[FRONT COVER]
[LOGO] STATE STREET RESEARCH
STATE STREET RESEARCH
INTERMEDIATE BOND FUND
ANNUAL REPORT
April 30, 1996
[ILLUSTRATION OF PERSON FISHING]
WHAT'S INSIDE
From the Chairman:
Favorable markets
reward investors
Portfolio Manager's Review:
Solid performance from
intermediate bonds
Fund Information:
Facts and figures
Plus, Complete Portfolio Holdings
and Financial Statements
[DALBAR LOGO]
For Excellence
in
Shareholder Service
<PAGE>
FROM THE CHAIRMAN
| Dear Shareholder:
| Over the past 12 months, the markets continued to reward
[PHOTO OF | investors. The environment was extremely favorable: The
RALPH VERNI] | economy was growing at a slow but reasonable pace, corporate
| earnings were strong, and inflation was low. More recently,
| we've seen some evidence that the economy is picking up
| speed. Job growth and sales of homes and autos have
| increased, and consumer confidence is higher.
Stocks
Over the past 12 months, large-company stocks--the household names we all
recognize--performed best. The Standard & Poor's 500 Composite Index, which
represents the 500 largest stocks, provided an impressive return of +30.18%
for the 12 months ended April 30, 1996.1 A stronger economy is generally
considered to be good for the stock market, as it can result in higher
profits for corporations.
Bonds
Bonds provided solid results over the past year. For the 12 months ended
April 30, 1996, the Lehman Brothers Government/Corporate Bond Index gained
+8.70%.1 These results include a slump over the first four months of 1996, as
bonds reacted negatively to a stronger economy and the Federal Reserve's
reluctance to cut interest rates further.
Looking ahead
Our outlook continues to call for moderate economic growth and low
inflation--which should be positive for both stocks and bonds. Although there
could be short-term bumps in the road for the markets, the prospects appear
favorable for long-term investors.
Sincerely,
/s/ Ralph F. Verni
Ralph F. Verni
Chairman
May 31, 1996
(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 Lehman Brothers Government/Corporate Bond Index is a commonly
used measure of 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)+7.25% 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)Performance reflects maximum 4.5% "A" share front-end sales charge. "C"
shares, offered without a sales charge, are available only to certain
employee benefit plans and large institutions.
(5)Cumulative total returns are not annualized and do not reflect sales
charges, which, if reflected, would reduce performance.
Please note that the discussion throughout this shareholder report is dated as
indicated and, because of possible changes in viewpoint, data and transactions,
should not be relied upon as being current thereafter.
______________________________________________________________________________
Fund Information
(all data are for periods ended April 30, 1996, except where otherwise noted)
______________________________________________________________________________
SEC Average Annual Compound Rates
of Return for periods ended 3/31/96
(at maximum applicable sales charge)(3,4)
- ----------------------------------------------
Life of Fund
(since 5/16/94) 1 Year
- ----------------------------------------------
Class A +4.62%/+3.67% +3.92%/+3.08%
- ----------------------------------------------
Class C +7.46%/+6.52% +9.05%/+8.18%
- ----------------------------------------------
Average Annual Compound Rates of Return
(at maximum applicable sales charge)(3,4)
- ----------------------------------------------
Life of Fund
(since 5/16/94) 1 Year
- ----------------------------------------------
Class A +4.20%/+3.27% +2.31%/+1.49%
- ----------------------------------------------
Class C +6.92%/+5.98% +7.25%/+6.40%
- ----------------------------------------------
Cumulative Total Returns
(do not reflect sales charge)(3,5)
- ----------------------------------------------
Life of Fund
(since 5/16/94) 1 Year
- ----------------------------------------------
Class A +13.52%/+11.52% +7.13%/+6.28%
- ----------------------------------------------
Class C +14.02%/+12.07% +7.25%/+6.40%
- ----------------------------------------------
SEC Yield
- ----------------------------------------------
Class A 5.47%/4.13%
Class C 6.03%/4.62%
- ----------------------------------------------
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, 1996.
Performance results for the Fund are increased by the Distributor's voluntary
reduction of fund fees and expenses related to the Fund. The first figure
reflects expense reduction; the second shows what results would have been
without subsidization. without subsidization.
<PAGE>
PORTFOLIO MANAGER'S REVIEW
[PHOTO] | The following is a discussion with Intermediate Bond Fund
John H. Kallis | portfolio manager John H. Kallis. Jack has 34 years of
Portfolio Manager | investment experience.
