<PAGE>
--------------------------------
STATE STREET RESEARCH
--------------------
STRATEGIC INCOME FUND
---------------------
ANNUAL REPORT
April 30, 2000
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WHAT'S INSIDE
---------------------
FROM THE CHAIRMAN
America's cycle of economic
prosperity continues
PORTFOLIO'S MANAGER'S REVIEW
Another challenging year for the
bond market
FUND INFORMATION
Facts and figures
PLUS, COMPLETE PORTFOLIO HOLDINGS
AND FINANCIAL STATEMENTS
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[DALBAR LOGO]
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For Excellence
[logo] STATE STREET RESEARCH in
Service
<PAGE>
FROM THE CHAIRMAN
DEAR SHAREHOLDER:
[Photo of Gerard P. Maus]
America's cycle of economic prosperity extended to a record-breaking nine
consecutive years as gross domestic product (GDP), a measure of goods and
services produced in the U.S., rose strongly in the second half of the period.
GDP grew at an annual rate of 7.3% in the fourth quarter of 1999 and 5.4% in the
first quarter of 2000, despite the efforts of the Federal Reserve Board to cool
down the economy by raising interest rates. The Fed has raised a key short-term
interest rate five times in the past 10 months, from 4.75% to 6.0% as inflation
picked up to 3.0% and unemployment sunk to a 30-year low.
STOCKS
The U.S. stock market delivered double-digit gains over the 12 months ended
April 30, 2000, despite weakness at the end of the period. The S&P 500 rose
10.12%(1). However, S&P technology stocks accounted for a disproportionate share
of those gains. And the technology-heavy Nasdaq gained a stunning 52.20% over
the same period despite giving back 15.56% in April 2000.
BONDS
In 1999, the bond market was hurt by factors associated with Y2K and rising
interest rates. However, long-term U.S. Treasury bonds picked up early in 2000,
helped by the federal government's repurchase of bonds -- the first since the
1930s -- and the perception that the Fed is working to stem inflation with
higher interest rates. In an environment marked with uncertainty, mortgage bonds
held up better than corporate bonds. Both delivered modest single-digit returns.
High-yield bonds, which were relatively strong in 1999, finished the fund
reporting year behind other bond sectors.
INTERNATIONAL
Economic growth around the globe was better than expected. In Asia and the
emerging markets of Latin America, economies rebounded from currency and
economic woes faster than anticipated. Japan began to show signs of progress in
revitalizing its economy after a decade of stagnation and decline. That was
reflected in strong stock market performance in 1999, especially among small
Japanese companies. However, Japanese stocks lagged early in 2000 as economic
fears returned. European stock markets delivered mixed results. European
technology and telecommunications sectors have soared -- and stumbled -- along
with the U.S. market.
OUTLOOK AND OPPORTUNITIES
As we enter the second half of 2000, many markets are poised for growth.
However, the volatility that has erupted within the technology and
telecommunications sectors, both at home and abroad, is a good reminder that
diversification still makes sense. Now is a good time to consult your financial
professional about the strategies that make sense for your personal portfolio.
And, as always, we thank you for your confidence in State Street Research.
Sincerely,
/s/ Gerard P. Maus
Gerard P. Maus, Chief Executive Officer
State Street Research Funds
(1) The S&P 500 (officially the "Standard & Poor's 500 Composite Stock Price
Index") is an unmanaged index of 500 U.S. stocks. The Lehman Brothers
Aggregate Bond Index is a market-value weighted index of fixed-rate debt
issues, including U.S. Treasury, agency, and corporate bond issues, and
mortgage-backed securities. The indices do not take transaction charges into
consideration. It is not possible to invest directly in the index.
(2) -3.04% for Class B(1) shares; -2.89% for Class B shares; -2.89% for Class C
shares; -2.06% for Class S shares.
(3) Keep in mind that past performance is no guarantee of future results. The
fund's share price, yield and return will fluctuate, and you may have a gain
or loss when you sell your shares. All returns assume reinvestment of
capital gains distributions and income dividends at net asset value.
(4) Performance reflects a maximum 4.5% Class A share front-end sales charge, or
5% Class B(1) or Class B share or 1% Class C share contingent deferred sales
charge, where applicable. Performance for Class B(1) reflects Class B
performance through December 31, 1998. Class B(1) was introduced on January
1, 1999.
(5) Class S shares, offered without a sales charge, are available through
certain employee benefit plans and special programs.
PLEASE NOTE THAT THE DISCUSSION THROUGHOUT THIS SHAREHOLDER REPORT IS DATED AS
INDICATED, AND BECAUSE OF POSSIBLE CHANGES IN VIEWPOINT, DATA AND TRANSACTIONS
SHOULD NOT BE RELIED UPON AS BEING CURRENT THEREAFTER.
-------------------------------------------------------------------------------
FUND INFORMATION (all data are for periods ended April 30, 2000, except where
noted)
-------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN FOR PERIOD ENDED 3/31/00
(at maximum applicable sales charge)(3)(4)(5)
-------------------------------------------------------------------------------
LIFE OF FUND
(since 8/30/96) 3 YEAR 1 YEAR
-------------------------------------------------------------------------------
Class A 4.19% 3.60% -5.29%
-------------------------------------------------------------------------------
Class B(1) 4.01% 3.55% -6.18%
-------------------------------------------------------------------------------
Class B 4.01% 3.55% -6.18%
-------------------------------------------------------------------------------
Class C 4.69% 4.38% -2.49%
-------------------------------------------------------------------------------
Class S 5.79% 5.47% -0.58%
-------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
(does not reflect sales charge)(3)(5)
-------------------------------------------------------------------------------
LIFE OF FUND
(since 8/30/96) 3 YEAR 1 YEAR
-------------------------------------------------------------------------------
Class A 5.36% 4.68% -2.16%
-------------------------------------------------------------------------------
Class B(1) 4.51% 3.86% -3.04%
-------------------------------------------------------------------------------
Class B 4.56% 3.91% -2.89%
-------------------------------------------------------------------------------
Class C 4.56% 3.91% -2.89%
-------------------------------------------------------------------------------
Class S 5.62% 4.94% -2.06%
-------------------------------------------------------------------------------
YIELD
-------------------------------------------------------------------------------
Class A 7.36%
-------------------------------------------------------------------------------
Class B(1) 6.98%
-------------------------------------------------------------------------------
Class B 6.97%
-------------------------------------------------------------------------------
Class C 6.97%
-------------------------------------------------------------------------------
Class S 7.97%
-------------------------------------------------------------------------------
Yield is based on the net investment income produced for the 30 days ended April
30, 2000.
<PAGE>
PORTFOLIO MANAGER'S REVIEW
Strategic Income Fund: Another challenging year for the bond market
[Photo of John H. Kallis]
John H. Kallis
Portfolio Manager
We spoke with Jack Kallis, portfolio manager of State Street Research Strategic
Income Fund, about the year ended April 30, 2000 and his views on the year
ahead.
Q: HOW DID THE FUND PERFORM LAST YEAR?
A: It was a challenging year for the fund. Class A shares returned -2.16% [does
not reflect sales charge](2) for the 12 months ended April 30, 2000. The fund
underperformed the Lipper Multi-Sector Income Fund Average, which returned
-1.08% over the same period, and the Lehman Brothers Aggregate Bond Index, which
generated a positive return of 1.26%.(1)
Q: WHAT ACCOUNTED FOR THE FUND'S PERFORMANCE?
A: The environment was generally unfavorable for bonds. The Federal Reserve
Board raised short-term interest rates five times in one-quarter percent
increments. That brought the federal funds rate up from 4.75% to 6.0% at the end
of the period. Although there were no winners in this environment, higher-grade
bonds did relatively better than other sectors. High-yield bonds were hurt
dramatically. And because 51% of this portfolio was invested in high-yield
bonds, the fund was hurt too.
Q: WHERE WERE THE REST OF THE FUND'S INVESTMENTS CONCENTRATED?
A: In addition to the fund's 52% position in high-yield bonds, about 14% was
invested in non-dollar foreign bonds. About 20% was invested in U.S. Treasuries
and agency bonds, 6% in mortgage bonds and 3% in corporate. Roughly 5% of the
fund was in cash at the end of the period. Our Treasury position was less than
half of what it was last year. That caused the fund to underperform because
investors favored these higher-quality bonds. Corporate bonds were also weak
during the period. Mortgage bonds held up pretty well because fewer homeowners
were inclined to refinance as interest rates rose.
Q: WHERE WERE THE FUND'S DISAPPOINTMENTS?
A: Clearly, our heavy weighting in high-yield and corporate bonds put us out of
step with our peers. However, as these products became cheaper and cheaper, we
decided to buy them in anticipation of an end to the rising interest rate cycle.
Unfortunately, we have not yet reached the end of that cycle. Also, we owned
some Eurodollar Spanish bonds. When we bought them we thought they were pretty
cheap. However, the Euro has continued to decrease in value, and that's brought
the value of the bonds down, too. That one position hurt the portfolio rather
dramatically. That said, our investments in Greek and New Zealand bonds have
done quite well.
Q: LAST YEAR YOU ADDED A SMALL POSITION IN EMERGING MARKET BONDS TO THE
PORTFOLIO. HOW HAS IT FARED?
A: We increased our investment from about 2% of the portfolio to around 4% of
the portfolio, and most of what we own is in relatively short, floating-rate
securities. Over the past three months they have delivered about a 2% return. We
do not expect these bonds to do well until the Fed is finished raising interest
rates, and we plan to pare the position back somewhat in the period ahead. In
general, we have been very cautious in this sector -- and very selective.
Q: WHAT IS YOUR OUTLOOK?
A: We expect the environment to remain relatively unfriendly to bonds until the
Federal Reserve has succeeded in slowing the economy through interest rate
hikes. Our strategy is to incrementally increase our investment in bonds that
offer attractive spreads, on the belief that markets that are underperforming
now will rebound once the cycle of raising interest rates is complete. (The
spread is a bond's yield premium over U.S. Treasury bonds.)
April 30, 2000
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
ASSET ALLOCATION
(by percentage of net assets)
High-Yield Corporate 52%
U.S. Government 20%
International 14%
Finance/Mortgage 6%
Cash 5%
Equities 3%
PERFORMANCE BY SECTOR
(12 months ended 4/30/00)
High Grade Debt 0.7%
High-Yield -0.9%
International Debt -3.0%
% Return
<PAGE>
<TABLE>
STATE STREET RESEARCH STRATEGIC INCOME FUND
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INVESTMENT PORTFOLIO
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April 30, 2000
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<CAPTION>
PRINCIPAL MATURITY VALUE
AMOUNT DATE (NOTE 1)
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<S> <C> <C> <C>
FIXED INCOME SECURITIES 92.5%
U.S. TREASURY 4.8%
U.S. Treasury Bond, 11.625% ........................... $ 625,000 11/15/2004 $ 744,825
U.S. Treasury Bond, 11.25% ............................ 125,000 2/15/2015 182,890
U.S. Treasury Bond, 8.875% ............................ 200,000 2/15/2019 255,812
U.S. Treasury Bond, 7.875% ............................ 450,000 2/15/2021 532,337
U.S. Treasury Bond, 8.125% ............................ 625,000 8/15/2021 759,081
U.S. Treasury Bond, 6.375% ............................ 675,000 8/15/2027 689,236
U.S. Treasury Bond, 6.125% ............................ 225,000 11/15/2027 222,608
U.S. Treasury Bond, 6.25% ............................. 100,000 5/15/2030 103,937
U.S. Treasury STRIPS, 0.00% ........................... 875,000 2/15/2021 248,850
U.S. Treasury TIPS, 3.875% ............................ 283,709 4/15/2029 284,330
-----------
4,023,906
-----------
U.S. AGENCY MORTGAGE 15.0%
Federal Home Loan Mortgage Corp., 6.50% ............... 662,066 7/01/2029 618,409
Federal Home Loan Mortgage Corp., 6.75% ............... 400,000 9/15/2029 377,376
Federal National Mortgage Association, 9.00% .......... 496,741 5/01/2009 509,313
Federal National Mortgage Association, 6.625% ......... 275,000 9/15/2009 262,325
Federal National Mortgage Association, 6.50% .......... 247,913 9/01/2028 231,576
Federal National Mortgage Association, 6.50% .......... 992,274 11/01/2028 926,854
Federal National Mortgage Association, 6.00% .......... 408,331 12/01/2028 369,666
Federal National Mortgage Association, 6.50% .......... 282,100 3/01/2029 263,501
Federal National Mortgage Association, 7.50% .......... 681,425 7/01/2029 668,007
Federal National Mortgage Association, 7.00% .......... 2,737,037 12/01/2029 2,618,140
Federal National Mortgage Association TBA, 7.00% ...... 1,175,000 5/15/2030 1,124,146
Federal National Mortgage Association TBA, 7.50% ...... 650,000 5/15/2030 636,084
Federal National Mortgage Association TBA, 8.00% ...... 450,000 6/14/2030 448,734
Government National Mortgage Association, 6.50% ....... 932,744 11/15/2028 873,869
Government National Mortgage Association, 7.00% ....... 466,786 6/15/2029 448,844
Government National Mortgage Association TBA, 8.50% ... 150,000 5/22/2030 152,625
Government National Mortgage Association TBA, 7.00% ... 1,175,000 5/22/2030 1,129,834
Government National Mortgage Association TBA, 8.00% ... 800,000 6/22/2030 800,000
-----------
12,459,303
-----------
YANKEE 2.3%
Bombardier Capital Inc. Note, 7.30%+ .................. 375,000 12/15/2002 370,500
Province of Quebec, 7.50% ............................. 150,000 9/15/2029 146,678
Republic of South Africa, 9.125% ...................... 1,000,000 5/19/2009 962,500
United Mexican States, 10.375% ........................ 150,000 2/17/2009 158,250
Woodside Finance Ltd. Note, 6.60%+ .................... 300,000 4/15/2008 276,078
-----------
1,914,006
-----------
FOREIGN GOVERNMENT 11.7%
Argentine Peso
Republic of Argentina, 7.375%(+) ...................... 340,000 3/31/2005 315,520
Brazilian Cruzado
Republic of Brazil, 8.00%> ............................ 277,067 4/15/2014 198,435
Greek Drachma
Republic of Greece, 8.80% ............................. 826,000,000 6/19/2007 2,571,511
New Zealand Dollar
Government of New Zealand, 10.00% ..................... 1,000,000 3/15/2002 510,986
Government of New Zealand, 8.00% ...................... 1,100,000 4/15/2004 551,746
Government of New Zealand, 8.00% ...................... 2,500,000 11/15/2006 1,274,812
Romanian Leu
Republic of Bulgaria, 7.0625%(+) ...................... 1,300,000 7/28/2000 988,000
Spanish Peseta
Government of Spain, 6.00% ............................ 1,650,000 1/31/2008 1,549,141
Morocco A Loan Participation, 7.50% ................... $ 725,000 4/02/2001 650,688
Republic of Brazil, 11.625%> .......................... 400,000 4/15/2004 396,000
Republic of Panama, 7.875%(+) ......................... 750,000 2/13/2002 736,875
-----------
9,743,714
-----------
FINANCE/MORTGAGE 6.7%
Capital One Bank Note, 6.62% .......................... 300,000 8/04/2003 286,740
Citibank Credit Card Master Trust Series 1999 Cl. A,
5.875% .............................................. 200,000 3/10/2011 179,062
Commerce 1999-1 A1, Common 1 Mortgage Passthru
Certificate Class A 1, 6.145% ....................... 161,256 2/15/2008 152,688
Countrywide Funding Corp. Note, 6.58% ................. 575,000 9/21/2001 566,996
DLJ Commercial Mortgage Corp. 98-C2 Cl. A1-A, 5.88% ... 662,624 11/12/2031 619,864
ERAC USA Finance Co. Note, 6.625%+ .................... 150,000 2/15/2005 142,695
Finova Capital Corp. Note, 6.50% ...................... 400,000 7/28/2002 377,864
Ford Motor Credit Co., 7.375% ......................... 1,400,000 10/28/2009 1,353,268
GMAC Commercial Mortgage Security Inc. 98-C1 Cl. A1,
6.41% ............................................... 217,985 11/15/2007 208,550
Heller Financial Inc. Note, 7.125% .................... 625,000 9/28/2004 613,238
Intertek Finance PLC Series B Sr. Sub. Note, 10.25% ... 250,000 11/01/2006 208,750
LB Commercial Mortgage Trust 98C1-A1, 6.33% ........... 144,505 11/18/2004 139,447
LB Commercial Mortgage Trust 98C4-A1, 5.87% ........... 207,330 8/15/2006 194,177
LB Commercial Mortgage Trust 98C4-A1, 6.21% ........... 105,000 10/15/2008 95,648
MBNA Corp. Sr. Note, 6.12% ............................ 425,000 8/13/2001 419,139
Morgan Stanley Capital Inc. 98-A1, 6.19% .............. 70,458 1/15/2007 67,342
-----------
5,625,468
-----------
CORPORATE 52.0%
Acetex Sr. Note, 9.75% ................................ 90,000 10/01/2003 81,900
Advanced Radio Telecom Corp. Sr. Note, 14.00% ......... 300,000 2/15/2007 276,000
Advanstar Communications Inc. Sr. Sub. Note, 9.25% .... 250,000 5/01/2008 228,750
Agriculture Minerals & Chemicals Sr. Note, 10.75% ..... 50,000 9/30/2003 39,000
AirGate PCS, Inc. Sr. Sub. Note, 0.00% to 9/30/2009,
13.5% from 10/1/2009 to maturity .................... 400,000 10/01/2009 228,000
Alaska Steel Corp. Sr. Note, 9.125% ................... 230,000 12/15/2006 225,400
Albertsons Inc. Sr. Deb., 7.45% ....................... 225,000 8/01/2029 204,962
American Pacific Corp. Sr. Note, 9.25% ................ 175,000 3/01/2005 179,375
American Tissue Inc. Note, 12.50% ..................... 250,000 7/15/2006 252,500
Ametek Inc. Sr. Note, 7.20% ........................... 400,000 7/15/2008 356,676
Archibald Candy Corp. Sr. Sec. Note, 10.25% ........... 325,000 7/01/2004 297,375
AT&T Corp. Note, 6.00% ................................ 250,000 3/15/2009 221,833
AT&T Corp. Note, 6.50% ................................ 350,000 3/15/2029 295,246
Aurora Foods Inc. Sr. Sub. Note Series E, 8.75% ....... 250,000 7/01/2008 138,750
Ball Corp. Sr. Note, 7.75% ............................ 1,000,000 8/01/2006 945,000
Bio Rad Laboratories Inc. Sr. Sub. Note, 11.625%+ ..... 100,000 2/15/2007 102,250
British Sky Broadcasting Group PLC Note, 6.875% ....... 225,000 2/23/2009 199,145
Buckeye Cellulose Corp. Sr. Sub. Note, 9.25% .......... 150,000 9/15/2008 147,000
Buckeye Technologies Inc. Sr. Sub. Note, 8.00% ........ 150,000 10/15/2010 135,375
California Infrastructure Development Series
1997- A6, 6.38% ..................................... 675,000 9/25/2008 643,990
Call-Net Enterprises Inc. Sr. Note, 8.00% ............. 500,000 8/15/2008 355,000
Calpine Corp. Sr. Note, 7.625% ........................ 75,000 4/15/2006 70,610
Canadian Forest Oil Ltd. Sr. Sub. Note, 8.75% ......... 150,000 9/15/2007 140,250
Cellnet Data Systems Inc. Sr. Note Series B, 0.00%
to 9/30/2002, 14.00% from 10/1/2002 to maturity[ ] .. 750,000 10/01/2007 61,875
Century Communications Corp. Sr. Note, 8.375% ......... 500,000 12/15/2007 446,250
Charter Communications Holdings Corp. Sr. Note,
10.25%+ ............................................. 535,000 1/15/2010 516,275
Chesapeake Energy Corp. Sr. Note Series B, 9.625% ..... 550,000 5/01/2005 530,750
Coca-Cola Enterprises Inc. Deb., 6.95% ................ 275,000 11/15/2026 245,476
Columbia/HCA Healthcare Corp. Note, 8.12% ............. 575,000 8/04/2003 551,770
Columbia/HCA Healthcare Corp. Note, 6.91% ............. 250,000 6/15/2005 225,938
Conseco Inc., 8.75% ................................... 275,000 2/09/2004 181,500
Conseco Inc. Note, 9.00% .............................. 150,000 10/15/2006 99,000
Covad Commerce Group, 12.00%+ ......................... 250,000 2/15/2010 233,750
Dover Corp. Deb., 6.65% ............................... 150,000 6/01/2028 115,851
Drypers Corp. Series B Sr. Note, 10.25% ............... 750,000 6/15/2007 585,000
Econophone Inc. Sr. Note, 13.50% ...................... 1,000,000 7/15/2007 1,005,000
El Paso Energy Corp. Sr. Note, 6.625% ................. 300,000 7/15/2001 296,379
Elgar Holdings Inc. Sr. Sub. Note, 9.875% ............. 500,000 2/01/2008 252,500
Empire Gas Corp. Sr. Sec. Note, 12.875% ............... 1,000,000 7/15/2004 672,500
Envirosource Inc. Note, 9.75% ......................... 1,500,000 6/15/2003 945,000
Envirosource Inc. Sr. Note Series B, 9.75% ............ 40,000 6/15/2003 16,800
First Wave Marine Inc. Sr. Note, 11.00% ............... 250,000 2/01/2008 138,750
Fisher Scientific International Inc. Sr. Sub.
