
NET ASSET VALUE, END OF PERIOD ($) 10.10 10.19
===== =====
Total return (%)(b) 0.79(c) 3.49(c)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period ($ thousands) 499 505
Expense ratio (%)* 1.90(d) 1.90(d)
Expense ratio after expense reductions (%)* 1.90(d) 1.90(d)
Ratio of investment income to average net assets (%)* 3.26(d) 3.91(d)
Portfolio turnover rate (%) 209.77 90.60
* Reflects voluntary reduction of expenses per share of these amounts (Note 3) ($) 0.00 0.03
---------------------------------------------------------------------------------------------------------------------------------
(a) Per-share figures have been calculated using the average shares method.
(b) Does not reflect any front-end or contingent deferred sales charges. Total return would be lower if the Distributor and
its affiliates had not voluntarily reduced the fund's expenses.
(c) Not annualized.
(d) Annualized.
(e) September 30, 1999 (commencement of share class) to October 31, 1999.
</TABLE>
<PAGE>
STATE STREET RESEARCH STRATEGIC INCOME PLUS FUND
<TABLE>
-------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (cont'd)
-------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS S
--------------------------------------------------------------------------------------------------
YEARS ENDED OCTOBER 31 SIX MONTHS ENDED
--------------------------------------------------------------------------- APRIL 30, 2000
1995(a) 1996(a) 1997(a) 1998(a) 1999(a) (UNAUDITED)(a)
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD ($) 9.56 10.56 10.93 11.32 10.92 10.11
----- ----- ----- ----- ----- -----
Net investment income ($)* 0.52 0.50 0.49 0.47 0.43 0.25
Net realized and
unrealized gain (loss)
on investments, foreign
currency, forward
contracts and futures
contracts ($) 0.97 0.60 0.95 0.42 (0.12) 0.15
----- ----- ----- ----- ----- -----
TOTAL FROM INVESTMENT
OPERATIONS ($) 1.49 1.10 1.44 0.89 0.31 0.40
----- ----- ----- ----- ----- -----
Dividends from net
investment income ($) (0.49) (0.48) (0.50) (0.50) (0.43) (0.27)
Distribution from
capital gains ($) -- (0.25) (0.55) (0.79) (0.69) (0.02)
----- ----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS ($) (0.49) (0.73) (1.05) (1.29) (1.12) (0.29)
----- ----- ----- ----- ----- -----
NET ASSET VALUE, END OF
PERIOD ($) 10.56 10.93 11.32 10.92 10.11 10.22
===== ===== ===== ===== ===== =====
Total return (%)(b) 16.11 10.82 14.11 8.60 2.84 4.02 (c)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of
period ($ thousands) 1,433 33,236 38,501 36,236 31,291 29,882
Expense ratio (%)* 0.90 0.90 0.90 0.90 0.90 0.90 (d)
Expense ratio after
expense reductions (%)* 0.90 0.90 0.90 0.90 0.90 0.90 (d)
Ratio of investment
income to average net
assets (%)* 4.91 4.50 4.47 4.35 4.07 4.91 (d)
Portfolio turnover rate (%) 132.50 126.41 117.66 186.03 209.77 90.60
* Reflects voluntary
reduction of expenses
per share of these
amounts (Note 3) ($) 0.05 0.06 0.05 0.04 0.04 0.03
-----------------------------------------------------------------------------------------------------------------------------------
(a) Per-share figures have been calculated using the average shares method.
(b) 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 the fund's expenses.
(c) Not annualized.
(d) Annualized.
(e) September 30, 1999 (commencement of share class) to October 31, 1999.
</TABLE>
<PAGE>
<TABLE>
STATE STREET RESEARCH STRATEGIC INCOME PLUS FUND
-----------------------------------------------------------------------------------------------------------------------------------
REPORT ON SPECIAL MEETING OF SHAREHOLDERS
-----------------------------------------------------------------------------------------------------------------------------------
A Special Meeting of Shareholders of the State Street Research Strategic Income Plus Fund ("Fund"), a series of State
Street Research Financial Trust, was convened on February 25, 2000 ("Meeting"). The results of the Meeting are set forth
below.
<CAPTION>
VOTES (THOUSANDS OF SHARES)
--------------------------------------
ACTION ON PROPOSAL FOR AGAINST ABSTAIN
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CLASS A SHARES
The Fund's current Rule 12b-1 Distribution Plan was amended to increase the amount that
may be expended for the distribution of Class A shares ................................... 49.4 0.0 0.0
CLASS B SHARES
The Fund's current Rule 12b-1 Distribution Plan was amended to increase the amount that
may be expended for the distribution of Class A shares ................................... 49.4 0.0 0.0
CLASS B(1) SHARES
The Fund's current Rule 12b-1 Distribution Plan was amended to increase the amount that
may be expended for the distribution of Class A shares ................................... 49.4 0.0 0.0
</TABLE>
<PAGE>
<TABLE>
STATE STREET RESEARCH STRATEGIC INCOME PLUS FUND
-----------------------------------------------------------------------------------------------------------------
FUND INFORMATION, OFFICERS AND TRUSTEES OF STATE STREET RESEARCH FINANCIAL TRUST
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FUND INFORMATION OFFICERS TRUSTEES
STATE STREET RESEARCH GERARD P. MAUS GERARD P. MAUS
STRATEGIC INCOME PLUS FUND Chairman of the Board, Chief Financial Officer,
One Financial Center President, Chief Executive Chief Administrative
Boston, MA 02111 Officer and Treasurer Officer, Director and
Interim Chief Operating Officer,
INVESTMENT ADVISER PETER C. BENNETT State Street Research &
State Street Research & Vice President Management Company
Management Company
One Financial Center JOHN R. BORZILLERI BRUCE R. BOND
Boston, MA 02111 Vice President Former Chairman of the Board,
Chief Executive Officer and
DISTRIBUTOR BRUCE A. EBEL President, PictureTel Corporation
State Street Research Vice President
Investment Services, Inc. STEVE A. GARBAN
One Financial Center JOHN H. KALLIS Former Senior Vice President
Boston, MA 02111 Vice President for Finance and Operations and
Treasurer, The Pennsylvania
SHAREHOLDER SERVICES THOMAS P. MOORE, JR. State University
State Street Research Vice President
Service Center DEAN O. MORTON
P.O. Box 8408 E.K. EASTON RAGSDALE, JR. Former Executive Vice President,
Boston, MA 02266-8408 Vice President Chief Operating Officer and
1-87-SSR-FUNDS (toll-free) Director, Hewlett-Packard
THOMAS A. SHIVELY Company
CUSTODIAN Vice President
State Street Bank and SUSAN M. PHILLIPS
Trust Company JAMES M. WEISS Dean, School of Business and
225 Franklin Street Vice President Public Management, George
Boston, MA 02110 Washington University; former
KENNARD P. WOODWORTH Member of the Board of Governors
LEGAL COUNSEL Vice President of the Federal Reserve System and
Goodwin, Procter & Hoar LLP Chairman and Commissioner of
Exchange Place JOSEPH W. CANAVAN the Commodity Futures Trading
Boston, MA 02109 Assistant Treasurer Commission
DOUGLAS A. ROMICH TOBY ROSENBLATT
Assistant Treasurer President, Founders Investments Ltd.
President, The Glen Ellen Company
FRANCIS J. MCNAMARA, III
Secretary and General Counsel MICHAEL S. SCOTT MORTON
Jay W. Forrester Professor of
DARMAN A. WING Management, Sloan School of
Assistant Secretary and Management, Massachusetts
Assistant General Counsel Institute of Technology
AMY L. SIMMONS
Assistant Secretary
</TABLE>
<PAGE>
STATE STREET RESEARCH STRATEGIC INCOME PLUS FUND
One Financial Center
Boston, MA 02111
QUESTIONS? COMMENTS?
E-MAIL us at:
[email protected]
INTERNET site:
www.ssrfunds.com
CALL us toll free at 1-87-SSR-FUNDS (1-877-773-8637 or
[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
[LOGO] STATE STREET RESEARCH
(C)2000 State Street Research Investment Services, Inc., One Financial Center,
Boston, MA 02111
This report is prepared for the general information of current shareholders.
This publication must be preceded or accompanied by a current State Street
Research Strategic Portfolios: Aggresive prospectus.
