[front cover]
[State Street logo] STATE STREET RESEARCH
STATE STREET RESEARCH
INTERNATIONAL EQUITY FUND
ANNUAL REPORT
October 31, 1995
[photo of man with umbrella running on the world]
WHAT'S INSIDE
From the President:
Most markets rewarded
investors
Portfolio Manager's Review:
Disappointing performance
for international stocks
Fund Information:
Facts and figures
Plus, Complete Portfolio Holdings
and Financial Statements
<PAGE>
FROM THE PRESIDENT
To Our Shareholders:
The markets continue to reward investors. U.S. stocks, U.S. bonds and
overseas bonds have all enjoyed stellar returns over the past year. The one
laggard has been international stocks.
For the twelve months ended October 31, 1995, the Standard & Poor's 500
Index, a common measure of U.S. stock market performance, provided a total
return of +26.41%.(1) The Merrill Lynch Government Master Index, an indicator
of U.S. bond market performance, provided a gain of +15.41% over the same
time period--a very strong return for bonds.(1) International stocks, as
measured by the Morgan Stanley EAFE Index, lost -0.37%.(1)
The benefits of long-term investing
The past 12 months clearly demonstrated the need to invest for the long term.
In the U.S., 1994 was a difficult year, with the stock and bond markets
dropping sharply. Overseas stock markets offered much better performance.
This year, the situation is reversed, with the domestic stock market besting
the international markets. We believe the best strategy is to remain patient
and maintain a long-term outlook.
Have you reviewed your portfolio?
The new year can be a good time to review your portfolio with your investment
representative. Are you fully diversified? Diversification can be a
successful way to reduce the risk in your investment portfolio. Did your
asset allocation change because of 1995's market performance? Your investment
representative can help you answer these important questions.
Thank you for investing with State Street Research.
Sincerely,
/s/ Jeffrey J. Hodgman
Jeffrey J. Hodgman
President and Chief Executive Officer
November 30, 1995
(1)The Standard & Poor's 500 Composite Index (S&P 500) includes 500 widely
traded common stocks. The Merrill Lynch Government Master Index is a commonly
used indicator of bond market performance. The Morgan Stanley Europe,
Australia, Far East Index is a commonly used measure of international stock
market performance. The indices are unmanaged and do not take sales charges
into account. Direct investment in the index is not possible; results are for
illustrative purposes only.
(2)-11.09% for Class B shares; -10.16% for Class C shares; -11.09% for Class
D shares.
(3)Investment result is based on a $10,000 investment in Class A shares at
the maximum sales charge of 4.5% with reinvestment of capital gain
distributions and income dividends. No adjustment has been made for income
taxes payable by shareholders on income dividends or capital gain
distributions.
(4)All returns represent past performance, which is no guarantee of future
results. The investment return and principal value of an investment made in
the Fund will fluctuate and shares, when redeemed, may be worth more or less
than their original cost. All returns assume reinvestment of capital gain
distributions and income dividends.
(5)Shares of the Fund had no class designations until March 1, 1994, when
designations were assigned based on the pricing and 12b-1 fees applicable to
shares sold thereafter. Performance for a class includes periods prior to the
adoption of class designations. Performance reflects up to a maximum 4.5%
front-end or 5% contingent deferred sales charge. Performance prior to class
designations in 1994 does not reflect annual 12b-1 fees of .25% for Class "A"
shares and 1% for Class "B" and "D" shares, which will reduce subsequent
performance.
- -------------------------------------------------------------------------------
Fund Information (all data are for periods ended October 31, 1995, except
where otherwise noted)
- -------------------------------------------------------------------------------
Total value of $10,000 invested on
January 22, 1992(3,4,5)
(Class A shares, at maximum applicable sales charge)
[typeset representation of mountain chart in bottom left-hand column]
1/92 9550
10/92 8389
10/93 12430
10/94 15213
10/95 13635
SEC Average Annual Compound Rates of Return for periods ended 9/30/95
(at maximum applicable sales charge)(4,5)
Life of Fund
(since 1/22/92) 1 Year
- -------- --------------- ----------------
Class A +9.54%/+8.49% -10.65%/-11.20%
- -------- ------------- ---------------
Class B +9.95%/+8.88% -11.55%/-12.12%
- -------- ------------- ---------------
Class C +11.06%/+9.99% -6.23%/-6.81%
- -------- ------------- ---------------
Class D +10.54%/+9.49% -8.12%/-8.69%
- -------- ------------- ---------------
Performance results for the Fund are increased by the investment manager's
voluntary reduction of fees and expenses related to the Fund. The first
figure reflects expense reduction; the second shows what results would have
been without subsidization.
Average Annual Compound Rates of Return for periods ended 10/31/95
(at maximum applicable sales charge)(4,5)
Life of Fund
(since 1/22/92) 3 years 1 year
- -------- --------------- --------------- ----------------
Class A +8.55%/+7.52% +15.79%/+14.99% -14.41%/-14.95%
- -------- ------------- ------------- ---------------
Class B +8.90%/+7.84% +16.35%/+15.53% -15.31%/-15.88%
- -------- ------------- ------------- ---------------
Class C +10.03%/+8.98% +17.78%/+16.96% -10.16%/-10.72%
- -------- ------------- ------------- ---------------
Class D +9.52%/+8.48% +17.08%/+16.27% -11.94%/-12.50%
- -------- ------------- ------------- ---------------
Cumulative Total Returns for periods ended 10/31/95
(do not reflect sales charge)(4)
Life of Fund
(since 1/22/92) 3 years 1 year
- -------- --------------- --------------- ----------------
Class A +42.77%/+37.73% +62.54%/+59.20% -10.38%/-10.94%
- -------- ------------- ------------- ---------------
Class B +40.98%/+36.00% +60.50%/+57.20% -11.09%/-11.66%
- -------- ------------- ------------- ---------------
Class C +43.51%/+38.40% +63.38%/+59.98% -10.16%/-10.72%
- -------- ------------- ------------- ---------------
Class D +40.98%/+36.00% +60.50%/+57.20% -11.09%/-11.66%
- -------- ------------- ------------- ---------------
<PAGE>
PORTFOLIO MANAGER'S REVIEW
International Equity Fund's portfolio manager is GFM International Investors
Limited, a London-based money manager and indirect subsidiary of MetLife.
It was a difficult environment for international stocks over the past year.
International Equity Fund's Class A shares provided a total return of -10.38%
(does not reflect sales charge)(2) for the 12 months ended October 31, 1995.
Over the same time period, Lipper Analytical Services' International Funds
category provided an average return of -1.09% (does not reflect sales
charge).
The Fund's disappointing performance was the result of weakness in Japan's
stock market, a position in stocks of companies tied to raw materials, and
volatile international currencies. It is important to note that performance
for an international stock fund should be viewed over a longer time period,
not simply over the short term. For the three years ended October 31,
International Equity Fund solidly outperformed its Lipper category.
Mixed performance in Europe
The Germany and UK markets turned in respectable performance over the past 12
months. French stocks have been disappointing since the Presidential
elections in August. The Fund's performance was hurt by its position in
mid-cap (medium-sized) stocks. Mid-cap stocks provide more concentrated
exposure to national markets, which helps provide greater diversification for
investors' portfolios. Over the past year, however, the best performance was
delivered by large, multinational corporations with more exposure to the U.S.
market.
Difficult Japanese market
Entering 1994, Japan's stock market and consumer spending seemed poised to
recover. However, the Kobe earthquake in January derailed any recovery, and
domestic investors have remained on the sidelines. Despite disappointing
performance in Japan, the Fund believed Japanese stocks offered attractive
value throughout the year and retained a significant position there.
Raw materials stocks offered value
Much of the Fund's position in Canada and Australia was invested in the
stocks of companies tied to mining and raw materials--gold and other metals,
chemicals and agriculture. These stocks offered excellent value and were
expected to benefit from declining supply and increasing demand driven by
emerging market economies. Although at this point the markets have not
recognized the potential for these stocks, they still offer strong value and
the Fund remains committed to the strategy.
Fluctuating exchange rates
In Europe and Japan, political and economic uncertainty led to volatile
currencies--which impacted local stock markets. Much of this fluctuation
tends to be short-term in nature--as a result, International Equity Fund's
portfolio was not "hedged" to protect it from changes in foreign currency
exchange rates. GFM's long-term outlook is for a weaker dollar, which would
benefit the Fund's unhedged portfolio.
Outlook
GFM believes International Equity Fund offers significant potential. Japan's
economy appears poised for recovery, as cautious consumers begin to re-emerge
after a difficult year. European stocks could benefit from interest rate cuts
and corporate restructuring and cost-cutting, similar to what occurred in the
United States over recent years. The portfolio also maintains positions in
raw materials stocks, where there is a continuing imbalance of supply and
demand.
[typeset representation of bar chart in lower left-hand column]
5 Largest Country Positions
(by percentage of net assets for country of issue)
United Kingdom 14.6%
Canada 10.3%
Japan 10.3%
Germany 8.5%
France 6.1%
Total net assets: 49.8%
Because of active management, there is no guarantee that the Fund currently
invests, or will continue to invest, in the countries listed in this table.
10 Largest Equity Positions
(by percentage of net assets)
1 Avocet Ventures Tungsten and gold miner Canada/UK 2.3%
2 Waverley Mining Mining/finance company United Kingdom 1.9%
3 Emtech Technology/research firm Canada/Ukraine 1.8%
4 Alexon Group Merchandising company United Kingdom 1.3%
5 Epicore Networks Environmental firm Canada 1.2%
6 Prospect Japan Fund Fund of small-cap stocks Japan 1.1%
7 Sumitomo Realty Real estate developer Japan 1.1%
8 Western Mining Mining, minerals producer Australia 1.0%
9 Black Hawk Mining Gold and nickel miner Canada 1.0%
10 Tokyo Tungsten Metals producer Japan 0.9%
These securities represent an aggregate of 13.6% of the portfolio. Because of
active management, there is no guarantee that the Fund currently invests, or
will continue to invest, in the securities listed in this table.