Note, 9.00% ......................................... 150,000 2/01/2008 138,000
Florida Windstorm Underwriting Sr. Sec. Note Series
1999-A, 7.125%+ ..................................... 225,000 2/25/2019 211,014
Four M Corp. Sr. Sec. Note Series B, 12.00% ........... 500,000 6/01/2006 472,500
Frontier Corp. Sr. Note, 9.125% ....................... 750,000 2/15/2006 637,500
Gentek Inc. Sr. Sub. Note, 11.00% ..................... 350,000 8/01/2009 351,750
Globenet Communications Group Ltd. Sr. Note, 13.00% ... 100,000 7/15/2007 100,000
GNI Group Inc. Sr. Note, 10.875% ...................... 300,000 7/15/2005 120,000
Golden Ocean Group Ltd. Sr. Note, 10.00%[ ] ........... 1,000,000 8/31/2001 150,000
Great Central Mines Ltd. Sr. Note, 8.875% ............. 350,000 4/01/2008 330,750
Gulfmark Offshore Inc. Sr. Note, 8.75% ................ 175,000 6/01/2008 157,938
Harrah's Operating Inc. Sr. Sub. Note, 7.875% ......... 115,000 12/15/2005 106,950
Henry Co. Sr. Note Series B, 10.00% ................... 350,000 4/15/2008 246,750
Hollinger International Publishing Inc. Sr. Sub.
Note, 9.25% ......................................... 125,000 3/15/2007 120,625
Hollinger International Sr. Sub. Note, 9.25% .......... 45,000 2/01/2006 43,425
Hollywood Casino Note, 13.00%+ ........................ 250,000 8/01/2006 266,250
Hyperion Telecommunication Inc. Sr. Sub. Note, 12.00% . 250,000 11/01/2007 253,750
Iasis Healthcare Corp. Sr. Sub. Note, 13.00%+ ......... 150,000 10/15/2009 149,625
ICG Holdings Inc. Sr. Note, 0.00% to
9/14/2000, 13.50% from 9/15/2000 to maturity ........ 350,000 9/15/2005 332,500
Intermedia Communications Inc. Sr. Note, 8.60% ........ 150,000 6/01/2008 136,875
International Game Technology Sr. Note, 8.375% ........ 275,000 5/15/2009 252,313
International Knife & Saw Inc. Sr. Sub. Note, 11.375% . 585,000 11/15/2006 435,825
International Shipholding Corp. Sr. Note
Series B, 7.75% ..................................... 400,000 10/15/2007 346,000
Intersil Corp. Sr. Note, 13.25% ....................... 227,000 8/15/2009 256,510
J. Crew Group Inc. Sr. Deb. Note, 0.00%to 10/14/2002,
13.125% from 10/15/2002 to maturity ................. 1,500,000 10/15/2008 832,500
J. Crew Operating Corp. Sr. Sub. Note, 10.375% ........ 450,000 10/15/2007 397,125
J.B. Poindexter Inc. Sr. Note, 12.50% ................. 1,460,000 5/15/2004 1,365,100
J.H. Heafner Inc. Sr. Note Series D, 10.00% ........... 400,000 5/15/2008 344,000
Kaiser Aluminum & Chemical Corp. Sub. Note, 12.75% .... 600,000 2/01/2003 567,000
Lear Corp. Sr. Note Series B, 8.11% ................... 205,000 5/15/2009 184,020
LIN Televison Corp. Sr. Note, 8.375% .................. 150,000 3/01/2008 127,500
Loehmann's Inc. Sr. Note, 11.875%[ ] .................. 500,000 5/15/2003 110,000
Mohegan Tribal Gaming Authority Sr. Note, 8.125% ...... 1,100,000 1/01/2006 1,034,000
NE Restaurant Inc. Sr. Note, 10.75% ................... 650,000 7/15/2008 539,500
New Jersey Economic Development Authority, 7.425% ..... 275,000 2/15/2029 266,866
Newpark Resources Inc. Sr. Sub. Note Series B, 8.625% . 525,000 12/15/2007 450,187
News America Holdings Inc. Deb., 7.375% ............... 175,000 10/17/2008 164,374
Nextel Partners Inc., 11.00%+ ......................... 145,000 3/15/2010 142,463
Nextel Partners Inc. Sr. Note, 0.00% to
1/31/2004, 14.00% from 2/1/2004 to maturity ......... 63,000 2/01/2009 40,635
North Atlantic Trading Inc. Sr. Note, 11.00% .......... 1,000,000 6/15/2004 885,000
Northpoint Commerce Group Inc. Sr. Note, 12.875%+ ..... 290,000 2/15/2010 259,550
Ocean Energy Corp. Sr. Sub. Note, 8.625% .............. 100,000 8/01/2005 96,250
Ocean Energy Inc. Series B Sr. Note, 7.625% ........... 125,000 7/01/2005 116,875
Owens-Illinois Inc. Sr. Deb., 7.50% ................... 200,000 5/15/2010 174,798
Packaging Resources Inc. Sr. Sec. Note, 11.625% ....... 300,000 5/01/2003 181,500
Pagemart Nationwide Inc. Sr. Note, 0.00% to 1/31/
2000, 15.00% from 2/1/2000 to maturity .............. 1,325,000 2/01/2005 1,338,250
Pagemart Wireless Inc. Sr. Sub. Note, 0.00% to 1/31/
2003, 11.25% from 2/1/2003 to maturity .............. 1,225,000 2/01/2008 661,500
Park Place Entertainment Corp. Sr. Sub. Note, 9.375%+ . 500,000 2/15/2007 495,000
Pathmark Stores Inc. Sr. Sub. Note, 9.625% ............ 150,000 5/01/2003 109,500
Peco Energy Transport Trust Series 1999A Cl. A6, 6.05% 400,000 3/01/2009 368,032
Phase Metrics Inc. Sr. Note, 10.75%[ ] ................ 500,000 2/01/2005 40,000
Pioneer Americans Acquisition Corp. Sr. Sec. Note
Series B, 9.25% ..................................... 750,000 6/15/2007 622,500
Plains Resources Inc. Sr. Sub. Note, 10.25% ........... 715,000 3/15/2006 687,294
Pogo Producing Co. Sr. Sub. Note, 8.75% ............... 500,000 5/15/2007 470,000
Pool Energy Services Co. Sr. Sub. Note, 8.625% ........ 425,000 4/01/2008 428,187
Premier Parks Inc. Sr. Note, 9.75% .................... 200,000 6/15/2007 190,000
Primus Telecommunications Group Sr. Note, 11.75% ...... 500,000 8/01/2004 482,500
PSINet, Inc. Sr. Note, 10.50% ......................... 340,000 12/01/2006 299,200
Quest Diagnostics Inc. Sr. Sub. Note, 10.75% .......... 1,000,000 12/15/2006 1,040,000
Raytheon Co. Note, 8.30%+ ............................. 250,000 3/01/2010 243,885
Rhythms Netconnections Inc. Sr. Note, 14.00%+ ......... 500,000 2/15/2010 440,000
Rose Hills Co. Sr. Sub. Note, 9.50% ................... 500,000 11/15/2004 350,000
RSL Communications Ltd. Sr. Note, 12.25% .............. 750,000 11/15/2006 744,375
Safety-Kleen Corp. Sr. Note, 9.25% .................... 250,000 5/15/2009 11,250
Safety-Kleen Services Inc. Sr. Sub. Note, 9.25% ....... 350,000 6/01/2008 39,375
Safeway Inc. Note, 7.00% .............................. 300,000 9/15/2002 294,446
Sbarro Inc. Sr. Note, 11.00% .......................... 50,000 9/15/2009 50,000
SCG Holding Corp. Series B, 12.00% .................... 105,000 8/01/2009 112,350
Scotts Co. Sr. Sub. Note, 8.625%+ ..................... 200,000 1/15/2009 190,000
Service Master Co. Note, 8.45% ........................ 125,000 4/15/2005 123,227
SFX Entertainment Inc. Sr. Note Series B, 9.125% ...... 75,000 2/01/2008 75,000
Sheffield Steel Corp. Note Series B, 11.50% ........... 250,000 12/01/2005 195,000
Simonds Industries Inc. Sr. Sub. Note, 10.25% ......... 225,000 7/01/2008 157,500
Startec Global Communications Corp. Sr. Note, 12.00% .. 750,000 5/15/2008 626,250
Stater Brothers Holdings Inc. Sr. Note, 10.75% ........ 200,000 8/15/2006 200,500
Stericycle Inc. Sr. Sub. Note Series B, 12.375% ....... 125,000 11/15/2009 125,625
Terra Industries Sr. Note, 10.50% ..................... 100,000 6/15/2005 75,000
Tom's Foods Inc. Sr. Sec. Note, 10.50% ................ 500,000 11/01/2004 427,500
Transdigm Inc. Sr. Sub. Note, 10.375% ................. 150,000 12/01/2008 118,500
Transwestern Publishing Co. Sr. Sub. Note
Series D, 9.625% .................................... 250,000 11/15/2007 242,500
Triad Hospitals Sr. Sub. Note, 11.00% ................. 175,000 5/15/2009 182,000
United Technologies Corp. Deb., 7.50% ................. 175,000 9/15/2029 169,740
US Unwired Inc. Sr. Sub. Note, 0.00% to 10/31/2004,
13.375% from 11/1/2004 to maturity+ ................. 335,000 11/01/2009 182,575
USA Waste Services Inc. Sr. Note, 7.00% ............... 750,000 10/01/2004 672,090
Viatel Inc. Sr. Note, 11.50% .......................... 283,000 3/15/2009 258,945
Viatel Inc. Sr. Note, 0.00% to 4/14/2003, 12.50%
from 4/15/2003 to maturity .......................... 500,000 4/15/2008 270,000
Wal-Mart Stores, Inc. Note, 7.55% ..................... 325,000 2/15/2030 326,407
Waste Management Inc. Note, 7.70% ..................... 1,000,000 10/01/2002 948,180
Westinghouse Air Brake Co. Sr. Note Series B2, 9.375% . 150,000 6/15/2005 146,250
Williams Communications Group Sr. Note, 10.875% ....... 400,000 10/01/2009 403,000
Winstar Communicaions Inc., 12.50%+ ................... 350,000 4/15/2008 337,750
World Access Inc. Sr. Note, 13.25% .................... 500,000 1/15/2008 447,500
Zilog Inc. Sr. Sec. Note, 9.50% ....................... 100,000 3/01/2005 89,500
-----------
43,289,027
-----------
Total Fixed Income Securities (Cost $85,514,224) .......................................... 77,055,424
-----------
-----------------------------------------------------------------------------------------------------------------
SHARES
-----------------------------------------------------------------------------------------------------------------
COMMON STOCKS & OTHER 2.7%
AirGate PCS, Inc. Com.* ............................... 1,396 119,707
Ameriking Inc. Com.*+ ................................. 300 3,000
Ameriking Inc. Sr. Exch. Pfd.*> ....................... 18,158 208,817
Cluett American Corp. Pfd.*> .......................... 5,990 101,830
Hollinger International, Inc. Cl. A Com. .............. 96,900 1,223,363
Ionica PLC Wts.*+ ..................................... 1,000 10
Loral Orion Network Systems Inc. Wts.*+ ............... 1,000 6,000
North Atlantic Trading Inc. Sr. Pfd.*> ................ 13,845 211,136
Primus Telecommunications Group Wts.*+ ................ 500 22,125
RSL Communications Ltd. Wts.*+ ........................ 500 30,000
Startec Global Communications Wts.*+ .................. 750 1,350
Viatel Inc. Com.* ..................................... 8,000 306,000
Wireless One Inc. Wts.* ............................... 750 750
World Access Inc. Com.* ............................... 1,571 24,743
-----------
Total Common Stocks & Other (Cost $2,696,738) ............................................. 2,258,831
-----------
SHORT-TERM INVESTMENTS 5.7%
5.7%State Street Navigator Securities Lending Prime
Portfolio ........................................ 4,712,062 4,712,062
-----------
Total Short-Term Investments (Cost $4,712,062) ............................................ 4,712,062
-----------
-----------------------------------------------------------------------------------------------------------------
PRINCIPAL MATURITY VALUE
AMOUNT DATE (NOTE 1)
-----------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER 7.4%
American Express Credit Corp., 5.99% .................. $1,700,000 5/04/2000 $ 1,700,000
American Express Credit Corp., 5.99% .................. 764,000 5/04/2000 764,000
American Express Credit Corp., 6.02% .................. 590,000 5/09/2000 590,000
Citicorp, 6.01% ....................................... 3,083,000 5/01/2000 3,083,000
-----------
Total Commercial Paper (Cost $6,137,000) .................................................. 6,137,000
-----------
Total Investments (Cost $99,060,024) - 108.3% ............................................. 90,163,317
Cash and Other Assets, Less Liabilities - (8.3%) .......................................... (6,885,038)
-----------
Net Assets - 100.0% ....................................................................... $83,278,279
===========
-----------------------------------------------------------------------------------------------------------------
Federal Income Tax Information:
At April 30, 2000, the net unrealized depreciation of investments based on cost for Federal
income tax purposes of $99,114,828 was as follows:
Aggregate gross unrealized appreciation for all investments in which there is an excess of
value over tax cost ..................................................................... $ 785,067
Aggregate gross unrealized depreciation for all investments in which there is an excess of
tax cost over value ..................................................................... (9,736,578)
-----------
$(8,951,511)
===========
-----------------------------------------------------------------------------------------------------------------
* Nonincome-producing securities.
+ Security restricted in accordance with Rule 144A under the Securities Act of 1933, which allows for the
resale of such securities among certain qualified buyers. The total cost and market value of Rule 144A
securities owned at April 30, 2000 were $4,970,930 and $4,766,332 (5.72% of net assets), respectively.
TBA Represents "TBA" (to be announced) purchase commitment to purchase securities for a fixed unit price at
a future date beyond customary settlement time. Although the unit price has been established, the principal
value has not been finalized and may vary by no more than 1%.
> Payments of income may be made in cash or in the form of additional securities.
[ ] Security is in default.
(+) Interest rates on these floating-rate bonds will reset annually or biannually based on the six month London
Interbank Offered Rate (LIBOR) plus .8125%.
Futures contracts open at April 30, 2000, are as follows:
<CAPTION>
NOTIONAL EXPIRATION UNREALIZED
TYPE AMOUNT MONTH DEPRECIATION
------------------------------------------------------------------------------------------
<S> <C> <C> <C>
5 Year U.S. Treasury Note $1,200,000 June, 2000 $(1,342)
10 Year U.S. Treasury Note 1,200,000 June, 2000 (3,062)
-------
$(4,404)
=======
Forward currency exchange contracts outstanding at April 30, 2000, are as follows:
<CAPTION>
CONTRACT UNREALIZED DELIVERY
TOTAL VALUE PRICE APPRECIATION DATE
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sell Euro, Buy U.S. dollars 352,200 EUR .99120 EUR $ 28,447 5/18/00
Sell Euro, Buy U.S. dollars 179,200 EUR .94745 EUR 5,873 6/26/00
Sell Greek drachma, Buy U.S. dollars 155,290,000 GRD .00286 GRD 24,699 5/19/00
Sell Greek drachma, Buy U.S. dollars 11,170,000 GRD .00287 GRD 1,841 5/09/00
Sell Greek drachma, Buy U.S. dollars 250,466,000 GRD .00294 GRD 59,586 5/18/00
Sell New Zealand dollars, Buy U.S. dollars 20,000 NZD .49538 NZD 196 5/18/00
Sell New Zealand dollars, Buy U.S. dollars 2,041,000 NZD .49600 NZD 21,355 7/26/00
Sell New Zealand dollars, Buy U.S. dollars 2,710,000 NZD .49535 NZD 26,594 7/26/00
--------
$168,591
========
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
STATE STREET RESEARCH STRATEGIC INCOME FUND
-------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
-------------------------------------------------------------------------------
April 30, 2000
ASSETS
Investments, at value (Cost $99,060,024) (Note 1) ............ $ 90,163,317
Cash ......................................................... 599
Receivable for securities sold ............................... 2,269,073
Interest and dividends receivable ............................ 1,968,340
Receivable for open forward contracts ........................ 168,591
Receivable for fund shares sold .............................. 100,043
Deferred organization costs and other assets (Note 1) ........ 21,432
------------
94,691,395
LIABILITIES
Payable for collateral received on securities loaned ......... 4,712,062
Payable for securities purchased ............................. 5,991,654
Dividends payable ............................................ 249,955
Payable for fund shares redeemed ............................. 134,453
Accrued management fee (Note 2) .............................. 106,067
Accrued distribution and service fees (Note 4) ............... 90,753
Accrued transfer agent and shareholder services (Note 2) ..... 24,143
Accrued trustee's fees (Note 2) .............................. 9,714
Payable for variation margin (Note 1) ........................ 188
Other accrued expenses ....................................... 94,127
------------
11,413,116
------------
NET ASSETS ................................................... $ 83,278,279
============
Net Assets consist of:
Undistributed net investment income ........................ $ 119,085
Unrealized depreciation of investments ..................... (8,896,707)
Unrealized appreciation of forward contracts and
foreign currency ......................................... 142,184
Unrealized depreciation of futures contracts ............... (4,404)
Accumulated net realized loss .............................. (5,383,080)
Paid-in capital ............................................ 97,301,201
------------
$ 83,278,279
============
Net Asset Value and redemption price per share of Class A
shares ($28,233,987 / 4,515,247 shares) .................... $6.25
=====
Maximum Offering Price per share of Class A shares
($6.25 / .955) ............................................. $6.54
=====
Net Asset Value and offering price per share of
Class B(1) shares ($7,303,345 / 1,171,623 shares)* ......... $6.23
=====
Net Asset Value and offering price per share of
Class B shares ($30,417,008 / 4,876,704 shares)* ........... $6.24
=====
Net Asset Value and offering price per share of
Class C shares ($7,886,971 / 1,264,482 shares)* ............ $6.24
=====
Net Asset Value, offering price and redemption
price per share of Class S shares
($9,436,968 / 1,509,619 shares) ............................ $6.25
=====
-------------------------------------------------------------------------------
*Redemption price per share for Class B(1), Class B and Class C is equal to
net asset value less any applicable contingent deferred sales charge.
The accompanying notes are an integral part of the financial statements.
<PAGE>
-------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
-------------------------------------------------------------------------------
For the year ended April 30, 2000
INVESTMENT INCOME
Interest, net of foreign taxes of $3,729 (Note 1) ............ $ 8,610,220
Dividends .................................................... 158,527
------------
8,768,747
EXPENSES
Management fee (Note 2) ...................................... 741,186
Custodian fee ................................................ 161,833
Service fee-Class A (Note 4) ................................. 79,992
Distribution and service fees-Class B(1) (Note 4) ............ 62,872
Distribution and service fees-Class B (Note 4) ............... 371,635
Distribution and service fees-Class C (Note 4) ............... 131,473
Transfer agent and shareholder services (Note 2) ............. 160,905
Registration fees ............................................ 114,009
Audit fee .................................................... 46,177
Reports to shareholders ...................................... 46,055
Amortization of organization costs (Note 1) .................. 16,291
Trustees' fees (Note 2) ...................................... 13,420
Legal fees ................................................... 5,795
Miscellaneous ................................................ 14,775
------------
1,966,418
Fees paid indirectly (Note 2) ................................ (5,904)
------------
1,960,514
------------
Net investment income ........................................ 6,808,233
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FOREIGN
CURRENCY, FORWARD CONTRACTS AND FUTURES CONTRACTS
Net realized loss on investments (Notes 1 and 3) ............. (4,212,500)
Net realized loss on futures contracts (Note 1) .............. (7,466)
Net realized gain on forward contracts and foreign
currency (Note 1) .......................................... 916,805
------------
Total net realized loss .................................... (3,303,161)
------------
Net unrealized depreciation of investments ................. (6,351,000)
Net unrealized depreciation of forward contracts and foreign
currency ................................................... (2,016)
Net unrealized depreciation of futures contracts ............. (10,461)
------------
Total net unrealized depreciation .......................... (6,363,477)
------------
Net loss on investments, forward contracts, foreign
currency and futures contracts ............................. (9,666,638)
------------
Net decrease in net assets resulting from operations ......... $ (2,858,405)
============
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATE STREET RESEARCH STRATEGIC INCOME FUND
-------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
-------------------------------------------------------------------------------
YEAR ENDED APRIL 30
----------------------------
1999 2000
-------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income ......................... $ 7,814,686 $ 6,808,233
Net realized loss on investments, foreign
currency, foward contracts and futures
contracts ................................... (1,598,647) (3,303,161)
Net unrealized depreciation of
investments, foreign currency,
forward contracts and futures
contracts ................................... (3,078,282) (6,363,477)
------------ ------------
Net increase (decrease) resulting
from operations ............................. 3,137,757 (2,858,405)
------------ ------------
Dividends from net investment income:
Class A ................................... (3,329,784) (2,367,113)
Class B(1) ................................ (48,325) (419,139)
Class B ................................... (3,122,662) (2,474,869)
Class C ................................... (1,011,221) (873,066)
Class S ................................... (948,209) (780,960)
------------ ------------
(8,460,201) (6,915,147)
------------ ------------
Distribution from net realized gains:
Class A ................................... (630,946) --
Class B ................................... (603,363) --
Class C ................................... (201,990) --
Class S ................................... (172,194) --
------------ ------------
(1,608,493) --
------------ ------------
Net increase (decrease) from fund share
transactions (Note 5) ....................... 14,923,121 (18,639,036)
------------ ------------
Total increase (decrease) in net assets ....... 7,992,184 (28,412,588)
NET ASSETS
Beginning of year ............................. 103,698,683 111,690,867
------------ ------------
End of year (including undistributed net
investment income of $140,066 and $119,085,
respectively) ............................... $111,690,867 $ 83,278,279
============ ============
The accompanying notes are an integral part of the financial statements.