When used after June 30, 2000, 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: (exp 0601) SSR-LD STP-1943-0500
<PAGE>
--------------------------------
STATE STREET RESEARCH
--------------------------------
STRATEGIC PORTFOLIOS: AGGRESSIVE
--------------------------------
SEMIANNUAL REPORT
April 30, 2000
---------------------
WHAT'S INSIDE
---------------------
INVESTMENT UPDATE
About the fund,
economy and markets
FUND INFORMATION
Facts and figures
PLUS, COMPLETE PORTFOLIO HOLDINGS
AND FINANCIAL STATEMENTS
-------------------
[DALBAR LOGO]
-------------------
For Excellence
[logo] STATE STREET RESEARCH in
Service
<PAGE>
INVESTMENT ENVIRONMENT
THE ECONOMY
o The U.S. economy grew by an annualized rate of 7.3% in the fourth quarter of
1999, as measured by gross domestic product (GDP). Growth slowed to 5.4% in
the first quarter of 2000, but remains strong enough to raise concerns about
inflation.
o Inflation appears to be heating up. Core consumer inflation -- figured without
the impact of energy, food and tobacco -- advanced to 3.7% in March before
falling back to 3.0% in April.
o In an effort to dampen economic growth, the Federal Reserve Board raised
short-term interest rates three times during the period. The federal funds
rate closed out the first quarter at 6.0%, up from 5.25% six months ago.
THE MARKETS
o The S&P 500 ended 1999 up 21.03%(1). However, interest rate increases and
soaring valuations became more than the stock market could bear. By the end of
April, the S&P 500 was down 0.79%.
o After losing ground early in the six-month period, bonds strengthened during
the first quarter of 2000 as the yield on 30-year Treasury bonds fell below
6.0% for the first time in more than a year.
THE FUND
OVER THE PAST SIX MONTHS
o Class S shares of State Street Research Strategic Portfolios: Aggressive Class
S shares returned 14.49% for the 6-month period ended April 30, 2000. That was
higher than the 7.18% return on the S&P 500 for the same period.
o The fund's investments in stocks, which represented approximately 71% of the
portfolio, helped performance. In particular, stocks of large-cap growth,
small-cap growth and international companies did well.
o The fund's investment in bonds tracked the performance of the Lehman Brothers
Aggregate Bond Index. The return on high-grade and international bonds helped
offset a loss in the fund's investments in high-yield bonds.
CURRENT STRATEGY
o The fund is positioned to anticipate a more moderate pace of economic growth
in the U.S. and continued economic recovery outside the U.S. The manager looks
for both economic and corporate profit growth in the U.S. to slow in response
to rising interest rates.
o Although interest rates are expected to continue to rise, the manager believes
the rate of return on long-term bonds remains attractive.
April 30, 2000
(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) The Lehman Brothers Aggregate Bond Index is a commonly used index of bond
market performance. The index does not take transaction charges into
consideration. It is not possible to invest directly in the index.
(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 gains distributions and income dividends at net asset value.
(4) Class S shares, offered without a sales charge, are available through
certain employee benefit plans and special programs.
PLEASE NOTE THAT THE DISCUSSION THROUGHOUT THIS SHAREHOLDER REPORT IS DATED AS
INDICATED, AND, BECAUSE OF POSSIBLE CHANGES IN VIEWPOINT, DATA AND TRANSACTIONS
SHOULD NOT BE RELIED UPON AS BEING CURRENT THEREAFTER.
-------------------------------------------------------------------------------
FUND INFORMATION (all data are for periods ended April 30, 2000, except where
noted)
-------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
FOR PERIODS ENDED 3/31/00(2)(3)
---------------------------------------------------------------------------
LIFE OF FUND
(since 5/16/94) 1 YEAR
---------------------------------------------------------------------------
Class S 16.28% 24.30%
---------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN(2)(3)
---------------------------------------------------------------------------
LIFE OF FUND
(since 5/16/94) 1 YEAR
---------------------------------------------------------------------------
Class S 15.06% 13.58%
---------------------------------------------------------------------------
ASSET ALLOCATION
(by percentage of net assets)
Equities 71%
Bonds 21%
Cash 8%
<PAGE>
<TABLE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: AGGRESSIVE
-----------------------------------------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
-----------------------------------------------------------------------------------------------------------------
April 30, 2000 (Unaudited)
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
VALUE
SHARES (NOTE 1)
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
EQUITY SECURITIES 70.5%
AUTOMOBILES & TRANSPORTATION 0.6%
AUTOMOTIVE PARTS 0.4%
Delphi Automotive Systems Corp. .............................................. 6,100 $ 116,662
Gentex Corp.* ................................................................ 4,000 129,000
------------
245,662
------------
TRUCKERS 0.2%
CNF Transportation Inc. ...................................................... 4,000 111,750
------------
Total Automobiles & Transportation ........................................... 357,412
------------
CONSUMER DISCRETIONARY 9.6%
ADVERTISING AGENCIES 2.0%
Lifeminders.com, Inc.* ....................................................... 4,300 190,813
Mediaplex Inc. ............................................................... 1,500 76,875
Omnicom Group Inc. ........................................................... 3,300 300,506
Valassis Communications Inc.* ................................................ 14,200 483,687
Young & Rubicam Inc.* ........................................................ 3,600 200,475
------------
1,252,356
------------
CASINOS/GAMBLING, HOTEL/MOTEL 1.2%
GTECH Holdings Corp.* ........................................................ 6,500 134,875
Harrah's Entertainment Inc.* ................................................. 16,165 332,393
International Game Technology Inc.* .......................................... 10,892 265,492
Motels of America Inc.*+ ..................................................... 175 44
------------
732,804
------------
COMMERCIAL SERVICES 1.7%
A.C. Nielsen Corp.* .......................................................... 16,900 389,756
America Online Inc.* ......................................................... 5,000 299,063
Copart Inc.* ................................................................. 8,600 148,350
Hotel Reservations Network Inc. Cl. A* ....................................... 3,000 59,625
QRS Corp.* ................................................................... 4,400 145,200
------------
1,041,994
------------
COMMUNICATIONS, MEDIA & ENTERTAINMENT 1.8%
AMFM Inc.* ................................................................... 1,800 119,475
CBS Corp.* ................................................................... 8,300 487,625
TiVo Inc.* ................................................................... 2,800 50,050
U.S.A. Networks Inc.* ........................................................ 7,400 170,200
Wink Communications, Inc.* ................................................... 3,400 67,150
World Wrestling Federation Entertainment Inc. Cl. A* ......................... 11,100 189,393
------------
1,083,893
------------
CONSUMER SERVICES 0.2%
DeVry Inc.* .................................................................. 5,100 121,444
------------
PRINTING & PUBLISHING 0.8%
Hollinger International, Inc. Cl. A .......................................... 39,600 499,950
------------
RESTAURANTS 0.1%
Darden Restaurants Inc. ...................................................... 4,700 86,656
------------
RETAIL 1.7%
Circuit City Stores Inc. ..................................................... 6,000 352,875
Federated Department Stores Inc.* ............................................ 4,200 142,800
Home Depot Inc.* ............................................................. 3,900 218,644
Ticketmaster Online City Search, Inc. Cl. B* ................................. 5,500 110,000
TJX Companies, Inc. .......................................................... 3,400 65,238
Wal-Mart Stores, Inc.* ....................................................... 2,500 138,437
------------
1,027,994
------------
TOYS 0.1%
Mattel Inc. .................................................................. 6,200 75,950
------------
Total Consumer Discretionary ................................................. 5,923,041
------------
CONSUMER STAPLES 1.8%
BEVERAGES 0.3%
Anheuser-Busch Companies, Inc.* .............................................. 2,800 197,575
------------
DRUG & GROCERY STORE CHAINS 0.7%
CVS Corp. .................................................................... 5,000 217,500
Duane Reade Inc.* ............................................................ 4,300 129,000
Hannaford Brothers Co.* ...................................................... 1,185 85,765
------------
432,265
------------
HOUSEHOLD PRODUCTS 0.7%
Colgate-Palmolive Co. ........................................................ 5,700 325,612
Dial Corp.* .................................................................. 6,420 89,479
------------
415,091
------------
TOBACCO 0.1%
UST Inc.* .................................................................... 5,700 85,500
