[FRONT COVER]
(State Street Research Logo) STATE STREET RESEARCH
STATE STREET RESEARCH
INTERMEDIATE BOND FUND
ANNUAL REPORT
April 30, 1995
[graphic] (illustration of person fishing)
WHAT'S INSIDE
New and Improved:
A new design that's
easier to read
From the Chairman:
The market rebound
continues
Portfolio Manager's Review:
Solid performance in the
Fund's first year
Fund Information:
Facts and Figures
Plus, Complete Portfolio Holdings
and Financial Statements
<PAGE>
FROM THE CHAIRMAN
[photo of Ralph F. Verni]
To Our Shareholders:
The stock and bond markets continue to rebound from a disappointing 1994. For
the 12 months ended April 30, 1995, the Lehman Brothers Aggregate Bond Index
provided a total return of +7.31%. The S&P 500 provided a total return of
+17.44%.(1) In both cases, most of the gains occurred in the first four months
of 1995.
There are several reasons for the sharp market recovery thus far in 1995.
First, the economy has demonstrated more signs of slowing. Consumers are
spending less, and sales of housing and automobiles have slowed considerably.
Second, inflation remains low, especially at the consumer level. Third, since
raising rates in February, the Federal Reserve has remained on the sidelines.
Investors no longer feel that a rate hike is constantly around the corner, and
the result is more market stability and optimism.
Such a powerful rebound supports our view that mutual fund investors should
invest for the long-term. Often, it is best not to focus too much attention on
short-term declines or increases. After all, stocks and bonds had a
disappointing 1994, have recovered so far in 1995, and could certainly retreat
somewhat in the short-term. What's most important is how well your mutual fund
helps you meet your investment goals, such as paying for retirement or college
tuition.
Thank you for investing with State Street Research.
Sincerely,
[Signature Ralph F. Verni]
Ralph F. Verni
Chairman
May 31, 1995
(1)The Standard & Poor's Composite Index (S&P 500) includes 500 widely-traded
common stocks and is a commonly-used measure of U.S. stock market performance.
The Lehman Brothers Aggregate Bond Index is a commonly-used measure of bond
market performance. The indices are unmanaged and do not take sales charges
into account. Direct investment in the indices is not possible; results are for
illustrative purposes only.
(2)+6.30% for Class C shares.
(3)All returns represent past performance, which is no guarantee of future
results. The investment return and principal value of an investment made in the
Fund will fluctuate and shares, when redeemed, may be worth more or less than
their original cost. All returns assume reinvestment of capital gain
distributions and income dividends.
(4)"A" share returns reflect the maximum 4.5% sales charge. "C" shares, offered
without a sales charge, are available only to certain employee benefit plans
and large institutions.
FUND INFORMATION
(all data are for periods ended April 30, 1995)
Aggregate Total Return
(at maximum applicable sales charge)3,4
Life of Fund
(since 5/16/94)
Class A +1.19%/+0.49%
Class C +6.30%/+5.56%
Performance results for the Fund are increased by the distributor's voluntary
reduction of fees and expenses related to the Fund. The first figure reflects
expense reduction; the second shows what results would have been without
subsidization.
Cumulative Total Returns
(do not reflect sales charge)3
Life of Fund
(since 5/16/94) Year-to-date
Class A +5.96%/+5.22% +5.30%/+5.05%
Class C +6.30%/+5.56% +5.47%/+5.23%
SEC Yield
Class A 6.17%
Class C 6.72%
SEC yield is calculated according to Securities and Exchange Commission
requirements and is based on the net investment income produced for the 30 days
ended April 30, 1995.
<PAGE>
PORTFOLIO MANAGER'S REVIEW
[photo of John H. Kallis]
[caption]John H. Kallis
Portfolio Manager
State Street Research Intermediate Bond Fund performed in line with similar
funds over the past year. From May 16, 1994 (when the Fund began operations) to
April 30, 1995, the Fund's Class A shares provided a total return of +5.96%
(does not reflect sales charge).(2) The average total return for 156 funds in
Lipper Analytical Services' intermediate investment grade funds category was
+6.01% for the 12 months ended April 30, 1995 (does not reflect sales charge).
We believe the Fund's performance compared well, especially since it had 15
fewer days to achieve its return.
Our strategy has been to maintain a dollar-weighted effective maturity of three
to ten years for Intermediate Bond Fund. We believe this strategy has benefited
the Fund over the past 12 months.