<PAGE>
-------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
April 30, 2000
NOTE 1
State Street Research Strategic Income 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 Trust consists presently of three separate funds:
State Street Research Strategic Income Fund, State Street Research Legacy Fund
and State Street Research Galileo Fund.
The investment objective of the fund is to provide high current income
consistent with overall total return. In seeking to achieve its investment
objective, the Fund invests primarily in U.S. Government securities; high-
yield, high-risk debt securities (commonly known as "junk bonds"), as well as
investment grade debt, of U.S. issuers; and international debt securities of
governmental and private issuers.
The Fund offers five classes of shares. Class A shares are subject to an
initial sales charge of up to 4.50% and an annual service fee of 0.25% of
average daily net assets. On January 1, 1999, the Fund began offering Class B
(1) shares and continued offering Class B shares but only to current
shareholders through reinvestment of dividends and distributions or through
exchanges from existing Class B accounts of State Street Research funds. Class
B(1) and Class B pay annual distribution and service fees of 1.00% and both
classes automatically convert into Class A shares (which pay lower ongoing
expenses) at the end of eight years. Class B(1) shares are subject to a
contingent deferred sales charge on certain redemptions made within six years
of purchase. Class B shares are subject to a contingent deferred sales charge
on certain redemptions made within five years of purchase. Class C shares are
subject to a contingent deferred sales charge of 1.00% on any shares redeemed
within one year of their purchase. Class C shares also pay annual distribution
and service fees of 1.00%. Class S shares are only offered through certain
employee retirement accounts, advisory accounts of State Street Research &
Management Company (the "Adviser"), an indirect wholly owned subsidiary of
MetLife, Inc. ("MetLife"). No sales charge is imposed at the time of purchase
or redemption of Class S shares. Class S shares do not pay any distribution or
service fees. The Fund's expenses are borne pro-rata by each class, except
that each class bears expenses, and has exclusive voting rights with respect
to provisions of the plans of distribution, related specifically to that
class. The Trustees declare separate dividends on each class of shares.
The following significant accounting policies are consistently followed by the
Fund in preparing its financial statements, and such policies are in
conformity with generally accepted accounting principles for investment
companies.
A. INVESTMENT VALUATION
Fixed income securities are valued by a pricing service, which utilizes market
transactions, quotations from dealers, and various relationships among
securities in determining value. If not valued by a pricing service, such
secuities are valued at prices obtained from independent brokers. Values for
listed equity securities reflect final sales on national securities exchanges
quoted prior to the close of the New York Stock Exchange. Over-the-counter
securities quoted on the National Association of Securities Dealers Automated
Quotation ("Nasdaq") system are valued at closing prices supplied through such
system. If not quoted on the Nasdaq system, such securities are valued at
prices obtained from independent brokers. In the absence of recorded sales,
valuations are at the mean of the closing bid and asked quotations. Short-term
securities maturing within sixty days are valued at amortized cost. Other
securities, if any, are valued at their fair value as determined in good faith
under consistently applied procedures established by and under the supervision
of the Trustees.
B. SECURITY TRANSACTIONS
Security transactions are accounted for on the trade date (date the order to
buy or sell is executed). Realized gains or losses are reported on the basis
of identified cost of securities delivered. Gains and losses that arise from
changes in exchange rates are not segregated from gains and losses that arise
from changes in market prices of investments.
C. NET INVESTMENT INCOME
Net investment income is determined daily and consists of interest and
dividends accrued and discount earned, less the estimated daily expenses of
the Fund. Interest income is accrued daily as earned. Dividend income is
accrued on the ex-dividend date. Discount on debt obligations is amortized
under the effective yield method. The Fund is charged for expenses directly
attributable to it, while indirect expenses are allocated among all funds in
the Trust.
D. DIVIDENDS
Dividends from net investment income are declared daily and paid or reinvested
monthly. Net realized capital gains, if any, are distributed annually, unless
additional distributions are required for compliance with applicable tax
regulations.
Income dividends and capital gain distributions are determined in accordance
with Federal income tax regulations which may differ from generally accepted
accounting principles. The difference is primarily due to differing treatments
for foreign currency transactions.
E. FEDERAL INCOME TAXES
No provision for Federal income taxes is necessary because the Fund 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, 2000, the Fund had a capital
loss carryforward of $3,860,331 available, to the extent provided in
regulations, to offset future capital gains, if any, which expires April 30,
2008.
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, 1998 through April
30, 1999, the Fund incurred net capital losses of $1,956,431 and has deferred
and treated such losses as arising in the fiscal year ended April 30, 2000.
From November 1, 1999 through April 30, 2000, the Fund incurred net capital
losses of approximately $1,472,000 and intends to defer and treat such losses
as arising in the fiscal year ended April 30, 2001.
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.
I. SECURITIES LENDING
The Fund may seek additional income by lending portfolio securities to
qualified institutions. The Fund will receive cash or securities as collateral
in an amount equal to at least 100% of the current market value of any loaned
securities plus accrued interest. By reinvesting any cash collateral it
receives in these transactions, the Fund could realize additional gains and
losses. If the borrower fails to return the securities and the value of the
collateral has declined during the term of the loan, the Fund will bear the
loss. At April 30, 2000, the value of the securities loaned and the value of
collateral were $4,614,988 and $4,712,062, respectively. During the year
ended, April 30, 2000, income from securities lending amounted to $13,697 and
is included in interest income.
J. FUTURES CONTRACTS
The Fund may enter into futures contracts as a hedge against unfavorable
market conditions and to enhance income. The Fund will limit its risks by
entering into a futures position only if it appears to be a liquid investment.
Upon entering into a futures contract, the Fund deposits with the selling
broker sufficient cash or U.S. Government securities to meet the minimum
"initial margin" requirements. Thereafter, the Fund receives from or pays to
the broker cash or U.S. Government securities equal to the daily fluctuation
in value of the contract ("variation margin"), which is recorded as unrealized
gain or loss. When the contract is closed, the Fund records a realized gain or
loss equal to the difference between the value of the contract at the time it
was opened and the value at the time it was closed.
NOTE 2
The Trust and the Adviser have entered into an agreement under which the
Adviser earns monthly fees at an annual rate of 0.75% of the Fund's average
daily net assets. In consideration of these fees, the Adviser furnishes the
Fund with management, investment advisory, statistical and research facilities
and services. The Adviser also pays all salaries, rent and certain other
expenses of management. During the year ended April 30, 2000, the fees
pursuant to such agreement amounted to $741,186.
State Street Research Service Center, a division of State Street Research
Investment Services, Inc., the Trust's principal underwriter (the
"Distributor"), an indirect wholly owned subsidiary of MetLife, provides
certain shareholder services to the Fund such as responding to inquiries and
instructions from investors with respect to the purchase and redemption of
shares of the Fund. During the year ended April 30, 2000, the amount of such
expenses was $77,504.
The Fund has entered into an agreement with its transfer agent whereby credits
realized as a result of uninvested cash balances were used to reduce a portion
of the Fund's expenses. During the year ended April 30, 2000, the Fund's
transfer agent fees were reduced by $5,904 under this agreement.
The fees of the Trustees not currently affiliated with the Adviser amounted to
$13,420 during the year ended April 30, 2000.
NOTE 3
For the year ended April 30, 2000, purchases and sales of securities,
exclusive of short-term obligations, aggregated $155,913,259 and
$172,997,800, (including $87,886,394 and $101,135,137 of U.S. Government
securities), respectively.
NOTE 4
The Trust has adopted plans of distribution pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended. Under the plans, the Fund will pay
annual service fees to the Distributor at a rate of 0.25% of average daily net
assets for Class A, Class B(1), Class B and Class C shares. In addition, the
Fund will pay annual distribution fees of 0.75% of average daily net assets
for Class B(1), Class B and Class C shares. The Distributor uses such payments
for personal service and/or the maintenance or servicing of shareholder
accounts, to compensate or reimburse securities dealers for distribution and
marketing services, to furnish ongoing assistance to investors and to defray a
portion of its distribution and marketing expenses. For the year ended April
30, 2000, fees pursuant to such plans amounted to $79,992, $62,872, $371,635
and $131,473 for Class A, Class B(1), Class B and Class C shares,
respectively.
The Fund has been informed that the Distributor and MetLife Securities, Inc.,
a wholly-owned subsidiary of Metropolitan, earned initial sales charges
aggregating $31,450 and $79,411, respectively, on sales of Class A shares of
the Fund during the year ended April 30, 2000, and that MetLife Securities,
Inc. earned commissions aggregating $97,444 and $2,379 on sales of Class B(1)
and Class B shares, and that the Distributor collected contingent deferred
sales charges aggregating $33,914, $233,378 and $913 on redemptions of Class B
(1), Class B and Class C shares, respectively, during the period.
NOTE 5
The Trustees have the authority to issue an unlimited number of shares of
beneficial interest, $.001 par value per share. At April 30, 2000, MetLife
owned 1,157,666 Class A shares, 72,359 Class B(1) shares and 1,176,759 Class S
shares of the Fund.
Share transactions were as follows:
<TABLE>
<CAPTION>
YEARS ENDED APRIL 30
---------------------------------------------------------------
1999 2000
CLASS A ---------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ..................... 1,663,344 $ 11,724,754 1,834,786 $ 11,867,202
Issued upon reinvestment of:
Dividends from net investment
income ...................... 184,480 1,287,946 206,176 1,332,257
Distribution from net realized
gains ....................... 82,187 588,209 -- --
Shares redeemed ................. (2,311,032) (15,949,011) (2,788,366) (18,051,759)
---------- ------------ ---------- ------------
Net decrease .................... (381,021) $ (2,348,102) (747,404) $ (4,852,300)
========== ============ ========== ============
CLASS B(1) SHARES* AMOUNT* SHARES AMOUNT
------------------------------------------------------------------------------------------------------
Shares sold ..................... 553,702 $ 3,800,702 819,604 $ 5,350,587
Issued upon reinvestment of
dividends from net investment
income ........................ 3,640 24,932 48,847 312,994
Shares redeemed ................. (14,780) (101,368) (239,390) (1,534,272)
---------- ------------ ---------- ------------
Net increase .................... 542,562 $ 3,724,266 629,061 $ 4,129,309
========== ============ ========== ============
CLASS B SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------------------------------
Shares sold ..................... 2,632,299 $18,607,800 302,152 $ 1,967,645
Issued upon reinvestment of:
Dividends from net investment
income ...................... 229,456 1,595,713 256,727 1,656,247
Distribution from net realized
gains ....................... 69,847 498,378 -- --
Shares redeemed ................. (1,629,177) (11,427,253) (2,105,254) (13,596,054)
---------- ------------ ---------- ------------
Net increase (decrease) ......... 1,302,425 $ 9,274,638 (1,546,375) $ (9,972,162)
========== ============ ========== ============
CLASS C SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------------------------------
Shares sold ..................... 1,162,260 $ 8,135,977 415,772 $ 2,778,632
Issued upon reinvestment of:
Dividends from net investment
income ...................... 36,564 249,739 95,290 616,015
Distribution from net realized
gains ....................... 24,066 171,822 -- --
Shares redeemed ................. (711,904) (5,017,485) (1,568,941) (10,114,152)
---------- ------------ ---------- ------------
Net increase (decrease) ......... 510,986 $ 3,540,053 (1,057,879) $ (6,719,505)
========== ============ ========== ============
CLASS S SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------------------------------
Shares sold ..................... 105,621 $ 753,209 27,785 $ 181,729
Issued upon reinvestment of:
Dividends from net investment
income ...................... 26,264 183,457 37,789 243,566
Distribution from net realized
gains ....................... 23,933 171,355 -- --
Shares redeemed ................. (52,964) (375,755) (252,208) (1,649,673)
---------- ------------ ---------- ------------
Net increase (decrease) ......... 102,854 $ 732,266 (186,634) $ (1,224,378)
========== ============ ========== ============
------------------------------------------------------------------------------------------------------
* January 1, 1999 (commencement of share class) to April 30, 1999.
</TABLE>
<PAGE>
<TABLE>
STATE STREET RESEARCH STRATEGIC INCOME FUND
-----------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
For a share outstanding throughout each year:
CLASS A
----------------------------------------------------------
AUGUST 30, 1996
(COMMENCEMENT OF YEARS ENDED APRIL 30
OPERATIONS) TO ----------------------------------
APRIL 30, 1997(a) 1998(a) 1999(a) 2000(a)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR ($) 7.00 7.06 7.33 6.88
---- ---- ---- ----
Net investment income ($)* 0.38 0.55 0.52 0.47
Net realized and unrealized gain (loss) on investments, foreign
currency, forward contracts and futures contracts ($) 0.01 0.38 (0.30) (0.62)
---- ---- ---- ----
TOTAL FROM INVESTMENT OPERATIONS ($) 0.39 0.93 0.22 (0.15)
---- ---- ---- ----
Dividends from net investment income ($) (0.31) (0.55) (0.56) (0.48)
Distributions from net realized gains ($) (0.02) (0.11) (0.11) --
---- ---- ---- ----
TOTAL DISTRIBUTIONS ($) (0.33) (0.66) (0.67) (0.48)
---- ---- ---- ----
NET ASSET VALUE, END OF YEAR ($) 7.06 7.33 6.88 6.25
==== ==== ==== ====
Total return(b) (%) 5.60 (d) 13.70 3.10 (2.16)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of year ($ thousands) 36,110 41,348 36,227 28,234
Expense ratio (%)* 1.35 (e) 1.35 1.36 1.59
Expense ratio after expense reductions (%)* 1.35 (e) 1.35 1.35 1.58
Ratio of net investment income to average net assets (%)* 7.30 (e) 7.51 7.36 7.30
Portfolio turnover rate (%) 110.37 179.82 169.92 164.29
* Reflects voluntary reduction of expenses per share of these amounts ($) 0.01 0.01 0.01 --
<CAPTION>
CLASS B(1)
--------------------------
YEARS ENDED APRIL 30
--------------------------
1999(a)(c) 2000(a)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR ($) 6.91 6.87
---- ----
Net investment income ($) 0.12 0.43
Net realized and unrealized gain (loss) on investments, foreign currency,
forward contracts and futures contracts ($) 0.00 (0.64)
---- ----
TOTAL FROM INVESTMENT OPERATIONS ($) 0.12 (0.21)
---- ----
Dividends from net investment income ($) (0.16) (0.43)
---- ----
TOTAL DISTRIBUTIONS ($) (0.16) (0.43)
---- ----
NET ASSET VALUE, END OF YEAR ($) 6.87 6.23
==== ====
Total return(b) (%) 1.71(d) (3.04)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of year ($ thousands) 3,726 7,303
Expense ratio (%) 2.11(e) 2.34
Expense ratio after expense reductions (%) 2.10(e) 2.33
Ratio of net investment income to average net assets (%) 6.54(e) 6.60
Portfolio turnover rate (%) 169.92 164.29
----------------------------------------------------------------------------------------------------------------------------------
(a) Per-share figures have been calculated using the average shares method.
(b) Does not reflect any front-end or contingent deferred sales charge.
(c) January 1, 1999 (commencement of share class) to April 30, 1999.
(d) Not annualized.
(e) Annualized.
</TABLE>
<PAGE>
<TABLE>
STATE STREET RESEARCH STRATEGIC INCOME FUND
-----------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (cont'd)
-----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS B
----------------------------------------------------------
AUGUST 30, 1996
(COMMENCEMENT OF YEARS ENDED APRIL 30
OPERATIONS) TO ----------------------------------
APRIL 30, 1997(a) 1998(a) 1999(a) 2000(a)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR ($) 7.00 7.05 7.31 6.87
---- ---- ---- ----
Net investment income ($)* 0.31 0.49 0.47 0.43
Net realized and unrealized gain (loss) on investments, foreign
currency, forward contracts and futures contracts ($) 0.04 0.38 (0.30) (0.63)
---- ---- ---- ----
TOTAL FROM INVESTMENT OPERATIONS ($) 0.35 0.87 0.17 (0.20)
---- ---- ---- ----
Dividends from net investment income ($) (0.28) (0.50) (0.50) (0.43)
Distributions from net realized gains ($) (0.02) (0.11) (0.11) --
---- ---- ---- ----
TOTAL DISTRIBUTIONS ($) (0.30) (0.61) (0.61) (0.43)
---- ---- ---- ----
NET ASSET VALUE, END OF YEAR ($) 7.05 7.31 6.87 6.24
==== ==== ==== ====
Total return(b) (%) 4.96 (d) 12.74 2.49 (2.89)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of year ($ thousands) 19,678 37,432 44,110 30,417
Expense ratio (%)* 2.10 (e) 2.10 2.11 2.34
Expense ratio after expense reductions (%)* 2.10 (e) 2.10 2.10 2.33
Ratio of net investment income to average net assets (%)* 6.73 (e) 6.77 6.63 6.54
Portfolio turnover rate (%) 110.37 179.82 169.92 164.29
* Reflects voluntary reduction of expenses per share of these amounts ($) 0.01 0.01 0.01 --
<CAPTION>
CLASS C
----------------------------------------------------------
AUGUST 30, 1996
(COMMENCEMENT OF YEARS ENDED APRIL 30
OPERATIONS) TO ----------------------------------
APRIL 30, 1997(a) 1998(a) 1999(a) 2000(a)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR ($) 7.00 7.05 7.31 6.87
---- ---- ---- ----
Net investment income ($)* 0.32 0.49 0.46 0.43
Net realized and unrealized gain (loss) on investments, foreign
currency, forward contracts and futures contracts ($) 0.03 0.38 (0.29) (0.63)
---- ---- ---- ----
TOTAL FROM INVESTMENT OPERATIONS ($) 0.35 0.87 0.17 (0.20)
---- ---- ---- ----
Dividends from net investment income ($) (0.28) (0.50) (0.50) (0.43)
Distributions from net realized gains ($) (0.02) (0.11) (0.11) --
---- ---- ---- ----
TOTAL DISTRIBUTIONS ($) (0.30) (0.61) (0.61) (0.43)
---- ---- ---- ----
NET ASSET VALUE, END OF YEAR ($) 7.05 7.31 6.87 6.24
==== ==== ==== ====
Total return(b) (%) 4.96 (d) 12.74 2.49 (2.89)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of year ($ thousands) 8,590 13,243 15,949 7,887
Expense ratio (%)* 2.10 (e) 2.10 2.11 2.34
Expense ratio after expense reductions (%)* 2.10 (e) 2.10 2.10 2.33
Ratio of net investment income to average net assets (%)* 6.67 (e) 6.77 6.62 6.52
Portfolio turnover rate (%) 110.37 179.82 169.92 164.29
* Reflects voluntary reduction of expenses per share of these amounts ($) 0.01 0.01 0.01 --
----------------------------------------------------------------------------------------------------------------------------------
(a) Per-share figures have been calculated using the average shares method.
(b) Does not reflect any front-end or contingent deferred sales charge.
(c) January 1, 1999 (commencement of share class) to April 30, 1999.
(d) Not annualized.
(e) Annualized.
</TABLE>
<PAGE>
<TABLE>
STATE STREET RESEARCH STRATEGIC INCOME FUND
-----------------------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS S
----------------------------------------------------------
AUGUST 30, 1996
(COMMENCEMENT OF YEARS ENDED APRIL 30
OPERATIONS) TO ----------------------------------
APRIL 30, 1997(a) 1998(a) 1999(a) 2000(a)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR ($) 7.00 7.06 7.33 6.89
---- ---- ---- ----
Net investment income ($)* 0.39 0.57 0.54 0.49
Net realized and unrealized gain (loss) on investments, foreign
currency, forward contracts and futures contracts ($) 0.02 0.38 (0.30) (0.63)
---- ---- ---- ----
TOTAL FROM INVESTMENT OPERATIONS ($) 0.41 0.95 0.24 (0.14)
---- ---- ---- ----
Dividends from net investment income ($) (0.33) (0.57) (0.57) (0.50)
Distributions from net realized gains ($) (0.02) (0.11) (0.11) --
---- ---- ---- ----
TOTAL DISTRIBUTIONS ($) (0.35) (0.68) (0.68) (0.50)
---- ---- ---- ----
NET ASSET VALUE, END OF YEAR ($) 7.06 7.33 6.89 6.25
==== ==== ==== ====
Total return(b) (%) 5.76 (d) 13.99 3.51 (2.06)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of year ($ thousands) 10,908 11,675 11,679 9,437
Expense ratio (%)* 1.10 (e) 1.10 1.11 1.34
Expense ratio after expense reductions (%)* 1.10 (e) 1.10 1.10 1.33
Ratio of net investment income to average net assets (%)* 7.51 (e) 7.74 7.62 7.55
Portfolio turnover rate (%) 110.37 179.82 169.92 164.29
* Reflects voluntary reduction of expenses per share of these amounts ($) 0.01 0.01 0.01 --
----------------------------------------------------------------------------------------------------------------------------------
(a) Per-share figures have been calculated using the average shares method.
(b) Does not reflect any front-end or contingent deferred sales charge.
(c) January 1, 1999 (commencement of share class) to April 30, 1999.
(d) Not annualized.
(e) Annualized.
</TABLE>
<PAGE>
-------------------------------------------------------------------------------
REPORT OF INDEPENDENT AUDITORS
-------------------------------------------------------------------------------
TO THE TRUSTEES OF STATE STREET RESEARCH SECURITIES TRUST
AND SHAREHOLDERS OF STATE STREET RESEARCH STRATEGIC INCOME FUND:
In our opinion, the accompanying statement of assets and liabilities,
including the investment portfolio, and the related statements of operations
and of changes in the net assets and the financial highlights present fairly,
in all material respects, the financial position of State Street Research
Strategic Income Fund (a series of State Street Research Securities Trust,
hereafter referred to as the "Trust") at April 30, 2000, and the results of
its operations, the change in its net assets and the financial highlights for
the periods indicated, in conformity with accounting principles generally
accepted in the United States. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Trust's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States, which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included
confirmation of securities at April 30, 2000 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
June 5, 2000
<PAGE>
STATE STREET RESEARCH STRATEGIC INCOME FUND
-------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
-------------------------------------------------------------------------------
State Street Research Strategic Income Fund Class A shares returned -2.16% (does
not reflect sales charge) for the 12 months ended April 30, 2000. The fund
underperformed the Lipper Multi-Sector Income Funds Average, which returned
-1.08% over the same period, and the Lehman Brothers Aggregate Bond Index, which
generated a positive return of 1.26%.