------------
Total Consumer Staples ....................................................... 1,130,431
------------
FINANCIAL SERVICES 6.9%
BANKS & SAVINGS & LOAN 1.5%
BankNorth Group Inc. ......................................................... 2,500 59,688
Chase Manhattan Corp.* ....................................................... 2,600 187,362
Golden West Financial Corp.* ................................................. 3,900 133,087
Hudson City Bancorp Inc. ..................................................... 6,400 95,200
Hudson United Bancorp Inc. ................................................... 1,900 42,869
Mercantile Bankshares Corp.* ................................................. 1,900 54,150
North Fork BanCorp., Inc.* ................................................... 3,400 55,038
Peoples Heritage Financial Group* ............................................ 21,100 275,619
------------
903,013
------------
FINANCIAL DATA PROCESSING SERVICES & SYSTEMS 1.0%
First Data Corp. ............................................................. 9,400 457,663
Profit Recovery Group International Inc.* .................................... 9,350 164,209
------------
621,872
------------
INSURANCE 2.3%
Ace Ltd.* .................................................................... 18,100 433,269
American International Group Inc.* ........................................... 2,587 283,762
Partnerre Ltd.* .............................................................. 2,100 77,175
Saint Paul Companies, Inc.* .................................................. 8,300 295,687
XL Capital Ltd. Cl. A* ....................................................... 6,250 297,656
------------
1,387,549
------------
MISCELLANEOUS FINANCIAL 2.1%
Ambac Financial Group, Inc.* ................................................. 9,300 446,400
Citigroup, Inc.* ............................................................. 6,350 377,428
Metris Companies Inc. ........................................................ 2,200 82,500
Morgan Stanley Dean Witter & Co. ............................................. 4,200 322,350
S1 Corp. ..................................................................... 1,200 65,175
------------
1,293,853
------------
SECURITIES BROKERAGE & SERVICES 0.0%
Bear Stearns Company Inc.* ................................................... 438 18,779
------------
Total Financial Services ..................................................... 4,225,066
------------
HEALTH CARE 4.2%
DRUGS & BIOTECHNOLOGY 3.3%
Amgen Inc.* .................................................................. 5,200 291,200
Biovail Corp. ................................................................ 3,800 181,212
Biovail Corp. Wts ............................................................ 4,400 265,375
Genentech, Inc.* ............................................................. 400 46,800
ILEX Oncology Inc.* .......................................................... 3,600 86,400
Intelligent Polymers Ltd. .................................................... 10,600 368,350
Intermune Pharmaceuticals Inc. ............................................... 800 13,800
Lexicon Genetics Inc. ........................................................ 500 4,875
Priority Healthcare Corp. Cl. B* ............................................. 2,000 110,750
Sangstat Medical Corp.* ...................................................... 4,700 135,125
Warner-Lambert Co. ........................................................... 4,500 512,156
------------
2,016,043
------------
HEALTH CARE FACILITIES 0.1%
Tenet Healthcare Corp. ....................................................... 2,000 51,000
------------
HEALTH CARE SERVICES 0.6%
Province Healthcare Co.* ..................................................... 3,600 103,950
Quorum Health Group Inc.* .................................................... 25,200 267,750
------------
371,700
------------
HOSPITAL SUPPLY 0.2%
Aradigm Corp.* ............................................................... 7,800 125,288
Oratec Interventions Inc. .................................................... 500 17,031
------------
142,319
------------
Total Health Care ............................................................ 2,581,062
------------
INTEGRATED OILS 1.3%
INTEGRATED DOMESTIC 0.4%
Unocal Corp.* ................................................................ 7,400 239,113
------------
INTEGRATED INTERNATIONAL 0.9%
BP Amoco PLC ADR ............................................................. 4,000 204,000
Suncor Energy Inc.* .......................................................... 2,600 111,047
Total Fina SA ADR* ........................................................... 3,000 226,875
------------
541,922
------------
Total Integrated Oils ........................................................ 781,035
------------
MATERIALS & PROCESSING 4.4%
BUILDING & CONSTRUCTION 0.1%
York International Corp. ..................................................... 3,300 79,613
------------
CHEMICALS 1.0%
Cambrex Corp.* ............................................................... 2,000 82,000
Dow Chemical Co.* ............................................................ 1,800 203,400
Omnova Solutions Inc.* ....................................................... 5,225 31,350
Solutia Inc. ................................................................. 16,700 227,538
Valence Technology Inc. ...................................................... 3,900 60,206
------------
604,494
------------
CONTAINERS & PACKAGING 0.8%
American National Can Group Inc. ............................................. 18,900 317,756
Smurfit Stone Container Corp.* ............................................... 12,400 189,100
------------
506,856
------------
DIVERSIFIED MANUFACTURING 0.7%
Ball Corp.* .................................................................. 13,300 418,950
------------
FERTILIZERS 0.3%
Agrium Inc.* ................................................................. 17,200 161,250
------------
FOREST PRODUCTS 0.1%
Champion International Corp.* ................................................ 700 46,025
------------
PAPER & FOREST PRODUCTS 0.8%
Fort James Corp. ............................................................. 12,440 297,782
Westvaco Corp. ............................................................... 6,600 203,775
------------
501,557
------------
STEEL 0.6%
Alaska Steel Holding Corp. ................................................... 15,043 166,413
Harsco Corp.* ................................................................ 7,000 207,813
------------
374,226
------------
Total Materials & Processing ................................................. 2,692,971
------------
OTHER 2.5%
MULTI-SECTOR 2.5%
Gencorp Inc. ................................................................. 10,200 102,638
General Electric Co.* ........................................................ 3,000 471,750
Grant Pride Inc. ............................................................. 2,700 51,975
Honeywell International Inc.* ................................................ 5,000 280,000
Ogden Corp.* ................................................................. 23,700 232,556
Tyco International Ltd.* ..................................................... 9,200 422,625
------------
Total Other .................................................................. 1,561,544
------------
OTHER ENERGY 6.0%
GAS PIPELINES 1.5%
Columbia Energy Group* ....................................................... 700 43,925
Dynegy Inc. Cl. A ............................................................ 6,800 444,975
Williams Companies Inc.* ..................................................... 12,647 471,891
------------
960,791
------------
OIL & GAS PRODUCERS 2.1%
Anadarko Petroleum Corp. ..................................................... 4,200 181,638
Burlington Resources Inc. .................................................... 3,400 133,663
Louis Dreyfus Natural Gas Corp.* ............................................. 2,300 64,400
Ocean Energy Inc.* ........................................................... 26,600 344,137
Plains Resources Inc.* ....................................................... 2,700 38,306
Santa Fe Snyder Corp.* ....................................................... 7,600 69,825
St. Mary Land & Exploration Co.* ............................................. 1,700 57,375
Union Pacific Resources Group Inc. ........................................... 20,655 396,318
------------
1,285,662
------------
OIL WELL EQUIPMENT & SERVICES 2.4%
Baker Hughes Inc. ............................................................ 4,500 143,156
Calpine Corp.* ............................................................... 2,400 219,600
Halliburton Co.* ............................................................. 3,200 141,400
IRI International Corp.* ..................................................... 4,000 31,250
National Oilwell Inc.* ....................................................... 7,100 169,956
Precision Drilling Corp. ..................................................... 10,000 318,050
Valero Energy Corp. .......................................................... 5,400 156,600
Veritas DGC Inc.* ............................................................ 8,000 192,000
Weatherford International Inc. ............................................... 2,700 109,688
------------
1,481,700
------------
Total Other Energy ........................................................... 3,728,153