Q: What is your philosophy in managing the Fund?
A: We look for steady performance without exposing the portfolio to a high level
of risk. To accomplish this, we diversify among higher-quality bond sectors and
maintain an average maturity of three to ten years--the intermediate range.
Intermediate bonds aren't as vulnerable to interest-rate fluctuations and have
historically provided solid total returns, which benefits the long-term
investor.
Q: How would you describe the Fund's performance over the past 12 months?
A: Overall, I think we did reasonably well. For the twelve months ended April
30, 1996, Intermediate Bond Fund's Class A shares provided a total return of
+7.13% (does not reflect sales charge).2 The Fund underperformed Lipper
Analytical Services' Intermediate Investment Grade category, which had an
average return of +7.67% for 166 funds. Our conservative positioning caused us
to miss some of the bond rally last year.
However, for the six months ended April 30, 1996, we improved relative to our
peer group, outperforming the Lipper average for that period. This same
conservative approach helped the Fund outperform when the bond market wasn't
doing well because of rising interest rates.
Q: How have you structured the portfolio over the past 12 months?
A: In this challenging investment environment, we've been very active with
the portfolio. Last year at this time, we were heavily weighted in
Treasuries, at 50% of the portfolio. When interest rates began to creep back
up in the early part of 1996, we took a more defensive stance and shortened
the average maturity of the portfolio. We reduced our position in Treasuries
and increased our holdings in mortgage securities, which offer more
protection when interest rates are on the rise. As of April 30, 1996, we had
15% of the portfolio invested in U.S government agency and other mortgage
securities.
We also diversified the portfolio out of the U.S. government sector.
Approximately one-third of the Fund's holdings are devoted to corporate bonds
and asset-backed and foreign government securities.
Q: What is your outlook for the market and your strategy for the Fund?
A: We are cautiously optimistic about the market. So far in 1996, interest
rates have already risen a full percentage point in response to the stronger
economy. I think the bond market will still be somewhat reactive to reports
on the economy and employment. Our future strategy and position in U.S.
Treasuries and mortgage securities will depend on the outlook for interest
rates.
April 30, 1996
[PIE CHART] [PIE CHART]
Asset Allocation Quality Ratings
(by percentage of net assets) (by percentage of net assets)
U.S. Treasury securities 37% AAA 82%
Corporate bonds 31% AA 4%
Foreign government bonds 3% A 10%
Cash 14% BBB 4%
Mortgage securities 15%
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, 1996
<TABLE>
<CAPTION>
Principal Maturity Value
Amount Date (Note 1)
- --------------------------------------- ---------- ------------------- ------------
<S> <C> <C> <C>
FIXED INCOME SECURITIES 85.9%
U.S. Treasury 37.4%
U.S. Treasury Note, 8.50% $1,250,000 5/15/1997 $1,284,575
U.S. Treasury Note, 6.75% 300,000 5/31/1999 304,077
U.S. Treasury Note, 5.875% 450,000 5/31/1999 450,212
U.S. Treasury Note, 7.125% 1,550,000 9/30/1999 1,588,502
U.S. Treasury Note, 6.875% 1,175,000 3/31/2000 1,195,751
U.S. Treasury Note, 7.50% 350,000 11/15/2001 366,352
U.S. Treasury Note, 5.75% 625,000 8/15/2003 594,531
U.S. Treasury Note, 7.875% 425,000 11/15/2004 457,474
----------
6,241,474
----------
U.S. Agency 2.8%
Federal Home Loan Mortgage Corp. Note,
7.24% 150,000 5/15/2002 149,905
Guaranteed Export Trust Notes, Series
95-B, 6.13% 300,000 6/15/2004 286,332
Guaranteed Export Trust Notes, Series