During the period, the fund was hurt by volatility in the U.S. bond market,
which was triggered by rising interest rates. The fund's heavy investment in
high-yield and corporate bonds hurt performance as investors sought the
relative safety of higher-quality U.S. Treasury bonds.
The manager reduced the fund's investments in U.S. Treasuries and added to the
fund's modest investment in emerging market bonds. Unfortunately, our position
in Eurodollar Spanish bonds hurt the portfolio rather dramatically. However,
several other foreign bond positions contributed positively to performance.
Mortgage bonds held up better than most other sectors because fewer homeowners
have sought refinancing in this environment of rising interest rates.
April 30, 2000
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 gains
distributions and income dividends. Performance reflects maximum 4.5% Class A
share front-end sales charge, or 5% Class B(1) or Class B share or 1% Class C
share contingent deferred sales charges, where applicable. Performance for
Class B(1) reflects Class B performance through December 31, 1998. Class B(1)
was introduced on January 1, 1999. Class S shares, offered without a sales
charge, are available through certain employee benefit plans and special
programs. The Lehman Brothers Aggregate Bond Index is a market-value weighted
index of fixed-rate debt issues, including U.S. Treasury, agency, and
corporate bond issues, and mortgage-backed securities. The index is unmanaged
and does not take transaction charges into consideration. Direct investment in
the index is not possible; results are for illustrative purposes only.
CHANGE IN VALUE OF $10,000
BASED ON THE LEHMAN BROTHERS AGGREGATE BOND INDEX
COMPARED TO CHANGE IN VALUE OF $10,000
INVESTED IN STRATEGIC INCOME FUND
CLASS A SHARES
Average Annual Total Return
--------------------------------
1 Year 3 Year Life of Fund
--------------------------------
-6.56% 3.08% 4.04%
--------------------------------
Strategic Lehman Brothers
Income Aggregate
Fund Bond Index
-------------------------------------------------------
8/96 $ 9,550 $10,000
4/97 10,085 10,577
4/98 11,466 11,731
4/99 11,822 12,467
4/00 11,567 12,624
CLASS B(1) SHARES
Average Annual Total Return
--------------------------------
1 Year 3 Year Life of Fund
--------------------------------
-7.58% 3.03% 3.86%
--------------------------------
Strategic Lehman Brothers
Income Aggregate
Fund Bond Index
-------------------------------------------------------
8/96 $10,000 $10,000
4/97 10,496 10,577
4/98 11,832 11,731
4/99 12,127 12,467
4/00 11,491 12,624
CLASS B SHARES
Average Annual Total Return
--------------------------------
1 Year 3 Year Life of Fund
--------------------------------
-7.43% 3.09% 3.90%
--------------------------------
Strategic Lehman Brothers
Income Aggregate
Fund Bond Index
-------------------------------------------------------
8/96 $10,000 $10,000
4/97 10,496 10,577
4/98 11,832 11,731
4/99 12,127 12,467
4/00 11,510 12,624
CLASS C SHARES
Average Annual Total Return
--------------------------------
1 Year 3 Year Life of Fund
--------------------------------
-3.79% 3.91% 4.56%
--------------------------------
Strategic Lehman Brothers
Income Aggregate
Fund Bond Index
-------------------------------------------------------
8/96 $10,000 $10,000
4/97 10,496 10,577
4/98 11,832 11,731
4/99 12,127 12,467
4/00 11,777 12,624
CLASS S SHARES
Average Annual Total Return
--------------------------------
1 Year 3 Year Life of Fund
--------------------------------
-2.06% 4.94% 5.62%
--------------------------------
Strategic Lehman Brothers
Income Aggregate
Fund Bond Index
-------------------------------------------------------
8/96 $10,000 $10,000
4/97 10,576 10,577
4/98 12,056 11,731
4/99 12,479 12,467
4/00 12,222 12,624
<TABLE>
<PAGE>
STATE STREET RESEARCH STRATEGIC INCOME FUND
-----------------------------------------------------------------------------------------------------------------------------------
REPORT ON SPECIAL MEETING OF SHAREHOLDERS
-----------------------------------------------------------------------------------------------------------------------------------
A Special Meeting of Shareholders of the State Street Research Strategic Income Fund ("Fund"), a series of State Street Research
Securities Trust, was convened on February 25, 2000 ("Meeting"). The results of the Meeting are set forth below.
<CAPTION>
VOTES (MILLIONS OF SHARES)
-----------------------------------
ACTION ON PROPOSAL FOR AGAINST ABSTAIN
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CLASS A SHARES
The Fund's current Rule 12b-1 Distribution Plan was amended to increase the amount that
may be expended for the distribution of Class A shares ................................... 2.6 0.4 0.3
CLASS B SHARES
The Fund's current Rule 12b-1 Distribution Plan was amended to increase the amount that
may be expended for the distribution of Class A shares ................................... 2.7 0.4 0.2
CLASS B(1) SHARES
The Fund's current Rule 12b-1 Distribution Plan was amended to increase the amount that
may be expended for the distribution of Class A shares ................................... 0.5 0.0 0.0
</TABLE>
<PAGE>
<TABLE>
STATE STREET RESEARCH STRATEGIC INCOME FUND
-----------------------------------------------------------------------------------------------------------------
FUND INFORMATION, OFFICERS AND TRUSTEES OF STATE STREET RESEARCH SECURITIES TRUST
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FUND INFORMATION OFFICERS TRUSTEES
STATE STREET RESEARCH GERARD P. MAUS GERARD P. MAUS
STRATEGIC INCOME FUND Chairman of the Board, Chief Financial Officer,
One Financial Center President, Chief Executive Chief Administrative Officer,
Boston, MA 02111 Officer and Treasurer Director and Interim Chief
Operating Officer,
INVESTMENT ADVISER PETER C. BENNETT State Street Research &
State Street Research & Vice President Management Company
Management Company
One Financial Center BARTLETT R. GEER BRUCE R. BOND
Boston, MA 02111 Vice President Former Chairman of the Board,
Chief Executive Officer and
DISTRIBUTOR JOHN H. KALLIS President, PictureTel Corporation
State Street Research Vice President
Investment Services, Inc. STEVE A. GARBAN
One Financial Center KIM M. PETERS Former Senior Vice President
Boston, MA 02111 Vice President for Finance and Operations and
Treasurer, The Pennsylvania
SHAREHOLDER SERVICES THOMAS A. SHIVELY State University
State Street Research Vice President
Service Center DEAN O. MORTON
P.O. Box 8408 JAMES M. WEISS Former Executive Vice
Boston, MA 02266-8408 Vice President President, Chief Operating
1-87-SSR-FUNDS (toll-free) Officer and Director,
ELIZABETH MCCOMBS WESTVOLD Hewlett-Packard Company
CUSTODIAN Vice President
State Street Bank and SUSAN M. PHILLIPS
Trust Company KENNARD WOODWORTH, JR. Dean, School of Business
225 Franklin Street Vice President and Public Management,
Boston, MA 02110 George Washington University;
JOSEPH W. CANAVAN former Member of the Board
LEGAL COUNSEL Assistant Treasurer of Governors of the Federal
Goodwin, Procter & Hoar LLP Reserve System and Chairman
Exchange Place DOUGLAS A. ROMICH of the Commodity Futures
Boston, MA 02109 Assistant Treasurer Trading Commission
INDEPENDENT AUDITORS FRANCIS J. MCNAMARA, III TOBY ROSENBLATT
PricewaterhouseCoopers LLP Secretary and General Counsel President, Founders Investments Ltd.
160 Federal Street President, The Glen Ellen Company
Boston, MA 02110 DARMAN A. WING
Assistant Secretary and MICHAEL S. SCOTT MORTON
Assistant General Counsel Jay W. Forrester Professor of
Management, Sloan School of
AMY L. SIMMONS Management, Massachusetts
Assistant Secretary Institute of Technology
</TABLE>
<PAGE>
---------------
Bulk Rate
STATE STREET RESEARCH STRATEGIC INCOME FUND U.S. Postage
One Financial Center PAID
Boston, MA 02111 Canton, MA
Permit #313
---------------
QUESTIONS? COMMENTS?
E-MAIL us at:
[email protected]
INTERNET site:
www.ssrfunds.com
CALL us toll-free at 1-87-SSR-FUNDS (1-877-773-8637 or
[hearing impaired 1-800-676-7876]
[Chinese and Spanish-speaking 1-888-638-3193]
WRITE us at:
State Street Research
Service Center
P.O. Box 8408
Boston, MA 02266-8408
[LOGO] STATE STREET RESEARCH
(C)2000 State Street Research Investment Services, Inc., One Financial Center,
Boston, MA 02111
This report is prepared for the general information of current shareholders.
This publication must be preceded or accompanied by a current State Street
Research Strategic Income Fund prospectus.
When used after June 30, 2000, this report must be accompanied by a current
Quarterly Performance Update.
Portfolio changes should not be considered recommendations for action by
individual investors.
The Dalbar awards recognize quality shareholder service and should not be
considered a rating of fund performance. The survey included mutual fund
complexes that volunteered or were otherwise selected to participate and was not
industry-wide.
CONTROL NUMBER: (exp0601) SSR-LD SI-1889-0500
<PAGE>
--------------------------------
STATE STREET RESEARCH
--------------------------------
GALILEO FUND
--------------------------------
ANNUAL REPORT
April 30, 2000
---------------------
WHAT'S INSIDE
---------------------
FROM THE CHAIRMAN
America's cycle of
economic prosperity continues
PORTFOLIO MANAGER'S REVIEW
Good timing, industry exposure
and stock selection aid performance
FUND INFORMATION
Facts and figures
PLUS, COMPLETE PORTFOLIO HOLDINGS
AND FINANCIAL STATEMENTS
-------------------
[DALBAR LOGO]
-------------------
For Excellence
[logo] STATE STREET RESEARCH in
Shareholder Service
<PAGE>
FROM THE CHAIRMAN
[Photo of Gerard P. Maus]
DEAR SHAREHOLDER:
America's cycle of economic prosperity extended to a record-breaking nine
consecutive years as gross domestic product (GDP), a measure of goods and
services produced in the U.S., rose strongly in the second half of the period.
GDP grew at an annual rate of 7.3% in the fourth quarter of 1999 and 5.4% in the
first quarter of 2000, despite the efforts by the Federal Reserve Board to cool
down the economy by raising interest rates. The Fed has raised a key short-term
interest rate five times in the past 10 months, from 4.75% to 6.00% as inflation
picked up to 3.00% and unemployment sunk to a 30-year low.
STOCKS
The U.S. stock market delivered double-digit gains over the 12 months ended
April 30, 2000, despite weakness at the end of the period. The S&P 500 rose
10.12%.(1) However, S&P technology stocks accounted for a disproportionate share
of those gains. And the technology-heavy Nasdaq gained a stunning 52.20% over
the same period despite giving back 15.56% in April 2000.
BONDS
In 1999, the bond market was hurt by factors associated with Y2K and rising
interest rates. However, long-term U.S. Treasury bonds picked up early in 2000,
helped by the federal government's repurchase of bonds -- the first since the
1930s -- and the perception that the Fed is working to stem inflation with
higher interest rates. In an environment marked with uncertainty, mortgage bonds
held up better than corporate bonds. Both delivered modest single-digit returns.
High-yield bonds, which were relatively strong in 1999, finished the fund
reporting year behind other bond sectors.
INTERNATIONAL
Economic growth around the globe was better than expected. In Asia and the
emerging markets of Latin America, economies rebounded from currency and
economic woes faster than anticipated. Japan began to show signs of progress in
revitalizing its economy after a decade of stagnation and decline. That was
reflected in strong stock market performance in 1999, especially among small
Japanese companies. However, Japanese stocks lagged early in 2000 as economic
fears returned. European stock markets delivered mixed results. European
technology and telecommunications sectors have soared -- and stumbled -- along
with the U.S. market.
OUTLOOK AND OPPORTUNITIES
As we enter the year 2000, many markets are poised for growth. However, the
volatility that has erupted within the technology and telecommunications
sectors, both at home and abroad, is a good reminder that diversification still
makes sense. Now is a good time to consult your financial professional about the
strategies that make sense for your personal portfolio. And, as always, we thank
you for your confidence in State Street Research.
Sincerely,
/s/ Gerard P. Maus
Gerard P. Maus, Chief Executive Officer
State Street Research Funds
(1) The S&P 500 (officially the "Standard & Poor's 500 Composite Stock Price
Index") is an unmanaged index of 500 U.S. stocks. The index does not take
transaction changes into consideration. It is not possible to invest
directly in the index.
(2) 17.52% for Class B(1) shares; 17.61% for Class B shares; 17.70% for Class C
shares; 18.87% for Class S shares.
(3) Keep in mind that past performance is no guarantee of future results. The
fund's share price, yield and return will fluctuate, and you may have a gain
or loss when you sell your shares. All returns assume rein- vestment of
capital gains distributions and income dividends at net asset value.
(4) Performance reflects a maximum 5.75% Class A share front-end sales charge,
or 5% Class B(1) or Class B share or 1% Class C share contingent deferred
sales charge, where applicable. Performance for Class B(1) reflects Class B
performance through December 31, 1998. Class B (1) was introduced on January
1, 1999.
(5) Class S shares, offered without a sales charge are available through certain
employee benefit plans and special programs.
PLEASE NOTE THAT THE DISCUSSION THROUGHOUT THIS SHAREHOLDER REPORT IS DATED AS
INDICATED, AND BECAUSE OF POSSIBLE CHANGES IN VIEWPOINT, DATA AND TRANSACTIONS
SHOULD NOT BE RELIED UPON AS BEING CURRENT THEREAFTER.
-------------------------------------------------------------------------------
FUND INFORMATION (all data are for periods ended April 30, 2000, except where
noted)
-------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN FOR PERIOD ENDED 3/31/00
(at maximum applicable sales charge)(3)(4)(5)
--------------------------------------------------------------
LIFE OF FUND
(since 3/11/98) 1 YEAR
--------------------------------------------------------------
Class A 17.58% 18.90%
--------------------------------------------------------------
Class B(1) 18.80% 20.01%
--------------------------------------------------------------
Class B 18.84% 20.22%
--------------------------------------------------------------
Class C 20.08% 24.19%
--------------------------------------------------------------
Class S 21.30% 26.56%
--------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
(Does not reflect sales charge)(3)(5)
-------------------------------------------------------------
LIFE OF FUND
(since 3/11/98) 1 YEAR
-------------------------------------------------------------
Class A 19.20% 18.57%
-------------------------------------------------------------
Class B(1) 18.23% 17.52%
-------------------------------------------------------------
Class B 18.27% 17.61%
-------------------------------------------------------------
Class C 18.30% 17.70%
-------------------------------------------------------------
Class S 19.48% 18.87%
-------------------------------------------------------------
<PAGE>
PORTFOLIO MANAGER'S REVIEW
Galileo Fund: Good timing, industry exposure and stock selection aid performance
State Street Research would like to update you on some recent fund news. As of
May 2000, Maureen Depp assumed portfolio management responsibility for State
Street Research Galileo Fund. Maureen joined the firm in 1997 as vice president
and equity analyst. She has 23 years of investment experience.
Q: HOW DID THE FUND PERFORM LAST YEAR?
A: It was a good year for the fund. Class A shares returned 18.57% [does not
reflect sales charge](2) for the 12 months ended April 30, 2000. The fund
outperformed the S&P 500, which returned 10.12% over the same period. It also
outperformed the Lipper Large-Cap Core Funds Average, which gained 14.29%.(1)
Q: WHAT ACCOUNTED FOR THE FUND'S STRONG PERFORMANCE?
A: The easy answer would be wireless and semiconductor stocks. Our stock
selection in both segments helped us identify market leaders such as Nokia, the
world's leading maker of wireless phones, and Altera and Analog Devices, two
leading semi- conductor companies.
But here's a more detailed answer: Because the fund is organized around
fifteen sectors, each followed by an analyst who studies the sector and is
responsible for picking the stocks, we submit the fund to a rigorous analysis by
an outside firm that tells us very specifically where our performance comes
from. It is measured against four factors -- market timing, a list of 12 risk
indices, industry exposure and asset selection. This year all four of these
factors made a positive contribution to performance, and that is good. Of
course, we would rather be neutral on the first three and have asset selection
-- that is, our stock picking -- account for the lion's share of performance.
However, we'll take this report as good news, and we'll keep working on the rest
of the formula.
Q: WHERE WERE THE FUND'S DISAPPOINTMENTS?
A: Although our industry exposure showed up as a positive contributor to
performance, our disappointments were clustered in four industry groups:
property and casualty insurance, specialty retailing, wireless communications
and semiconductors. In the property and casualty sector, we were overweighted,
which hurt us during the year because rising interest rates and a variety of
industry- specific factors held the stocks down. However, in the past three
months, our holdings have been major positive contributors. After being one of
the biggest contributors to performance, wireless telecommunications hurt us
although some of the fund's strongest performers were also in this segment. That
was also true of semiconductors. Although we invested in several strong
semiconductor companies, some of our other picks in the sector were laggards. In
fact, after riding the semiconductor sector for almost a year, we have started
to reduce our exposure to this sector.
Q: WHAT IS THE OUTLOOK FOR THE YEAR AHEAD?
A: This is really a bottom-up stock selection fund. Our analysts are charged
with picking the best stocks in their industries. If the environment is
changing, if interest rates are going up and the economy is cooling off, some
stocks are going to do better than other stocks. It's the job of our analysts to
assess the environment and find the winners. We have 15 analysts on the job,
thinking in terms of their industries and their companies. As the environment
changes, their goal is to find the best stocks in their industries for the time
frame that lies ahead.
--------------------------------------------------------------------------------
TOP 10 STOCK POSITIONS
(by percentage of net assets)
1 CISCO SYSTEMS Networking products 3.5%
2 SOLECTRON Electronic components 2.8%
3 NOKIA Telecommunications equipment 2.4%
4 BAXTER INTERNATIONAL Medical products 2.3%
5 GENERAL ELECTRIC Diversified manufacturer 2.2%
6 INTEL Electrical components 2.1%
7 QWEST COMMUNICATIONS Telecommunications 1.8%
8 ELECTRONIC DATA SYSTEMS Computer services 1.8%
9 VOICESTREAM WIRELESS Cellular telecom 1.7%
J PHARMACIA & UPJOHN Medical/drugs 1.7%
These securities represent an aggregate of 22.3% 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 or in the text
above.