------------
PRODUCER DURABLES 3.8%
ELECTRICAL EQUIPMENT & COMPONENTS 1.0%
Mark IV Industries Inc. ...................................................... 22,700 480,956
Nortel Networks Corp. ........................................................ 1,000 113,250
------------
594,206
------------
MACHINERY 1.0%
Helix Technology Corp. ....................................................... 2,500 127,656
Howmet International Inc.* ................................................... 22,400 474,600
------------
602,256
------------
MISCELLANEOUS EQUIPMENT 0.5%
Thomas & Betts Corp. ......................................................... 9,390 289,330
------------
PRODUCTION TECHNOLOGY EQUIPMENT 1.3%
Brooks Automation Inc.* ...................................................... 1,400 125,562
Cymer Inc.* .................................................................. 2,200 85,938
PRI Automation Inc. .......................................................... 1,200 95,850
Teradyne Inc.* ............................................................... 4,800 528,000
------------
835,350
------------
Total Producer Durables ...................................................... 2,321,142
------------
TECHNOLOGY 14.2%
COMMUNICATIONS TECHNOLOGY 4.9%
Cisco Systems Inc.* .......................................................... 18,300 1,268,704
Covad Communications Group Inc.* ............................................. 3,525 97,819
CSG Systems International Inc.* .............................................. 2,400 110,700
Digital Microwave Corp.* ..................................................... 5,520 203,895
General Motors Corp. Cl. H* .................................................. 1,500 144,469
Inktomi Corp.* ............................................................... 500 76,969
Lernout & Hauspie Speech Products NV ADR* .................................... 5,300 512,775
Marimba Inc. ................................................................. 1,600 31,700
NCR Corp.* ................................................................... 5,500 212,437
Packeteer Inc.* .............................................................. 4,800 108,000
Remec Inc.* .................................................................. 4,100 155,544
Spectrasite Holdings, Inc.* .................................................. 5,100 107,100
------------
3,030,112
------------
COMPUTER SOFTWARE 2.4%
Acxiom Corp.* ................................................................ 12,200 329,400
Broadbase Software Inc. ...................................................... 3,500 55,344
GRIC Communications, Inc.* ................................................... 1,900 29,569
Interworld Corp. ............................................................. 4,400 84,425
Kana Communications, Inc.* ................................................... 1,700 72,356
Level 8 Systems Inc. ......................................................... 2,800 70,700
Microsoft Corp.* ............................................................. 5,900 411,525
Netegrity Inc. ............................................................... 3,100 137,562
Sanchez Computer Associates Inc. ............................................. 1,400 27,125
Software Technologies Corp. .................................................. 2,700 48,263
Tenfold Corp. ................................................................ 100 2,556
Versata, Inc.* ............................................................... 1,200 36,450
Viador Inc. .................................................................. 2,400 48,450
Zoran Corp. .................................................................. 1,900 94,881
------------
1,448,606
------------
COMPUTER TECHNOLOGY 3.4%
Electronic Data Systems Corp.* ............................................... 5,100 350,625
EMC Corp.* ................................................................... 5,000 694,687
International Business Machines Corp.* ....................................... 2,500 279,062
Radiant Systems Inc.* ........................................................ 7,500 139,688
Silicon Graphics Inc.* ....................................................... 21,400 153,813
Sun Microsystems Inc.* ....................................................... 4,800 441,300
Unisys Corp.* ................................................................ 1,800 41,738
------------
2,100,913
------------
ELECTRONICS 1.8%
Aeroflex Inc.* ............................................................... 7,500 279,375
Nokia Corp. ADR .............................................................. 9,200 523,250
Solectron Corp.* ............................................................. 7,200 337,050
------------
1,139,675
------------
ELECTRONICS: SEMI-CONDUCTORS/COMPONENTS 1.7%
Artisan Components Inc. ...................................................... 2,800 27,650
Cree Research Inc. ........................................................... 700 101,850
Cypress Semiconductor Corp.* ................................................. 5,550 288,253
Sawtek Inc.* ................................................................. 3,500 167,344
Texas Instruments Inc. ....................................................... 2,700 439,762
------------
1,024,859
------------
Total Technology ............................................................. 8,744,165
------------
UTILITIES 4.6%
ELECTRICAL 2.3%
CMP Group Inc. ............................................................... 5,500 159,156
DQE, Inc.* ................................................................... 4,000 153,000
Energy East Corp. ............................................................ 8,400 175,350
Niagara Mohawk Holdings Inc.* ................................................ 5,300 73,538
OGE Energy Corp.* ............................................................ 8,900 176,331
Pinnacle West Capital Corp.* ................................................. 12,100 425,012
Scana Corp. .................................................................. 9,300 240,638
------------
1,403,025
------------
GAS DISTRIBUTION 0.4%
National Fuel Gas Co. ........................................................ 2,500 118,594
Nicor Inc.* .................................................................. 1,800 60,975
Questar Corp.* ............................................................... 4,000 75,250
------------
254,819
------------
TELECOMMUNICATIONS 1.9%
AirGate PCS, Inc.* ........................................................... 171 14,663
AT&T Corp. ................................................................... 2,000 63,625
Broadwing Inc. ............................................................... 2,000 56,625
MCI WorldCom Inc.* ........................................................... 6,950 315,791
Network Plus Corp. ........................................................... 2,000 38,000
Nextel Communications Inc. Cl. A* ............................................ 1,000 109,438
Qwest Communications International Inc.* ..................................... 7,000 303,625
RSL Communications Ltd. Cl. A* ............................................... 11,400 158,887
Time Warner Telecom Inc. Cl. A ............................................... 2,100 114,975
Viatel Inc. .................................................................. 300 11,475
------------
1,187,104
------------
Total Utilities .............................................................. 2,844,948
------------
NON-U.S. EQUITIES 10.6%
BHF Bank AG* ................................................................. 3,800 134,729
BMCMedia.com Ltd. ............................................................ 129,600 152,886
British Telecom PLC .......................................................... 13,400 239,926
China Telecom Ltd. ........................................................... 34,000 243,350
City Developments ............................................................ 36,000 163,492
Clearnet Communications Inc. Wts.* ........................................... 990 7,920
Corus Entertainment Inc* ..................................................... 2,600 70,228
Hikari Tsushin Inc.* ......................................................... 200 28,885
Infineon Technologies AG ..................................................... 2,400 165,274
Kyocera Corp. ................................................................ 1,000 167,292
L.M. Ericsson Telephone Co. Cl. B* ........................................... 4,800 426,679
Murata Manufacturing Co. ..................................................... 1,000 194,417
Nokia AB Oy .................................................................. 14,400 826,045
Norsk Hydro ASA .............................................................. 7,000 255,902
Petrochina Co. Ltd. .......................................................... 1,298,900 201,775
PTT Exploration & Production Public Co. Ltd.* ................................ 64,000 324,498
Royal Dutch Petroleum Co. .................................................... 6,400 368,876
Sema Group PLC* .............................................................. 21,000 339,057
Societe Generale de France SA* ............................................... 1,200 248,512
Taiyo Yuden Co ............................................................... 2,000 141,647
Takara Shuzo Co. Ltd.* ....................................................... 26,000 558,441