2
<PAGE>
STATE STREET RESEARCH INTERNATIONAL EQUITY FUND
- ------------------------------------------------------------------------------
Investment Portfolio
- ------------------------------------------------------------------------------
October 31, 1995
Value
Shares (Note 1)
- ------------------------------------------------ --------- ------------
COMMON STOCKS 71.2%
Argentina 0.7%
Buenos Aires Embotelladora ADR 25,300 $ 578,737
----------
Australia 6.0%
Austpac Gold NL* 2,000,000 68,556
Coles Myer Ltd. 60,000 207,038
Elders Australia Ltd. 350,000 413,239
Gold Mines of Australia Ltd.* 2,396,447 492,871
Henry Walker Group 140,000 179,159
ISR Group Ltd.* 815,000 788,429
MultiStack International 272,899 185,009
Pima Mining NL* 500,000 41,895
QBE Insurance Group 105,200 464,778
Rhodes Mining NL* 2,000,000 228,519
Savage Resources* 600,000 434,186
Star Mining Corp.* 3,872,000 619,378
Sydney Aquarium Ltd. 145,250 241,198
Vanguard Petroleum Ltd.* 615,000 154,593
Western Mining Corp. 140,000 897,928
----------
5,416,776
----------
Austria 1.6%
Creditanstalt Bank AG 3,040 159,653
Flughafen Wien AG 2,500 160,582
OMV Handels AG 7,500 647,629
VA Stahl AG* 15,000 459,021
----------
1,426,885
----------
Belgium 0.8%
D'ieteren Trading 3,000 238,424
UCB 200 228,231
Union Miniere SA* 3,500 227,972
----------
694,627
----------
Canada 10.3%
Advanced Material Resources Ltd.* 750,000 380,654
Akiko Gold Resources Ltd.* 545,500 219,861
Asia Pacific Resources Ltd.* 100,000 365,726
Avocet Ventures Inc.* 637,500 2,079,322
Black Hawk Mining Inc.* 1,565,000 887,744
Canadian Crew Energy Corp.* 210,000 156,740
Epicore Networks Inc.* 300,000 1,119,570
Eurogas Corp.* 375,000 237,910
Master Plan Mineral & Petroleum Development
Corp.* 3,353,740 225,285
Nelson Gold Corp Ltd.* 365,000 653,829
Princess Resource Ltd.* 630,000 145,768
Reclamation Management Ltd.* 150,000 10,076
SCC Resource Inc.* 500,000 279,893
Siam Trading Ltd.* 550,000 418,719
Tan Range Exploration Corp. Cl. A* 922,000 385,371
Canada (cont'd)
TVI Pacific Inc.* 450,000 $ 591,133
United Reef Ltd.* 1,000,000 380,654
Xavier Mines Ltd.* 856,000 734,736
----------
9,272,991
----------
Finland 0.1%
Cultor OY 3,000 124,305
----------
France 6.1%
Assur General De France 10,000 285,475
AXA 4,000 222,163
Banque Nationale Paris 3,000 123,494
Bouygues 1,500 159,506
Castorama Dubois 1,950 316,221
Cetelem 1,500 239,259
Credit Comm France 13,800 685,753
Eaux (Cie Generale) SA* 4,750 441,479
Eramet 3,500 236,191
Imetal 1,500 176,683
LaFarge Coppee SA 5,000 331,384
LVMH Moet Hennessy Louis Vuitton 1,500 298,460
Pechiney International NV 20,000 455,614
Peugot SA 2,500 325,658
SGS Thomson Micro* 4,665 215,120
Total SA 10,000 617,983
Usinor Sacilor* 25,000 373,203
----------
5,503,646
----------
Germany 8.5%
Allianz AG Holdings 326 603,318
Altana AG 550 319,817
Ava Allg Handels AG 1,000 379,369
Bankgesell Berlin 750 221,121
Bayer AG 1,250 332,481
CKAG Colonia Konzern AG 400 312,589
Commerzbank AG 2,000 462,916
Daimler-Benz AG 1,100 530,229
Degussa AG 1,000 321,824
Gildemeister AG* 2,500 283,284
Man AG 1,500 434,783
Mannesmann AG 1,100 362,056
Merck KGAA* 4,250 177,536
Metallgesellschaft* 7,500 156,117
SGL Carbon AG* 3,000 196,718
Siemens AG 1,250 655,371
SKW Trostberg AG* 10,000 217,747
Springer Verlag AG 1,000 603,865
Veba AG 15,000 615,835
Volkswagen AG 1,250 393,844
----------
7,580,820
----------
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
STATE STREET RESEARCH INTERNATIONAL EQUITY FUND
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Value
Shares (Note 1)
- ------------------------------------------------ --------- ------------
Hong Kong 1.5%
Cathay Pacific Airways 165,000 $ 243,284
China Merchants China Direct 375,000 177,031
China North Industries* 265,000 231,875
Hong Kong Aircraft 76,000 195,610
SemiTech 137,500 215,186
Shanghai Lujiazhuie 370,000 262,700
----------
1,325,686
----------
Ireland 1.2%
Dana Petroleum PLC* 5,000,000 691,700
Kish Resources PLC* 5,000,000 316,206
World Fluids PLC* 3,521,073 97,421
----------
1,105,327
----------
Italy 0.9%
Danieli & Co. 35,000 190,809
Edison 40,000 160,602
Fiat SPA 47,000 153,030
Italgas* 100,000 265,997
----------
770,438
----------
Japan 10.3%
Anritsu Corp. 45,000 475,097
Eiwa Corp. 29,000 286,329
Keyence Corp. 5,000 615,866
Meitec Corp. 50,000 816,267
Misawa Homes Co. Ltd. 60,000 466,885
Mitsukoshi 80,000 634,244
MOS Food Services 6,000 150,154
Nice Nichiei Co. 90,000 301,774
Nintendo Co. Ltd. 6,000 441,077
Nippon Shinpan Co. Ltd. 110,000 687,130
Prospect Japan Fund 100,000 1,000,000
Sumitomo Osaka Cement 120,000 484,481
Sumitomo Realty & Development Co. Ltd. 150,000 985,385
Tokio Marine & Fire Insurance Co. Ltd. 75,000 769,832
Tokyo Nissan Auto Sales Co. Ltd.* 45,000 274,940
Tokyo Tungsten Co. Ltd. 87,000 850,481
----------
9,239,942
----------
Korea 0.9%
CITC Frontier Fund* 20,000 356,000
Yellow Sea Investment Co.* 45,000 472,500
----------
828,500
----------
Malaysia 0.9%
Landmarks BHD 165,000 185,714
Tenaga Nasional BHD 55,000 207,792
UMW Holdings BHD 100,000 238,095
Wembley Industries Holdings* 111,000 162,503
----------
794,104
----------
Mexico 0.1%
Fundo Opcion S.A. de C.V.* 115,000 $ 125,249
----------
Netherlands 1.5%
Hunter Douglas NV 5,000 240,525
IHC Caland NV 15,000 423,057
International Nederlanden Group 5,500 327,671
Ver Ned Uitgevers 2,500 349,379
----------
1,340,632
----------
New Zealand 0.7%
Corporate Investments Ltd. 2,275,000 510,595
Fernz Corp. 45,000 133,078
----------
643,673
----------
Norway 0.2%
Pacific Basin Bulk Ship 16,060 226,847
----------
Singapore 0.5%
Comfort Group 250,000 208,776
Jurong Shipyard 29,000 192,923
----------
401,699
----------
Spain 1.5%
Asturiana de Zinc* 60,000 533,366
Banco Bilbao Vizcaya 4,000 122,240
Banco ESP De Credito* 2,279 15,404
Banco Santander SA 3,838 167,287
Empresa Nacionale Celulosas* 25,000 457,785
----------
1,296,082
----------
Sweden 1.1%
Autoliv AB 6,000 344,246
L.M. Ericsson Telephone Co. 11,000 233,563
Lindex AB* 25,000 363,295
----------
941,104
----------
Switzerland 1.2%
BBC Brown Boveri AG 180 208,808
Ciba Geigy AG 500 432,925
CS Holding 4,000 408,703
Von Roll AG* 2,750 60,557
----------
1,110,993
----------
United Kingdom 14.6%
Alexon Group PLC* 1,180,000 1,156,680
Anglo Eastern Plantations 150,000 282,213
Arcadian International PLC 316,000 264,791
Ascot Holdings PLC* 200,000 648,221
Aviva Petrol Inc.* 400,000 281,423
Bakyrchik Gold PLC* 72,000 211,731
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
STATE STREET RESEARCH INTERNATIONAL EQUITY FUND
- ------------------------------------------------------------------------------
INVESTMENT PORTFOLIO (cont'd)
- ------------------------------------------------------------------------------
Value
Shares (Note 1)
- ------------------------------------------------ --------- ------------
United Kingdom (cont'd)
Birse Group PLC* 500,000 $ 122,530
British Biotech* 30,000 423,083
BTR PLC 75,000 398,419
Cedardata PLC 215,000 593,162
Celsis International* 232,372 462,907
DCS Group PLC 215,745 341,099
Euro Sales Finance 283,560 560,395
Exploration Co. of Louisiana, Inc.* 50,000 27,273
Geest PLC 50,000 116,206
Grand Metropolitan PLC 45,000 311,621
Great Western Resources* 394,737 115,457
Guangdong Development Fund Ltd. 250,000 150,000
Hampden Group PLC 395,000 434,032
Hay (Norman) PLC 275,000 128,261
Hobson PLC 900,000 398,419
Lloyds Bank PLC 30,000 369,249
Medeva PLC 75,000 323,123
National Westminster Bank PLC 50,000 499,209
Panther Securities PLC 250,000 262,846
Premium Underwriting PLC* 60,000 114,783
Prospect Industries PLC 1,750,000 138,340
Sainsbury PLC 50,000 334,783
Simon Engineering PLC* 311,111 408,256
Sims Food Group PLC 320,000 263,083
Upton & Southern Holdings PLC Cum Cv. 115,207 169,395
Upton & Southern Holdings PLC* 7,500,000 296,443
UTD Breweries PLC* 15,000,000 385,375
Vision Group PLC* 150,000 409,091
Waverley Mining Finance PLC* 1,214,480 1,677,711
----------
13,079,610
----------
Total Common Stocks (Cost $63,871,069) 63,828,673
----------
EQUITY-RELATED SECURITIES 5.0%
Asahi Glass Co. Wts.* 340 114,750
Baltic Republics Fund Units* 5,000 545,000
Best Denki Co. Wts.* 380 156,750
Casio Computer Co. Wts.* 500 200,000
Citizen Watch Co. Wts.* 760 57,000
Daido Steel Co. Wts.* 425 74,375
Dainichiseika Wts.* 1,050 33,295
Emtech Ltd. Units* 1,600,000 1,612,181
Godo Steel Wts.* 610 38,125
Gold Mines of Australia Ltd. Option* 302,447 23,038
Guangdong Development Fund Ltd. Wts.* 50,000 6,750
Hankyu Corp. Wts.* 425 138,125
Kuraray Co. Wts.* 550 165,000
Nippon Ceramic Co. Ltd. Wts* 2,785 125,108
Nishio Rent All Co. Wts.* 320 $ 152,000
Pacific Metals Co. Wts.* 2,340 208,174
Panther Securities PLC Wts.* 50,000 5,929
Prospect Japan Fund Wts.* 20,000 62,500
Ryobi Wts.* 250 115,625
Showa Sangyo Co. Wts.* 900 78,750
SNT Corp. Wts.* 764 30,283
Sumitomo Light Metals Co. Wts.* 6,750 95,129
Sumitomo Metal & Mining Co. Wts.* 360 180
Takashimaya Co. Wts.* 905 90,500
Tobu Railway Co. Wts.* 950 178,125
Toyo Engineering Wts.* 1,370 85,625
Upton & Southern Holdings PLC Wts.* 750,000 5,929
Von Roll AG Wts.* 2,750 7,267
Yamazen Corp. Wts.* 3,200 67,647
----------
Total Equity-Related Securities (Cost $6,044,646) 4,473,160
----------
Principal Maturity
Amount Date
- ------------------------------- -------------- --------- -----------
CONVERTIBLE BONDS 6.5%
Lippo Treasury Ltd. Cv. Bond,
1.25% $ 220,000 12/31/2000 199,100
Mitsubishi Bank Cv. Bond, 3.50% 1,900,000 3/31/2004 1,776,500
Regal Hotels International Cv.