96-A, 6.55% 25,000 6/15/2004 25,000
----------
461,237
----------
U.S. Agency Mortgage 12.4%
Federal Home Loan Mortgage Corp. Gold,
7.50% 328,250 4/01/2026 324,761
Federal Home Loan Mortgage Corp. Gold,
7.50%+ 325,000 5/20/2026 321,344
Federal National Mortgage Association
REMIC Series 93-52-C, 5.00% 170,949 2/25/2001 169,666
Federal National Mortgage Association
FHA-VA, 8.00% 238,418 4/01/2008 245,642
Federal National Mortgage Association
FHA-VA, 8.00% 239,298 6/01/2008 246,549
Government National Mortgage
Association, 8.00% 279,677 5/15/2008 289,026
Government National Mortgage
Association, 6.50% 73,036 2/15/2009 71,142
Government National Mortgage
Association, 6.50% 99,697 5/15/2009 97,081
Government National Mortgage
Association, 9.00% 94,311 11/15/2016 100,584
Government National Mortgage
Association, 8.00%+ 200,000 6/19/2026 201,938
----------
2,067,733
----------
Bank 1.8%
First Chicago Credit Master Trust
Series 1991-D, 8.40% 150,000 6/15/1998 150,984
NationsBank Master Trust Series 1995-1,
6.45% 150,000 4/15/2003 149,014
----------
299,998
----------
Canadian--Yankee 5.7%
British Columbia Hydroelectric
Authority Deb. Series FH, 15.50% $ 125,000 7/15/2011 $ 135,595
Hydro-Quebec Deb. Series FL, 13.25% 250,000 12/15/2013 296,790
Province of Manitoba Global Note, 6.75% 75,000 3/01/2003 74,135
Province of Ontario Deb., 11.50% 175,000 3/10/2013 196,987
Province of Quebec, 8.80% 100,000 4/15/2003 108,575
Talisman Energy, Inc. Deb., 7.125% 150,000 6/01/2007 144,506
----------
956,588
----------
Electric Utility 0.9%
Southern California Edison Co. Deb.,
5.875% 150,000 1/15/2001 143,680
----------
Finance 12.3%
Associates Corp. of North America Note,
6.375% 150,000 10/15/2002 145,420
Beneficial Corp. Master Trust Note,
8.17% 200,000 11/09/1999 208,648
Community Program Loan Trust Series
1987 A-3, 4.50% 48,074 4/01/2002 47,624
Countrywide Funding Corp. Master Trust
Note, 6.28% 175,000 1/15/2003 165,296
Discover Credit Card Trust Series 1993
A, 6.25% 150,000 8/16/2000 149,718
Ford Credit Auto Loan Master Trust
Series 95-1, 6.50% 425,000 8/15/2000 420,614
General Electric Capital Corp. Master
Trust Note, 7.625% 175,000 7/24/1996 175,805
General Motors Acceptance Corp. Master
Trust Note, 7.85% 275,000 11/17/1997 281,647
Household Affinity Credit Card Master
Trust Series
1994-1A, 5.65% 150,000 5/15/2001 150,000
Household Finance Corp. Note, 6.875% 75,000 3/01/2003 73,499
Los Angeles County, California Pension
Series 94-D, 6.65% 100,000 6/30/2003 97,714
Sears Credit Account Master Trust
Series 1995-2, 8.10% 125,000 6/15/2004 130,976
----------
2,046,961
----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
STATE STREET RESEARCH INTERMEDIATE BOND FUND
<TABLE>
<CAPTION>
Principal Maturity Value
Amount Date (Note 1)
- ----------------------------------------------- ------- --------- -----------
<S> <C> <C> <C>
Foreign Government 2.9%
Australian Dollar
Australian Government, 9.50% $ 150,000 8/15/2003 $ 123,463
Canadian Dollar
Canadian Government, 7.50% 100,000 12/01/2003 73,022
Danish Krone
Kingdom of Denmark, 8.00% 250,000 11/15/2001 45,747
Kingdom of Denmark, 8.00% 425,000 3/15/2006 75,956
Deutsche Mark
German Unity Fund, 8.00% 175,000 1/21/2002 127,629
French Franc
Government of France, 8.00% 25,000 4/25/2003 33,334
---------
479,151
---------
Industrial 5.2%
Case Credit Corp. Note, 6.125% $100,000 2/15/2003 94,028
Chevron Corp. Profit Sharing Note, 8.11% 125,000 12/01/2004 131,534
Columbia/HCA Healthcare Corp. Master Trust
Note, 6.87% 125,000 9/15/2003 122,745
Darden Restaurants, Inc. Note, 6.375% 175,000 2/01/2006 161,995
Electronic Data Systems Corp. 6.85%++ 250,000 5/15/2000 251,070
ITT Corp. Note, 6.25% 100,000 11/15/2000 97,272
---------
858,644
---------
Mortgage 3.7%
American Southwest Financial Services Corp.