Technip ...................................................................... 2,700 308,048
Telecom Italia SPA* .......................................................... 40,500 566,269
WM Data AB Cl. B* ............................................................ 6,600 231,140
Wolters Kluwer* .............................................................. 6,800 160,482
------------
Total Non-U.S. Equities ...................................................... 6,525,770
------------
Total Equity Securities (Cost $33,727,195) ................................... 43,416,740
------------
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
PRINCIPAL MATURITY
AMOUNT DATE
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FIXED INCOME SECURITIES 21.3%
U.S. TREASURY 2.2%
U.S. Treasury Bond, 11.25% ............................ $ 50,000 2/15/2015 73,156
U.S. Treasury Bond, 8.875% ............................ 50,000 2/15/2019 63,953
U.S. Treasury Bond, 7.875% ............................ 150,000 2/15/2021 177,445
U.S. Treasury Bond, 8.125% ............................ 125,000 5/15/2021 151,621
U.S. Treasury Bond, 8.125% ............................ 35,000 8/15/2021 42,509
U.S. Treasury Bond, 6.75% ............................. 75,000 8/15/2026 80,109
U.S. Treasury Bond, 6.375% ............................ 75,000 8/15/2027 76,582
U.S. Treasury Bond, 3.875% ............................ 103,167 4/15/2029 103,393
U.S. Treasury Bond, 6.25% ............................. 35,000 5/15/2030 36,378
U.S. Treasury Note, 5.875% ............................ 100,000 9/30/2002 98,250
U.S. Treasury Note, 5.875% ............................ 350,000 11/15/2004 340,756
U.S. Treasury STRIPS, 0.00% ........................... 125,000 5/15/2003 102,633
------------
1,346,785
------------
U.S. AGENCY MORTGAGE 6.3%
Federal Home Loan Mortgage Corporation, 6.75% ......... 125,000 9/15/2029 117,930
Federal National Mortgage Association, 6.625% ......... 275,000 9/15/2009 262,325
Federal National Mortgage Association, 6.50% .......... 90,151 9/01/2028 84,207
Federal National Mortgage Association, 6.50% .......... 229,610 11/01/2028 214,472
Federal National Mortgage Association, 6.50% .......... 120,342 12/01/2028 112,520
Federal National Mortgage Association, 6.50% .......... 94,033 3/01/2029 87,833
Federal National Mortgage Association, 6.50% .......... 138,907 5/01/2029 129,749
Federal National Mortgage Association, 7.50% .......... 149,062 7/01/2029 146,127
Federal National Mortgage Association, 7.00% .......... 838,567 12/01/2029 802,139
Federal National Mortgage Association TBA, 7.00% ...... 275,000 12/31/2030 263,098
Federal National Mortgage Association TBA, 7.50% ...... 325,000 12/31/2030 318,042
Federal National Mortgage Association TBA, 8.00% ...... 125,000 12/31/2030 124,648
Government National Mortgage Association, 6.50% ....... 23,417 2/15/2009 22,708
Government National Mortgage Association, 6.50% ....... 57,345 7/15/2009 55,608
Government National Mortgage Association, 6.50% ....... 76,677 11/15/2010 73,985
Government National Mortgage Association, 7.50% ....... 50,556 12/15/2010 50,524
Government National Mortgage Association, 7.00% ....... 15,696 1/15/2025 15,166
Government National Mortgage Association, 7.00% ....... 248,762 5/15/2028 239,277
Government National Mortgage Association, 6.50% ....... 135,507 11/15/2028 126,954
Government National Mortgage Association TBA, 7.00% ... 350,000 12/31/2030 336,546
Government National Mortgage Association TBA, 8.00% ... 250,000 12/31/2030 250,000
Government National Mortgage Association TBA, 8.50% ... 50,000 12/31/2030 50,875
------------
3,884,733
------------
YANKEE 0.5%
British Sky Broadcasting Group Note, 6.875% ........... 50,000 2/23/2009 44,255
Province of Quebec, 7.50% ............................. 50,000 9/15/2029 48,892
Republic of Greece, 6.95% ............................. 75,000 3/04/2008 72,379
United Mexican States, 9.875% ......................... 25,000 2/01/2010 25,750
Vodafone AirTouch PLC, 7.75%+ ......................... 50,000 2/15/2010 50,253
Woodside Finance Ltd. Note, 6.60%+ .................... 50,000 4/15/2008 46,013
------------
287,542
------------
FOREIGN GOVERNMENT 2.0%
Greek Drachma
Republic of Greece, 8.80% ............................. 141,600,000 6/19/2007 440,830
New Zealand Dollar
Government of New Zealand, 8.00% ...................... 275,000 4/15/2004 137,937
Government of New Zealand, 8.00% ...................... 1,225,000 11/15/2006 624,658
------------
1,203,425
------------
FINANCE/MORTGAGE 1.9%
AT&T Capital Corp. Note, 6.75% ........................ $ 100,000 2/04/2002 98,696
Capital One Bank Note, 6.62% .......................... 50,000 8/04/2003 47,790
Citibank Credit Card Master Trust Series 1999-A,
5.875% .............................................. 25,000 3/10/2011 22,383
Countrywide Funding Corp. Note, 6.58% ................. 75,000 9/21/2001 73,956
DLJ Commercial Mortgage Corp. 99-C1, 6.46% ............ 250,000 1/10/2009 231,016
Finova Capital Corp., 6.375% .......................... 50,000 5/15/2005 44,201
Ford Motor Credit Co. Note, 7.375% .................... 200,000 10/28/2009 193,324
General Motors Acceptance Corp., 6.40% ................ 50,000 9/21/2001 49,155
General Motors Acceptance Corp. Note, 6.33% ........... 100,000 10/07/2002 100,859
GMAC Commercial Mortgage Security Inc. 99-C1 Cl
A2, 6.175% .......................................... 75,000 5/15/2033 67,875
Household Finance Corp. Sr. Note, 6.125% .............. 50,000 7/15/2012 48,459
MBNA Corp. Sr. Note, 6.12% ............................ 100,000 8/13/2001 98,621
MBNA Master Credit Card Trust, 5.90% .................. 50,000 8/15/2011 45,541
Prime Credit Card Master Trust Series 1996-1A, 6.70% .. 50,000 7/15/2004 49,656
------------
1,171,532
------------
CORPORATE 8.4%
Acetex Sr. Note, 9.75% ................................ 10,000 10/01/2003 9,100
Advanced Radio Telecom Corp. Sr. Note, 14.00% ......... 30,000 2/15/2007 27,600
Advanstar Communications Inc. Sr. Sub. Note, 9.25% .... 20,000 5/01/2008 18,300
Airgate Pcs Inc. Sr. Sub. Note, 0.00% ................. 45,000 10/01/2009 25,650
Alaska Steel Corp. Sr. Note, 9.125% ................... 25,000 12/15/2006 24,500
American Tissue Inc. Note, 12.50% ..................... 15,000 7/15/2006 15,150
Archibald Candy Corp. Sr. Sec. Note, 10.25% ........... 50,000 7/01/2004 45,750
Arizona Public Service Co. Note, 6.25% ................ 75,000 1/15/2005 69,121
AT&T Corp. Note, 6.00% ................................ 25,000 3/15/2009 22,183
AT&T Corp. Note, 6.50% ................................ 25,000 3/15/2029 21,089
Atlantic Richfield Co. Note, 5.90% .................... 100,000 4/15/2009 89,214
Aurora Foods Inc., 9.875% ............................. 175,000 2/15/2007 98,875
Beckman Instruments Inc., 7.10% ....................... 5,000 3/04/2003 4,707
Bio Rad Laboratories Inc. Sr. Sub. Note, 11.625%+ ..... 10,000 2/15/2007 10,225
Bombardier Capital Inc. Note, 7.30%+ .................. 100,000 12/15/2002 98,800
Buckeye Technologies Inc. Sr. Sub. Note, 8.00% ........ 200,000 10/15/2010 180,500
California Infrastructure Development Series
1997-A7, 6.42% ...................................... 150,000 9/25/2008 143,391
Call-Net Enterprises Inc. Sr. Note, 9.375% ............ 100,000 5/15/2009 75,000
Charter Communications Holdings Sr. Note, 10.25%+ ..... 40,000 1/15/2010 38,600
Chesapeake Energy Corp. Sr. Note Series B, 9.625% ..... 75,000 5/01/2005 72,375
CK Witco Corp. Sr. Note, 8.50%+ ....................... 25,000 3/15/2005 24,935
Coca-Cola Enterprises Inc. Deb., 6.95% ................ 25,000 11/15/2026 22,316
Coca-Cola Enterprises Inc. Deb., 6.75% ................ 100,000 9/15/2028 86,581
Columbia/HCA Healthcare Corp. Note, 7.69% ............. 50,000 6/15/2025 40,750
Columbia/HCA Healthcare Corp. Note, 7.75% ............. 50,000 7/15/2036 42,625
Conseco Inc., 8.75% ................................... 75,000 2/09/2004 49,500
Conseco Inc. Note, 9.00% .............................. 75,000 10/15/2006 49,500
Covad Commerce Group, 12.00%+ ......................... 25,000 2/15/2010 23,375
Dover Corp. Deb., 6.65% ............................... 100,000 6/01/2028 77,234
Drypers Corp. Series B Sr. Note, 10.25% ............... 50,000 6/15/2007 39,000
Dynegy Holdings Inc., 8.125% .......................... 50,000 3/15/2005 49,551
El Paso Energy Corp. Sr. Note, 6.625% ................. 100,000 7/15/2001 98,793
Empire Gas Corp. Sr. Sec. Note, 12.875% ............... 250,000 7/15/2004 168,125
Envirosource Inc. Note, 9.75% ......................... 500,000 6/15/2003 315,000
First Wave Marine Inc. Sr. Note, 11.00% ............... 100,000 2/01/2008 55,500
Fisher Scientific International Inc. Sr. Sub. Note,
9.00% ............................................... 25,000 2/01/2008 23,000
Fort James Corp. Note, 6.234% ......................... 50,000 3/15/2011 49,481
Four M Corp. Sr. Sec. Note Series B, 12.00% ........... 40,000 6/01/2006 37,800
Fresenius Med Care Capital Trust, 9.00% ............... 20,000 12/01/2006 19,200
Frontier Corp. Sr. Note, 9.125% ....................... 50,000 2/15/2006 42,500
Gentek Inc. Sr. Sub. Note, 11.00% ..................... 75,000 8/01/2009 75,375
Globenet Communications Group Sr. Note, 13.00% ........ 10,000 7/15/2007 10,106
GST Equipment Funding Inc. Sr. Sec. Note, 13.25% ...... 30,000 5/01/2007 15,000
Gulfmark Offshore Inc. Sr. Note, 8.75% ................ 25,000 6/01/2008 22,563
Harrah's Operating Inc. Sr. Sub. Note, 7.875% ......... 10,000 12/15/2005 9,300
Henry Co. Sr. Note Series B, 10.00% ................... 50,000 4/15/2008 35,250
Hollinger International Publishing Inc. Sr. Sub.