Bond, 5.25% 415,000 12/13/2008 331,751
S Megga International Cv. Bond,
2.50% 280,000 4/01/2002 231,000
Sino Land Co. Cv. Bond, 5.00% 440,000 10/21/2000 452,650
Tanayong Cv. Bond, 3.50% 300,000 3/01/2004 228,000
Japanese Yen
Hankyu Corp. Cv. Bond, 1.25% 90,000,000 9/30/1998 879,808
HKR International Ltd. Cv. Hong Kong Dollar
Bond, 6.00% 2,104,200 6/26/2000 224,866
Austrian Schilling
Lenzing AG Cv. Bond, 5.25% 800,000 12/30/2001 76,837
Hoi Sing Holdings Cv. Bond, Swiss Franc
1.50% 350,000 12/31/1998 283,240
NEC Corp. Cv. Bond, 1.00% 1,100,000 3/31/1999 1,194,178
---------
Total Convertible Bonds (Cost $5,534,106) 5,877,930
---------
Total Investments (Cost $75,449,821)--82.7% 74,179,763
Cash and Other Assets, Less Liabilities--17.3% 15,488,941
---------
Net Assets--100.0% $89,668,704
=========
* Nonincome-producing securities.
ADR and GDR stand for American Depositary Receipt and Global Depositary
Receipt, respectively, representing ownership of foreign securities.
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
STATE STREET RESEARCH INTERNATIONAL EQUITY FUND
Federal Income Tax Information:
At October 31, 1995, the net unrealized
depreciation of investments based on
cost for Federal income tax purposes
of $75,499,467 was as follows:
Aggregate gross unrealized appreciation
for all investments in which there is
an excess of value over tax cost $ 8,669,935
Aggregate gross unrealized depreciation
for all investments in which there is
an excess of tax cost over value (9,989,639)
----------
$(1,319,704)
==========
- ------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- ------------------------------------------------------
October 31, 1995
Assets
Investments, at value (Cost $75,449,821) (Note 1) $74,179,763
Foreign currency, at value (Cost $12,607,433) 12,064,011
Cash 4,793,768
Receivable for securities sold 316,733
Receivable for fund shares sold 241,644
Dividends and interest receivable 121,144
Foreign Tax receivable 74,836
Receivable from investment manager (Note 3) 54,510
Deferred organization costs and other assets (Note 1) 20,233
----------
91,866,642
Liabilities
Payable for securities purchased 1,519,389
Payable for fund shares redeemed 200,236
Accrued transfer agent and shareholder services (Note 2) 173,823
Accrued management fee (Note 2) 76,423
Accrued distribution fee (Note 5) 34,567
Accrued directors' fees (Note 2) 18,926
Other accrued expenses 174,574
----------
2,197,938
----------
Net Assets $89,668,704
==========
Net Assets consist of:
Accumulated net investment loss $ (221,450)
Unrealized depreciation of investments and foreign
currency (1,818,168)
Accumulated net realized loss on investments and
foreign currency (637,687)
Shares of beneficial interest 92,346,009
----------
$89,668,704
==========
Net Asset Value and redemption price per share of Class A
shares ($22,497,304 / 2,409,238 shares of beneficial
interest) $9.34
==========
Maximum Offering Price per share of Class A shares
($9.34 / .955) $9.78
==========
Net Asset Value and offering price per share of Class B
shares ($27,614,183 / 2,994,636 shares of beneficial
interest)* $9.22
==========
Net Asset Value, offering price and redemption price per
share of Class C shares ($33,882,999 / 3,609,214 shares
of beneficial interest) $9.39
==========
Net Asset Value and offering price per share of Class D
shares ($5,674,218 / 615,728 shares of beneficial
interest)* $9.22
==========
* Redemption price per share for Class B and Class D is equal to net asset
value less any applicable contingent deferred sales charge.
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
STATE STREET RESEARCH INTERNATIONAL EQUITY FUND
- -------------------------------------------------
STATEMENT OF OPERATIONS
- -------------------------------------------------
For the year ended October 31, 1995
Investment Income
Interest $ 80,541
Dividends, net of foreign taxes of $113,990 892,985
-----------
973,526
Expenses
Management fee (Note 2) 830,476
Transfer agent and shareholder services (Note 2) 579,528
Custodian fee 281,995
Reports to shareholders 102,629
Audit fee 59,758
Registration fees 56,816
Distribution fee--Class A (Note 5) 54,286
Distribution fees--Class B (Note 5) 233,787
Distribution fees--Class D (Note 5) 36,306
Amortization of organization costs (Note 1) 17,467
Legal fees 17,282
Directors' fees (Note 2) 14,824
Miscellaneous 11,798
-----------
2,296,952
Expenses borne by the investment manager (Note 3) (529,341)
-----------
1,767,611
-----------
Net investment loss (794,085)
-----------
Realized and Unrealized Gain (Loss)
on Investments and Foreign Currency
Net realized loss on investments (Notes 1 and 4) (3,765,395)
Net realized gain on foreign currency (Note 1) 3,324,162
-----------
Total net realized loss (441,233)
-----------
Net unrealized depreciation of investments (8,756,032)
Net unrealized depreciation of foreign currency (605,718)
-----------
Total net unrealized depreciation (9,361,750)
-----------
Net loss on investments and foreign currency (9,802,983)
-----------
Net decrease in net assets resulting from operations $(10,597,068)
===========
- ------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------
Year ended October 31
---------------------------
1995 1994
- ---------------------------------------- ----------- ------------
Increase (Decrease) in Net Assets
Operations:
Net investment loss $ (794,085) $ (544,898)
Net realized gain (loss) on investments
and foreign currency* (441,233) 4,742,053
Net unrealized appreciation
(depreciation) of investments and
foreign currency (9,361,750) 4,880,123
--------- ----------
Net increase (decrease) resulting from
operations (10,597,068) 9,077,278
--------- ----------
Dividend from net
investment income-Class C -- (182,135)
--------- ----------
Distributions from net realized gains:
Class A (1,132,506) --
Class B (1,086,016) --
Class C (2,059,288) (1,787,935)
Class D (138,131) --
--------- ----------
(4,415,941) (1,787,935)
--------- ----------
Net increase from fund share
transactions (Note 6) 6,433,624 63,373,570
--------- ----------
Total increase (decrease) in net assets (8,579,385) 70,480,778
Net Assets
Beginning of year 98,248,089 27,767,311
--------- ----------
End of year (including accumulated net
investment loss of $221,450 and
$281,289, respectively $ 89,668,704 $98,248,089
========== ==========
* Net realized gain (loss) for Federal
income tax purposes (Note 1) $ (588,041) $ 4,512,616
========= ==========
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
STATE STREET RESEARCH INTERNATIONAL EQUITY FUND
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
October 31, 1995
Note 1
State Street Research International Equity Fund (the "Fund"), formerly
MetLife International Equity Fund, is a diversified series of State Street
Research Portfolios, Inc. ("Portfolios"), formerly MetLife Portfolios, Inc.,
which was organized as a Maryland corporation in April, 1991 and is
registered under the Investment Company Act of 1940, as amended, as an
open-end management investment company. The Fund commenced operations in
January, 1992. Portfolios consists presently of two separate funds: State
Street Research International Equity Fund and State Street Research
International Fixed Income Fund.
The Fund offers four classes of shares. Class A shares are subject to an
initial sales charge of up to 4.50% and annual service fees of 0.25% of
average daily net assets. Class B shares are subject to a contingent deferred
sales charge on certain redemptions made within five years of purchase and
pay annual distribution and service fees of 1.00%. Class B shares
automatically convert into Class A shares (which pay lower ongoing expenses)
at the end of eight years after the issuance of the Class B shares. Class C
shares are only offered to certain employee benefit plans and large
institutions. No sales charge is imposed at the time of purchase or
redemption of Class C shares. Class C shares do not pay any distribution or
service fees. Class D shares are subject to a contingent deferred sales
charge of 1.00% on any shares redeemed within one year of their purchase.
Class D shares also pay annual distribution and service fees of 1.00%. The
Fund's expenses are borne pro-rata by each class, except that each class
bears expenses, and has exclusive voting rights with respect to provisions of
the Plan of Distribution, related specifically to that class. The Directors
declare separate dividends on each class of shares.
The following significant accounting policies are consistently followed by
the Fund in preparing its financial statements, and such policies are in
conformity with generally accepted accounting principles for investment
companies.
A. Investment Valuation
Securities traded on domestic stock exchanges are valued at the last sale
price as of the close of business on the day the securities are being valued,
or, lacking any sales, at the mean between closing bid and asked prices.
Securities traded on the National Association of Securities Dealers Automated
Quotation ("NASDAQ") system are valued at the last reported sales price. Each
security traded primarily on non-domestic securities exchanges is generally
valued at the preceding closing value of such security on the exchange where
it is primarily traded. A security that is listed or traded on more than one
exchange is valued at the quotation on the exchange determined to be the
primary market for such security by the Board of Directors or its delegates.