Series 94-C2, 8.00% 74,075 8/25/2010 75,256
Countrywide MBS Series 94-2 A-7 PAC, 6.50% 150,000 4/25/2008 150,093
Fund America Investors Corp. Series 96-A, 6.00% 75,000 4/25/2006 75,000
Prudential Home Mortgage Series 93-29 A-6 PAC,
6.75% $105,841 8/25/2008 $ 105,742
Structured Assets Security Corp. Series
1996-CFL A-1C, 5.944% 225,000 2/25/2028 216,070
---------
622,161
---------
Trust Certificates 0.8%
Rural Electric Cooperative Grantor Trust
Certificates, 10.11% 125,000 12/15/2017 137,643
---------
Total Fixed Income Securities (Cost
$14,519,297) 14,315,270
---------
SHORT-TERM OBLIGATIONS 15.6%
American Express Credit Corp., 5.26% 830,000 5/10/1996 830,000
General Electric Capital Corp., 5.31% 500,000 5/20/1996 500,000
Philip Morris Cos., Inc., 5.23% 480,000 5/07/1996 479,583
Wal-Mart Stores, Inc., 5.26% 800,000 5/02/1996 799,883
---------
Total Short-Term Obligations (Cost $2,609,466) 2,609,466
---------
Total Investments (Cost $17,128,763)--101.5% 16,924,736
Cash and Other Assets, Less Liabilities--(1.5%) (256,819)
---------
Net Assets--100.0% $16,667,917
=========
Federal Income Tax Information:
At April 30, 1996, the net unrealized depreciation of
investments based on cost for Federal income tax
purposes of $17,141,230 was as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of value over
tax cost $ 65,729
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax cost
over value (282,223)
----------
$ (216,494)
==========
</TABLE>
+ Represents "TBA" (to be announced) purchase commitment to purchase
securities for a fixed unit price at a future date beyond customary
settlement time. Although the unit price has been established, the
principal value has not been finalized and may vary by no more than 2%.
++ Security restricted in accordance with Rule 144A under the Securities Act
of 1933, which allows for the resale of such securities among certain
qualified buyers. The cost and market value of the Rule 144A security
owned at April 30, 1996 was $249,803 and $251,070 (1.51% of net assets),
respectively.
Forward currency exchange contracts outstanding at April 30, 1996 are as
follows:
<TABLE>
<CAPTION>
Unrealized
Total Contract Appreciation Delivery
Value Price (Depreciation) Date
- --------------------------------------------- ---------- ----------- ---------------------- --------
<S> <C> <C> <C> <C>
Sell Australian dollars, buy U.S. dollars 8,400 AUD .75220 AUD $ (274) 5/15/96
Sell Australian dollars, buy U.S. dollars 137,000 AUD .78280 AUD 129 7/24/96
Sell Canadian dollars, buy U.S. dollars 99,000 CAD .73540 CAD (14) 7/24/96
Sell Danish krone, buy U.S. dollars 669,000 DKK .17623 DKK 4,462 5/15/96
Sell Danish krone, buy U.S. dollars 15,700 DKK .17167 DKK 25 7/24/96
Sell Deutsche mark, buy U.S. dollars 32,000 DEM .68169 DEM 893 5/15/96
Sell Deutsche mark, buy U.S. dollars 94,900 DEM .68381 DEM 2,849 5/15/96
Sell U.S. dollars, buy Deutsche mark 80,300 DEM .67820 DEM (1,960) 5/15/96
Sell Deutsche mark, buy U.S. dollars 135,000 DEM .66269 DEM 810 7/24/96
Sell European currency units, buy U.S.