U.S. Treasury Securities
One-half of Intermediate Bond Fund's portfolio is invested in U.S. Treasury
securities. These securities offer the highest possible credit quality. In
addition, U.S. Treasury securities respond quickly to interest rate changes,
which benefited the portfolio as bond yields declined over the past several
months.
Mortgage Securities
Approximately 16% of the portfolio is invested in mortgage securities issued by
U.S. Government agencies. Such bonds offer high quality, as well as higher
yields than U.S. Treasury bonds with similar maturities. Because of the higher
yields, mortgage securities offer better protection when interest rates rise,
as happened in much of 1994. Over the past six months, as interest rates fell,
we have been reducing our holdings in mortgage securities.
Corporate Securities
The Fund holds 29% of its assets in corporate bonds, spread over several
different types of securities. 7% is invested in "Yankee" bonds issued by
Canadian provinces or corporations, but denominated in U.S. dollars. Most of
the remainder is invested in instruments backed by specific assets, such as
credit card receivables. The Yankee bonds and asset-backed securities offer
attractive yields and value.
Current Strategy
As of April 30, 1995, the portfolio was positioned for an environment of
falling interest rates. We increased the Fund's duration to 3.5 years, nearly
10% longer than the market average. (Duration is a measure of the portfolio's
sensitivity to interest rate changes.) Overall, Intermediate Bond Fund
continues to focus on high-quality securities--the bonds in the portfolio have
an average quality of AAA-, as rated by Standard & Poor's or equivalent.
Asset Allocation
(by percentage of net assets)
[pie chart]
U.S. Treasury securities 50%
Corporate bonds 29%
Mortgage securities 16%
Cash 4%
Foreign Government bonds 1%
Quality Ratings
(by percentage of net assets)
[pie chart]
AAA 84%
AA 4%
A 8%
BBB 4%
As rated by Standard & Poor's Corporation or
Moody's Investors Service, Inc., or unrated but equivalent.
2
<PAGE>
STATE STREET RESEARCH INTERMEDIATE BOND FUND
INVESTMENT PORTFOLIO
April 30, 1995
Principal Maturity Value
Amount Date (Note 1)
FIXED INCOME SECURITIES 95.6%
U.S. Treasury 49.7%
U.S. Treasury Bond, 8.125% $ 375,000 8/15/2021 $ 402,717
U.S. Treasury Note, 5.875% 1,925,000 5/31/1996 1,914,470
U.S. Treasury Note, 8.50% 1,525,000 5/15/1997 1,579,809
U.S. Treasury Note, 5.125% 150,000 6/30/1998 143,016
U.S. Treasury Note, 5.875% 225,000 3/31/1999 217,757
U.S. Treasury Note, 7.125% 1,125,000 9/30/1999 1,135,721
U.S. Treasury Note, 5.75% 1,675,000 8/15/2003 1,538,906
6,932,396
U.S. Agency Mortgage 16.2%
Federal Home Loan Mortgage Corp.
Gold, 6.50% 320,962 7/01/2008 307,620
Federal Home Loan Mortgage Corp.
Gold, 7.00% 248,751 8/01/2024 236,778
Federal Home Loan Mortgage Corp.
Gold, 8.00%+ 450,000 6/13/2025 448,031
Federal National Mortgage
Association REMIC Series
93-52-C PAC, 5.00% 175,000 2/25/2001 169,913
Federal National Mortgage
Association, 7.00% 285,235 2/01/2024 271,239
Federal National Mortgage
Association, 7.00% 175,986 11/01/2024 167,350
Government National Mortgage
Association, 6.50% 335,130 4/15/2009 320,780
Government National Mortgage
Association, 7.00% 365,231 1/15/2025 345,713
2,267,424
U.S. Agency 1.4%
Federal National Mortgage
Association, 5.41% 200,000 6/25/1998 191,792
Bank 5.2%
Advanta Credit Card Master Trust
Series 1994-B, 6.405% 150,000 10/15/2001 149,906
Capital One Bank Sr. Note, 8.125% 200,000 3/01/2000 202,528
First Chicago Credit Master Trust
Series 1991-D, 8.40% 225,000 6/15/1998 228,375
Standard Credit Card Master Trust
Series 1994-3A, 6.80% 150,000 4/07/2001 147,655
728,464
Canadian--Yankee 7.4%
Bell Telephone Co. Canada Deb.