Note, 9.25% ......................................... 15,000 3/15/2007 14,475
Hollinger International Sr. Sub. Note, 9.25% .......... 5,000 2/01/2006 4,825
Hollywood Casino Note, 13.00%+ ........................ 50,000 8/01/2006 53,250
Hyperion Telecommunication Inc. Sr. Sub. Note, 12.00% . 50,000 11/01/2007 50,750
Iasis Healthcare Corp. Sr. Sub. Note, 13.00%+ ......... 40,000 10/15/2009 39,900
Intermedia Communications Inc. Sr. Note, 8.60% ........ 50,000 6/01/2008 45,625
International Game Technology Sr. Note, 8.375% ........ 30,000 5/15/2009 27,525
International Knife & Saw Inc. Sr. Sub. Note, 11.375% . 55,000 11/15/2006 40,975
International Shipholding Corp. Sr. Note Series B,
7.75% ............................................... 45,000 10/15/2007 38,925
J. Crew Group Inc. Sr. Deb., 1.00% .................... 120,000 10/15/2008 66,600
J.B. Poindexter Inc. Sr. Note, 12.50% ................. 100,000 5/15/2004 93,500
Kroger Co. Sr. Note Series B, 7.25% ................... 50,000 6/01/2009 46,901
Lear Corp. Sr. Note Series B, 8.11% ................... 20,000 5/15/2009 17,953
Level 3 Communications Inc. Sr. Note, 11.25%+ ......... 5,000 3/15/2010 4,788
LIN Televison Corp., 8.375% ........................... 5,000 3/01/2008 4,250
Lucent Technologies Inc. Deb., 6.45% .................. 100,000 3/15/2029 86,510
Mohegan Tribal Gaming Authority Sr. Note, 8.125% ...... 120,000 1/01/2006 112,800
New Jersey Economic Development Authority, 7.425% ..... 125,000 2/15/2029 121,302
Newpark Resources Inc. Sr. Sub. Note Series B, 8.625% . 40,000 12/15/2007 34,300
News America Holdings Inc. Deb., 7.375% ............... 25,000 10/17/2008 23,482
News America Inc. Sr. Deb., 7.125% .................... 50,000 4/08/2028 42,420
Nextel Partners Inc., 11.00%+ ......................... 10,000 3/15/2010 9,825
Northpoint Commerce Group Inc. Sr. Note, 12.875%+ ..... 35,000 2/15/2010 31,325
Ocean Energy Inc. Series B Sr. Note, 7.625% ........... 50,000 7/01/2005 46,750
Owens-Illinois Inc. Sr. Deb., 7.50% ................... 20,000 5/15/2010 17,480
Packaging Resources Inc. Sr. Sec. Note, 11.625% ....... 50,000 5/01/2003 30,250
Park Place Entertainment Corp. Sr. Sub. Note, 9.375%+ . 75,000 2/15/2007 74,250
Peco Energy Transport Trust Series 99-A Cl. A7, 6.13% . 100,000 3/01/2009 91,016
Pioneer Americans Acquisition Corp. Sr. Sec. Note
Series B, 9.25% ..................................... 100,000 6/15/2007 83,000
Plains Resources Inc. Sr. Sub. Note, 10.25% ........... 40,000 3/15/2006 38,450
Plains Resources Inc. Sr. Sub. Note, 10.25%+ .......... 15,000 3/15/2006 14,419
Pogo Producing Co. Sr. Sub. Note, 8.75% ............... 25,000 5/15/2007 23,500
Pool Energy Services Co. Sr. Sub. Note, 8.625% ........ 40,000 4/01/2008 40,300
Premier Parks Inc. Sr. Note, 9.75% .................... 50,000 6/15/2007 47,500
Prime Succession Inc. Sr. Sub. Note, 10.75%[] ......... 150,000 8/15/2004 34,500
Primus Telecommunications Group Sr. Note, 11.75% ...... 30,000 8/01/2004 28,950
PSI Net Inc. Sr. Note, 11.00% ......................... 15,000 8/01/2009 13,200
Raytheon Company, 8.20%+ .............................. 75,000 3/01/2006 73,950
Rhythms Netconnections Inc., 14.00%+ .................. 25,000 2/15/2010 22,000
Rhythms Netconnections Inc. Note, 12.75% .............. 50,000 4/15/2009 42,500
Rose Hills Co. Sr. Sub. Note, 9.50% ................... 250,000 11/15/2004 175,000
RSL Communications Ltd. Sr. Note, 12.25% .............. 75,000 11/15/2006 74,437
Safety-Kleen Services Inc. Sr. Sub. Note, 9.25% ....... 30,000 6/01/2008 3,375
Safeway Inc. Note, 7.00% .............................. 75,000 9/15/2002 73,612
Sbarro Inc. Sr. Note, 11.00% .......................... 5,000 9/15/2009 5,000
SCG Holding Corp. Note, 12.00% ........................ 10,000 8/01/2009 10,750
Service Master Co., 8.45% ............................. 50,000 4/15/2005 49,398
Sheffield Steel Corp. Note Series B, 11.50% ........... 35,000 12/01/2005 27,300
Simonds Industries Inc. Sr. Sub. Note, 10.25% ......... 15,000 7/01/2008 10,500
Spanish Broadcasting Systems Inc. Sr. Sub. Note, 9.625% 15,000 11/01/2009 14,663
Startec Global Communications Sr. Note, 12.00% ........ 25,000 5/15/2008 20,875
Stater Brothers Holdings Inc. Sr. Note, 10.75% ........ 15,000 8/15/2006 15,038
Stericycle Inc. Sr. Sub. Note Series B, 12.375% ....... 25,000 11/15/2009 24,750
Terra Industries Sr. Note, 10.50% ..................... 5,000 6/15/2005 3,750
Textron Finance Corp. Note, 6.125%+ ................... 25,000 3/15/2001 24,782
Triad Hospitals Sr. Sub. Note, 11.00% ................. 15,000 5/15/2009 15,600
Tyco International Group SA, 6.25% .................... 50,000 6/15/2003 47,495
United Technologies Corp., 7.50% ...................... 25,000 9/15/2029 24,249
US Unwired Inc. Sr. Sub. Note, 0.00% to 10/31/2004,
13.375% from 11/1/2004 to maturity+ ................. 40,000 11/01/2009 21,800
USA Waste Services Inc. Sr. Note, 7.00% ............... 50,000 10/01/2004 44,806
Viatel Inc. Sr. Note, 11.25% .......................... 50,000 4/15/2008 43,000
Wal-Mart Stores, Inc. Note, 7.55% ..................... 75,000 2/15/2030 75,325
Williams Communications Group Sr. Note, 10.875% ....... 40,000 10/01/2009 40,300
Winstar Communications Inc., 12.50%+ .................. 30,000 4/15/2008 28,950
Zilog Inc. Sr. Sec. Note, 9.50% ....................... 10,000 3/01/2005 8,950
------------
5,190,416
------------
Total Fixed Income Securities (Cost $14,224,021) ......................................... 13,084,433
------------
-----------------------------------------------------------------------------------------------------------------
SHARES
-----------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS 14.5%
State Street Navigator Securities Lending Prime Portfolio .................... 8,901,630 $ 8,901,630
------------
Total Short-Term Investments (Cost $8,901,630) ............................................ 8,901,630
------------
-----------------------------------------------------------------------------------------------------------------
PRINCIPAL MATURITY
AMOUNT DATE
-----------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER 10.2%
American Express Credit Corp., 6.00% .................. $ 757,000 5/15/2000 757,000
Citicorp, 6.01% ....................................... 1,947,000 5/01/2000 1,947,000
Exxon Corp., 5.85% .................................... 2,566,000 5/01/2000 2,566,000
Ford Motor Credit Co., 5.93% .......................... 356,000 5/04/2000 356,000
Ford Motor Credit Co., 6.00% .......................... 649,000 5/22/2000 649,000
------------
Total Commercial Paper (Cost $6,275,000) ................................................. 6,275,000
------------
Total Investments (Cost $63,127,846) - 116.5% ............................................ 71,677,803
Cash and Other Assets, Less Liabilities - (16.5%) ........................................ (10,125,651)
------------
Net Assets - 100.0% ...................................................................... $ 61,552,152
============
Federal Income Tax Information:
At April 30, 2000, the net unrealized appreciation of
investments based on cost for Federal income tax purposes of
$63,388,601 was as follows:
Aggregate gross unrealized appreciation for all investments in
which there is an excess of value over tax cost ......................................... $ 12,957,857
Aggregate gross unrealized depreciation for all investments in
which there is an excess of tax cost over value ......................................... (4,668,655)
------------
$ 8,289,202
============
ADR Stands for American Depositary Receipt, representing ownership of foreign securities.