dollars 27,400 XEU 1.26095 XEU 883 5/15/96
-------
$ 7,803
=======
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
STATE STREET RESEARCH INTERMEDIATE BOND FUND
_____________________________________________________________________________
STATEMENT OF ASSETS AND LIABILITIES
_____________________________________________________________________________
April 30, 1996
<TABLE>
<S> <C>
Assets
Investments, at value (Cost $17,128,763) (Note 1) $16,924,736
Cash 924
Interest receivable 238,964
Receivable for securities sold 203,634
Receivable from Distributor (Note 3) 19,116
Receivable for open forward contracts 10,051
Deferred organization costs and other assets (Note 1) 67,511
----------
17,464,936
Liabilities
Payable for securities purchased 730,564
Accrued trustees' fees (Note 2) 13,625
Accrued transfer agent and shareholder services (Note 2) 8,810
Accrued management fee (Note 2) 7,520
Payable for open forward contracts 2,248
Accrued service fee (Note 5) 122
Other accrued expenses 34,130
----------
797,019
----------
$16,667,917
==========
Net Assets
Net Assets consist of:
Undistributed net investment income $ 156,154
Unrealized depreciation of investments (204,027)
Unrealized appreciation of forward contracts and
foreign currency 7,630
Accumulated net realized gain 122,677
Shares of beneficial interest 16,585,483
----------
$16,667,917
==========
Net Asset Value and redemption price per share of Class
A shares ($592,663 / 60,764 shares of beneficial
interest) $ 9.75
==========
Maximum Offering Price per share of Class A shares
($9.75 / .955) $10.21
==========
Net Asset Value, offering price and redemption price
per share of Class C shares ($16,075,254 / 1,659,934
shares of beneficial interest) $ 9.68
==========
</TABLE>
_____________________________________________________________________________
STATEMENT OF OPERATIONS
_____________________________________________________________________________
For the year ended April 30, 1996
<TABLE>
<S> <C>
Investment Income
Interest $1,127,602
Expenses
Management fee (Note 2) 89,783
Custodian fee 71,226
Transfer agent and shareholder services (Note 2) 33,454
Service fee--Class A (Note 5) 22,661
Reports to shareholders 18,705
Amortization of organization costs (Note 1) 17,674
Audit fee 16,176
Trustees' fees (Note 2) 13,878
Legal fees 10,735
Registration fees 9,076
Miscellaneous 6,814
----------
310,182
Expenses borne by the Distributor (Note 3) (165,638)
----------
144,544
----------
Net investment income 983,058
----------
Realized and Unrealized Gain (Loss)
on Investments, Forward Contracts
and Foreign Currency
Net realized gain on investments (Notes 1 and 4) 420,441
Net realized gain on forward contracts and foreign
currency (Note 1) 5,863
----------
Total net realized gain 426,304
----------
Net unrealized depreciation of investments (350,014)
Net unrealized appreciation of forward contracts and
foreign currency 8,553
----------
Total net unrealized depreciation (341,461)
----------
Net gain on investments, foreign currency and forward
contracts 84,843
----------
Net increase in net assets resulting from operations $1,067,901
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
STATE STREET RESEARCH INTERMEDIATE BOND FUND
_____________________________________________________________________________
Statement of Changes in Net Assets
_____________________________________________________________________________
<TABLE>
<CAPTION>
For the
period
May 16, 1994
(Commencement
of
Operations)
Year ended to
April 30, April 30,
1996 1995
- ------------------------------- ------------ -------------
<S> <C> <C>
Increase (Decrease) in Net
Assets
Operations:
Net investment income $ 983,058 $ 786,765
Net realized gain (loss) on
investments, forward
contracts and foreign
currency* 426,304 (144,687)
Net unrealized appreciation
(depreciation) of
investments, forward
contracts and foreign
currency (341,461) 145,064
---------- -----------
Net increase resulting from
operations 1,067,901 787,142
---------- -----------
Dividends from net investment
income:
Class A (499,811) (465,343)
Class C (491,281) (178,010)
---------- -----------
(991,092) (643,353)
---------- -----------
Distribution from net
realized gains:
Class A (85,667) --
Class C (52,497) --
---------- -----------
(138,164) --
---------- -----------
Net increase from fund share
transactions (Note 6) 2,769,590 13,815,893
---------- -----------
Total increase in net assets 2,708,235 13,959,682
Net Assets
Beginning of year 13,959,682 --
---------- -----------
End of year (including
undistributed net investment
income of $156,154 and
$151,627, respectively) $16,667,917 $13,959,682
========== ===========
*Net realized gain (loss) for
Federal income tax
purposes (Note 1) $ 310,547 $ (37,239)
========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
_____________________________________________________________________________
NOTES TO FINANCIAL STATEMENTS
_____________________________________________________________________________
April 30, 1996
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 investment objective of the Fund is to provide total return, consisting
primarily of current income and secondarily of capital appreciation,
commensurate with reasonable investment risk. In seeking to achieve this
investment objective, the Fund invests primarily in a diversified portfolio
of debt securities considered investment grade by one or more nationally
recognized rating agencies or of comparable quality by the Fund's investment
manager.