If no closing price is available, then such security is valued at the mean
between the last current bid and asked prices or by using the last available
closing price. Domestic securities traded in the over-the-counter market are
valued at the mean between the bid and asked prices or yield equivalent as
obtained from two or more dealers that make markets in the securities. All
non-U.S. securities traded in the over-the-counter market are valued at the
last sale quote or the last closing bid price, if there is no active trading
in a particular security for a given day. Portfolio securities traded both in
the over-the-counter market and on a securities exchange are valued according
to the broadest and most representative market. Securities for which market
quotations are not readily available are valued as determined in good faith
by or under the authority of the Directors. 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
Interest income is accrued daily as earned. Dividend income is accrued on the
ex-dividend date. The Fund is charged for expenses directly attributable to
it, while indirect expenses are allocated among all funds in the Portfolios.
D. Dividends
Dividends from net investment income are declared and paid or reinvested
annually. 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. At October 31, 1995, the
Fund had a capital loss carryforward of $588,041 available, to the extent
provided in regulations, to offset future capital gains, if any, which
expires on October 31, 2003.
8
<PAGE>
STATE STREET RESEARCH INTERNATIONAL EQUITY FUND
- ------------------------------------------------------------------------------
NOTES (cont'd)
- ------------------------------------------------------------------------------
F. Deferred Organization Costs
Certain costs incurred in the organization and registration of the Fund were
capitalized and are being amortized under the straight-line method over a
period of five years.
Note 2
The Fund and State Street Research Investment Services, Inc., the Fund's
investment manager and principal underwriter (the "Investment Manager" and
"Distributor"), a wholly-owned, indirect subsidiary of Metropolitan Life
Insurance Company ("Metropolitan"), have entered into an agreement under
which the Investment Manager receives monthly fees at an annual rate of 0.95%
of the Fund's average daily net assets. The Investment Manager has entered
into a Sub-Investment Management Agreement with GFM International Investors
Limited (the "Sub-Investment Manager"), a substantially wholly-owned,
indirect subsidiary of Metropolitan, pursuant to which the Sub-Investment
Manager has assumed the overall responsibility for managing the investments
of the Fund. During the year ended October 31, 1995, the Fund paid the
Investment Manager $830,476 in management fees. The Fund has no
responsibility for the payment of fees to the Sub-Investment Manager.
State Street Research Shareholder Services, a division of the Distributor,
provides certain shareholder services to the Fund such as responding to
inquiries and instructions from investors with respect to the purchase and
redemption of shares of the Fund. In addition, Metropolitan receives a fee
for maintenance of the accounts of certain shareholders who are participants
in sponsored arrangements, employee benefit plans and similar programs or
plans, through or under which shares of the Fund may be purchased. During the
year ended October 31, 1995, the amount of such expenses was $163,898.
The fees of the Directors not currently affiliated with the Investment
Manager amounted to $14,824 during the year ended October 31, 1995.
Note 3
The Investment Manager or affiliates may from time to time and in varying
amounts voluntarily assume some portion of fees or expenses relating to the
Fund. During the year ended October 31, 1995, the amount of such assumed
expenses was $529,341.
Note 4
For the year ended October 31, 1995, purchases and sales of securities,
exclusive of short-term obligations, aggregated $74,914,476 and $79,642,940,
respectively.
Note 5
The Portfolios have adopted a Plan of Distribution Pursuant to Rule 12b-1
(the "Plan") under the Investment Company Act of 1940, as amended. Under the
Plan, the Fund pays annual service fees to the Distributor at a rate of 0.25%
of average daily net assets for Class A, Class B and Class D shares. In
addition, the Fund pays annual distribution fees of 0.75% of average daily
net assets for Class B and Class D shares. The Distributor uses such payments
for personal services and/or the maintenance of shareholder accounts, to
reimburse securities dealers for distribution and marketing services, to
furnish ongoing assistance to investors and to defray a portion of its
distribution and marketing expenses. For the year ended October 31, 1995,
fees pursuant to such plan amounted to $54,286, $233,787 and $36,306 for
Class A, Class B and Class D, respectively.
The Fund has been informed that the Distributor and MetLife Securities, Inc.,
a wholly-owned subsidiary of Metropolitan, earned initial sales charges
aggregating $29,729 and $168,621, respectively, on sales of Class A shares of
the Fund during the year ended October 31, 1995, and that MetLife Securities,
Inc. earned commissions aggregating $278,018 on sales of Class B shares, and
that the Distributor collected contingent deferred sales charges of $81,190
and $2,446 on redemptions of Class B and Class D shares, respectively, during
the same period.
9
<PAGE>
STATE STREET RESEARCH INTERNATIONAL EQUITY FUND
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Note 6
The authorized capital stock of the Fund currently consists of 100,000,000
shares, $.01 par value per share. The Fund reserves the right to issue
additional classes of shares.
Share transactions were as follows:
March 1, 1994
(Commencement of
Share Class
Year ended Designations) to
October 31, 1995 October 31, 1994
------------------------- ------------------------
Class A Shares Amount Shares Amount
------------------------ ---------- ----------- -------- ------------
Shares sold 1,597,600 $ 15,459,854 2,513,950 $26,806,424
Issued upon reinvestment
of distribution from net
realized gains 112,688 1,095,324 -- --
Shares repurchased (1,357,862) (12,966,664) (457,138) (4,879,066)
---------- ----------- -------- ------------
Net increase 352,426 $ 3,588,514 2,056,812 $21,927,358
========== =========== ======== ============
Class B Shares Amount Shares Amount
------------------------ ---------- ----------- -------- ------------
Shares sold 1,891,639 $ 18,088,917 1,800,031 $19,220,723
Issued upon reinvestment
of distribution from
net realized gains 108,264 1,045,778 -- --
Shares repurchased (734,821) (6,927,600) (70,477) (754,050)
---------- ----------- -------- ------------
Net increase 1,265,082 $ 12,207,095 1,729,554 $18,466,673
========== =========== ======== ============
Year ended
October 31, 1994
---------------------------
Class C Shares Amount Shares Amount
-------------------- ---------- ------------ ---------- -------------
Shares sold 1,440,157 $ 13,962,911 3,082,343 $ 31,816,155
Issued upon
reinvestment of:
Distribution from
net realized gains 207,652 2,026,671 187,082 1,772,926
Dividends from net
investment income -- -- 11,528 109,898
Shares repurchased (3,000,375) (29,391,886) (1,223,806) (12,796,604)
---------- ------------ ---------- -------------
Net increase
(decrease) (1,352,566) $(13,402,304) 2,057,147 $ 20,902,375
========== ============ ========== =============
March 1, 1994
(Commencement of
Share Class Designations)
to October 31, 1994
-------------------------
Class D Shares Amount Shares Amount
--------------------- -------- ----------- -------- -------------
Shares sold 555,007 $ 5,321,534 273,636 $ 2,922,952
Issued upon
reinvestment of
distribution from
net realized gains 13,592 131,305 -- --
Shares repurchased (148,231) (1,412,520) (78,276) (845,788)
-------- ----------- -------- -------------
Net increase 420,368 $ 4,040,319 195,360 $2,077,164
======== =========== ======== =============
10
<PAGE>
STATE STREET RESEARCH INTERNATIONAL EQUITY FUND
- ------------------------------------------------------------------------------
Financial Highlights
- ------------------------------------------------------------------------------
For a share outstanding throughout each year:
<TABLE>
<CAPTION>
Class A Class B
------------------------------- ---------------------------------
Year ended Year ended
October 31, 1995*** 1994** October 31, 1995*** 1994**
----------------------------------------------------- -------------------- ------- -------------------- ---------
<S> <C> <C> <C> <C>
Net asset value, beginning of year $10.98 $10.54 $10.93 $10.54
Net investment loss* (.08) (.04) (.15) (.06)
Net realized and unrealized gain (loss) on
investments (1.04) .48 (1.04) .45
Distributions from net realized gains (.52) -- (.52) --
-------------------- ------- -------------------- ---------
Net asset value, end of year $9.34 $10.98 $9.22 $10.93
==================== ======= ==================== =========
Total return (10.38)%+ 4.17+++ (11.09)%+ 3.70%+++
Net assets at end of year (000s) $22,497 $22,579 $27,614 $18,904
Ratio of operating expenses to average net assets* 1.90% 1.90%++ 2.65% 2.65%++
Ratio of net investment loss to average net assets* (0.82)% (0.87)%++ (1.54)% (1.61)%++
Portfolio turnover rate 100.68% 80.60% 100.68% 80.60%
*Reflects voluntary assumption of fees or expenses
per share in each year. (Note 3) $.06 $.03 $.06 $.03
</TABLE>
<TABLE>
<CAPTION>
Class C Class D
-------------------------------------------------- -----------------------------
January 22, 1992
Year ended October 31 (Commencement Year ended
--------------------------- of Operations) to October 31,
1995*** 1994 1993 October 31, 1992 1995*** 1994**
- --------------------------------------- -------- ------ ------ ------------------ ---------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 11.01 $ 9.56 $ 6.50 $ 7.40 $ 10.93 $ 10.54
Net investment income (loss)* (.05) (.07) (.02) .04 (.15) (.07)
Net realized and unrealized gain (loss)
on investments (1.05) 2.09 3.17 (.94) (1.04) .46
Dividends from net investment income -- (.05) (.04) -- -- --
Distributions from net realized gains (.52) (.52) (.05) -- (.52) --
-------- ------ ------ ------------------ ---------------- ---------
Net asset value, end of year $9.39 $11.01 $9.56 $6.50 $9.22 $10.93
======== ====== ====== ================== ================ =========
Total return (10.16)%+ 22.73%+ 48.95%+ (12.16)%+++ (11.09)%+ 3.70%+++
Net assets at end of year (000s) $33,883 $54,631 $27,767 $10,418 $ 5,674 $ 2,134
Ratio of operating expenses to average
net assets* 1.65% 1.65% 1.65% 1.65%++ 2.65% 2.65%++
Ratio of net investment income (loss)
to average net assets* (0.51)% (0.75)% (0.37)% 0.79%++ (1.55)% (1.62)%++
Portfolio turnover rate 100.68% 80.60% 116.12% 77.83% 100.68% 80.60%
*Reflects voluntary assumption of fees
or expenses per share in each year.
(Note 3) $.06 $.05 $.08 $.10 $.06 $.03
</TABLE>
**March 1, 1994 (commencement of share class designations) to October 31,
1994.
***Per-share figures have been calculated using the average shares method.
++Annualized
+Total return figures do not reflect any front-end or contingent deferred
sales charges. Total return would be lower if the Investment Manager and
its affiliates had not voluntarily assumed a portion of the Fund's
expenses.
+++Represents aggregate return for the period without annualization and does
not reflect any front-end or contingent deferred sales charges. Total
return would be lower if the Investment Manager and its affiliates had not
voluntarily assumed a portion of the Fund's expenses.