Series DJ, 13.375% 125,000 10/15/2010 135,035
British Columbia Hydroelectric
Authority Deb. Series FH,
15.50% 125,000 7/15/2011 144,439
Hydro-Quebec Deb. Series FL,
13.25% 250,000 12/15/2013 304,045
Laidlaw Inc. Deb., 8.75% 75,000 4/15/2025 74,690
Province of Manitoba Global Note,
6.75% 75,000 3/01/2003 71,656
Province of Ontario Deb., 11.50% 175,000 3/10/2013 198,485
Province of Quebec, 8.80% 100,000 4/15/2003 104,959
1,033,309
Finance 11.0%
American General Finance Corp.
Note, 8.00% 100,000 2/15/2000 102,139
Beneficial Corp. Master Trust
Note, 8.17% 200,000 11/09/1999 205,364
Community Program Loan Trust
Series 1987 A-3, 4.50% 160,781 4/01/2002 156,912
Discover Credit Card Trust Series
1993-A, 6.25% 150,000 8/16/2000 146,672
Ford Motor Credit Co. Note, 8.00% 125,000 12/01/1997 127,446
General Electric Capital Corp.
Master Trust Note, 7.625% 175,000 7/24/1996 176,669
General Motors Acceptance Corp.
Master Trust Note, 7.85% 275,000 11/17/1997 278,630
Household Affinity Credit Card
Master Trust Series 1994- 1A,
6.275% 150,000 5/15/2001 149,156
Sears Credit Account Master Trust
Series 1995-2, 8.10% 125,000 6/15/2004 129,258
Tandy Master Trust Certificates
Series 1991-A, 8.25% 57,488 4/15/1999 57,829
1,530,075
Foreign Government 1.0%
Federal Republic of Germany, Deutsche Mark
6.625% 200,000 7/09/2003 140,878
Industrial 2.0%
American Home Products Corp.
Note, 7.70% $ 150,000 2/15/2000 152,469
Chevron Corp. Profit Sharing
Amortized Note, 8.11% 125,000 12/01/2004 129,099
281,568
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
STATE STREET RESEARCH INTERMEDIATE BOND FUND
Mortgage 0.7%
American Southwest Financial
Services Corp. Series 94-C2,
8.00% $ 98,184 8/25/2010 $ 98,829
Trust Certificates 1.0%
Rural Electric Cooperative
Grantor Trust Certificates,
10.11% 125,000 12/15/2017 137,816
Total Fixed Income Securities (Cost $13,196,564) 13,342,551
SHORT-TERM OBLIGATIONS 5.7%
American Express Credit Corp.,
5.80% 526,000 5/02/1995 526,000
Chevron Oil Finance Co., 5.92% 278,000 5/04/1995 278,000
Total Short-Term Obligations (Cost $804,000) 804,000
Total Investments (Cost $14,000,564)--101.3% 14,146,551
Cash and Other Assets, Less Liabilities--(1.3)% (186,869)
Net Assets--100.0% $13,959,682
Federal Income Tax Information:
At April 30, 1995, the net unrealized
appreciation of investments based on cost for
Federal income tax purposes of $14,022,104 was
as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of
value over tax cost $198,543
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax
cost over value (74,096)
$124,447
+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.