TOP 5 INDUSTRIES
(by percentage of net assets)
TELECOMMUNICATIONS 8.2%
DRUGS & BIOTECHNOLOGY 7.8%
RETAIL 7.0%
COMMUNICATIONS TECHNOLOGY 6.7%
ELECTRONICS 5.8%
Total: 35.5%
<PAGE>
STATE STREET RESEARCH GALILEO FUND
-------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
-------------------------------------------------------------------------------
April 30, 2000
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
VALUE
SHARES (NOTE 1)
---------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 96.3%
AUTOMOBILES & TRANSPORTATION 1.9%
AUTOMOTIVE PARTS 1.3%
Eaton Corp. ....................................................... 10,400 $ 873,600
-----------
AUTOMOBILES 0.6%
General Motors Corp. .............................................. 4,000 374,500
-----------
Total Automobiles & Transportation ................................ 1,248,100
-----------
CONSUMER DISCRETIONARY 10.3%
CASINOS/GAMBLING, HOTEL/MOTEL 0.7%
International Game Technology Inc.* ............................... 19,600 477,750
-----------
COMMUNICATIONS, MEDIA & ENTERTAINMENT 2.6%
Infinity Broadcasting Corp. Cl. A* ................................ 23,700 804,319
USA Networks Inc.* ................................................ 15,200 349,600
Walt Disney Co. ................................................... 12,900 558,731
-----------
1,712,650
-----------
RETAIL 7.0%
Bed Bath & Beyond Inc.* ........................................... 16,800 616,350
Circuit City Stores Inc. .......................................... 14,800 870,425
Costco Wholesale Corp.* ........................................... 12,100 654,156
Gap Inc. .......................................................... 7,100 260,925
Home Depot Inc. ................................................... 13,500 756,844
Staples Inc.* ..................................................... 25,300 482,281
TJX Companies, Inc. .............................................. 14,600 280,138
Wal-Mart Stores, Inc. ............................................. 14,200 786,325
-----------
4,707,444
-----------
Total Consumer Discretionary ...................................... 6,897,844
-----------
CONSUMER STAPLES 4.0%
BEVERAGES 1.4%
Anheuser-Busch Companies, Inc. ................................... 5,400 381,037
Coca-Cola Co. ..................................................... 11,700 550,631
-----------
931,668
-----------
DRUG & GROCERY STORE CHAINS 2.0%
CVS Corp. ......................................................... 21,500 935,250
Kroger Co.* ....................................................... 22,800 423,225
-----------
1,358,475
-----------
FOODS 0.6%
Quaker Oats Co. ................................................... 6,500 423,719
-----------
Total Consumer Staples ............................................ 2,713,862
-----------
FINANCIAL SERVICES 14.8%
BANKS & SAVINGS & LOAN 2.9%
Bank of New York Company, Inc. .................................... 12,000 492,750
Chase Manhattan Corp. ............................................ 5,200 374,725
Firstar Corp. .................................................... 26,100 649,237
Wells Fargo & Co. ................................................ 9,800 402,413
-----------
1,919,125
-----------
FINANCIAL DATA PROCESSING SERVICES & SYSTEMS 1.4%
First Data Corp. .................................................. 20,100 978,619
-----------
INSURANCE 4.9%
Ace Ltd. .......................................................... 30,100 720,519
Hartford Financial Services Group, Inc. ........................... 11,600 605,375
Mutual Risk Management Ltd. ....................................... 36,700 575,731
Saint Paul Companies, Inc. ........................................ 22,600 805,125
XL Capital Ltd. Cl. A ............................................. 12,353 588,311
-----------
3,295,061
-----------
MISCELLANEOUS FINANCIAL 5.6%
Ambac Financial Group, Inc. ....................................... 8,800 422,400
Capital One Financial Corp. ...................................... 13,300 581,875
Citigroup, Inc. .................................................. 14,850 882,647
Mellon Financial Corp. ............................................ 17,500 562,188
Merrill Lynch & Company Inc. ...................................... 7,800 795,112
Metris Companies Inc. ............................................. 13,000 487,500
-----------
3,731,722
-----------
Total Financial Services .......................................... 9,924,527
-----------
HEALTH CARE 9.7%
DRUGS & BIOTECHNOLOGY 7.8%
ALZA Corp.* ....................................................... 15,200 669,750
Baxter International Inc. ........................................ 24,000 1,563,000
Genzyme Corp.* .................................................... 7,400 361,213
Pharmacia & Upjohn Corp. .......................................... 22,625 1,129,836
Schering-Plough Corp. ............................................. 15,740 634,519
Teva Pharmaceutical Industries Ltd. ADR ........................... 9,200 404,800
Warner-Lambert Co. ................................................ 4,200 478,012
-----------
5,241,130
-----------
HOSPITAL SUPPLY 1.9%
Biomet Inc. ....................................................... 11,350 405,053
Guidant Corp.* .................................................... 14,800 849,150
-----------
1,254,203
-----------
Total Health Care ................................................. 6,495,333
-----------
INTEGRATED OILS 2.1%
INTEGRATED DOMESTIC 1.1%
Kerr-McGee Corp. .................................................. 7,400 382,950
Unocal Corp. ...................................................... 12,000 387,750
-----------
770,700
-----------
INTEGRATED INTERNATIONAL 1.0%
Total Fina SA ADR ................................................. 8,600 650,375
-----------
Total Integrated Oils ............................................. 1,421,075
-----------
MATERIALS & PROCESSING 2.4%
CHEMICALS 0.8%
Dow Chemical Co. .................................................. 4,600 519,800
-----------
PAPER & FOREST PRODUCTS 0.7%
Fort James Corp. .................................................. 18,200 435,663
-----------
STEEL 0.9%
Harsco Corp. ...................................................... 21,400 635,312
-----------
Total Materials & Processing ...................................... 1,590,775
-----------
OTHER 5.6%
MULTI-SECTOR 5.6%
General Electric Co. .............................................. 9,600 1,509,600
Seagram Ltd. ...................................................... 10,200 550,800
Standard & Poor's Depositary Receipt .............................. 1,500 217,641
Teleflex Inc. ..................................................... 12,000 414,750
Tyco International Ltd. .......................................... 23,100 1,061,156
-----------
Total Other ....................................................... 3,753,947
-----------
OTHER ENERGY 4.7%
GAS PIPELINES 1.0%
Dynegy Inc. Cl. A ................................................. 10,400 680,550
-----------
OIL & GAS PRODUCERS 1.4%
Anadarko Petroleum Corp. .......................................... 11,200 486,500
Burlington Resources Inc. ......................................... 11,550 454,059
-----------
940,559
-----------
OIL WELL EQUIPMENT & SERVICES 2.3%
Baker Hughes Inc. ................................................. 14,800 470,825
Coflexip ADR ...................................................... 7,100 360,325
Halliburton Co. ................................................... 8,800 388,850
Valero Energy Corp. ............................................... 10,700 310,300
-----------
1,530,300
-----------
Total Other Energy ................................................ 3,151,409
-----------
PRODUCER DURABLES 3.8%
AEROSPACE 0.6%
United Technologies Corp. ......................................... 6,500 404,219
-----------
ELECTRICAL EQUIPMENT & COMPONENTS 0.9%
Nortel Networks Corp. ............................................. 5,400 611,550
-----------
MISCELLANEOUS EQUIPMENT 1.0%
Danaher Corp. ..................................................... 11,500 656,937
-----------
OFFICE FURNITURE & BUSINESS EQUIPMENT 0.7%
Lexmark International Group Inc. Cl. A* ........................... 4,000 472,000
-----------
TELECOMMUNICATIONS EQUIPMENT 0.6%
American Tower Corp. Cl. A* ....................................... 9,500 441,750
-----------
Total Producer Durables ........................................... 2,586,456
-----------
TECHNOLOGY 27.1%
COMMUNICATIONS TECHNOLOGY 6.7%
Cisco Systems Inc.* ............................................... 34,300 2,377,955
General Motors Corp. Cl. H* ....................................... 4,800 462,300
Lucent Technologies Inc. .......................................... 14,900 926,594
Motorola Inc. ..................................................... 3,300 392,906
Qualcomm Inc.* .................................................... 3,400 368,687
-----------
4,528,442
-----------
COMPUTER SOFTWARE 5.0%
Citrix Systems Inc.* .............................................. 5,800 354,162
i2 Technologies Inc.* ............................................. 3,400 439,450
Microsoft Corp.* .................................................. 14,900 1,039,275
Oracle Systems Corp.* ............................................. 13,600 1,087,150
Veritas Software Co.* ............................................. 4,200 450,516
-----------
3,370,553
-----------
COMPUTER TECHNOLOGY 5.3%
Dell Computer Corp.* .............................................. 20,800 1,042,600
Electronic Data Systems Corp. ..................................... 17,800 1,223,750
EMC Corp.* ........................................................ 5,000 694,688
IBM Corp. ......................................................... 5,600 625,100
-----------
3,586,138
-----------
ELECTRONICS 5.8%
Kopin Corp.* ...................................................... 4,800 371,700
Nokia Corp. ADR ................................................... 28,000 1,592,500
Solectron Corp.* .................................................. 40,800 1,909,950
-----------
3,874,150
-----------
ELECTRONICS: SEMI-CONDUCTORS/COMPONENTS 4.3%
Altera Corp.* ..................................................... 6,900 705,525
Analog Devices Inc.* .............................................. 9,800 752,762
Intel Corp. ...................................................... 11,100 1,407,619
-----------
2,865,906
-----------
Total Technology .................................................. 18,225,189
-----------
UTILITIES 9.9%
ELECTRICAL 1.0%
Peco Energy Co. ................................................... 16,500 687,844
-----------
GAS DISTRIBUTION 0.7%
Questar Corp. ..................................................... 23,800 447,738
-----------
TELECOMMUNICATIONS 8.2%
Colt Telecom Group PLC ADR* ....................................... 6,100 1,041,575
Equant N.V.* ...................................................... 3,900 304,200
Global Crossing Ltd.* ............................................. 10,377 326,875
MCI WorldCom Inc.* ................................................ 18,850 856,497
Qwest Communications International Inc.* .......................... 28,552 1,238,443
Vodafone AirTouch PLC ADR ......................................... 12,700 596,900
Voicestream Wireless Corp.* ....................................... 11,500 1,138,500
-----------
5,502,990
-----------
Total Utilities ................................................... 6,638,572
-----------
Total Common Stocks (Cost $49,923,899) ............................ 64,647,089
-----------
--------------------------------------------------------------------------------------------------
PRINCIPAL MATURITY
AMOUNT DATE
--------------------------------------------------------------------------------------------------
COMMERCIAL PAPER 3.6%
American Express Credit Corp., 5.94% ...... $ 626,000 5/03/2000 626,000
Ford Motor Credit Co., 6.02% .............. 1,755,000 5/03/2000 1,755,000
-----------
Total Commercial Paper (Cost $2,381,000) ....................................... 2,381,000
-----------
Total Investments (Cost $52,304,899) - 99.9% ................................... 67,028,089
Cash and Other Assets, Less Liabilities - 0.1% ................................. 77,854
-----------
Net Assets - 100.0% ............................................................ $67,105,943
===========
Federal Income Tax Information:
At April 30, 2000, the net unrealized appreciation of investments
based on cost for Federal income tax purposes of $52,670,081
was as follows:
Aggregate gross unrealized appreciation for all investments in
which there is an excess of value over tax cost ........................... $16,257,233
Aggregate gross unrealized depreciation for all investments in
which there is an excess of tax cost over value .............................. (1,899,225)
-----------
$14,358,008
===========
--------------------------------------------------------------------------------------------------
*Nonincome-producing securities.
ADR stands for American Depositary Receipt, representing ownership of foreign securities.
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATE STREET RESEARCH GALILEO FUND
-----------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
-----------------------------------------------------------------------------
April 30, 2000
ASSETS
Investments, at value (Cost $52,304,899) (Note 1) ......... $67,028,089
Cash ...................................................... 53
Receivable for securities sold ............................ 961,997
Receivable from Distributor (Note 3) ...................... 176,260
Receivable for fund shares sold ........................... 71,547
Dividends and interest receivable ......................... 26,319
Deferred organizational costs and other assets (Note 1) 95,644
-----------
68,359,909
LIABILITIES
Payable for securities purchased .......................... 978,797
Accrued management fee (Note 2) ........................... 71,516
Accrued distribution and service fees (Note 5) ............ 66,075
Accrued transfer agent and shareholder services
(Note 2) ................................................ 30,623
Payable for fund shares redeemed .......................... 23,139
Accrued trustees' fees (Note 2) ........................... 1,404
Other accrued expenses .................................... 82,412
-----------
1,253,966
-----------
NET ASSETS $67,105,943
===========
Net Assets consist of:
Unrealized appreciation of investments .................. $14,723,190
Accumulated net realized gain ........................... 2,060,218
Paid-in capital ......................................... 50,322,535
-----------
$67,105,943
===========
Net Asset Value and redemption price per share of
Class A shares ($26,703,809 / 1,949,415 shares) ......... $13.70
======
Maximum Offering Price per share of Class A shares
($13.70 / .9425) ........................................ $14.54
======
Net Asset Value and offering price per share of
Class B(1) shares ($6,846,893 / 508,577 shares)* $13.46
======
Net Asset Value and offering price per share of
Class B shares ($21,267,229 / 1,578,374 shares)* $13.47
======
Net Asset Value and offering price per share of
Class C shares ($5,392,635 / 400,182 shares)* ........... $13.48
======
Net Asset Value, offering price and redemption
price per share of Class S shares
($6,895,377 / 500,683 shares) ........................... $13.77
======
-----------------------------------------------------------------------------
*Redemption price per share for Class B(1), Class B and Class C is equal to
net asset value less any applicable contingent deferred sales charge.
The accompanying notes are an integral part of the financial statements.
<PAGE>
---------------------------------------------------------------------------
STATEMENT OF OPERATIONS
---------------------------------------------------------------------------
For the year ended April 30, 2000
INVESTMENT INCOME
Dividends, net of foreign taxes of $6,171 ................. $ 465,687
Interest .................................................. 81,633
-----------
547,320
EXPENSES
Management fee (Note 2) ................................... 370,582
Transfer agent and shareholder services (Note 2) .......... 270,613
Custodian fee ............................................. 91,944
Reports to shareholders ................................... 58,716
Service fee-Class A (Note 5) .............................. 57,804
Distribution and service fees-Class B(1) (Note 5) ......... 40,747
Distribution and service fees-Class B (Note 5) ............ 196,694
Distribution and service fees-Class C (Note 5) ............ 40,150
Registration fee .......................................... 45,000
Legal fees ................................................ 30,040
Audit fee ................................................. 24,192
Amortization of organization costs (Note 1) ............... 17,929
Trustees' fees (Note 2) ................................... 6,764
Miscellaneous ............................................. 14,260
-----------
1,265,435
Expenses borne by the Distributor (Note 3) ................ (349,425)
Fees paid indirectly (Note 2) ............................. (10,489)
-----------
905,521
-----------
Net investment loss ....................................... (358,201)
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments (Notes 1 and 4) .......... 3,278,655
Net unrealized appreciation of investments ................ 7,076,602
-----------
Net gain on investments ................................... 10,355,257
-----------
Net increase in net assets resulting from operations ...... $ 9,997,056
===========
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATE STREET RESEARCH GALILEO FUND
-------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
-------------------------------------------------------------------------------
YEARS ENDED APRIL 30
-----------------------------
1999 2000
-------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment loss ........................... $ (153,057) $ (358,201)
Net realized gain on investments .............. 90,025 3,278,655
Net unrealized appreciation of investments .... 7,360,231 7,076,602
----------- -----------
Net increase resulting from operations ........ 7,297,199 9,997,056
----------- -----------
Dividend from net investment income:
Class A ..................................... (4,187) --
Class B(1) .................................. (392) --
Class B ..................................... (3,499) --
Class C ..................................... (162) --
Class S ..................................... (1,833) --
----------- -----------
(10,073) --
----------- -----------
Distribution from net realized gains:
Class A ..................................... -- (353,067)
Class B(1) .................................. -- (62,081)
Class B ..................................... -- (298,049)
Class C ..................................... -- (53,412)
Class S ..................................... -- (92,063)
----------- -----------
-- (858,672)
----------- -----------
Net increase from fund share transactions
(Note 6) .................................... 22,384,425 11,197,665
----------- -----------
Total increase in net assets .................. 29,671,551 20,336,049
NET ASSETS
Beginning of year ............................. 17,098,343 46,769,894
----------- -----------
End of year ................................... $46,769,894 $67,105,943
=========== ===========
The accompanying notes are an integral part of the financial statements.
<PAGE>
-------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-------------------------------------------------------------------------------
NOTE 1
State Street Research Galileo 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 Trust presently consists of three separate funds:
State Street Research Galileo Fund, State Street Research Legacy Fund and
State Street Research Strategic Income Fund.
The Fund seeks to provide long-term growth of capital. Under normal market
conditions, the Fund invests at least 65% of total assets in stocks and
convertible securities of companies in the Russell 1000 Index and of other
U.S. and foreign companies of comparable size.
The Fund offers five classes of shares. Class A shares are subject to an
initial sales charge of up to 5.75% and pay a service fee equal to 0.25% of
average daily net assets. On January 1, 1999, the Fund began offering Class B
(1) shares and continued offering Class B shares but only to current
shareholders through reinvestment of dividends and distributions or through
exchanges from existing Class B accounts of State Street Research funds. Class
B(1) and Class B pay annual distribution and service fees of 1.00% and both
classes automatically convert into Class A shares (which pay lower ongoing
expenses) at the end of eight years. Class B(1) shares are subject to a
contingent deferred sales charge on certain redemptions made within six years
of purchase. Class B shares are subject to a contingent deferred sales charge
on certain redemptions made within five years of purchase. Class C shares are
subject to a contingent deferred sales charge of 1.00% on any shares redeemed
within one year of their purchase. Class C shares also pay annual distribution
and service fees of 1.00%. Class S shares are only offered through certain
retirement accounts, advisory accounts of State Street Research & Management
Company (the "Adviser"), an indirect wholly owned subsidiary of MetLife Inc.
("MetLife"), and special programs. No sales charge is imposed at the time of
purchase or redemption of Class S shares. Class S shares do not pay any
distribution or service fees. The Fund's expenses are borne pro-rata by each
class, except that each class bears expenses, and has exclusive voting rights
with respect to provisions of the plans of distribution, related specifically
to that class. The Trustees declare separate dividends on each class of
shares.
The following significant accounting policies are consistently followed by the
Fund in preparing its financial statements, and such policies are in
conformity with generally accepted accounting principles for investment
companies.
A. INVESTMENT VALUATION
Values for listed securities reflect final sales on national securities
exchanges quoted prior to the close of the New York Stock Exchange. Over-the-
counter securities quoted on the National Association of Securities Dealers
Automated Quotation ("Nasdaq") system are valued at closing prices supplied
through such system. In the absence of recorded sales and for those over-the-
counter securities not quoted on the Nasdaq system, valuations are at the mean
of the closing bid and asked quotations. Short-term securities maturing within
sixty days are valued at amortized cost. Other securities, if any, are valued
at their fair value as determined in accordance with established methods
consistently applied.
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
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 Trust.
D. DIVIDENDS
Dividends from net investment income, if any, 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. For the year ended April 30, 2000, the Fund has
designated as long-term $478,671 of the distributions from net realized gains.
E. FEDERAL INCOME TAXES
No provision for Federal income taxes is necessary because the Fund intends to
qualify under Subchapter M of the Internal Revenue Code and its policy is to
distribute all of its taxable income, including net realized capital gains,
within the prescribed time periods.
F. DEFERRED ORGANIZATION COSTS
Certain costs incurred in the organization and registration of the Fund were
capitalized and are being amortized under the straight-line method over a
period of five years.
G. ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period.
Actual results could differ from those estimates.
H. SECURITIES LENDING
The Fund may seek additional income by lending portfolio securities to
qualified institutions. The Fund will receive cash or securities as collateral
in an amount equal to at least 100% of the current market value of any loaned
securities plus accrued interest. By reinvesting any cash collateral it
receives in these transactions, the Fund could realize additional gains and
losses. If the borrower fails to return the securities and the value of the
collateral has declined during the term of the loan, the Fund will bear the
loss. During the year ended April 30, 2000, there were no loaned securities.
NOTE 2
The Trust and the Adviser have entered into an agreement under which the
Adviser earns monthly fees at an annual rate of 0.65% of the Fund's average
daily net assets. In consideration of these fees, the Adviser furnishes the
Fund with management, investment advisory, statistical and research facilities
and services. The Adviser also pays all salaries, rent and certain other
expenses of management. During the year ended April 30, 2000, the fees
pursuant to such agreement amounted to $370,582.
State Street Research Service Center, a division of State Street Research
Investment Services, Inc., the Trust's principal underwriter (the
"Distributor"), an indirect wholly owned subsidiary of MetLife, provides
certain shareholder services to the Fund such as responding to inquiries and
instructions from investors with respect to the purchase and redemption of
shares of the Fund. During the year ended April 30, 2000, the amount of such
expenses was $80,664.
The Fund has entered into an agreement with its transfer agent whereby credits
realized as a result of uninvested cash balances were used to reduce a portion
of the Fund's expenses. During the year ended April 30, 2000 the Fund's
transfer agent fees were reduced by $10,489 under this agreement.
The fees of the Trustees not currently affiliated with the Adviser amounted to
$6,764 during the year ended April 30, 2000.
NOTE 3
The Distributor and its affiliates may from time to time and in varying
amounts voluntarily assume some portion of fees or expenses relating to the
Fund. During the year ended April 30, 2000, the amount of such expenses
assumed by the Distributor and its affiliates was $349,425.
NOTE 4
For the year ended April 30, 2000, purchases and sales of securities,
exclusive of short-term obligations, aggregated $68,011,143 and $58,731,723,
respectively.
NOTE 5
The Trust has adopted plans of distribution pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended. Under the plans, the Fund pays
annual service fees to the Distributor at a rate of 0.25% of average daily net
assets for Class A, Class B(1), Class B and Class C shares. In addition, the
Fund pays annual distribution fees of 0.75% of average daily net assets for
Class B(1), Class B and Class C shares. The Distributor uses such payments for
personal service and/or the maintenance or servicing of shareholder accounts,
to compensate or reimburse securities dealers for distribution and marketing
services, to furnish ongoing assistance to investors and to defray a portion
of its distribution and marketing expenses. For the year ended April 30, 2000,
fees pursuant to such plans amounted to $57,804, $40,747, $196,694 and $40,150
for Class A, Class B(1), Class B and Class C shares, respectively.
The Fund has been informed that the Distributor and MetLife Securities, Inc., a
wholly owned subsidiary of MetLife, earned initial sales charges aggregating
$49,020 and $42,047, respectively, on sales of Class A shares of the Fund during
the year ended April 30, 2000, and that MetLife Securities, Inc. earned
commissions aggregating $61,710 and $3,371 on sales of Class B(1) and Class B
shares, and that the Distributor collected contingent deferred sales charges
aggregating $26,392, $115,012 and $146 on redemptions of Class B(1), Class B and
Class C shares, respectively, during the period.
NOTE 6
The Trustees have the authority to issue an unlimited number of shares of
beneficial interest, $.001 par value per share. At April 30, 2000, MetLife
owned 53,153 Class A shares, 47,763 Class B(1) shares, 5,401 Class B shares,
53,164 Class C shares and 478,356 Class S shares of the Fund.