11
<PAGE>
- ------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
- ------------------------------------------------------------------------------
To the Board of Directors of State Street
Research Portfolios, Inc. and the Shareholders of
State Street Research International Equity Fund
We have audited the accompanying statement of assets and liabilities,
including the investment portfolio, of State Street Research International
Equity Fund, formerly MetLife International Equity Fund, (a series of State
Street Research Portfolios, Inc., formerly MetLife Portfolios, Inc.) as of
October 31, 1995, and the related statement of operations for the year then
ended, the statement of changes in net assets for the two years then ended
and the financial highlights for each of the years in the four year period
ended October 31, 1995. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on the financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned at October 31, 1995, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of State Street
Research International Equity Fund (a series of State Street Research
Portfolios, Inc.) at October 31, 1995, the results of its operations, the
changes in its net assets, and its financial highlights for the respective
stated periods, in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Boston, Massachusetts
December 15, 1995
12
<PAGE>
STATE STREET RESEARCH INTERNATIONAL EQUITY FUND
- ------------------------------------------------------------------------------
Management's Discussion of Fund Performance
- ------------------------------------------------------------------------------
European stocks, which represented more than 40% of the portfolio, offered
mixed results. In addition, the Fund was hurt by its position in mid-cap
(medium-sized) stocks; the best performance was delivered by stocks of large,
multinational corporations with exposure to the U.S. market.
Japanese stocks had disappointing performance. The Kobe earthquake in January
derailed any market recovery, and domestic investors remained on the
sideline.
Much of the Fund's position in Canada and Australia was invested in stocks of
companies tied to mining and raw materials. These stocks offered excellent
value and were expected to benefit from declining supply and increasing
demand, driven by emerging market economies. At this point, the market has
not recognized the potential for these stocks.
The Morgan Stanley EAFE Index is a commonly used indicator of international
stock market performance. The index is unmanaged and does not take sales
charges into consideration. Direct investment in the index is not possible;
results are for illustrative purposes only. All returns represent past
performance, which is no guarantee of future results. The investment return
and principal value of an investment made in the Fund will fluctuate and
shares, when redeemed, may be worth more or less than their original cost.
All returns assume reinvestment of capital gain distributions and income
dividends. Shares of the Fund had no class designations until March 1, 1994,
when designations were assigned based on the pricing and 12b-1 fees
applicable to shares sold thereafter. Performance for a class includes
periods prior to the adoption of class designations. Performance reflects up
to a maximum 4.5% front-end or 5% contingent deferred sales charge.
Performance prior to class designations in 1994 does not reflect annual 12b-1
fees of .25% for Class "A" shares and 1% for Class "B" and "D" shares, which
will reduce subsequent performance. Performance results are increased by the
investment manager's voluntary reduction of fees and expenses related to the
Fund. The first figure reflects expense reduction; the second shows what
results would have been without subsidization.
Comparison Of Change In Value Of A $10,000
Investment in International Equity Fund
And The Morgan Stanley EAFE Index
Class A Shares
Average Annual Total Return
1 Year Life of Fund
-14.41%/-14.95% +8.55%/+7.52%
International Morgan Stanley
Equity Fund EAFE Index
9550 10000
10/31/92 8389 8845
10/31/93 12430 12158
10/31/94 15213 13385
10/31/95 13635 13335
Class B Shares
Average Annual Total Return
1 Year Life of Fund
-15.31%/-15.88% +8.90%/+7.84%
International Morgan Stanley
Equity Fund EAFE Index
10000 10000
10/31/92 8784 8845
10/31/93 13015 12158
10/31/94 15858 13385
10/31/95 13798 13335
Class C Shares
Average Annual Total Return
1 Year Life of Fund
-10.16%/-10.72% +10.03%/+8.98%
International Morgan Stanley
Equity Fund EAFE Index
10000 10000
10/31/92 8784 8845
10/31/93 13015 12158
10/31/94 15974 13385
10/31/95 14351 13335
Class D Shares
Average Annual Total Return
1 Year Life of Fund
-11.94%/-12.50% +9.52%/+8.58%
International Morgan Stanley
Equity Fund EAFE Index
10000 10000
10/31/92 8784 8845
10/31/93 13015 12158
10/31/94 15858 13385
10/31/95 14098 13335
13
<PAGE>
STATE STREET RESEARCH INTERNATIONAL EQUITY FUND
- ------------------------------------------------------------------------------
FUND INFORMATION, OFFICERS AND DIRECTORS OF STATE STREET RESEARCH PORTFOLIOS,
INC.
- ------------------------------------------------------------------------------
Fund Information
State Street Research
International Equity Fund
One Madison Avenue
New York, NY 10010
Investment Manager
and Distributor
State Street Research
Investment Services, Inc.
One Financial Center
Boston, MA 02111
Sub-Investment Manager
GFM International
Investors Limited
5 Upper St. Martins Lane
London, WC2H 9EA
England
Shareholder Services
State Street Research
Shareholder Services
P.O. Box 8408
Boston, MA 02266-8408
1-800-562-0032
Custodian
State Street Bank and
Trust Company
225 Franklin Street
Boston, MA 02110
Legal Counsel
Sullivan & Worcester
1025 Connecticut Avenue, N.W.
Washington, D.C. 20036
Independent Accountants
Deloitte & Touche LLP
125 Summer Street
Boston, MA 02110
Officers
Jeffrey J. Hodgman
President and
Chief Executive Officer
Gary Lineberry
Vice President
Albert Rosenthal
Vice President and
Chief Operating Officer
Elliot Reiter
Treasurer
Ronald Zito
Controller
Christopher P. Nicholas
Secretary
Directors
Steve A. Garban
Retired; formerly Senior Vice
President for Finance and
Operations and Treasurer, The
Pennsylvania State University
Jeffrey J. Hodgman, Chairman
Senior Vice President,
Metropolitan Life Insurance
Company
Malcolm T. Hopkins
Former Vice Chairman of the
Board and Chief Financial
Officer, St. Regis Corp.
Robert A. Lawrence
Partner, Saltonstall & Co.
Dean O. Morton
Retired; formerly Executive Vice
President, Chief Operating
Officer and Director,
Hewlett-Packard Company
Michael S. Scott Morton
Jay W. Forrester Professor of
Management, Sloan School of
Management, Massachusetts
Institute of Technology
John H. Tweedie
Senior Vice President,
Metropolitan Life Insurance
Company
14
<PAGE>
[back cover]
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or write us at:
State Street Research
Shareholder Services
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[State Street logo] STATE STREET RESEARCH
This report is prepared for the general information of current shareholders
only. It is not authorized for use as sales material with prospective
investors.
CONTROL NUMBER: 2852-951222(0197)SSR-LD
Cover Illustration by Dorothy Cullinan
IE-905D-1295
<PAGE>
[Front cover]
[State Street Research logo]
State Street Research
International Fixed Income Fund
Annual Report
October 31, 1995
[Graphic - man carrying opened umbrella and briefcase
leaping over globe of the world]
What's Inside
From the President:
The markets reward
investors
Portfolio Manager's Review:
A strong year for international bonds
Fund Information:
Facts and figures
Plus, Complete Portfolio Holdings
and Financial Statements
[Back cover]
State Street Research Investment Services
One Financial Center
Boston, MA 02111
[Indicia]
Bulk Rate
U.S. Postage
PAID
Brockton, MA
Permit No. 600
Questions? Comments?
Call us at 1-800-562-0032,
or write us at:
State Street Research
Shareholder Services
P.O. Box 8408
Boston, MA 02266-8408
[logo-State Street Research]
This report is prepared for the general information of current shareholders
only. It is not authorized for use as sales material with prospective investors.
CONTROL NUMBER: 2853-951222(0197)SSR-LD
Cover Illustration by Dorothy Cullinan
IF-108E-1295
From the President
To Our Shareholders:
The markets continue to reward investors. U.S. stocks, U.S. bonds and
overseas bonds have all enjoyed stellar returns over the past year. The one
laggard has been international stocks.
For the twelve months ended October 31, 1995, the Standard & Poor's 500
Index, a common measure of U.S. stock market performance, provided a total
return of +26.41%.(1) The Merrill Lynch Government Master Index, an indicator
of U.S. bond market performance, provided a gain of +15.41% over the same
time period--a very strong return for bonds.(1) International bonds, as
measured by the Salomon Brothers Non-U.S. Dollar World Bond Index, gained
+15.19%.(1)
The benefits of long-term investing
The past 12 months clearly demonstrated the benefits of investing for the
long term. In the U.S., 1994 was a difficult year, with the stock and bond
markets dropping sharply. Overseas bonds markets offered very moderate
performance in 1994. However, in the past year, U.S. and international bonds
delivered vastly improved performance. Patient investors were able to enjoy
the benefits of a much more positive year.
Have you reviewed your portfolio?
The new year can be a good time to review your portfolio with your investment
representative--especially after a year of such strong market performance.
Are you fully diversified? Diversification can be a successful way to reduce
the risk in your investment portfolio. Did your asset allocation change
because of 1995's market performance? Your investment representative can help
you answer these important questions.
Thank you for investing with State Street Research.
Sincerely,
[Signature of Jeffrey J. Hodgman]
Jeffrey J. Hodgman
President and Chief Executive Officer
November 30, 1995
(1)The Standard & Poor's 500 Composite Index (S&P 500) includes 500 widely
traded common stocks and is a commonly used measure of U.S. stock market
performance. The Merrill Lynch Government Master Index is a commonly used
index of U.S. bond market performance. The Salomon Brothers Non-U.S. Dollar
World Bond Index is a commonly used measure of overseas bond market
performance. The indices are unmanaged and do not take sales charges into
consideration. Direct investment in the indices is not possible; results are
for illustrative purposes only.
(2)+13.53% for Class B shares; +14.51% for
Class C shares; +13.49% for Class D shares.
(3)All returns represent past
performance, which is no guarantee of future results. The investment return
and principal value of an investment made in the Fund will fluctuate and
shares, when redeemed, may be worth more or less than their original cost.
All returns assume reinvestment of capital gain distributions and income
dividends.
(4)Shares of the Fund had no class designations until March 1, 1994,
when designations were assigned based on the pricing and 12b-1 fees
applicable to shares sold thereafter. Performance for a class includes
periods prior to the adoption of class designations. Performance reflects up
to a maximum 4.5% front-end or 5% contingent deferred sales charge.
Performance prior to class designations in 1994 does not reflect annual 12b-1
fees of .25% for Class "A" shares and 1% for Class "B" and "D" shares, which
will reduce subsequent performance.