* Non-income-producing securities.
TBA Represents "TBA" (to be announced) purchase commitment to purchase securities for a fixed unit price at a
future date beyond customary settlement time. Although the unit price has been established, the principal
value has not been finalized.
+ 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, 2000 were $716,784 and $691,484 (1.12% of net assets), respectively.
[ ] Security is in default.
Futures contracts open at April 30, 2000, are as follows:
<CAPTION>
EXPIRATION UNREALIZED
TYPE NOTIONAL AMOUNT MONTH DEPRECIATION
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
5 year U.S. Treasury Notes $400,000 June, 2000 $(1,325)
10 year U.S. Treasury Notes $300,000 June, 2000 (766)
-------
$(2,091)
=======
Forward currency exchange contracts outstanding at April 30, 2000, are as
follows:
<CAPTION>
UNREALIZED
CONTRACT APPRECIATION DELIVERY
TOTAL VALUE PRICE (DEPRECIATION) DATE
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sell Euro, Buy U.S. dollars 63,580 EUR 0.99210 EUR $ 5,135 5/18/00
Sell Euro, Buy U.S. dollars 28,600 EUR 0.94745 EUR 937 7/26/00
Sell Greek drachma, Buy U.S. dollars 15,500,000 GRD 0.00287 GRD 2,554 5/09/00
Sell Greek drachma, Buy U.S. dollars 12,750,000 GRD 0.00286 GRD 2,028 5/09/00
Sell Greek drachma, Buy U.S. dollars 42,938,000 GRD 0.00294 GRD 10,215 5/18/00
Buy New Zealand dollars, Sell U.S. dollars 51,000 NZD 0.48837 NZD (142) 5/18/00
Buy New Zealand dollars, Sell U.S. dollars 282,000 NZD 0.49612 NZD (2,969) 5/18/00
Sell New Zealand dollars, Buy U.S. dollars 119,000 NZD 0.49000 NZD 525 5/18/00
Sell New Zealand dollars, Buy U.S. dollars 780,000 NZD 0.49023 NZD 3,619 5/18/00
Sell New Zealand dollars, Buy U.S. dollars 190,000 NZD 0.49538 NZD 1,860 5/18/00
Sell New Zealand dollars, Buy U.S. dollars 770,000 NZD 0.49600 NZD 8,057 7/26/00
---------
$ 31,819
=========
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: AGGRESSIVE
-------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
-------------------------------------------------------------------------------
April 30, 2000 (Unaudited)
ASSETS
Investments, at value (Cost $63,127,846) (Note 1) ............... $71,677,803
Foreign currency ................................................ 171,393
Cash ............................................................ 96,849
Receivable for securities sold .................................. 913,347
Interest and dividends receivable ............................... 320,492
Receivable for open forward contracts ........................... 34,930
Receivable from Distributor (Note 3) ............................ 34,717
Other assets .................................................... 36,029
-----------
73,285,560
LIABILITIES
Payable for collateral received on securities loaned ............ 8,901,630
Payable for securities purchased ................................ 2,653,679
Accrued management fee (Note 2) ................................. 78,954
Accrued transfer agent and shareholder services (Note 2) ........ 21,891
Accrued trustees' fees (Note 2) ................................. 7,280
Payable for open forward contracts .............................. 3,111
Payable for fund shares redeemed ................................ 708
Other accrued expenses .......................................... 66,155
-----------
11,733,408
-----------
NET ASSETS ...................................................... $61,552,152
===========
Net Assets consist of:
Undistributed net investment income ........................... $ 628,887
Unrealized appreciation of investments ........................ 8,549,957
Unrealized appreciation of forward contracts and foreign
currency .................................................... 26,665
Unrealized depreciation of futures contracts .................. (2,092)
Accumulated net realized gain ................................. 6,189,456
Paid-in capital ............................................... 46,159,279
-----------
$61,552,152
===========
Net Asset Value, offering price and redemption price per share
of Class S shares ($61,552,152 / 5,035,805 shares) ............ $12.22
======
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, 2000 (Unaudited)
INVESTMENT INCOME
Interest, net of foreign taxes of $4,371 (Note 1) ............... $ 857,021
Dividends ....................................................... 173,264
-----------
1,030,285
EXPENSES
Management fee (Note 2) ......................................... 233,306
Custodian fee ................................................... 75,551
Transfer agent and shareholder services (Note 2) ................ 29,748
Audit fee ....................................................... 13,524
Reports to shareholders ......................................... 12,246
Registration fees ............................................... 9,338
Trustees' fees (Note 2) ......................................... 7,280
Legal fees ...................................................... 1,140
Miscellaneous ................................................... 15,539
-----------
397,672
Expenses borne by the Distributor (Note 3) ...................... (54,991)
Fees paid indirectly (Note 2) ................................... (500)
-----------
342,181
-----------
Net investment income ........................................... 688,104
-----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
FOREIGN CURRENCY, FORWARD CONTRACTS AND FUTURES CONTRACTS
Net realized gain on investments (Notes 1 and 4) ................ 6,821,703
Net realized loss on foreign currency and forward contracts
(Note 1) ...................................................... (294,516)
Net realized loss on futures contracts (Note 1) ................. (229)
-----------
Total net realized gain ....................................... 6,526,958
-----------
Net unrealized appreciation of investments ...................... 986,039
Net unrealized appreciation of foreign currency and
forward contracts ............................................. 163,575
Net unrealized depreciation of futures contracts ................ (2,554)
-----------
Total net unrealized appreciation ............................. 1,147,060
-----------
Net gain on investments, foreign currency, forward
contracts and futures contracts ............................... 7,674,018
-----------
Net increase in net assets resulting from operations ............ $ 8,362,122
===========
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: AGGRESSIVE
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED APRIL 30, 2000
OCTOBER 31, 1999 (UNAUDITED)
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income ......................................... $ 1,072,842 $ 688,104
Net realized gain on investments, foreign currency, forward
contracts and futures contracts ............................. 1,105,796 6,526,958
Net unrealized appreciation of investments, foreign currency,
forward contracts and futures contracts ..................... 5,411,590 1,147,059
----------- -----------
Net increase resulting from operations ........................ 7,590,228 8,362,121
----------- -----------
Dividends from net investment income -- Class S ............... (765,775) (623,502)
----------- -----------
Distributions from net realized gains -- Class S .............. (8,002,009) (1,625,786)
----------- -----------
Class S share transactions (Note 6):
Proceeds from sale of shares ................................ 5,716,393 2,562,143
Net asset value of shares issued in payment of:
Dividends from net investment income ...................... 298,971 223,967
Distributions from net realized gains ..................... 8,001,998 1,625,782
Cost of shares repurchased .................................. (10,960,555) (6,699,723)
----------- -----------
Net increase (decrease) from fund share transactions .......... 3,056,807 (2,287,831)
----------- -----------
Total increase in net assets .................................. 1,879,251 3,825,002
NET ASSETS
Beginning of period ........................................... 55,847,899 57,727,150
----------- -----------
End of period (including undistributed net investment income
of $564,286 and $628,887, respectively) ..................... $57,727,150 $61,552,152
=========== ===========
Number of Class S shares:
Sold ........................................................ 517,034 210,539
Issued upon reinvestment of:
Dividends from net investment income ...................... 27,969 19,241
Distributions from net realized gains ..................... 779,162 139,672
Repurchased ................................................. (988,554) (548,937)
----------- -----------
Net increase (decrease) in fund shares ...................... 335,611 (179,485)
=========== ===========
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: AGGRESSIVE
-------------------------------------------------------------------------------
NOTES TO UNAUDITED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
April 30, 2000
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 six separate funds: State Street
Research Strategic Portfolios: Aggressive, State Street Research Government
Income Fund, State Street Research Strategic Income Plus Fund, State Street
Research IntelliQuant Portfolios: Small-Cap Value, State Street Research Health
Sciences Fund and State Street Research International Equity Fund.
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 5.75% 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 paid 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 MetLife, Inc.
("MetLife"), 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 plans 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 has
elected to qualify under Subchapter M of the Internal Revenue Code and its
policy is to distribute all of its taxable income, including net realized
capital gains, within the prescribed time periods.
F. 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.
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, 2000, the value of the securities loaned and the value of
collateral were $7,785,200 and $8,901,630, respectively. During the six months
ended April 30, 2000, income from securities lending amounted to $35,828 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 0.75% 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, 2000, the fees
pursuant to such agreement amounted to $233,306.