Forward currency exchange contract outstanding at April 30, 1995 is as follows:
Contract Unrealized Delivery
Total Value Price Depreciation Date
Sell Deutsche mark
Buy U.S. dollars 192,200 DEM .71721 DEM $(965) 5/24/95
Statement of Assets and Liabilities
April 30, 1995
Assets
Investments, at value (Cost $14,000,564) (Note 1) $14,146,551
Cash 906
Interest receivable 227,363
Receivable from Distributor (Note 3) 21,895
Deferred organization costs and other assets (Note 1) 73,480
14,470,195
Liabilities
Payable for securities purchased 449,091
Accrued management fee (Note 2) 6,288
Accrued trustees' fees (Note 2) 3,872
Accrued distribution fee (Note 5) 2,094
Payable for open forward contract 965
Accrued transfer agent and shareholder services (Note 2) 168
Other accrued expenses 48,035
510,513
Net Assets $13,959,682
Net Assets consist of:
Undistributed net investment income $ 151,627
Unrealized appreciation of investments 145,987
Unrealized depreciation of forward contracts and
foreign currency (923)
Accumulated net realized loss (152,902)
Shares of beneficial interest 13,815,893
$13,959,682
Net Asset Value and redemption price per share of Class
A shares ($10,221,776 [division sign] 1,057,613 shares of
beneficial interest) $ 9.66
Maximum Offering Price per share of Class A shares
($9.66 [division sign] .955) $10.12
Net Asset Value, offering price and redemption price
per share of Class C shares ($3,737,906 [division sign]
386,712 shares of beneficial interest) $ 9.67
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
STATE STREET RESEARCH INTERMEDIATE BOND FUND
STATEMENT OF OPERATIONS
For the period May 16, 1994
(commencement of operations) to April 30, 1995
Investment Income
Interest, net of foreign taxes of $5,845 $ 909,169
Expenses
Management fee (Note 2) 72,084
Custodian fee 64,685
Reports to shareholders 29,651
Distribution fee--Class A (Note 5) 24,108
Registration fees 21,900
Amortization of organization costs (Note 1) 16,853
Trustees' fees (Note 2) 14,947
Audit fee 12,174
Legal fees 9,988
Transfer agent and shareholder services (Note 2) 473
Miscellaneous 7,498
274,361
Expenses borne by the Distributor (Note 3) (151,957)
122,404
Net investment income 786,765
Realized and Unrealized Gain (Loss)
on Investments, Forward Contracts
and Foreign Currency
Net realized loss on investments (Notes 1 and 4) (143,780)
Net realized loss on forward contracts and foreign
currency (Note 1) (907)
Total net realized loss (144,687)
Net unrealized appreciation of investments 145,987
Net unrealized depreciation of forward contracts and
foreign currency (923)
Total net unrealized appreciation 145,064
Net gain on investments, foreign currency and forward
contracts 377
Net increase in net assets resulting from operations $ 787,142
STATEMENT OF CHANGES IN NET ASSETS
For the period May 16, 1994
(commencement of operations) to April 30, 1995
Increase (Decrease) in Net Assets
Operations:
Net investment income $ 786,765
Net realized loss on investments, forward contracts
and foreign currency* (144,687)
Net unrealized appreciation of investments, forward
contracts and foreign currency 145,064
Net increase resulting from operations 787,142
Dividends from net investment income:
Class A (465,343)
Class C (178,010)
(643,353)
Net increase from fund share transactions (Note 6) 13,815,893
Total increase in net assets 13,959,682
Net Assets
Beginning of period --
End of period (including undistributed net investment
income of $151,627) $13,959,682
* Net realized loss for Federal income tax purposes
(Note 1) $ (37,239)
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
STATE STREET RESEARCH INTERMEDIATE BOND FUND
NOTES TO FINANCIAL STATEMENTS
April 30, 1995
Note 1
State Street Research Intermediate Bond Fund (the "Fund") is a series of State
Street Research Securities Trust (the "Trust"), which was organized as a
Massachusetts business trust in January, 1994 and is registered under the
Investment Company Act of 1940, as amended, as an open-end management
investment company. The Fund commenced operations in May, 1994. The Fund is
presently the only active series of the Trust, although the Trustees have the
authority to create an unlimited number of series.
The Fund is authorized to issue four classes of shares. Only Class A and Class C
shares are presently available for purchase. Class B and Class D shares are not
being offered at this time. Class A shares are subject to an initial sales
charge of up to 4.50% and an annual service fee of 0.25% of average daily net
assets. Class B shares will be subject to a contingent deferred sales charge on
certain redemptions made within five years of purchase and pay annual
distribution and service fees of 1.00%. Class B shares automatically convert
into Class A shares (which pay lower ongoing expenses) at the end of eight years
after the issuance of the Class B shares. Class C shares are only offered to
certain employee benefit plans and large institutions. No sales charge is
imposed at the time of purchase or redemption of Class C shares. Class C shares
do not pay any distribution or service fees. Class D shares are subject to a
contingent deferred sales charge of 1.00% on any shares redeemed within one year
of their purchase. Class D shares also pay annual distribution and service fees
of 1.00%. The Fund's expenses are borne pro-rata by each class, except that each
class bears expenses, and has exclusive voting rights with respect to provisions
of the Plan of Distribution, related specifically to that class. The Trustees
declare separate dividends on each class of shares.
The following significant accounting policies are consistently followed by the
Fund in preparing its financial statements, and such policies are in conformity
with generally accepted accounting principles for investment companies.