Fund Information (all data are for periods ended October 31, 1995, except
where otherwise noted)
SEC Yield
(as of October 31, 1995)
- ---------------- -----------
Class A 2.99%/2.70%
- ---------------- -----------
Class B 2.41%/2.11%
- ---------------- -----------
Class C 3.37%/3.07%
- ---------------- -----------
Class D 2.41%/2.11%
- ---------------- -----------
SEC yield is calculated according to Securities and Exchange Commission
requirements and is based on the net investment income produced for the 30
days ended October 31, 1995.
SEC Average Annual Compound Rates of
Return for periods ended 9/30/95
(at maximum applicable sales charge)3,4
Life of Fund
(since 1/22/92) 1 Year
- -------- --------------- ----------------
Class A +8.54%/+7.94% +11.50%/+10.54%
- -------- ------------- ---------------
Class B +8.93%/+8.29% +11.01%/+9.98%
- -------- ------------- ---------------
Class C +10.02%/+9.38% +17.01%/+15.98%
- -------- ------------- ---------------
Class D +9.52%/+8.92% +14.70%/+13.69%
Performance results for the Fund are increased by the investment manager's
voluntary reduction of Fund fees and expenses. The first figure reflects
expense reduction; the second shows what results would have been without
subsidization.
Average Annual Compound Rates of
Return for periods ended 10/31/95
(at maximum applicable sales charge)3,4
Life of Fund
(since 1/22/92) 1 Year
- -------- --------------- ---------------
Class A +8.66%/+8.06% +9.12%/+8.11%
- -------- ------------- ---------------
Class B +9.03%/+8.37% +8.53%/+7.48%
- -------- ------------- ---------------
Class C +10.11%/+9.47% +14.51%/+13.45%
- -------- ------------- ---------------
Class D +9.66%/+9.05% +12.49%/+11.44%
Cumulative Total Returns for periods
ended 10/31/95
(do not reflect sales charge)3
Life of Fund
(since 1/22/92) 1 Year
- -------- --------------- ---------------
Class A +43.33%/+40.35% +14.26%/+13.20%
- -------- --------------- ---------------
Class B +41.61%/+38.49% +13.53%/+12.48%
- -------- --------------- ---------------
Class C +43.91%/+40.74% +14.51%/+13.45%
- -------- --------------- ---------------
Class D +41.67%/+38.72% +13.49%/+12.44%
<PAGE>
Portfolio Managers' Review
International Fixed Income Fund's portfolio manager is GFM International
Investors Limited, a London-based money manager and indirect subsidiary of
MetLife.
Strong overseas bond markets helped International Fixed Income Fund to very
attractive returns over the past 12 months. For the 12 months ended October
31, 1995, Class A shares of the Fund provided a total return of +14.26% (does
not reflect sales charge).(2) The Fund solidly outperformed its peer
group--Lipper Analytical Services' World Income category provided an average
total return of +11.52% over the same time period (does not reflect sales
charge).
Slowing economies helped the Fund
Late in 1994, the portfolio was heavily positioned in European bonds. As
expected, Europe's economy slowed, resulting in lower interest rates and a
rally in the bond market. The Fund benefited significantly. After extremely
strong performance in the first three months of 1995, the Fund added to its
cash level as a defensive measure to lock in some price gains and protect the
Fund from any subsequent bond market declines.
Strong bond market in Japan
In the first six months of 1995, the Japanese bond market soared, prodded by
the slow economy, interest rate cuts and a strengthening yen. More than 20%
of the portfolio was denominated in Japanese currency, which helped
International Fixed Income Fund's performance.
Exchange rates
The Fund's performance is also linked to the strength of the U.S. dollar
relative to other world currencies. In the past 12 months, GFM did not
"hedge" the portfolio to protect it from changes in foreign currency.
International Fixed Income Fund benefited from a weakening U.S. dollar
earlier in the year. However, over the most recent few months, the U.S.
dollar strengthened--which cut into the Fund's returns. Overall, GFM's
long-term outlook is for a weaker dollar.
Outlook
In Europe and Japan, GFM believes interest rates may have reached their low
points. Rates could move lower in the short term, but indications are that
the long-term move will be to stable or increasing rates. As a result, the
Fund is maintaining a somewhat defensive strategy, holding a cash position of
25% on October 31, 1995. The portfolio is currently focused on bonds issued
by the major European markets, including Germany and France.
[Pie Chart]
Asset Allocation
(as of October 31, 1995, by percentage of net assets)
Bonds 75%
Cash and currency 25%
[End Pie Chart]
[Pie Chart}
Currency Allocation
(as of October 31, 1995, by percentage of net assets)
European currencies 74%
German deutsche mark 24%
French franc 20%
Belgian franc 5%
Dutch guilder 5%
Danish krone 4%
Danish krone 4%
Italian lira 4%
Spanish peseta 4%
British pound 3%
Other 5%
Japanese yen 20%
Other 6%
Because of active management, there is no guarantee that the Fund currently
invests, or will continue to invest, in the currencies shown.
[End of Pie Chart]
This is for chart only
2
<PAGE>
Investment Portfolio
October 31, 1995
Principal Maturity Value
Amount Date (Note 1)
- --------------------------- ----------------- --------- ------------
Fixed Income Securities 75.1%
Austria 3.6% Japanese Yen
Republic of Austria, 5.00% 100,000,000 1/22/2001 $ 1,115,646
----------
Belgium 2.8% Belgian Franc
Kingdom of Belgium, 7.50% 25,000,000 7/29/2008 868,607
----------
Denmark 1.9% Danish Krone
Kingdom of Denmark, 9.00% 3,000,000 11/15/2000 594,839
----------
France 21.3% French Franc
Government of France, 8.50% 4,500,000 11/25/2002 996,145
Government of France, 6.75% 6,500,000 10/25/2003 1,299,840
Government of France, 6.75% 6,000,000 10/25/2004 1,188,933
Government of France, 8.50% 3,500,000 10/25/2008 776,497
Credit Foncier de France, Deutsche Mark
7.25% 1,500,000 2/24/2003 1,085,891
Credit Local de France, Japanese Yen
6.00% 100,000,000 10/31/2001 1,169,412
----------
6,516,718
----------
Germany 15.1%
Federal Republic of Deutsche Mark
Germany, 6.50% 1,500,000 7/15/2003 1,076,620
KFW International Finance,
6.25% 2,000,000 10/15/2003 1,403,481
LKB Baden Wurttemb, 6.625% 1,500,000 8/20/2003 1,080,030
Sudwest Landesbank, 6.75% 1,500,000 8/26/2003 1,075,021
----------
4,635,152
----------
Italy 3.8% Italian Lira
Republic of Italy, 12.00% 1,800,000,000 9/01/2002 1,160,402
----------
Japan 2.1%
Japan Development Bank, Japanese Yen
6.50% 23,000,000 9/20/2001 275,991
Tokyo Electric Power Co. Pound Sterling
Inc., 11.00% 200,000 6/05/2001 356,719
----------
632,710
----------
Netherlands 4.5%
Government of Netherlands, Guilder
7.75% 2,000,000 3/01/2005 $ 1,379,769
----------
Spain 3.8%
Government of Spain, Spanish Peseta
10.50% 145,000,000 10/30/2003 1,166,962
----------
United Kingdom 1.2% Pound Sterling
British Gas PLC, 10.875% 200,000 3/26/2001 351,779
----------
Supranational 15.0%
European Investment Bank, Japanese Yen
6.625% 100,000,000 3/15/2000 1,176,133
Inter-American Development
Bank, 6.75% 100,000,000 2/20/2001 1,199,961
International Bank for
Reconstruction &
Development, 4.50% 100,000,000 6/20/2000 1,098,539
European Economic Deutsche Mark
Community, 6.50% 1,500,000 3/10/2000 1,105,605
----------
4,580,238
----------
Total Fixed Income Securities and Investments
(Cost $19,867,007)--75.1% 23,002,822
Cash and Other Assets, Less Liabilities--24.9% 7,643,635
----------
Net Assets--100.0% $30,646,457
==========
Federal Income Tax Information:
At October 31, 1995, the net unrealized appreciation of
investments based on cost for Federal income tax purposes
of $19,867,007 was as follows:
Aggregate gross unrealized appreciation for all investments
in which there is an excess of value over tax cost $ 3,240,724
Aggregate gross unrealized depreciation for all investments
in which there is an excess of tax cost over value (104,909)
----------
$ 3,135,815
==========
The principal amount of each security is stated in the currency in which the
security is denominated.
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
Statement of Assets and Liabilities
October 31, 1995
Assets
Investments, at value (Cost $19,867,007) (Note 1) $23,002,822
Foreign currency, at value (Cost $5,537,197) 5,765,716
Cash 1,320,116
Interest receivable 609,316
Receivable for fund shares sold 26,375
Receivable from investment manager (Note 3) 7,543
Foreign tax receivable 5,305
Deferred organization costs and other assets (Note 1) 39,715
----------
30,776,908
Liabilities
Accrued directors' fees (Note 2) 21,377
Accrued management fee (Note 2) 19,255
Payable for fund shares redeemed 5,205
Accrued distribution fee (Note 5) 3,789
Other accrued expenses 80,825
----------
130,451
----------
Net Assets $30,646,457
==========
Net Assets consist of:
Undistributed net investment income $ 696,597
Unrealized appreciation of investments
and foreign currency 3,348,189
Accumulated net realized gain on investments
and foreign currency 197,020
Shares of beneficial interest 26,404,651
----------
$30,646,457
==========
Net Asset Value and redemption price per share of
Class A shares ($2,106,392 / 239,305 shares of
beneficial interest) $8.80
==========
Maximum Offering Price per share of Class A shares
($8.80 / .955) $9.21
==========
Net Asset Value and offering price per share of
Class B shares ($2,851,041 / 324,973 shares of
beneficial interest)* $8.77
==========
Net Asset Value, offering price and redemption
price per share of Class C shares ($24,516,118 /
2,781,432 shares of beneficial interest) $8.81
==========
Net Asset Value and offering price per share of
Class D shares ($1,172,906 / 133,659 shares of
beneficial interest)* $8.78
==========
*Redemption price per share for Class B and Class D is equal to net asset
value less any applicable contingent deferred sales charge.