These transactions break down by share class as follows:
<TABLE>
<CAPTION>
YEARS ENDED APRIL 30
--------------------------------------------------------------
1999 2000
----------------------------- -----------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ....................... 1,300,910 $12,827,023 1,091,104 $13,213,898
Issued upon reinvestment of:
Dividend from net investment
income ........................ 346 3,871 -- --
Distribution from net realized
gains ......................... -- -- 28,677 352,277
Shares redeemed ................... (536,633) (5,339,004) (553,147) (6,843,631)
--------- ----------- --------- -----------
Net increase ...................... 764,623 $ 7,491,890 566,634 $ 6,722,544
========= =========== ========= ===========
CLASS B(1) SHARES* AMOUNT* SHARES AMOUNT
------------------------------------------------------------------------------------------------------
Shares sold ....................... 155,558 $ 1,695,333 408,824 $ 4,955,974
Issued upon reinvestment of:
Dividend from net investment
income ........................ 25 278 -- --
Distribution from net realized
gains ......................... -- -- 5,050 61,289
Shares redeemed ................... (2,833) (31,548) (58,047) (724,984)
--------- ----------- --------- -----------
Net increase ...................... 152,750 $ 1,664,063 355,827 $ 4,292,279
========= =========== ========= ===========
CLASS B SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------------------------------
Shares sold ....................... 1,541,674 $15,031,738 233,464 $ 2,848,968
Issued upon reinvestment of:
Dividend from net investment
income ........................ 273 3,041 -- --
Distribution from net realized
gains ......................... -- -- 24,004 290,910
Shares redeemed ................... (401,173) (4,085,786) (339,103) (4,124,433)
--------- ----------- --------- -----------
Net increase (decrease) ........... 1,140,774 $10,948,993 (81,635) $ (984,555)
========= =========== ========= ===========
CLASS C SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------------------------------
Shares sold ....................... 251,953 $ 2,568,968 192,750 $ 2,394,823
Issued upon reinvestment of:
Dividend from net investment
income ........................ 5 55 -- --
Distribution from net realized
gains ......................... -- -- 4,073 49,381
Shares redeemed ................... (43,795) (422,874) (111,900) (1,365,111)
--------- ----------- --------- -----------
Net increase ...................... 208,163 $ 2,146,149 84,923 $ 1,079,093
========= =========== ========= ===========
CLASS S SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------------------------------
Shares sold ....................... 16,658 $ 166,409 3,726 $ 47,665
Issued upon reinvestment of:
Dividend from net investment
income ........................ 9 85 -- --
Distribution from net realized
gains ......................... -- -- 7,467 92,063
Shares redeemed ................... (3,136) (33,164) (4,129) (51,424)
--------- ----------- --------- -----------
Net increase ...................... 13,531 $ 133,330 7,064 $ 88,304
========= =========== ========= ===========
------------------------------------------------------------------------------------------------------
* January 1, 1999 (commencement of share class) to April 30, 1999.
</TABLE>
<PAGE>
<TABLE>
STATE STREET RESEARCH GALILEO FUND
----------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
----------------------------------------------------------------------------------------------------------------------------------
For a share outstanding throughout each year:
<CAPTION>
CLASS A CLASS B(1)
---------------------------------------------------- ------------------------
MARCH 11, 1998
(COMMENCEMENT OF YEARS ENDED APRIL 30 YEARS ENDED APRIL 30
OPERATIONS) TO -------------------------- ----------------------
APRIL 30, 1998(a) 1999(a) 2000(a) 1999(a)(c) 2000(a)
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR ($) 9.55 9.92 11.73 10.63 11.63
---- ----- ----- ----- -----
Net investment income (loss) ($)* 0.01 (0.01) (0.04) (0.03) (0.13)
Net realized and unrealized gain on
investments ($) 0.36 1.82 2.20 1.03 2.15
---- ----- ----- ----- -----
TOTAL FROM INVESTMENT OPERATIONS ($) 0.37 1.81 2.16 1.00 2.02
---- ----- ----- ----- -----
Dividend from net investment income ($) -- (0.00) -- (0.00) --
Distribution from net realized gains ($) -- -- (0.19) -- (0.19)
---- ----- ----- ----- -----
TOTAL DISTRIBUTIONS ($) -- (0.00) (0.19) (0.00) (0.19)
---- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD ($) 9.92 11.73 13.70 11.63 13.46
==== ===== ===== ===== =====
Total return(b) (%) 3.87(d) 18.28 18.57 9.44(d) 17.52
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of year ($ thousands) 6,132 16,220 26,704 1,776 6,847
Expense ratio (%)* 1.25(e) 1.27 1.27 2.02(e) 2.02
Expense ratio after expense reductions (%)* 1.25(e) 1.25 1.25 2.00(e) 2.00
Ratio of net investment income (loss) to average
net assets (%)* 0.45(e) (0.09) (0.29) (1.01(e) (1.05)
Portfolio turnover rate (%) 13.04 134.16 106.12 134.16 106.12
* Reflects voluntary reduction of expenses per
share of these amounts (Note 3) ($) 0.03 0.08 0.08 0.02 0.09
<CAPTION>
CLASS B
-----------------------------------------------
MARCH 11, 1998
(COMMENCEMENT OF YEARS ENDED APRIL 30
OPERATIONS) TO -------------------------
APRIL 30, 1998(a) 1999(a) 2000(a)
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR ($) 9.55 9.90 11.63
---- ----- -----
Net investment loss ($)* (0.00) (0.09) (0.13)
Net realized and unrealized gain on investments ($) 0.35 1.82 2.16
---- ----- -----
TOTAL FROM INVESTMENT OPERATIONS ($) 0.35 1.73 2.03
---- ----- -----
Dividend from net investment income ($) -- (0.00) --
Distribution from net realized gains ($) -- -- (0.19)
---- ----- -----
TOTAL DISTRIBUTIONS ($) -- (0.00) (0.19)
---- ----- -----
NET ASSET VALUE, END OF YEAR ($) 9.90 11.63 13.47
==== ===== =====
Total return(b) (%) 3.66(d) 17.50 17.61
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of year ($ thousands) 5,142 19,300 21,267
Expense ratio (%)* 2.00(e) 2.02 2.02
Expense ratio after expense reductions (%)* 2.00(e) 2.00 2.00
Ratio of net investment loss to average net
assets (%)* (0.31)(e) (0.84) (1.04)
Portfolio turnover rate (%) 13.04 134.16 106.12
* Reflects voluntary reduction of expenses per
share of these amounts (Note 3) ($) 0.03 0.08 0.07
------------------------------------------------------------------------------------------------------
(a) Per-share figures have been calculated using the average shares method.
(b) Does not reflect any front-end or contigent deferred sales charges. Total return would be lower if
the Distributor and is affiliates had not voluntarily reduced a portion of the fund's expenses.
(c) January 1, 1999 (commencement of share class) to April 30, 1999.
(d) Not annualized.
(e) Annualized.
</TABLE>
<PAGE>
<TABLE>
STATE STREET RESEARCH GALILEO FUND
------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (cont'd)
------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS C
-----------------------------------------------
MARCH 11, 1998
(COMMENCEMENT OF YEARS ENDED APRIL 30
OPERATIONS) TO -------------------------
APRIL 30, 1998(a) 1999(a) 2000(a)
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR ($) 9.55 9.91 11.63
------ ------ ------
Net investment loss ($)* (0.00) (0.09) (0.13)
Net realized and unrealized gain on investments ($) 0.36 1.81 2.17
------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS ($) 0.36 1.72 2.04
------ ------ ------
Dividend from net investment income ($) -- (0.00) --
Distribution from net realized gains ($) -- -- (0.19)
------ ------ ------
TOTAL DISTRIBUTIONS ($) 0.00 (0.00) (0.19)
------ ------ ------
NET ASSET VALUE, END OF YEAR ($) 9.91 11.63 13.48
====== ====== ======
Total return(b) (%) 3.77(d) 17.36 17.70
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of year ($ thousands) 1,061 3,667 5,393
Expense ratio (%)* 2.00(e) 2.02 2.02
Expense ratio after expense reductions (%)* 2.00(e) 2.00 2.00
Ratio of net investment loss to average net assets (%)* (0.13)(e) (0.85) (1.08)
Portfolio turnover rate (%) 13.04 134.16 106.12
* Reflects voluntary reduction of expenses per share of
these amounts (Note 3) ($) 0.04 0.08 0.08
CLASS S
-----------------------------------------------
MARCH 11, 1998
(COMMENCEMENT OF YEARS ENDED APRIL 30
OPERATIONS) TO -------------------------
APRIL 30, 1998(a) 1999(a) 2000(a)
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR ($) 9.55 9.92 11.76
------ ------ ------
Net investment income (loss) ($)* 0.02 0.02 (0.00)
Net realized and unrealized gain on investments ($) 0.35 1.82 2.20
------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS ($) 0.37 1.84 2.20
------ ------ ------
Dividend from net investment income ($) -- (0.00) --
Distribution from net realized gains ($) -- -- (0.19)
------ ------ ------
TOTAL DISTRIBUTIONS ($) -- (0.00) (0.19)
------ ------ ------
NET ASSET VALUE, END OF YEAR ($) 9.92 11.76 13.77
====== ====== ======
Total return(b) (%) 3.87(d) 18.59 18.87
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of year ($ thousands) 4,763 5,806 6,895
Expense ratio (%)* 1.00(e) 1.02 1.02
Expense ratio after expense reductions (%)* 1.00(e) 1.00 1.00
Ratio of net investment income (loss) to average net
assets (%)* 0.98(e) 0.18 (0.04)
Portfolio turnover rate (%) 13.04 134.16 106.12
* Reflects voluntary reduction of expenses per share of
these amounts (Note 3) ($) 0.06 0.08 0.07
-------------------------------------------------------------------------------------------------------
(a) Per-share figures have been calculated using the average shares method.
(b) Does not reflect any front-end or contigent deferred sales charges. Total return would be lower if
the Distributor and is affiliates had not voluntarily reduced a portion of the fund's expenses.
(c) January 1, 1999 (commencement of share class) to April 30, 1999.
(d) Not annualized.
(e) Annualized.
</TABLE>
<PAGE>
TO THE TRUSTEES OF STATE STREET RESEARCH
SECURITIES TRUST AND SHAREHOLDERS OF
STATE STREET RESEARCH GALILEO FUND:
In our opinion, the accompanying statement of assets and liabilities,
including the investment portfolio, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of State Street
Research Galileo Fund (a series of State Street Research Securities Trust,
hereafter referred to as the "Trust") at April 30, 2000, and the results of
its operations, the changes in its net assets and the financial highlights for
the periods indicated, in conformity with accounting principles generally
accepted in the United States. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Trust's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included
confirmation of securities at April 30, 2000 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
June 5, 2000
<PAGE>
STATE STREET RESEARCH GALILEO FUND
-------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
-------------------------------------------------------------------------------
It was a good year for State Street Research Galileo Fund. Class A shares
returned 18.57% [does not reflect sales charge] for the 12 months ended April
30, 2000. The fund outperformed the S&P 500, which returned 10.12% over the
same period. It also outperformed the Lipper Large-Cap Core Funds Average,
which gained 14.29%.
The fund's strongest performers were technology stocks, including Nokia, the
world's leading wireless phone manufacturer, and Altera and Analog Devices,
leading semiconductor manufacturers. The fund's disappointments were in
property and casualty insurance, specialty retailing, wireless communications
and semiconductors. Although some of the fund's strongest performers were in
the latter two sectors, overall stock selection held performance down for the
group.
April 30, 2000
Keep in mind that past performance is no guarantee of future results. The
fund's share price, yield and return will fluctuate, and you may have a gain
or loss when you sell your shares. All returns assume reinvestment of capital
gain distributions and income dividends at net asset value. Performance
reflects a maximum 5.75% Class A share front-end sales charge, or 5% Class B
(1) or Class B share or 1% Class C share contingent deferred sales charge,
where applicable. Performance for Class B(1) reflects Class B performance
through December 31, 1999. Class B(1) was introduced on January 1, 1999. Class
S shares, offered without a sales charge, are available through certain
employee benefit plans and special programs. The S&P 500 (officially the
"Standard and Poor's 500 Composite Stock Price Index") is an unmanaged index
of 500 U.S. stocks. The Russell 1000 Index is an index of the 1,000 largest
publicly-traded U.S. companies. The indices do not take transaction charges
into consideration. It is not possible to invest directly in the indices.
CHANGE IN VALUE OF $10,000
BASED ON THE S&P 500 AND THE RUSSELL 1000 INDEX
COMPARED TO CHANGE IN VALUE OF $10,000
INVESTED IN GALILEO FUND
CLASS A SHARES
Average Annual Total Return
----------------------------
1 Year Life of Fund
---------------------------
11.76% 15.95%
---------------------------
Galileo Russell S&P 500
Fund 1000 Index Index
------------------------------------------------------------------------
3/98 $ 9,425 $10,000 $10,000
4/98 9,790 10,103 10,102
4/99 11,580 12,154 12,308
4/00 13,734 13,667 13,553
CLASS B(1) SHARES
Average Annual Total Return
----------------------------
1 Year Life of Fund
---------------------------
12.52% 17.07%
---------------------------
Galileo Russell S&P 500
Fund 1000 Index Index
------------------------------------------------------------------------
3/98 $10,000 $10,000 $10,000
4/98 10,366 10,103 10,102
4/99 12,182 12,154 12,308
4/00 14,317 13,667 13,553
CLASS B SHARES
Average Annual Total Return
----------------------------
1 Year Life of Fund
---------------------------
12.61% 17.10%
---------------------------
Galileo Russell S&P 500
Fund 1000 Index Index
------------------------------------------------------------------------
3/98 $10,000 $10,000 $10,000
4/98 10,366 10,103 10,102
4/99 12,180 12,154 12,308
4/00 14,325 13,667 13,553
CLASS C SHARES
Average Annual Total Return
----------------------------
1 Year Life of Fund
---------------------------
16.70% 18.30%
---------------------------
Galileo Russell S&P 500
Fund 1000 Index Index
------------------------------------------------------------------------
3/98 $10,000 $10,000 $10,000
4/98 10,377 10,103 10,102
4/99 12,179 12,154 12,308
4/00 14,334 13,667 13,553
CLASS S SHARES
Average Annual Total Return
----------------------------
1 Year Life of Fund
---------------------------
18.87% 19.48%
---------------------------
Galileo Russell S&P 500
Fund 1000 Index Index
------------------------------------------------------------------------
3/98 $10,000 $10,000 $10,000
4/98 10,387 10,103 10,102
4/99 12,318 12,154 12,308
4/00 14,643 13,667 13,553
<PAGE>
<TABLE>
STATE STREET RESEARCH GALILEO FUND
-----------------------------------------------------------------------------------------------------------------------------------
REPORT ON SPECIAL MEETING OF SHAREHOLDERS
-----------------------------------------------------------------------------------------------------------------------------------
A Special Meeting of Shareholders of the State Street Research Galileo Fund ("Fund"), a series of State Street Research Securities
Trust, was convened on February 25, 2000 ("Meeting"). The results of the Meeting are set forth below.
<CAPTION>
VOTES (MILLIONS OF SHARES)
---------------------------------------
ACTION ON PROPOSAL FOR AGAINST ABSTAIN
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CLASS A SHARES
The Fund's current Rule 12b-1 Distribution Plan was amended to increase the amount that
may be expended for the distribution of Class A shares ................................... 1.0 0.2 0.1
CLASS B SHARES
The Fund's current Rule 12b-1 Distribution Plan was amended to increase the amount that
may be expended for the distribution of Class A shares ................................... 0.7 0.1 0.0
CLASS B(1) SHARES
The Fund's current Rule 12b-1 Distribution Plan was amended to increase the amount that
may be expended for the distribution of Class A shares ................................... 0.2 0.0 0.0
</TABLE>
<PAGE>
<TABLE>
STATE STREET RESEARCH GALILEO FUND
-----------------------------------------------------------------------------------------------------------------
FUND INFORMATION, OFFICERS AND TRUSTEES OF STATE STREET RESEARCH SECURITIES TRUST
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FUND INFORMATION OFFICERS TRUSTEES
STATE STREET RESEARCH GERARD P. MAUS GERARD P. MAUS
GALILEO FUND Chairman of the Board, Chief Financial Officer,
One Financial Center President, Chief Executive Chief Administrative
Boston, MA 02111 Officer and Treasurer Officer, Director and Interim
Chief Operating Officer,
INVESTMENT ADVISER PETER C. BENNETT State Street Research &
State Street Research & Vice President Management Company
Management Company
One Financial Center BARTLETT R. GEER BRUCE R. BOND
Boston, MA 02111 Vice President Former Chairman of the Board,
Chief Executive Officer
DISTRIBUTOR JOHN H. KALLIS and President, PictureTel Corporation
State Street Research Vice President
Investment Services, Inc. STEVE A. GARBAN
One Financial Center KIM M. PETERS Former Senior Vice President
Boston, MA 02111 Vice President for Finance and Operations and
Treasurer, The Pennsylvania
SHAREHOLDER SERVICES THOMAS A. SHIVELY State University
State Street Research Vice President
Service Center DEAN O. MORTON
P.O. Box 8408 JAMES M. WEISS Former Executive Vice
Boston, MA 02266-8408 Vice President President, Chief Operating
1-87-SSR-FUNDS (toll free) Officer and Director,
ELIZABETH MCCOMBS WESTVOLD Hewlett-Packard Company
CUSTODIAN Vice President
State Street Bank and SUSAN M. PHILLIPS
Trust Company KENNARD WOODWORTH, JR. Dean, School of Business and
225 Franklin Street Vice President Public Management, George
Boston, MA 02110 Washington University; former
JOSEPH W. CANAVAN Member of the Board of Governors
LEGAL COUNSEL Assistant Treasurer of the Federal Reserve System and
Goodwin, Procter & Hoar LLP Chairman and Commissioner of
Exchange Place DOUGLAS A. ROMICH the Commodity Futures Trading
Boston, MA 02109 Assistant Treasurer Commission
INDEPENDENT AUDITORS FRANCIS J. MCNAMARA, III TOBY ROSENBLATT
PricewaterhouseCoopers LLP Secretary and General Counsel President, Founders Investments Ltd.
160 Federal Street President, The Glen Ellen Company
Boston, MA 02110 DARMAN A. WING
Assistant Secretary and MICHAEL S. SCOTT MORTON
Assistant General Counsel Jay W. Forrester Professor of
Management, Sloan School of
AMY L. SIMMONS Management, Massachusetts
Assistant Secretary Institute of Technology
</TABLE>
<PAGE>
STATE STREET RESEARCH GALILEO INCOME FUND
One Financial Center
Boston, MA 02111
QUESTIONS? COMMENTS?
E-MAIL us at:
[email protected]
INTERNET site:
www.ssrfunds.com
CALL us toll free at 1-87-SSR-FUNDS (1-877-773-8637 or
[hearing impaired 1-800-676-7876]
[Chinese and Spanish-speaking 1-888-638-3193]
WRITE us at:
State Street Research
Service Center
P.O. Box 8408
Boston, MA 02266-8408
[LOGO] STATE STREET RESEARCH
(C)2000 State Street Research Investment Services, Inc., One Financial Center,
Boston, MA 02111
This report is prepared for the general information of current shareholders.
This publication must be preceded or accompanied by a current State Street
Research Galileo Fund prospectus.
When used after June 30, 2000, this report must be accompanied by a current
Quarterly Performance Update.
Portfolio changes should not be considered recommendations for action by
individual investors.
The Dalbar awards recognize quality shareholder service and should not be
considered a rating of fund performance. The survey included mutual fund
complexes that volunteered or were otherwise selected to participate and was not
industry-wide.
CONTROL NUMBER: (exp 0601) SSR-LD GA-1891-0600
<PAGE>
[LOGO] STATE STREET RESEARCH [PHOTO]
Legacy Fund
--------------------------------------------------------------------------------
Annual Report to Shareholders
April 30, 2000
---------------
In this Report
---------------
Setting the
Record Straight
on Tax-Managed Investing
[PHOTO]
plus
Tax-Management Techniques
The Fed Tries to Dampen
a Sizzling Economy
Fund Portfolio and Financials
<PAGE>
--------------------------------------------------------------------------------
Contents
2 12 Month Review
A look at the fund and its market environment over the past 12 months
6 Performance in Perspective
The most recent performance in the context of the fund's track record
8 The Fund in Detail
Portfolio holdings, financials and notes
--------------------------------------------------------------------------------
From the Chairman
[PHOTO]
Gerard P. Maus
It would be nice if there were a compass to point investors in the right
direction in a volatile market. But if you have an anchor to keep you grounded,
you won't have to worry about what to do next. Focus on your plan, continue to
invest regularly, and don't let short-term factors derail your long-term goals.
Pay attention to the recent rumblings about inflation, rising interest rates and
concerns about valuation. But consider the opportunities yet to be mined in a
robust economy with prospects for continued innovation in technology,
telecommunications, biotechnology and elsewhere. Read up on how your mutual
funds have performed, what your fund manager thinks and how that affects the
fund's performance. That's what you'll find in these pages. With our new report
format, they are easier to follow. No compass required.
Sincerely,
/s/ Gerard P. Maus
Gerard P. Maus
Chief Executive Officer
State Street Research Funds
[GRAPHIC]
12 Month Review Management's Discussion of Fund Performance Part 1
How State Street Research
Legacy Fund Performed
It was a good year for State Street Research Legacy Fund. The fund returned
10.89% for the 12-month period ended April 30, 2000 and paid no distributions.
Its return was higher than the 10.12% return on the S&P 500 Index for the same
period.
Reasons for the Fund's Performance
Despite a volatile spring, technology stocks drove the stock market and
accounted for much of Legacy Fund's gains. Exactly 30% of the fund's assets were
invested in technology, including Cisco, Analog Devices, i2 Technologies and
EMC, which were among the fund's strongest performers. We took profits in
selected technology stocks in advance of the March downturn. However, we
continue to hold a market weighting in the sector.
Although the health care sector generally lagged the market, our investments in
Amgen, a leading biotechnology company, and Medtronic, a medical equipment
company, did well. Investments in CBS, which is now Viacom, and Home Depot also
contributed to performance.
We were disappointed by the performance of Xerox, Caterpillar and Bank One,
which we had targeted for their turnaround potential. We sold our investment in
Xerox and Bank One, but held on to Caterpillar on the belief that stronger
global economic growth could begin to help boost earnings.
Outlook
As long as the Federal Reserve continues to raise interest rates, we expect the
stock market to continue to be volatile and trendless. In that environment, we
believe our diversified portfolio of high-quality companies is well positioned
to withstand volatility and perform in line with the market.
More Management's Discussion of Fund Performance on pages 6 and 7.