A. Investment Valuation
Securities are valued by a pricing service, which utilizes market transactions,
quotations from dealers, and various relationships among securities in
determining value. Short-term securities maturing within sixty days are valued
at amortized cost.
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.
C. Net Investment Income
Net investment income is determined daily and consists of interest accrued and
discount earned, less the estimated daily expenses of the Fund. Interest income
is accrued daily as earned. Discount on debt obligations is amortized under the
effective yield method.
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 and paydown gains and losses.
E. Federal Income Taxes
No provision for Federal income taxes is necessary because the Fund intends to
qualify under Subchapter M of the Internal Revenue Code and its policy is to
distribute all of its taxable income, including net realized capital gains,
within the prescribed time periods. At April 30, 1995, the Fund had a capital
loss carryforward of $37,239 available, to the extent provided in regulations,
to offset future capital gains, if any, which expires on April 30, 2003.
In order to meet certain excise tax distribution requirements under Section
4982 of the Internal Revenue Code, the Fund is required to measure and
distribute annually, if necessary, net capital gains realized during a
twelve-month period ending October 31. In this connection, the Fund is
permitted to defer into its next fiscal year any net capital losses incurred
between each November 1 and the end of its fiscal year. From November 1, 1994
through April 30, 1995, the Fund incurred net capital losses of approximately
$94,000 and intends to defer and treat such losses as arising in the fiscal
year ending April 30, 1996.
F. Deferred Organization Costs
Certain costs incurred in the organization and registration of the Fund were
capitalized and are being amortized under the straight-line method over a
period of five years.
G. Forward Contracts and Foreign Currencies
The Fund enters into forward foreign currency exchange contracts in order to
hedge its exposure to changes in foreign currency exchange rates on its foreign
portfolio holdings and to hedge certain purchase and sale commitments
denominated in foreign currencies. A forward foreign currency exchange contract
is an obligation by the Fund to purchase or sell a specific currency at a
future date, which may be any fixed number of days from the origination date of
the contract. Forward foreign currency exchange contracts establish an exchange
rate at a future date. These contracts are transferable in the interbank market
conducted directly between currency traders (usually large commercial banks)
and their customers. Risks may arise from the potential inability of a
counterparty to meet the terms of a contract and from unanticipated movements
in the value of foreign currencies relative to the U.S. dollar. The aggregate
principal amount of forward currency exchange contracts is recorded in the
Fund's accounts. All commitments are marked-to-market at the applicable
6
<PAGE>
STATE STREET RESEARCH INTERMEDIATE BOND FUND
NOTES (cont'd)
transaction rates resulting in unrealized gains or losses. The Fund records
realized gains or losses at the time the forward contracts are extinguished by
entry into a closing contract or by delivery of the currency. Neither spot
transactions nor forward currency exchange contracts eliminate fluctuations in
the prices of the Fund's portfolio securities or in foreign exchange rates, or
prevent loss if the price of these securities should decline.
Securities quoted in foreign currencies are translated into U.S. dollars at the
current exchange rate. 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.
Note 2
The Trust and State Street Research & Management Company (the "Adviser"), an
indirect wholly-owned subsidiary of Metropolitan Life Insurance Company
("Metropolitan"), have entered into an agreement under which the Adviser earns
monthly fees at an annual rate of 0.55% 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 period ended May 16, 1994 (commencement of operations) to April 30,
1995, the fees pursuant to such agreement amounted to $72,084.
State Street Research Shareholder Services, a division of State Street Research
Investment Services, Inc., the Trust's principal underwriter (the
"Distributor"), an indirect wholly-owned subsidiary of Metropolitan, provides
certain shareholder services to the Fund such as responding to inquiries and
instructions from investors with respect to the purchase and redemption of
shares of the Fund. During the period May 16, 1994 (commencement of operations)
to April 30, 1995, the amount of such expenses was $89.
The fees of the Trustees not currently affiliated with the Adviser amounted to
$14,947 during the period May 16, 1994 (commencement of operations) to April
30, 1995.
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 period May 16, 1994 (commencement of operations) to April 30, 1995,
the amount of such expenses assumed by the Distributor and its affiliates was
$151,957.
Note 4
For the period May 16, 1994 (commencement of operations) to April 30, 1995,
purchases and sales of securities, exclusive of short-term obligations,
aggregated $32,912,371 and $19,376,604 (including $24,420,098 and $17,723,077
of U.S. Government securities), respectively.