Statement of Operations
For the year ended October 31, 1995
Investment Income
Interest, net of foreign taxes of $15,189 $1,853,452
Expenses
Management fee (Note 2) 210,657
Custodian fee 137,628
Registration fees 59,512
Audit fee 46,319
Transfer agent and shareholder services (Note 2) 36,577
Reports to shareholders 22,572
Directors' fees (Note 2) 20,698
Amortization of organization costs (Note 1) 17,250
Legal fees 6,409
Distribution fee--Class A (Note 5) 3,502
Distribution fees--Class B (Note 5) 19,980
Distribution fees--Class D (Note 5) 7,326
Miscellaneous 9,555
---------
597,985
Expenses borne by the investment manager (Note 3) (149,825)
---------
448,160
---------
Net investment income 1,405,292
---------
Realized and Unrealized Gain on Investments and
Foreign Currency
Net realized gain on investments (Notes 1 and 4) 28,314
Net realized gain on foreign currency (Note 1) 656,681
---------
Total net realized gain 684,995
---------
Net unrealized appreciation of investments 1,441,341
Net unrealized appreciation of foreign currency 127,582
---------
Total net unrealized appreciation 1,568,923
---------
Net gain on investments and foreign currency 2,253,918
---------
Net increase in net assets resulting from
operations $3,659,210
=========
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
Statement of Changes in Net Assets
Year ended October 31
--------------------------
1995 1994
- ------------------------------------- ---------- ------------
Increase (Decrease) in Net Assets
Operations:
Net investment income $ 1,405,292 $ 1,409,678
Net realized gain on investments and
foreign currency* 684,995 505,691
Net unrealized appreciation
(depreciation) of investments
and foreign currency 1,568,923 (43,817)
-------- ----------
Net increase resulting from
operations 3,659,210 1,871,552
-------- ----------
Dividends from net investment income:
Class A (88,114) (26,264)
Class B (113,623) (31,489)
Class C (1,691,435) (1,451,541)
Class D (41,936) (14,910)
-------- ----------
(1,935,108) (1,524,204)
-------- ----------
Distributions from net realized
gains:
Class A (5,975) --
Class B (8,086) --
Class C (123,136) (90,111)
Class D (2,986) --
-------- ----------
(140,183) (90,111)
-------- ----------
Net increase from fund share
transactions (Note 6) 2,690,071 1,150,573
-------- ----------
Total increase in net assets 4,273,990 1,407,810
Net Assets
Beginning of year 26,372,467 24,964,657
-------- ----------
End of year (including undistributed
net investment income of $696,597
and $738,734, respectively) $30,646,457 $26,372,467
======== ==========
*Net realized gain for Federal
income tax purposes (Note 1) $ 197,316 $ 139,887
======== ==========
Notes to Financial Statements
October 31, 1995
Note 1
State Street Research International Fixed Income Fund (the "Fund"), formerly
MetLife International Fixed Income Fund, is a diversified series of State
Street Research Portfolios, Inc. ("Portfolios"), formerly MetLife Portfolios,
Inc., which was organized as a Maryland corporation in April, 1991 and is
registered under the Investment Company Act of 1940, as amended, as an
open-end management investment company. The Fund commenced operations in
January, 1992. Portfolios consists presently of two separate funds: State
Street Research International Fixed Income Fund and State Street Research
International Equity Fund.
The Fund offers four classes of shares. Class A shares are subject to an
initial sales charge of up to 4.50% and annual service fees of 0.25% of
average daily net assets. Class B shares are subject to a contingent deferred
sales charge on certain redemptions made within five years of purchase and
pay annual distribution and service fees of 1.00%. Class B shares
automatically convert into Class A shares (which pay lower ongoing expenses)
at the end of eight years after the issuance of the Class B shares. Class C
shares are only offered to certain employee benefit plans and large
institutions. No sales charge is imposed at the time of purchase or
redemption of Class C shares. Class C shares do not pay any distribution or
service fees. Class D shares are subject to a contingent deferred sales
charge of 1.00% on any shares redeemed within one year of their purchase.
Class D shares also pay annual distribution and service fees of 1.00%. The
Fund's expenses are borne pro-rata by each class, except that each class
bears expenses, and has exclusive voting rights with respect to provisions of
the Plan of Distribution, related specifically to that class. The Directors
declare separate dividends on each class of shares.
The following significant accounting policies are consistently followed by
the Fund in preparing its financial statements, and such policies are in
conformity with generally accepted accounting principles for investment
companies.
A. Investment Valuation
Securities traded on domestic stock exchanges are valued at the last sale
price as of the close of business on the day the securities are being valued,
or, lacking any sales, at the mean between closing bid and asked prices.
Securities traded on the National Association of Securities Dealers Automated
Quotation ("NASDAQ") system are valued at the last reported sales price. Each
security traded primarily on non-domestic securities exchanges is generally
valued at the preceding closing value of such security on the exchange where
it is primarily traded. A security that is listed or traded on more than one
exchange is valued at the quotation on the exchange determined to be the
primary market for such security by the Board of Directors or its delegates.
If no closing price is available, then such security is valued at the mean
between the last current bid and asked prices or by using the last available
closing price. Domestic securities traded in the over-the-counter market are
valued at the mean between the bid and asked prices or yield equivalent as
obtained from two or more dealers that make markets in the securities. All
non-U.S. securities traded in the over-the-counter market are valued at the
last sale quote or the last closing bid price, if there is no active trading
in a particular security for a given day. Portfolio securities traded both in
the
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
over-the-counter market and on a securities exchange are valued according to
the broadest and most representative market. Securities for which market
quotations are not readily available are valued as determined in good faith
by or under the authority of the Directors. 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
Investment income is accrued daily as earned. The Fund is charged for
expenses directly attributable to it, while indirect expenses are allocated
among all funds in the Portfolios.
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. Deferred Organization Costs
Certain costs incurred in the organization and registration of the Fund were
capitalized and are being amortized under the straight-line method over a
period of five years.
Note 2
The Fund and State Street Research Investment Services, Inc., the Fund's
investment manager and principal underwriter (the "Investment Manager" and
"Distributor"), a wholly owned indirect subsidiary of Metropolitan Life
Insurance Company ("Metropolitan"), have entered into an agreement under
which the Investment Manager receives monthly fees at an annual rate of 0.75%
of the Fund's average daily net assets. The Investment Manager has entered
into a Sub-Investment Management Agreement with GFM International Investors
Limited (the "Sub-Investment Manager"), a substantially wholly owned,
indirect subsidiary of Metropolitan, pursuant to which the Sub-Investment
Manager has assumed the overall responsibility for managing the investments
of the Fund. During the year ended October 31, 1995, the Fund paid the
Investment Manager $210,657 in management fees. The Fund has no
responsibility for the payment of fees to the Sub-Investment Manager.
State Street Research Shareholder Services, a division of the Distributor,
provides certain shareholder services to the Fund such as responding to
inquiries and instructions from investors with respect to the purchase and
redemption of shares of the Fund. In addition, Metropolitan receives a fee
for maintenance of the accounts of certain shareholders who are participants
in sponsored arrangements, employee benefit plans and similar programs or
plans, through or under which shares of the Fund may be purchased. During the
year ended October 31, 1995, the amount of such expenses was $18,284.
The fees of the Directors not currently affiliated with the Investment
Manager amounted to $20,698 during the year ended October 31, 1995.
Note 3
The Investment Manager or affiliates may from time to time and in varying
amounts voluntarily assume some portion of fees or expenses relating to the
Fund. During the year ended October 31, 1995, the amount of such assumed
expenses was $149,825.
Note 4
For the year ended October 31, 1995, purchases and sales of securities,
exclusive of short-term obligations, aggregated $5,570,579 and $9,379,254,
respectively.
Note 5
The Portfolios have adopted a Plan of Distribution Pursuant to Rule 12b-1
(the "Plan") under the Investment Company Act of 1940, as amended. Under the
Plan, the Fund pays annual service fees to the Distributor at a rate of 0.25%
of average daily net assets for Class A, Class B and Class D shares. In
addition, the Fund pays annual distribution fees of 0.75% of average daily
net assets for Class B and Class D shares. The Distributor uses such payments
for personal services and/or the maintenance of shareholder accounts, to
reimburse securities dealers for distribution and marketing services, to
furnish ongoing assistance to investors and to defray a portion of its
distribution and marketing expenses. For the year ended October 31, 1995,
fees pursuant to such plan amounted to $3,502, $19,980 and $7,326 for Class
A, Class B and Class D, respectively.
The Fund has been informed that the Distributor and MetLife Securities, Inc.,
a wholly owned subsidiary of Metropolitan, earned initial sales charges
aggregating $3,148 and $15,206, respectively on sales of Class A shares of
the Fund during the year ended October 31, 1995, and that MetLife Securities,
Inc. earned commissions aggregating $15,741 on sales of Class B shares, and
that the Distributor collected contingent deferred sales charges of $3,822
and $430 on redemptions of Class B and Class D, respectively, during the same
period.
6
<PAGE>
Note 6
The authorized capital stock of the Fund currently consists of
100,000,000 shares, $.01 par value per share. The Fund reserves the right to
issue additional classes of shares. At October 31, 1995, Metropolitan owned
62,933 Class A shares, 62,933 Class B shares, 2,539,382 Class C shares and
62,933 Class D shares of the Fund.