Because financial markets and mutual fund strategies are constantly evolving,
it's possible that the fund's holdings, market stance, outlook for various
industries or securities and other matters discussed in this report have changed
since this information was prepared. Portfolio changes should not be considered
recommendations for action by individual investors.
Class A Shares(1)
30.08%
Technology stocks accounted for much of Legacy Fund's gains.
{PHOTO]
Pete Woodworth
Portfolio Manager,
State Street Research
Legacy Fund
Morgan Stanley
Capital International
EAFE Index(2)
6.72%
2 State Street Research Legacy Fund
<PAGE>
--------------------------------------------------------------------------------
[GRAPHIC] The Fund at a Glance as of 4/30/00
--------------------------------------------------------------------------------
State Street Research Legacy Fund: a tax-managed approach to investing in stocks
for long-term growth.
Amgen
We invested in Amgen, a biotech leader with highly profitable existing products
as well as new products in the pipeline. Although the stock has come down from
its January high of $75/share, it has held up better than many other biotech
stocks.
[GRAPHIC]
Hits
&
Misses
[GRAPHIC]
Xerox
We invested in Xerox on the expectation that the company, which made its
reputation in the photocopier business, was poised for a turnaround. However,
when the company announced disappointing sales and earnings figures in the third
quarter of 1999, we lost our confidence in management's ability to recover and
sold our position at a loss.
Total Net Assets: $483 million
--------------------------------------------------------------------------------
Top 10 Holdings
Issuer/Security % of fund assets
(1) Cisco Systems 6.6%
(2) General Electric 5.5%
(3) Total Fina SA 4.8%
(4) Amgen 3.6%
(5) Home Depot 3.6%
(6) IBM 3.5%
(7) Solectron 3.4%
(8) Tyco International 3.3%
(9) EMC 3.2%
(10) General Motors 3.1%
Total 40.6%
See page 11 for more detail.
Performance: Class A
Year ended 4/30/00: 10.89%(1)
Fund average annual total return as of 4/30/00(1,3)
Life of Fund
1 Year (12/31/97)
-----------------------------------------------
10.89% 22.30%
S&P 500 as of 4/30/00(2)
Life of Fund
1 Year (12/31/97)
-----------------------------------------------
10.12% 20.50%
Fund average annual total return as of 3/31/00(3,4)
Life of Fund
1 Year (12/31/97)
-----------------------------------------------
12.61% 21.88%
See pages 6 and 7 for data on other share classes.
S&P 500 as of 3/31/00(2)
Life of Fund
1 Year (12/31/97)
-----------------------------------------------
17.93% 22.96%
--------------------------------------------------------------------------------
Top 5 Industries
% of fund assets
April 30, 1999 April 30, 2000
Drugs & Communications
Biotechnology 10.4% Technology 12.7%
--------------------------- -----------------------------
Computer Drugs &
Technology 8.2% Biotechnology 11.3%
--------------------------- -----------------------------
Banks and Multi-Sector 8.8%
Savings & Loans 8.0%
--------------------------- -----------------------------
Multi-Sector 7.0% Technology 6.7%
--------------------------- -----------------------------
Telecommunications 6.6% Retail 6.5%
--------------------------------------------------------------------------------
Ticker Symbols
State Street Research Legacy Fund
Class A: SRLAX Class B(1): SRLPX Class B: SRLBX Class C: SRLCX Class S: SRLSX*
--------------------------------------------------------------------------------
(1) Does not reflect sales charge.
(2) The S&P 500 (officially the "Standard and Poor's 500 Composite Stock Price
Index") is an unmanaged index of 500 U.S. stocks. The index does not take
transaction charges into consideration. It is not possible to invest
directly in the index.
(3) Keep in mind that past performance is no guarantee of future results. The
fund's share price and return will fluctuate and you may have a gain or
loss when you sell your shares. All returns assume reinvestment of capital
gains distributions and income dividends at net asset value.
(4) Performance reflects a maximum 5.75% Class A front-end sales charge.
* Proposed.
3
<PAGE>
[GRAPHIC]
The Way We Think
Setting the
Record Straight
on Tax-Managed Investing
If you think tax-managed investing is only for the wealthy, you're not alone.
It's one of the most common misconceptions to surface as tax-managed investing
has gained popularity over the past several years. At State Street Research,
we've used tax-managed strategies since our founding in 1924. And we'd like to
set the record straight, using the knowledge we've gained over more than 75
years. Following are eight common misconceptions about tax-managed investing,
who benefits, how it works and why.
1 Tax efficiency is the primary goal of tax management
Yes, and no. No fund wants to be tax inefficient. But the primary goal of a
tax-managed fund is to maximize after-tax returns. If Fund A returns 15% pre-tax
and 12% after-tax, its tax efficiency is 80%. If Fund B returns 12% pre-tax and
11% after-tax, it has a higher tax efficiency (92%) than Fund A, but a lower
after-tax return. Which one would you choose?
2 Only the wealthy need to be concerned about taxes
With federal income tax rates as high as 39.6%, it's true that high-income
investors enjoy the greatest benefit from tax-management strategies. But even
investors in the 28% federal income tax bracket stand to gain from
tax-management strategies -- particularly if the effects of state taxes are
included.
[PHOTO]
3 Portfolio turnover is the key indicator of tax efficiency
Portfolio turnover is often a good indicator, but it's not always a very
reliable measure of tax efficiency. In fact, studies show that the statistical
correlation between portfolio turnover and tax efficiency are relatively weak
and it may be more reliable to consider turnover relative to a fund's average
holding period.
4 Indexing is the best way to maximize after-tax returns
Index funds have certain characteristics, such as low turnover, that tend to
foster
--------------------------------------------------------------------------------
The Fed Tries to Dampen a Sizzling Economy
Despite five consecutive one-quarter percent interest rate hikes, the Federal
Reserve Board has not been able to slow economic growth to an acceptable level.
In fact, the pace of the U.S. economy quickened to 5% as the current expansion,
which began in 1991, turned nine years old in February.
Inflation Rises Rising energy costs pushed inflation up from 1.2% to 2.9% over
the past year. Even core inflation -- figured without the impact of energy, food
and tobacco -- rose 1.7%. Labor costs rose 4.3% over the past year -- an
eight-year high -- while unemployment fell to 3.9%, a 30-year low. American
consumers celebrated the good times by opening their checkbooks. Consumer
spending rose an astonishing 8.3% last year while the personal savings rate fell
to 0.4% in the last quarter of the period, up slightly from a low of 0.2%
recorded in February.
Markets Fear Fed's Heavy Hand 1999 ended on a strong note for the S&P 500.
Late-year results for the technology-driven Nasdaq were stunning, and 2000 got
off to a strong start. However, by March, prospects of further interest rate
increases coupled with soaring valuations on technology stocks became more than
the stock market could bear. All major stock market indices had sunk into
negative territory for the calendar year by April. The bond market, which had
been hampered in 1999 by factors associated with Y2K, was further weakened by
rising rates. Long-term U.S. Treasury bonds were the exception: they were strong
performers as the result of a federal buyback of bonds and in reaction to the
Fed's aggressive moves to curb inflation. Global markets have slumped in
sympathy with U.S. markets. Around the world, investors wait to see whether the
Fed's heavy hand can slow the good ship U.S. without capsizing it.
The Five Fed Rate Hikes
Target an Overheating Economy
Federal Funds* rate after increase
[The following information was represented by a bar graph in the printed
material.]
6/30/99 - 5.00%
8/24/99 - 5.25%
11/16/99 - 5.50%
2/02/00 - 5.75%
3/21/00 - 6.00%
Source: Federal Reserve.
*The interest rate Federal Reserve member banks charge each other for overnight
loans.
4 State Street Research Legacy Fund
--------------------------------------------------------------------------------
<PAGE>
tax efficiency. However, index funds also have some unique limitations:
o Managers are required to buy or sell whenever a stock is added to or
deleted from an index, which can lead to a considerable recognition of
gains.
o Timing of sales may also be inefficient. An index fund may sell a stock
just days before it would qualify for long-term capital gains treatment.
o A fund may also have to invest in high dividend stocks simply because they
are part of the index.
o And, when shareholders redeem from the fund, tax efficiency can go out the
window. If a large number of redemptions take place in a declining market,
the fund could be forced to realize considerable gains while it is losing
money.
5 Any investment style can be tax efficient
Not really. Growth-oriented investment strategies seem to be more appropriate
for tax-managed investing. That's because growth is oriented toward capital
appreciation. A 1998 study found that growth funds provided higher average
pre-tax returns, higher after-tax returns, and greater tax efficiency than
growth and income mutual funds, or equity income funds, which may have a heavier
emphasis on value.
Mutual funds that focus on large-cap stocks are also better candidates for
tax-managed investing than small-cap funds. Small-cap funds have a built in
reason to sell: If a company succeeds, it's no longer small and no longer fits
the portfolio. Small companies are also more likely to be bought out -- another
road to capital gains.
6 Taxes don't have much impact on fund rankings
Not so, say Dickson and Shoven, in a 1993 study of growth and growth and income
funds. One fund soared from a pre-tax ranking in the 19th percentile to the 61st
percentile on an after-tax basis. If a fund isn't run with an eye toward tax
efficiency, there's always the risk that its after-tax performance could bring
it down the rankings chart.
7 Once tax efficient, always tax efficient
Not if past tax efficiency is largely a matter of coincidence. Only mutual funds
whose objectives or management styles include sensitivity to taxes are likely to
maintain their tax efficiency over time.
8 All tax-sensitive investors have the same needs
Generalizations can be comforting, but investors are different. Federal and
state marginal rates vary from individual to individual. Some taxpayers are
subject to the federal alternative minimum tax, or AMT.
Led astray by a grain of truth
Misconceptions about tax-managed investing usually contain a grain of truth.
But, as you can see, it's easy to oversimplify the concept and reach an
incorrect conclusion. If you have questions about tax-managed investing, talk to
your financial professional. Or call us toll-free at 1-87-SSR-FUNDS
(1-877-773-8637) and ask for a copy of Tax-Managed Investing: a State Street
Research White Paper. It's free.
--------------------------------------------------------------------------------
A Closer Look [GRAPHIC]
Tax Management Techniques
Pete Woodworth, portfolio manager of State Street Research Legacy Fund, employs
six techniques that are specifically associated with tax efficiency. He:
o focuses on maximizing after-tax returns rather than minimizing taxes.
o focuses on the holding period of his positions, rather than on the
turnover.
o takes advantage of opportunities to offset capital gains by harvesting
capital losses elsewhere in the portfolio.
o uses a buy-and-hold strategy.
o staggers the purchase of securities and sells them on a highest-in,
first-out (HIFO) basis. That means the shares bought at the highest price
are sold first to minimize capital gains.
o avoids high-yielding securities.
Woodworth points out that investors can use these same techniques to improve the
tax efficiency of their individual portfolios.
--------------------------------------------------------------------------------
Growth Funds Are Top Candidates for Tax Efficiency
Average return rankings for mutual fund classes, 1976-1996
Fund type Pre-tax return After-tax return
--------------------------------------------------------------------------------
Growth 15.36% 11.92%
--------------------------------------------------------------------------------
Growth & income 13.75% 9.89%
--------------------------------------------------------------------------------
Equity income 13.71% 9.31%
--------------------------------------------------------------------------------
Taxable bonds 8.68% 4.13%
--------------------------------------------------------------------------------
Municipal bonds 6.79% 6.60%
--------------------------------------------------------------------------------
Source: Donald J. Peters and Mary J. Miller, The Journal of Investing, 1998
5
<PAGE>
[GRAPHIC]
Performance in Perspective Management's Discussion of Fund Performance Part 2
Performance Figures as of April 30, 2000
These two pages focus on the fund's long-term track record. While a mutual
fund's past performance is never a guarantee of future results, long-term
returns can serve as an important context for evaluating recent performance.
Three ways of measuring long-term performance are cumulative returns, average
annual returns and the change in dollar value over time of a given investment.
Information about these measures follows, while the share class boxes contain
the results of these measures for each share class.
Cumulative Total Return
This represents the total percentage you would have earned or lost if you had
invested a lump sum in the fund and left it there until the end of the period
indicated. Performance would be lower if sales charges were reflected.
Average Annual Total Return
Average annual total return percentage is the rate you would have had to earn
during each year of a given time period -- say, five years -- in order to end up
with the fund's actual cumulative return for those five years. In reality, of
course, fund performance varies from year to year. Because of this, a fund's
actual performance for a given year may be higher or lower than an average
annual performance figure.
$10,000 Over Life of Fund
This example is similar to cumulative total return, but uses dollars rather than
percentages, and assumes that the lump sum you invested was $10,000. It also
compares fund performance to the performance of a market index.
--------------------------------------------------------------------------------
Class A Front Load
o Initial sales charge of 5.75% or less, with lower sales charges for larger
investments (see a prospectus for details)
o Lower annual expenses than Class B(1) or Class C shares because of lower
service (12b-1) fee of 0.25%
Life of Fund
Cumulative Total Return 1 Year (12/31/97)
(does not reflect ----------------------------
sales charge) 10.89% 59.98%
Life of Fund
Average Annual Total Return 1 Year (12/31/97)
(at maximum applicable ----------------------------
sales charge) 4.51% 19.24%
$10,000 Over Life of Fund
Class A
"97" 9425 10000
"98" 10990 11511
"99" 13598 14023
"00" 15078 15442
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class B(1) Back Load for accounts opened after 1/1/99
o No initial sales charge
o Deferred sales charge of 5% or less on shares you sell within six years
o Annual distribution/service (12b-1) fee of 1.00%
o Automatic conversion to Class A shares after eight years, reducing future
annual expenses
Life of Fund
Cumulative Total Return 1 Year (12/31/97)
(does not reflect ----------------------------
sales charge) 10.01% 57.18%
Life of Fund
Average Annual Total Return 1 Year (12/31/97)
(at maximum applicable ----------------------------
sales charge) 5.01% 20.41%
$10,000 Over Life of Fund
Class B(1)
"97" 10000 10000
"98" 11640 11511
"99" 14287 14023
"00" 15418 15442
--------------------------------------------------------------------------------
6 State Street Research Legacy Fund
<PAGE>
--------------------------------------------------------------------------------
Class B Back Load for accounts opened before 1/1/99
o No initial sales charge
o Deferred sales charge of 5% or less on shares you sell within five years
o Annual distribution/service (12b-1) fee of 1.00% (effective February 2000,
this fee was voluntarily reduced to 0.34%)
o Automatic conversion to Class A shares after eight years, reducing future
annual expenses
Life of Fund
Cumulative Total Return 1 Year (12/31/97)
(does not reflect ----------------------------
sales charge) 10.22% 57.48%
Life of Fund
Average Annual Total Return 1 Year (12/31/97)
(at maximum applicable ----------------------------
sales charge) 5.22% 20.51%
$10,000 Over Life of Fund
Class B
"97" 10000 10000
"98" 11640 11511
"99" 14287 14023
"00" 15448 15442
--------------------------------------------------------------------------------
Class C Level Load
o No initial sales charge
o Deferred sales charge of 1%, paid if you sell shares within one year of
purchase
o Lower deferred sales charge than Class B(1) shares
o Annual distribution/service (12b-1) fee of 1.00%
o No conversion to Class A shares after eight years, so annual expenses do
not decrease
Life of Fund
Cumulative Total Return 1 Year (12/31/97)
(does not reflect ----------------------------
sales charge) 10.01% 57.18%
Life of Fund
Average Annual Total Return 1 Year (12/31/97)
(at maximum applicable ----------------------------
sales charge) 9.01% 21.41%
$10,000 Over Life of Fund
Class C
"97" 10000 10000
"98" 11630 11511
"99" 14287 14023
"00" 15718 15442
--------------------------------------------------------------------------------
Class S Special Programs
o Available through certain retirement accounts, advisory accounts of the
investment manager and other programs that usually involve special
conditions and separate fees (see a prospectus for details)
o No sales charges of any kind
o No distribution/service (12b-1) fees; annual expenses are lower than for
other share classes
Life of Fund
Cumulative Total Return 1 Year (12/31/97)
(does not reflect ----------------------------
sales charge) 11.12% 60.98%
Life of Fund
Average Annual Total Return 1 Year (12/31/97)
(at maximum applicable ----------------------------
sales charge) 11.12% 22.63%
$10,000 Over Life of Fund
Class S
"97" 10000 10000
"98" 11680 11511
"99" 14487 14023
"00" 16098 15442
--------------------------------------------------------------------------------
[MAGNIFYING GLASS]
A Closer Look
12b-1 fees
12b-1 fees are named after the SEC rule that permits them.
The fund pays 12b-1 fees to cover service and distribution costs. The fees cover
personal services and the maintenance of shareholder accounts. The fees also
cover selling and marketing expenditures for the sale of fund shares.
The fund pays 12b-1 fees out of its assets, so shareholders see them as an
indirect charge rather than a direct charge.
All of the performance figures on these pages assume reinvestment of dividends
and distributions.
The average annual total returns for the fund also include the effects of any
fees and sales charges that would apply for each share class.
The S&P 500 (officially, the "Standard & Poor's 500 Composite Stock Price
Index") is an unmanaged index of 500 U.S. stocks. The index does not take
transaction charges into consideration. It is not possible to invest directly in
the index.
Keep in mind that past performance is no guarantee of future results. The fund's
share price and return will fluctuate and you may have a gain or loss when you
sell your shares.
Class B(1) was introduced January 1, 1999.
7
<PAGE>
[GRAPHIC]
The Fund in Detail
[PHOTO]
The following pages describe the fund in detail as of the date of this report.
They provide a "snapshot" of the fund's holdings at one moment in time (the
report date), describe the financial dimensions of its operations for the past
fiscal year and give a summary of operations on a per share basis for the past
three fiscal years. There's also an overview of the fund and its business
structure, as well as information on the accounting policies the fund uses in
arriving at the figures it presents here.
Together, the words and numbers in this section offer a comprehensive picture of
the fund and its recent activities. In fact, the text and notes on pages 9 to 20
are an integral part of the financial statements, which wouldn't be complete
without them.
For more information about the fund's strategies, risks and expenses, check the
fund's prospectus; you'll need to read it before making any investments. The
prospectus also has more details on the fund's share classes and its policies
for shareholder accounts. To get a copy of any State Street Research prospectus,
see the back cover of this report.
Keep in mind that in annual reports, the portfolio holdings and financial
statements are audited, while in semiannual reports they are unaudited.
8 State Street Research Legacy Fund
<PAGE>
About the Fund
--------------------------------------------------------------------------------
Business structure
State Street Research Legacy Fund is a mutual fund that allows shareholders to
pool their assets for investment in a portfolio of securities. This fund is a
series of State Street Research Securities Trust, a Massachusetts business trust
and is an open-end management investment company.
Four entities administer the fund's main business functions:
o The board of trustees oversee the fund with its shareholders' interests in
mind and have ultimate responsibility for the fund's activities (see
inside back cover for trustee information).
o The investment manager, State Street Research & Management Company, is
responsible for the fund's investment and business activities and receives
the management fee as compensation.
o The distributor, State Street Research Investment Services, Inc., sells
shares of the fund, handles investor inquiries and transaction orders and
provides other shareholder services.
o The custodian, State Street Bank and Trust Company, holds fund securities,
provides data on their market value and handles related services.
The investment manager and the distributor are subsidiaries of MetLife. State
Street Bank and Trust Company is not affiliated with MetLife (the similarity
between its name and the names of the investment manager and distributor is
coincidental). A majority of the trustees consists of people who are not
affiliated with MetLife or any of its subsidiaries. The distributor pays a
portion of its fees to MetLife for services it provides, including maintaining
the accounts of some investors who hold shares through their firm's employee
benefit plans and other sponsored arrangements.
Goal and strategy
The fund seeks to provide long-term growth of capital. In seeking to achieve its
investment objective, the fund invests at least 65% of total assets in stocks
and convertible securities of mid- and large-size companies. The fund employs a
tax-managed strategy, generally seeking to identify stocks with long-term growth
potential and holding them for extended periods.
Share classes
The fund generally offers four share classes, each with its own sales charge and
expense structure. The fund also offers an additional class of shares (Class B)
but only to current Class B shareholders through reinvestment of dividends and
distributions or through exchanges from existing Class B accounts of other State
Street Research funds.
Class A shares are subject to an initial sales charge of up to 5.75% and paid a
service fee equal to 0.25% of average daily net assets. Class B(1) shares pay
annual distribution and service fees of 1.00%. Prior to February 1, 2000, Class
B shares paid annual distribution and service fees of 1.00% and effective
February 1, 2000 began paying annual distribution and service fees of 0.34%.
Class B(1) and Class B shares automatically convert into Class A shares (which
pay lower ongoing expenses) at the end of eight years. Class B(1) and Class B
shares are subject to a contingent deferred sales charge on certain redemptions
made within six years and five years of purchase, respectively. Class C shares
are subject to a contingent deferred sales charge of 1.00% on any shares
redeemed within one year of their purchase and shares also pay annual
distribution and service fees of 1.00%. Class S shares are only offered through
certain retirement accounts, advisory accounts of the investment manager, and
special programs. No sales charge is imposed at the time of purchase or
redemption of Class S shares. Class S shares do not pay any distribution or
service fees.
The text and notes are an integral part of the financial statements.
9
<PAGE>
The Fund's Accounting Policies
--------------------------------------------------------------------------------
In keeping with accounting principles generally accepted in the United States,
the fund has used the following policies in preparing the portfolio holdings and
financial statements in this report:
The fund values all portfolio securities as of the date of this report (or, if
that day wasn't a business day, then the most recent business day). The fund
uses the following methods for determining the values of various types of
securities:
o Listed securities -- The fund uses the price of the last sale on a
national securities exchange that was quoted before the close of the
New York Stock Exchange.
o Over-the-counter securities -- The fund uses the closing prices
quoted on the Nasdaq system. If a security hasn't traded that day,
or if it is not quoted on the Nasdaq system, the value is set at
halfway between the closing bid and asked quotations.
o Securities maturing within sixty days -- The fund adjusts the value
of these securities daily, moving them closer to the amount due on
maturity as the maturity date approaches.