Note 5
The Trust has adopted a Plan of Distribution Pursuant to Rule 12b-1 (the
"Plan") under the Investment Company Act of 1940. Under the Plan, the Fund will
pay annual service fees to the Distributor at a rate of 0.25% of average daily
net assets for Class A, Class B and Class D shares. In addition, the Fund will
pay annual distribution fees of 0.75% of average daily net assets for Class B
and Class D shares. The Distributor uses such payments for personal service
and/or the maintenance of shareholder accounts, to reimburse securities dealers
for distribution and marketing services, to furnish ongoing assistance to
investors and to defray a portion of its distribution and marketing expenses.
For the period May 16, 1994 (commencement of operations) to April 30, 1995,
fees pursuant to such plan amounted to $24,108 for Class A.
Note 6
The Trustees have the authority to issue an unlimited number of shares of
beneficial interest, $.001 par value per share. At April 30, 1995, Metropolitan
owned 1,047,121 Class A shares and 386,133 Class C shares of the Fund and the
Adviser owned 10,471 Class A shares of the Fund. Share transactions were as
follows:
May 16, 1994
(Commencement of
Operations) to
April 30, 1995
Class A Shares Amount
Shares sold 1,057,613 $10,100,193
Net increase 1,057,613 $10,100,193
Class C Shares Amount
Shares sold 654,776 $ 6,291,798
Shares repurchased (268,064) (2,576,098)
Net increase 386,712 $ 3,715,700
7
<PAGE>
STATE STREET RESEARCH INTERMEDIATE BOND FUND
FINANCIAL HIGHLIGHTS
For a share outstanding from May 16, 1994
(commencement of operations) to April 30, 1995.
<TABLE>
<CAPTION>
Class A Class C
<S> <C> <C>
Net asset value, beginning of period $9.55 $9.55
Net investment income* .54 .56
Net realized and unrealized gain on investments, foreign currency and forward contracts .01 .02
Dividends from net investment income (.44) (.46)
Net asset value, end of period $9.66 $9.67
Total return+++ 5.96% 6.30%
Net assets at end of period (000s) $10,222 $3,738
Ratio of operating expenses to average net assets* 1.00%++ 0.75%++
Ratio of net investment income to average net assets* 5.92%++ 6.17%++
Portfolio turnover rate 157.75% 157.75%
*Reflects voluntary assumption of fees or expenses per share. (Note 3) $.11 $.10
</TABLE>
++Annualized
+++Represents aggregate return for the period without annualization and does
not reflect any front-end or contingent deferred sales charges. Total return
would be lower if the Distributor and its affiliates had not voluntarily
assumed a portion of the Fund's expenses.
8
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of State Street Research
Securities Trust and Shareholders of
State Street Research Intermediate Bond Fund:
We have audited the accompanying statement of assets and liabilities of State
Street Research Intermediate Bond Fund, including the schedule of portfolio
investments, as of April 30, 1995, and the related statements of operations and
changes in net assets and the financial highlights for the period May 16, 1994
(commencement of operations) to April 30, 1995. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit.
We conducted our audit 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 as of
April 30, 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 audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of State
Street Research Intermediate Bond Fund as of April 30, 1995, the results of its
operations and changes in its net assets and the financial highlights for the
period May 16, 1994 (commencement of operations) to April 30, 1995, in
conformity with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
June 2, 1995
9
<PAGE>
STATE STREET RESEARCH INTERMEDIATE BOND FUND
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
State Street Research Intermediate Bond Fund performed in line with similar
funds over the past year, as measured by the average total return for Lipper
Analytical Services' intermediate investment grade funds category.
On April 30, 1995, the Fund's assets were allocated as follows: 50% to U.S.
Treasury securities, 29% to corporate bonds, 16% to mortgage securities, 1% in
foreign government bonds, and 4% to cash. The bonds in the portfolio also had a
high average quality of AAA-, as rated by Standard & Poor's or equivalent. On
April 30, 1995, the Fund's portfolio had a duration of 3.5 years, approximately
10% longer than the market average.
U.S. Treasury Securities
The Fund's holdings in U.S. Treasury securities offer the highest possible
credit quality. U.S. Treasury securities respond quickly to interest rate
changes, which benefited the portfolio as bond yields declined over the past
several months.