Share transactions were as follows:
<TABLE>
<CAPTION>
March 1, 1994
(Commencement of
Share Class Designations)
Year ended to
October 31, 1995 October 31, 1994
-------------------- -------------------------
Class A Shares Amount Shares Amount
- ------------------------------------ ------- --------- -------- -------------
<S> <C> <C> <C> <C>
Shares sold 154,393 $1,349,055 143,778 $ 1,152,383
Issued upon reinvestment of:
Distribution from net realized
gains 737 5,712 -- --
Dividends from net investment
income 5,748 47,607 1,077 8,636
Shares repurchased (51,420) (442,983) (15,008) (119,770)
----- ------- ------ -----------
Net increase 109,458 $ 959,391 129,847 $ 1,041,249
===== ======= ====== ===========
Class B Shares Amount Shares Amount
- ------------------------------------ ----- ------- ------ -----------
Shares sold 189,985 $1,645,022 180,601 $ 1,449,373
Issued upon reinvestment of:
Distribution from net realized
gains 931 7,205 -- --
Dividends from net investment
income 6,879 57,359 1,683 13,466
Shares repurchased (46,537) (393,423) (8,569) (70,408)
----- ------- ------ -----------
Net increase 151,258 $1,316,163 173,715 $ 1,392,431
===== ======= ====== ===========
Year ended
October 31, 1994
-----------------------
Class C Shares Amount Shares Amount
- ------------------------------------ ----- ------- ------ -----------
Shares sold 34,745 $ 311,510 101,016 $ 817,898
Issued upon reinvestment of:
Distributions from net realized
gains 15,646 121,415 11,332 90,111
Dividends from net investment
income 16,717 137,775 17,188 139,150
Shares repurchased (88,669) (760,263) (354,407) (2,846,802)
----- ------- ------ -----------
Net decrease (21,561) $ (189,563) (224,871) $(1,799,643)
===== ======= ====== ===========
March 1, 1994
(Commencement of
Share Class
Designations) to
October 31, 1994
-----------------------
Class D Shares Amount Shares Amount
- ------------------------------------ ----- ------- ------ -----------
Shares sold 73,243 $ 639,413 64,589 $ 516,298
Issued upon reinvestment of:
Distribution from net realized
gains 385 2,985 -- --
Dividends from net investment
income 894 7,531 30 238
Shares repurchased (5,482) (45,849) -- --
----- ------- ------ -----------
Net increase 69,040 $ 604,080 64,619 $ 516,536
===== ======= ====== ===========
</TABLE>
7
<PAGE>
Financial Highlights
For a share outstanding throughout each year:
<TABLE>
<CAPTION>
Class A Class B
------------------------- ---------------------------
Year ended Year ended
October 31, October 31,
1995*** 1994** 1995*** 1994**
- ------------------------------------------------ --------------- ------ --------------- --------
<S> <C> <C> <C> <C>
Net asset value, beginning of year $ 8.31 $ 7.99 $ 8.28 $ 7.99
Net investment income* .40 .30 .34 .27
Net realized and unrealized gain on investments .72 .27 .72 .26
Dividends from net investment income (.59) (.25) (.53) (.24)
Distributions from net realized gains (.04) -- (.04) --
------------- ---- ------------- ------
Net asset value, end of year $ 8.80 $ 8.31 $ 8.77 $ 8.28
============= ==== ============= ======
Total return 14.26%+ 7.33%+++ 13.53%+ 6.73%+++
Net assets at end of year (000s) $2,106 $1,079 $2,851 $1,439
Ratio of operating expenses to average net
assets* 1.74% 1.69%++ 2.49% 2.43%++
Ratio of net investment income to average net
assets* 4.71% 5.79%++ 3.94% 5.06%++
Portfolio turnover rate 23.31% 38.84% 23.31% 38.84%
*Reflects voluntary assumption of fees or
expenses per share in each year (Note 3). $ .06 $ .01 $ .06 $ .02
</TABLE>
<TABLE>
<CAPTION>
Class C Class D
------------------------------------------ --------------------
January 22, 1992
(Commencement
Year ended October 31 of Operations) to Year ended
---------------------
October 31,
1995*** 1994 1993 October 31, 1992 1995*** 1994**
- ------------------------------------- ---- ---- ---- ----------------- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 8.32 $ 8.24 $ 7.85 $ 7.40 $ 8.29 $ 7.99
Net investment income* .44 .14 .41 .32 .34 .27
Net realized and unrealized gain on
investments .70 .46 .34 .13 .72 .26
Dividends from net investment income (.61) (.49) (.36) -- (.53) (.23)
Distributions from net realized gains (.04) (.03) -- -- (.04) --
--- --- --- --------------- --------- ----
Net asset value, end of year $ 8.81 $ 8.32 $ 8.24 $ 7.85 $ 8.78 $ 8.29
=== === === =============== ========= ====
Total return 14.51%+ 7.72%+ 9.98%+ 6.08%+++ 13.49%+ 6.81%+++
Net assets at end of year (000s) $24,516 $23,319 $24,965 $22,299 $1,173 $ 536
Ratio of operating expenses to
average net assets* 1.49% 1.47% 1.50% 1.50%++ 2.49% 2.45%++
Ratio of net investment income to
average net assets* 5.14% 5.62% 5.48% 5.63%++ 3.94% 4.98%++
Portfolio turnover rate 23.31% 38.84% 20.44% 56.31% 23.31% 38.84%
*Reflects voluntary assumption of
fees or expenses per share in each
year (Note 3). $ .06 $ .03 $ .03 $ .04 $ .06 $ .01
</TABLE>
** March 1, 1994 (commencement of share class designations) to October 31,
1994.
*** Per-share figures have been calculated using the average shares method.
++ Annualized.
+ Total return figures do not reflect any front-end or contingent deferred
sales charges. Total return would be lower if the Investment Manager and
its affiliates had not voluntarily assumed a portion of the Fund's
expenses.
+++ Represents aggregate return for the period without annualization and does
not reflect any front-end or contingent deferred sales charges. Total
return would be lower if the Investment Manager and its affiliates had not
voluntarily assumed a portion of the Fund's expenses.
8
<PAGE>
Independent Auditors' Report
To the Board of Directors of State Street
Research Portfolios, Inc. and the Shareholders of
State Street Research International Fixed Income Fund
We have audited the accompanying statement of assets and lia-
bilities, including the investment portfolio, of State Street Research
International Fixed Income Fund, formerly MetLife International Fixed Income
Fund, (a series of State Street Research Portfolios, Inc., formerly MetLife
Portfolios, Inc.), as of October 31, 1995, and the related statement of
operations for the year then ended, the statement of changes in net assets
for the two years then ended and the financial highlights for each of the
years in the four year period ended October 31, 1995. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on the financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned at October 31, 1995, by correspondence with the custodian.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of State Street
Research International Fixed Income Fund (a series of State Street Research
Portfolios, Inc.) at October 31, 1995, the results of its operations, the
changes in its net assets, and its financial highlights for the respective
stated periods, in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Boston, Massachusetts
December 15, 1995
9
<PAGE>
Management's Discussion of Fund Performance
Late in 1994, the portfolio was heavily positioned in European bonds. Lower
European interest rates and a rallying bond market benefited the Fund
significantly. After strong performance in the first three months of 1995,
the Fund added to its cash level as a defensive measure.
In the first six months of 1995, the Japanese bond market benefited from a
slow economy, interest rate cuts and a strengthening yen. This helped the
Fund, which had more than 20% of its portfolio denominated in Japanese
currency.
The Fund's performance was also linked to the strength of the U.S. dollar
relative to other world currencies. In the past 12 months, GFM did not
"hedge" the portfolio to protect it from changes in foreign currency. As a
result, the Fund benefited from a weakening U.S. dollar earlier in the year.
However, over the most recent few months, the U.S. dollar strengthened--which
cut into the Fund's returns.
The Salomon Brothers Non-U.S. Dollar World Bond Index is a commonly used
measure of overseas bond market performance. The index is unmanaged and does
not take sales charges into consideration. Direct investment in the index is
not possible; results are for illustrative purposes only. All returns
represent past performance, which is no guarantee of future results. The
investment return and principal value of an investment made in the Fund will
fluctuate and shares, when redeemed, may be worth more or less than their
original cost. All returns assume reinvestment of capital gain distributions
and income dividends. Shares of the Fund had no class designations until
March 1, 1994, when designations were assigned based on the pricing and 12b-1
fees applicable to shares sold thereafter. Performance for a class includes
periods prior to the adoption of class designations. Performance reflects up
to a maximum 4.5% front-end or 5% contingent deferred sales charge.
Performance prior to class designations in 1994 does not reflect annual 12b-1
fees of .25% for Class "A" shares and 1% for Class "B" and "D" shares, which
will reduce subsequent performance. Performance results are increased by the
investment manager's voluntary reduction of fees and expenses related to the
Fund. The first figure reflects expense reduction; the second shows what
results would have been without subsidization.
Comparison Of Change In Value Of A $10,000
Investment in International Fixed Income Fund
And The Salomon Brothers Non-U.S. Dollar World
Bond Index
This is for charts only
[Line Chart for Class A Shares]
Class A Shares
1/92 9550 10000
10/92 10131 10990
10/93 11142 12222
10/94 11979 13299
10/95 13688 15319
[End Line Chart for Class A Shares
[Line Chart for Class B Shares]
Class B Shares
***[NEED PLOT POINTS FROM CUSTOMER]***
Average Annual Total Return
1 Year Life of Fund
+8.53%/+7.48% +9.03%/+8.37%
[End Line Chart for Class B Shares
[Line Chart for Class C Shares]
Class C Shares
1/92 10000 10000
10/92 10608 10990
10/93 11667 12222
10/94 12567 13299
10/95 14391 15319
Average Annual Total Return
1 Year Life of Fund
+14.51%/+13.45% +10.11%/+9.47%
[End Line Chart for Class C Shares
[Line Chart for Class D Shares]
1/92 10000 10000
10/92 10608 10990
10/93 11667 12222
10/94 12483 13299
10/95 14167 15319
Class D Shares
Average Annual Total Return
1 Year Life of Fund
+12.49%/+11.44% +9.66%/+9.05%
[End Line Chart for Class D Shares]
International Fixed Income Fund
Salomon Brothers Non-U.S. Dollar World Bond Index
10
<PAGE>
Fund Information, Officers and Directors of State Street Research Portfolios,
Inc.
Fund Information
State Street Research
International Fixed
Income Fund
One Madison Avenue
New York, NY 10010
Investment Manager
and Distributor
State Street Research
Investment Services, Inc.
One Financial Center
Boston, MA 02111
Sub-Investment Manager
GFM International
Investors Limited
5 Upper St. Martins Lane
London, WC2H 9EA
England
Shareholder Services
State Street Research
Shareholder Services
P.O. Box 8408
Boston, MA 02266-8408
1-800-562-0032
Custodian
State Street Bank and
Trust Company
225 Franklin Street
Boston, MA 02110
Legal Counsel
Sullivan & Worcester
1025 Connecticut Avenue, N.W.
Washington, D.C. 20036
Independent Accountants
Deloitte & Touche LLP
125 Summer Street
Boston, MA 02110
Officers
Jeffrey J. Hodgman
President and
Chief Executive Officer
Gary Lineberry
Vice President
Albert Rosenthal
Vice President and Chief
Operating Officer
Elliot Reiter
Treasurer
Ronald Zito
Controller
Christopher P. Nicholas
Secretary
Directors
Steve A. Garban
Retired; formerly Senior Vice President for Finance and
Operations and Treasurer, The Pennsylvania State University
Jeffrey J. Hodgman, Chairman
Senior Vice President,
Metropolitan Life Insurance
Company
Malcolm T. Hopkins
Former Vice Chairman of the Board and Chief Financial Officer, St. Regis
Corp.
Robert A. Lawrence
Partner, Saltonstall & Co.
Dean O. Morton
Retired; formerly Executive
Vice President, Chief
Operating Officer and Director,
Hewlett-Packard Company
Michael S. Scott Morton
Jay W. Forrester Professor of
Management, Sloan School
of Management, Massachusetts Institute of Technology
John H. Tweedie
Senior Vice President,
Metropolitan Life Insurance
Company
11
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