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. Securities quoted in foreign currencies
are translated into U.S. dollars at the current exchange rate.
6
<PAGE>
STATE STREET RESEARCH INTERMEDIATE BOND FUND
_____________________________________________________________________________
NOTES (cont'd)
_____________________________________________________________________________
B. Security Transactions
Security transactions are accounted for on the trade date (date the order to
buy or sell is executed). Realized gains or losses are reported on the basis
of identified cost of securities delivered. Gains and losses that arise from
changes in exchange rates are not segregated from gains and losses that arise
from changes in market prices of investments.
C. Net Investment Income
Net investment income is determined daily and consists of interest accrued
and discount earned, less the estimated daily expenses of the Fund. Interest
income is accrued daily as earned. 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.
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 $94,123 and
has deferred and treated 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 transaction rates resulting in unrealized
gains or losses. The Fund records realized gains or losses at the time the
forward contracts are extinguished by entry into a closing contract or by
delivery of the currency. Neither spot transactions nor forward currency
exchange contracts eliminate fluctuations in the prices of the Fund's
portfolio securities or in foreign exchange rates, or prevent loss if the
price of these securities should decline.
H. Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period.
Actual results could differ from those estimates.
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 year ended April 30, 1996, the fees pursuant to
such agreement amounted to $89,783.
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 year ended April 30, 1996, the amount of such
expenses was $7,996.
The fees of the Trustees not currently affiliated with the Adviser amounted
to $13,878 during the year ended April 30, 1996.
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 year ended April 30, 1996, the amount of such expenses
assumed by the Distributor and its affiliates was $165,638.
7
<PAGE>
STATE STREET RESEARCH INTERMEDIATE BOND FUND
_____________________________________________________________________________
Note 4
_____________________________________________________________________________
For the year ended April 30, 1996, purchases and sales of securities,
exclusive of short-term obligations, aggregated $19,305,814 and $17,961,009
(including $14,637,677 and $16,107,165 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 or servicing 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 April 30, 1996, fees
pursuant to such plan amounted to $22,661 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, 1996,
Metropolitan owned 50,000 Class A shares and 1,395,016 Class C shares of the
Fund and the Adviser owned 10,471 Class A shares of the Fund.
Share transactions were as follows:
<TABLE>
<CAPTION>
May 16, 1994
(Commencement of
Year ended Operations) to
April 30, 1996 April 30, 1995
------------------------- ------------------------
Class A Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 270 $ 2,653 1,057,613 $10,100,193
Issued upon reinvestment of distribution from
net realized gains 8,595 84,835 -- --
Shares repurchased (1,005,714) (10,003,474) -- --
-------- --------- ------ ---------
Net increase (decrease) (996,849) $ (9,915,986) 1,057,613 $10,100,193
======== ========= ====== =========
</TABLE>
<TABLE>
<CAPTION>
Class C Shares Amount Shares Amount
- ------------------------------------------------ -------- --------- ------ ---------
<S> <C> <C> <C> <C>
Shares sold 1,290,402 $ 12,860,137 654,776 $ 6,291,798
Issued upon reinvestment of:
Dividends from net investment income 12,035 118,427 -- --
Distribution from net realized gains 5,319 52,496 -- --
Shares repurchased (34,534) (345,484) (268,064) (2,576,098)
-------- --------- ------ ---------
Net increase 1,273,222 $ 12,685,576 386,712 $ 3,715,700
======== ========= ====== =========
</TABLE>
8
<PAGE>
STATE STREET RESEARCH INTERMEDIATE BOND FUND
_____________________________________________________________________________
Financial Highlights
_____________________________________________________________________________
For a share outstanding throughout each year.