Mortgage Securities
The portfolio holds high-quality mortgage securities issued by U.S. Government
agencies. Over the past six months, as bond yields declined, we reduced our
holdings in mortgage securities.
Corporate Securities
7% of the portfolio is invested in "Yankee" bonds issued by Canadian provinces
or corporations, but denominated in U.S. dollars. Most of the remainder is
invested in instruments backed by specific assets, such as credit card
receivables.
Comparison of Change In Value Of A $10,000
Investment in Intermediate Bond Fund and The Lehman
Brothers Government/Corporate Intermediate Bond Index
[line graph]
Class A Shares
Aggregate Total Return
Life of Fund
+1.19%/+0.49%
[Intermediate Bond Fund data]
start-5/94-$9,550
end-4/95-$10,119
[LB Gov't/Corporate Intermediate Bond Index data]
start-5/94-$10,000
end-4/95-$10,648
[line chart]
Class C Shares
Aggregate Total Return
Life of Fund
+6.30%/+5.56%
[Intermediate Bond Fund data]
start-5/94-$10,000
end-4/95-$10,630
[LB Gov't/Corporate Intermediate Bond Index data]
start-5/94-$10,000
end-4/95-$10,648
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. "A" share returns reflect the maximum 4.5%
sales charge. "C" shares, offered without a sales charge, are available only to
certain employee benefit plans and large institutions. Performance results for
the Fund are increased by the Distributor's voluntary reduction of fees and
expenses related to the Fund. The first figure reflects expense reduction; the
second shows what results would have been without subsidization. The Lehman
Brothers Government/Corporate Intermediate Bond Index is a commonly-used
measure of intermediate bond 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.
10
<PAGE>
STATE STREET RESEARCH INTERMEDIATE BOND FUND
FUND INFORMATION, OFFICERS AND TRUSTEES OF STATE STREET RESEARCH SECURITIES
TRUST
Fund Information
State Street Research
Intermediate Bond Fund
One Financial Center
Boston, MA 02111
Investment Adviser
State Street Research &
Management Company
One Financial Center
Boston, MA 02111
Distributor
State Street Research
Investment Services, Inc.
One Financial Center
Boston, MA 02111
Shareholder Services
State Street Research
Shareholder Services
P.O. Box 8408
Boston, MA 02266-8408
1-800-562-0032
Custodian
State Street Bank and
Trust Company
225 Franklin Street
Boston, MA 02110
Legal Counsel
Goodwin, Procter & Hoar
Exchange Place
Boston, MA 02109
Independent Accountants
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, MA 02109
Officers
Ralph F. Verni
Chairman of the Board,
President and
Chief Executive Officer
John H. Kallis
Vice President
Kim M. Peters
Vice President
Thomas A. Shively
Vice President
Gerard P. Maus
Treasurer
Joseph W. Canavan
Assistant Treasurer
Douglas A. Romich
Assistant Treasurer
Francis J. McNamara, III
Secretary and General Counsel
Darman A. Wing
Assistant Secretary and
Assistant General Counsel
Trustees
Ralph F. Verni
Chairman of the Board,
President, Chief Executive
Officer and Director,
State Street Research &
Management Company
Edward M. Lamont
Formerly in banking (Morgan
Guaranty Trust Company of
New York); presently engaged
in private investments and
civic affairs
Robert A. Lawrence
Partner, Saltonstall & Co.
Dean O. Morton
Retired; formerly Executive
Vice President, Chief
Operating Officer and Director,
Hewlett-Packard Company
Thomas L. Phillips
Retired; formerly Chairman of
the Board and Chief Executive
Officer, Raytheon Company
Toby Rosenblatt
President, The Glen Ellen Company
Vice President,
Founders Investments Ltd.
Michael S. Scott Morton
Jay W. Forrester Professor of
Management, Sloan School
of Management, Massachusetts
Institute of Technology
Jeptha H. Wade
Retired; formerly Of Counsel,
Choate, Hall & Stewart
11
<PAGE>
State Street Research Intermediate Bond Fund
One Financial Center
Boston, MA 02111
Bulk Rate
U.S. Postage
PAID
Brockton, MA
Permit No. 600
Questions? Comments?
Call us at 1-800-562-0032,
or write us at:
State Street Research
Shareholder Services
P.O. Box 8408
Boston, MA 02266-8408
[logo of clock] 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: 2390-950622(0796)SSR-LD
Cover Illustration by Dorothy Cullinan
IB-238E-695