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 MetLife 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, MetLife 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, 2000, the amount of such expenses was $22,214.
The Fund has entered into an arrangement with its transfer agent whereby
credits realized as a result of uninvested cash balances were used to reduce a
portion of the Fund's expense. During the six months ended April 30, 2000, the
Fund's transfer agent fees were reduced by $500, under this arrangement.
The fees of the Trustees not currently affiliated with the Adviser amounted to
$7,280 during the six months ended April 30, 2000.
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, 2000, the amount of such expenses
assumed by the Distributor and its affiliates was $54,991.
NOTE 4
For the six months ended April 30, 2000, purchases and sales of securities,
exclusive of short-term obligations, aggregated $32,620,349 and $40,861,091
(including $7,791,321 and $7,275,840 of U.S. Government obligations),
respectively.
NOTE 5
The Trust has adopted plans of distribution pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended. Under the plans, the Fund 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, $.001 par value per share. At April 30, 2000, MetLife
owned 3,418,962 Class S shares of the Fund.
<PAGE>
<TABLE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: AGGRESSIVE
-----------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------------------------------------------------------------------------
For a share outstanding throughout each period:
<CAPTION>
CLASS A
--------------------------------------------------
YEARS ENDED OCTOBER 31
------------------------------ NOVEMBER 1, 1996
1995(a) 1996(a) TO MARCH 27, 1997(a)
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ($) 9.74 10.93 12.45
----- ----- -----
Net investment income ($)* 0.20 0.14 0.10
Net realized and unrealized gain on
investments, foreign currency and forward
contracts ($) 1.19 1.79 0.41
----- ----- -----
TOTAL FROM INVESTMENT OPERATIONS ($) 1.39 1.93 0.51
----- ----- -----
Dividends from net investment income ($) (0.20) (0.17) (0.13)
Distributions from capital gains ($) -- (0.24) (1.48)
----- ----- -----
TOTAL DISTRIBUTIONS ($) (0.20) (0.41) (1.61)
----- ----- -----
NET ASSET VALUE, END OF PERIOD ($) 10.93 12.45 11.35
===== ===== =====
Total return(b) (%) 14.49 18.05 4.18(c)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period ($ thousands) 39,555 623 --
Ratio of operating expenses to average net
assets (%)* 1.35 1.35 1.35(d)
Ratio of net investment income to average net
assets (%)* 1.98 1.43 1.69(d)
Portfolio turnover rate (%) 127.44 145.59 136.48
* Reflects voluntary reduction of expenses
per share of these amounts (Note 3) ($) 0.02 0.01 0.02
<CAPTION>
CLASS S
-----------------------------------------------------------------------------------------------------
YEARS ENDED OCTOBER 31
SIX MONTHS ENDED
-------------------------------------------------------------------------- APRIL 30, 2000
1995(a) 1996(a) 1997(a) 1998(a) 1999(a) (UNAUDITED)(a)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD ($) 9.74 10.94 12.43 13.18 11.44 11.07
----- ----- ----- ----- ----- -----
Net investment income ($)* 0.22 0.22 0.22 0.21 0.20 0.13
Net realized and
unrealized gain on
investments, foreign
currency, forward
contracts and futures
contracts ($) 1.20 1.74 2.27 0.17 1.25 1.45
----- ----- ----- ----- ----- -----
TOTAL FROM INVESTMENT
OPERATIONS ($) 1.42 1.96 2.49 0.38 1.45 1.58
----- ----- ----- ----- ----- -----
Dividends from net
investment income ($) (0.22) (0.23) (0.26) (0.24) (0.15) (0.12)
Distributions from
capital gains ($) -- (0.24) (1.48) (1.88) (1.67) (0.31)
----- ----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS ($) (0.22) (0.47) (1.74) (2.12) (1.82) (0.43)
----- ----- ----- ----- ----- -----
NET ASSET VALUE, END OF
PERIOD ($) 10.94 12.43 13.18 11.44 11.07 12.22
===== ===== ===== ===== ===== =====
Total return(b) (%) 14.85 18.37 22.54 3.69 13.89 14.49 (c)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of
period ($ thousands) 20,809 63,272 77,753 55,848 57,727 61,552
Ratio of operating
expenses to average net
assets (%)* 1.10 1.10 1.10 1.10 1.10 1.10 (d)
Ratio of operating
expenses to average net
assets after expense
reductions (%)* 1.10 1.10 1.10 1.10 1.10 1.10 (d)
Ratio of net investment
income to average net
assets (%)* 2.13 1.78 1.79 1.81 1.82 2.21 (d)
Portfolio turnover rate (%) 127.44 145.59 136.48 124.15 108.44 55.14
* Reflects voluntary
reduction of expenses
per share of these
amounts (Note 3) ($) 0.02 0.03 0.02 0.02 0.02 0.01
----------------------------------------------------------------------------------------------------------------------------------
(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) Not annualized.
(d) Annualized.
</TABLE>
<PAGE>
<TABLE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: AGGRESSIVE
-----------------------------------------------------------------------------------------------------------------
FUND INFORMATION, OFFICERS AND TRUSTEES OF STATE STREET RESEARCH FINANCIAL TRUST
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FUND INFORMATION OFFICERS TRUSTEES
STATE STREET RESEARCH GERARD P. MAUS GERARD P. MAUS
STRATEGIC PORTFOLIOS: AGGRESSIVE Chairman of the Board, Chief Financial Officer,
One Financial Center President, Chief Executive Chief Administrative
Boston, MA 02111 Officer and Treasurer Officer, Director and
Interim Chief Operating Officer,
INVESTMENT ADVISER PETER C. BENNETT State Street Research &
State Street Research & Vice President Management Company
Management Company
One Financial Center JOHN R. BORZILLERI BRUCE R. BOND
Boston, MA 02111 Vice President Former Chairman of the Board
Chief Executive Officer and
DISTRIBUTOR BRUCE A. EBEL President, PictureTel Corporation
State Street Research Vice President
Investment Services, Inc. STEVE A. GARBAN
One Financial Center JOHN H. KALLIS Former Senior Vice President
Boston, MA 02111 Vice President for Finance and Operations and
Treasurer, The Pennsylvania
SHAREHOLDER SERVICES THOMAS P. MOORE, JR. State University
State Street Research Vice President
Service Center DEAN O. MORTON
P.O. Box 8408 E.K. EASTON RAGSDALE, JR. Former Executive Vice President,
Boston, MA 02266-8408 Vice President Chief Operating Officer and
1-87-SSR-FUNDS (toll-free) Director, Hewlett-Packard
THOMAS A. SHIVELY Company
CUSTODIAN Vice President
State Street Bank and SUSAN M. PHILLIPS
Trust Company JAMES M. WEISS Dean, School of Business and
225 Franklin Street Vice President Public Management, George
Boston, MA 02110 Washington University; former
KENNARD P. WOODWORTH Member of the Board of Governors
LEGAL COUNSEL Vice President of the Federal Reserve System and
Goodwin, Procter & Hoar LLP Chairman and Commissioner of
Exchange Place JOSEPH W. CANAVAN the Commodity Futures Trading
Boston, MA 02109 Assistant Treasurer Commission
DOUGLAS A. ROMICH TOBY ROSENBLATT
Assistant Treasurer President,
Founders Investments Ltd.
FRANCIS J. MCNAMARA, III President,
Secretary and General Counsel The Glen Ellen Company
DARMAN A. WING MICHAEL S. SCOTT MORTON
Assistant Secretary and Jay W. Forrester Professor of
Assistant General Counsel Management, Sloan School of
Management, Massachusetts
AMY L. SIMMONS Institute of Technology
Assistant Secretary
</TABLE>
<PAGE>
STATE STREET RESEARCH STRATEGIC PORTFOLIOS: AGGRESSIVE
One Financial Center
Boston, MA 02111
QUESTIONS? COMMENTS?
E-MAIL us at:
[email protected]
INTERNET site:
www.ssrfunds.com
CALL us toll free at 1-87-SSR-FUNDS (1-877-773-8637 or
[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
[LOGO] STATE STREET RESEARCH
(C)2000 State Street Research Investment Services, Inc., One Financial Center,
Boston, MA 02111
This report is prepared for the general information of current shareholders.
This publication must be preceded or accompanied by a current State Street
Research Strategic Portfolios: Aggressive prospectus.
When used after June 30, 2000, 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: (exp 0601) SSR-LD SPA-1944-0500