<TABLE>
<CAPTION>
Class A Class C
---------------------------- ------------------------------
May 16,
1994 May 16, 1994
(Commencement (Commencement
of of
Operations) Operations)
Year ended to Year ended to
April 30, April 30, April 30, April 30,
1996** 1995 1996** 1995
- ---------------------------------------- ------------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
Net asset value, beginning of year $9.66 $9.55 $9.67 $9.55
Net investment income* .59 .54 .61 .56
Net realized and unrealized gain on
investments, foreign currency and
forward contracts .10 .01 .09 .02
Dividends from net investment income (.52) (.44) (.61) (.46)
Distribution from net realized gains (.08) -- (.08) --
----- ------ ------ -----
Net asset value, end of period $9.75 $9.66 $9.68 $9.67
===== ====== ====== =====
Total return 7.13%+ 5.96%+++ 7.25%+ 6.30%+++
Net assets at end of year (000s) $ 593 $10,222 $16,075 $3,738
Ratio of operating expenses to average
net assets* 1.00% 1.00%++ 0.75% 0.75%++
Ratio of net investment income to
average net assets* 5.91% 5.92%++ 6.16% 6.17%++
Portfolio turnover rate 117.28% 157.75% 117.28% 157.75%
*Reflects voluntary assumption of fees
or expenses per share (Note 3). $ .09 $ .11 $ .11 $ .10
</TABLE>
++ Annualized
+ Total return figures do 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.
+++ 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.
** Per share figures have been calculated using the average shares method.
9
<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, 1996, and the related statement of operations
for the year then ended, the statement of changes in net assets and the
financial highlights for the year then ended and 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 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 as of April 30, 1996, 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, 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, 1996, the
results of its operations for the year then ended, the changes in its net
assets and the financial highlights for the year then ended and 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 3, 1996
10
<PAGE>
_____________________________________________________________________________
Management's Discussion of Fund Performance
_____________________________________________________________________________
Intermediate Bond Fund underperformed for the 12 months ended April 30, 1996.
Its conservative positioning caused it to miss some of the bond rally last
year. However, for the last six months of the period, the Fund's performance
improved relative to its peer group. This same conservative approach helped
the Fund outperform when the bond market wasn't doing well because of rising
interest rates. Fund management diversified among higher-quality bond
sectors and maintained an average maturity of three to ten years--the
intermediate range.
Intermediate Bond Fund's management was active in managing the structure
of the portfolio. Last year at this time, the Fund was heavily weighted in
Treasuries, at 50% of the portfolio, which hindered Fund performance when
interest rates began to creep back up in the early part of 1996. Fund
management responded by shortening the average maturity of the portfolio,
reducing the Fund's position in Treasuries and increasing its holdings in
mortgage securities, which helped Fund performance. As of April 30, 1996, the
Fund had 15% of the portfolio invested in mortgages. Almost one-third of the
Fund's holdings were devoted to corporate bonds and asset-backed and foreign
government securities.
April 30, 1996
Comparison Of Change In Value Of A $10,000
Investment In Intermediate Bond Fund and The Lehman
Brothers Government/Corporate Bond Index
[GRAPH]
- -------------------------------------------------------------------------------
Average Annual Total Return
----------------------------------
Value 1 Year Life of Fund
Class A Shares 4/30/96 4/30/95-4/30/96 5/15/94-4/30/96
- -------------------------------------------------------------------------------
Intermediate Bond Fund $10,841 +2.31%/+1.49% +4.20%/+3.27%
LB Gov't/Corporate Bond Index $11,483
- -------------------------------------------------------------------------------
[GRAPH]
- -------------------------------------------------------------------------------
Average Annual Total Return
----------------------------------
Value 1 Year Life of Fund
Class C Shares 4/30/96 4/30/95-4/30/96 5/15/94-4/30/96
- -------------------------------------------------------------------------------
Intermediate Bond Fund $11,402 +7.25%/+6.40% +6.92%/+5.98%
LB Gov't/Corporate Bond Index $11,483
- -------------------------------------------------------------------------------
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 performance reflects maximum
4.5% front-end sales charge. "C" shares, offered without a sales charge, are
available only to certain employee benefit plans and institutions.
Performance results for the Fund are increased by the Distributor's voluntary
reduction of fund 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 Bond Index is
a commonly used measure of 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.
11
<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
Amy L. Simmons
Assistant Secretary
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
12
<PAGE>
[BACK C0VER]
[POSTAGE PERMIT]
State Street Research Intermediate Bond Fund Bulk Rate
One Financial Center U.S. Postage
Boston, MA 02111 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.
The Dalbar awards recognize quality shareholder service and should not be
considered a rating of fund performance. The survey included mutual fund
complexes that volunteered or were otherwise selected to participate and was
not industry-wide.
CONTROL NUMBER: 3208-960626(0797)SSR-LD IB-238E-6/96
Cover Illustration by Dorothy Cullinan