The fund accounts for each purchase and sale of portfolio securities on the
trade date. In calculating realized gains or losses, the fund takes as its cost
basis the identified cost of securities sold.
The fund records investment income from portfolio securities as follows:
o Interest -- The fund accrues interest daily as it earns it.
o Cash dividends -- The fund accrues these on the ex-dividend date.
The fund may seek additional income by lending portfolio securities to qualified
institutions. The fund will receive cash or securities as collateral in the
amount equal to at least 100% of the current market value of any loaned
securities plus accrued interest. By reinvesting any cash collateral it receives
in these transactions, the fund could realize additional gains or losses. If the
borrower fails to return the securities and the collateral has declined in
value, the fund could lose money. The fund accounts for income from the lending
of its securities by including it in interest income.
The fund distributes its net earnings to its shareholders. The fund calculates
these distributions using federal income tax regulations. As a result, they may
be different than if the fund used generally accepted accounting principles. The
fund distributes its earnings on the following schedule:
o Dividends from net investment income -- The fund ordinarily declares
and pays these annually, if any, and may make an additional
distribution if tax regulations make it necessary.
o Net realized capital gains -- The fund distributes these annually,
if any, and may make an additional distribution if tax regulations
make it necessary.
If the fund has no earnings to distribute, it won't make a distribution.
The fund does not intend to pay federal income tax. This is because it has
elected to be exempt from taxes under Subchapter M of the Internal Revenue Code,
in part because it makes distributions as described above.
The fund pays expenses as follows:
o Expenses attributed to the fund -- The fund pays these directly.
Examples of these expenses include the management fee, transfer
agent fee, custodian fee and distribution and service fees.
o Expenses attributed to the trust of which the fund is a series --
These expenses are divided up among all funds in the trust. Each
fund pays a proportional share. Examples of these expenses include
the legal fees and trustees fees.
The fund has used certain estimates and assumptions in preparing this report.
Although they are necessary in order to follow generally accepted accounting
principles, these estimates and assumptions affect several key areas, including
the reported amounts of assets and liabilities and income and expenses. Actual
results could differ from those estimates.
The fund's securities and investment practices carry certain risks.
The text and notes are an integral part of the financial statements.
10 State Street Research Legacy Fund
<PAGE>
Portfolio Holdings April 30, 2000
--------------------------------------------------------------------------------
The listings that begin on this page detail the fund's investment holdings as of
the report date. We have grouped the holdings by asset class and by smaller
sub-groups as well. For example, we have grouped this fund's stocks by sector of
the economy, and then by specific industry within each sector.
The solid colored circles (1) show the fund's ten largest holdings, with the
number in the circle showing where the holding ranks in the top ten.
--------------------------------------------------------------------------------
Notes about specific elements of the financials are called out in boxes such as
this.
--------------------------------------------------------------------------------
Key to symbols
* Denotes a security which has not paid a dividend during the last year.
+ Denotes an American Depositary Receipt, a form of ownership of foreign
securities that is traded in the United States and denominated in U.S.
dollars.
Market
Issuer Shares Value
----------------------------------------------------------------------------
Common Stocks 97.1% of net assets
Consumer Discretionary 10.3% of net assets
============================================================================
Advertising Agencies 2.1%
----------------------------------------------------------------------------
Interpublic Group of Companies, Inc. 247,900 $10,163,900
------------
Communications, Media & Entertainment 1.7%
----------------------------------------------------------------------------
CBS Corp.* 133,900 7,866,625
------------
Retail 6.5%
----------------------------------------------------------------------------
(5) Home Depot Inc. 305,950 17,152,322
Building and home improvement products
----------------------------------------------------------------------------
Target Corp. 215,800 14,364,187
------------
----------------------------------------------------------------------------
31,516,509
------------
Total Consumer Discretionary 49,547,034
------------
Consumer Staples 8.1% of net assets
============================================================================
Beverages 2.4%
----------------------------------------------------------------------------
Coca-Cola Co. 246,000 11,577,375
------------
Drug & Grocery Store Chains 3.8%
----------------------------------------------------------------------------
CVS Corp. 276,600 12,032,100
----------------------------------------------------------------------------
Kroger Co.* 353,300 6,558,131
------------
----------------------------------------------------------------------------
18,590,231
------------
Household Products 1.9%
----------------------------------------------------------------------------
Procter & Gamble Co. 150,700 8,985,488
------------
Total Consumer Staples 39,153,094
------------
Financial Services 9.5% of net assets
============================================================================
Banks & Savings & Loan 2.3%
----------------------------------------------------------------------------
Bank of America Corp. 232,337 11,384,513
------------
Insurance 1.5%
----------------------------------------------------------------------------
Ace Ltd. 301,600 7,219,550
------------
Miscellaneous Financial 5.7%
----------------------------------------------------------------------------
American Express Co. 99,500 14,931,219
----------------------------------------------------------------------------
Federal National Mortgage Association 207,700 12,526,906
------------
----------------------------------------------------------------------------
27,458,125
------------
Total Financial Services 46,062,188
------------
The text and notes are an integral part of the financial statements.
11
<PAGE>
Portfolio Holdings April 30, 2000 CONTINUED
Market
Issuer Shares Value
-------------------------------------------------------------------------
Health Care 14.3% of net assets
=========================================================================
Drugs & Biotechnology 11.3%
-------------------------------------------------------------------------
(4) Amgen Inc.* 309,500 $17,332,000
Human therapeutics
-------------------------------------------------------------------------
Johnson & Johnson 171,300 14,132,250
-------------------------------------------------------------------------
Pfizer Inc. 282,300 11,891,887
-------------------------------------------------------------------------
Pharmacia Corp. 223,600 11,166,025
------------
-------------------------------------------------------------------------
54,522,162
------------
Hospital Supply 3.0%
-------------------------------------------------------------------------
Medtronic Inc. 277,400 14,407,463
------------
Total Health Care 68,929,625
------------
Integrated Oils 4.8% of net assets
=========================================================================
(3) Integrated International 4.8%
Total Fina SA+ 307,700 23,269,813
------------
Oil services
-------------------------------------------------------------------------
Total Integrated Oils 23,269,813
------------
Materials & Processing 2.3% of net assets
=========================================================================
Chemicals 2.3%
-------------------------------------------------------------------------
E.I. Du Pont De Nemours & Co. 233,400 11,071,913
------------
Total Materials & Processing 11,071,913
------------
Other 8.8% of net assets
=========================================================================
Multi-Sector 8.8%
-------------------------------------------------------------------------
(2) General Electric Co. 169,200 26,606,700
Consumer and industrial products
-------------------------------------------------------------------------
(8) Tyco International Ltd. 348,800 16,023,000
------------
Diversified manufacturer/service
-------------------------------------------------------------------------
Total Other 42,629,700
------------
Producer Durables 6.7% of net assets
=========================================================================
Machinery 1.6%
-------------------------------------------------------------------------
Caterpillar Inc. 190,800 7,524,675
------------
Miscellaneous Equipment 3.1%
-------------------------------------------------------------------------
Danaher Corp. 260,900 14,903,912
------------
Telecommunications Equipment 2.0%
-------------------------------------------------------------------------
American Tower Corp. Cl. A* 209,900 9,760,350
------------
Total Producer Durables 32,188,937
------------
Technology 30.0% of net assets
=========================================================================
Communications Technology 12.7%
-------------------------------------------------------------------------
(1) Cisco Systems Inc.* 459,800 $31,877,072
Data networking
-------------------------------------------------------------------------
(10)General Motors Corp. Cl. H* 157,700 15,188,481
Cars/satellite and wireless communications
-------------------------------------------------------------------------
Lucent Technologies Inc. 230,200 14,315,563
------------
-------------------------------------------------------------------------
61,381,116
------------
Computer Software 4.1%
-------------------------------------------------------------------------
i2 Technologies Inc.* 56,400 7,289,700
-------------------------------------------------------------------------
Microsoft Corp.* 179,200 12,499,200
------------
-------------------------------------------------------------------------
19,788,900
------------
Computer Technology 6.7%
-------------------------------------------------------------------------
(9) EMC Corp.* 112,100 15,574,894
Memory devices
-------------------------------------------------------------------------
(6) IBM Corp. 149,300 16,665,612
------------
Computer systems
-------------------------------------------------------------------------
32,240,506
------------
Electronics 3.4%
-------------------------------------------------------------------------
(7) Solectron Corp.* 345,700 16,183,081
------------
Integrated solutions
Electronics: Semi-Conductors/Components 3.1%
-------------------------------------------------------------------------
Analog Devices Inc.* 195,300 15,001,481
------------
Total Technology 144,595,084
------------
Utilities 2.3% of net assets
=========================================================================
Telecommunications 2.3%
-------------------------------------------------------------------------
MCI WorldCom Inc.* 247,100 11,227,606
------------
Total Utilities 11,227,606
------------
Total Common Stocks 468,674,994(1)
------------
--------------------------------------------------------------------------------
(1) The fund paid a total of $395,718,875 for these securities.
--------------------------------------------------------------------------------
The text and notes are an integral part of the financial statements.
12 State Street Research Legacy Fund
<PAGE>
<TABLE>
<CAPTION>
Coupon Maturity Amount of Market
Issuer Rate Date Principal Value
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial Paper 2.6% of net assets
--------------------------------------------------------------------------------------------------------------------------
American Express Credit Corp. 5.96% 5/02/2000 $8,000,000 $8,000,000
--------------------------------------------------------------------------------------------------------------------------
Ford Motor Credit Co. 5.97% 5/05/2000 1,657,000 1,657,000
--------------------------------------------------------------------------------------------------------------------------
Household Finance Corp. 5.99% 5/02/2000 2,846,000 2,846,000
------------
Total Commercial Paper 12,503,000(1)
------------
</TABLE>
--------------------------------------------------------------------------------
(1) The fund paid a total of $12,503,000 for these securities.
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
% of
Net Assets
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Summary of Portfolio Assets
--------------------------------------------------------------------------------------------------------------------------
Investments 99.7% $481,177,994(2)
--------------------------------------------------------------------------------------------------------------------------
Cash and Other Assets, Less Liabilities 0.3% 1,511,249
----- ------------
--------------------------------------------------------------------------------------------------------------------------
Net Assets 100.0% $482,689,243
===== ============
</TABLE>
--------------------------------------------------------------------------------
(2) The fund paid a total of $408,221,875 for these securities.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Federal Income Tax Information
At April 30, 2000, the net unrealized appreciation of investments based on cost
for Federal income tax purposes of $408,223,462 was as follows:
Aggregate gross unrealized appreciation for all investments in
which there is an excess of value over tax cost $96,113,831
Aggregate gross unrealized depreciation for all investments in
which there is an excess of tax cost over value (23,159,299)
------------
$72,954,532
============
--------------------------------------------------------------------------------
At April 30, 2000, the fund had a capital loss carryforward of $2,654,875
available, to the extent provided in regulations, to offset future capital
gains, if any, of which $353,559 and $2,301,316 expire on April 30, 2007 and
2008, repectively.
The text and notes are an integral part of the financial statements.
13
<PAGE>
Statement of
Assets and Liabilities April 30, 2000
--------------------------------------------------------------------------------
This is the fund's balance sheet as of the report date. It shows the fund's
assets, its liabilities and, by subtraction, its net assets. It also shows the
share price for each share class as of the report date.
Assets
Investments, at market value $481,177,994(1)
Cash 32
Receivable for securities sold 12,031,096
Receivable for fund shares sold 2,574,397
Dividends and interest receivable 277,112
Deferred organization costs and other assets 70,212
--------------
496,130,843
Liabilities
Payable for securities purchased 11,764,034
Accrued management fee 509,019
Payable for fund shares redeemed 480,154
Accrued distribution and service fees 473,567
Accrued transfer agent and shareholder services 159,059
Accrued trustees' fees 5,089
Other accrued expenses 50,678
--------------
13,441,600
--------------
Net Assets $482,689,243
==============
Net Assets consist of:
Unrealized appreciation of investments $72,956,119
Accumulated net realized loss (2,656,462)
Paid-in capital 412,389,586
--------------
$482,689,243(2)
==============
--------------------------------------------------------------------------------
(1) The fund paid a total of $408,221,875 for these securities.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(2) Net Asset Value (NAV) of Each Share Class
Except where noted, the NAV is the offering and the redemption price for each
class.
Net Assets / Number of Shares = NAV
A $143,037,332 8,946,539 $15.99*
B(1) $153,358,607 9,762,375 $15.71**
B $109,135,324 6,934,554 $15.74**
C $69,061,331 4,395,560 $15.71**
S $8,096,649 503,304 $16.09
* Maximum offering price per share $16.97 ($15.99 / .9425)
** When you sell Class B(1), Class B or Class C shares, you receive the net
asset value minus deferred sales charge, if any.
--------------------------------------------------------------------------------
The text and notes are an integral part of the financial statements.
14 State Street Research Legacy Fund
<PAGE>
Statement of
Operations For the year ended April 30, 2000
--------------------------------------------------------------------------------
This shows what the fund earned and lost over the report period, and what its
expenses were.
Investment Income
Dividends, net of foreign taxes $2,416,763(1)
Interest 627,151
-------------
3,043,914
Expenses
Management fee 2,252,800(2)
Service fee - Class A 261,389(3)
Distribution and service fees - Class B(1) 894,938(3)
Distribution and service fees - Class B 822,638(3)
Distribution and service fees - Class C 455,132(3)
Transfer agent and shareholder services 682,112(4)
Custodian fee 142,956
Registration fees 133,383
Reports to shareholders 56,649
Legal fees 33,968
Audit fee 21,183
Amortization of organization costs 18,000(5)
Trustees' fees 11,649(6)
Miscellaneous 17,622
-------------
5,804,419
Fees paid indirectly (21,437)(7)
-------------
5,782,982
-------------
Net investment loss (2,739,068)
-------------
Realized and Unrealized Gain
(Loss) on Investments
Net realized loss on investments (2,302,879)(8)
Net unrealized appreciation of investments 41,772,675
-------------
Net gain on investments 39,469,796
-------------
Net increase in net assets resulting
from operations $36,730,728
=============
--------------------------------------------------------------------------------
(1) The fund paid foreign taxes of $25,496.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(2) The management fee is 0.65% of fund net assets, annually.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(3) Payments made to the distributor under the fund's 12b-1 plans. The fees
cover personal services and the maintenance of shareholder accounts. The
fees also cover distribution and marketing expenditures for the sale of
fund shares.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(4) Includes a total of $295,051 paid to the distributor for the services it
provided and to MetLife for similar services it provided, including
maintaining the accounts of some investors who hold shares through that
firm's employee benefit plans and other sponsored arrangements.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(5) Organization costs were capitalized and are being amortized straight-line
over five years.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(6) Paid only to trustees who aren't currently affiliated with the adviser
(the fund doesn't pay trustees fees to affiliated trustees).
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(7) Represents transfer agent credits earned from uninvested cash balances and
directed brokerage credits used to reduce the custodian fee.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(8) To earn this, the fund sold $110,790,031 of securities. During this same
period, the fund also bought $345,923,256 worth of securities. These
figures don't include short-term obligations or U.S. government
securities.
--------------------------------------------------------------------------------
The text and notes are an integral part of the financial statements.
15
<PAGE>
Statement of
Changes in Net Assets
--------------------------------------------------------------------------------
This shows how the fund's size changed over the report period, including changes
that resulted from investment performance as well as those that resulted from
shareholders buying and selling fund shares.
Years ended April 30
-----------------------------------------------------------------------------
1999 2000
-----------------------------------------------------------------------------
Increase (Decrease) in Net Assets
Operations:
Net investment loss $(665,565) $(2,739,068)
Net realized loss on investments (353,576) (2,302,879)
Net unrealized appreciation
of investments 28,621,415 41,772,675
--------------------------------
Net increase resulting
from operations 27,602,274 36,730,728
--------------------------------
Distribution from net realized gains:
Class A (15,436) --
Class B (32,058) --
Class C (7,667) --
Class S (2,296) --
--------------------------------
(57,457) --
--------------------------------
Net increase from
fund share transactions 135,924,353 241,714,021(1)
--------------------------------
Total increase
in net assets 163,469,170 278,444,749
--------------------------------
Net Assets
Beginning of year 40,775,324 204,244,494
--------------------------------
End of year $204,244,494 $482,689,243
================================
The text and notes are an integral part of the financial statements.
16 State Street Research Legacy Fund
<PAGE>
--------------------------------------------------------------------------------
(1) These transactions break down by share class as follows:
<TABLE>
<CAPTION>
Years ended April 30
----------------------------------------------------------------
1999 2000
----------------------------------------------------------------
Class A Shares Amount Shares Amount
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 3,622,168 $45,842,648 6,594,156 $99,176,897*
Issued upon reinvestment of distribution from net realized gains 919 11,400 -- --
Shares redeemed (584,292) (7,001,947) (1,713,861) (26,504,520)
----------------------------------------------------------------
Net increase 3,038,795 $38,852,101 4,880,295 $72,672,377
================================================================
<CAPTION>
Class B(1) Shares(a) Amount(a) Shares Amount
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 1,782,571 $24,178,751 8,559,352 $126,892,143**
Shares redeemed (69,936) (989,900) (509,612) (7,786,415)***
----------------------------------------------------------------
Net increase 1,712,635 $23,188,851 8,049,740 $119,105,728
================================================================
<CAPTION>
Class B Shares Amount Shares Amount
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 5,151,707 $63,062,399 1,872,246 $27,832,460**
Issued upon reinvestment of distribution from net realized gains 1,370 16,880 -- --
Shares redeemed (656,476) (8,053,180) (1,126,376) (16,907,851)***
----------------------------------------------------------------
Net increase 4,496,601 $55,026,099 745,870 $10,924,609
================================================================
<CAPTION>
Class C Shares Amount Shares Amount
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 1,558,281 $19,296,668 2,886,082 $43,112,014**
Issued upon reinvestment of distribution from net realized gains 227 2,800 -- --
Shares redeemed (137,612) (1,639,209) (339,217) (5,111,844)****
----------------------------------------------------------------
Net increase 1,420,896 $17,660,259 2,546,865 $38,000,170
================================================================
<CAPTION>
Class S Shares Amount Shares Amount
-----------------------------------------------------------------------------------------------------------------------------------
Shares sold 87,078 $1,205,796 126,833 $1,988,265
Issued upon reinvestment of distribution from net realized gains 184 2,294 -- --
Shares redeemed (902) (11,047) (63,353) (977,128)
----------------------------------------------------------------
Net increase 86,360 $1,197,043 63,480 $1,011,137
================================================================
</TABLE>
The trustees have the authority to issue an unlimited number of fund
shares, with a $.001 par value per share. MetLife owned 50,025 Class A
shares, 11,799 Class B shares, 50,025 Class C shares and 387,908 Class S
share of the fund.
* Includes $450,920 and $930,609 in sales charges collected by the
distributor and MetLife.
** Like all broker-dealers, MetLife received commissions that were calculated
as a percentage of these sales but the commissions of $889,863, $9,986 and
$4,259 for Class B(1), Class B and Class C, were paid by the distributor,
not the fund.
*** Includes $209,250 and $256,171 in deferred sales charges collected by the
distributor for Class B(1) and Class B.
**** Includes $4,596 in deferred sales charges collected by the distributor.
(a) January 1, 1999 (commencement of share class) to April 30, 1999.
--------------------------------------------------------------------------------
The text and notes are an integral part of the financial statements.
17
<PAGE>
Financial Highlights
--------------------------------------------------------------------------------
These provide a summary of each share class's financial performance.
<TABLE>
<CAPTION>
Class A
---------------------------------------------
Years ended April 30
---------------------------------------------
Per Share Data 1998 (a) (f) 1999 (a) 2000 (a)
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of year ($) 10.00 11.66 14.42
----- ----- -----
Net investment income (loss) ($)* 0.00 (0.02) (0.05)
Net realized and unrealized gain
on investments ($) 1.66 2.79 1.62
----- ----- -----
Total from investment operations ($) 1.66 2.77 1.57
----- ----- -----
Distribution from net realized gains ($) -- (0.01) --
----- ----- -----
Total distributions ($) -- (0.01) --
----- ----- -----
Net asset value, end of year ($) 11.66 14.42 15.99
===== ===== =====
Total return (%) (b) 16.60 (d) 23.73 10.89
Ratios/Supplemental Data
--------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year ($ thousands) 11,984 58,642 143,037
Expense ratio (%)* 1.25 (e) 1.20 1.22
Expense ratio after expense reductions (%)* 1.25 (e) 1.19 1.21
Ratio of net investment income (loss)
to average net assets (%)* 0.01(e) (0.14) (0.34)
Portfolio turnover rate (%) 6.44 42.09 33.23
*Reflects voluntary reduction of
expenses per share of these amounts ($) 0.04 0.00 --
<CAPTION>
Class B(1)
------------------------------
Years ended April 30
------------------------------
Per Share Data 1999 (a) (c) 2000 (a)
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of year ($) 13.08 14.28
----- -----
Net investment loss ($) (0.04) (0.17)
Net realized and unrealized gain
on investments ($) 1.24 1.60
----- -----
Total from investment operations ($) 1.20 1.43
----- -----
Net asset value, end of year ($) 14.28 15.71
===== =====
Total return (%) (b) 9.17 (d) 10.01
Ratios/Supplemental Data
--------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year ($ thousands) 24,454 153,359
Expense ratio (%) 1.88 (e) 1.97
Expense ratio after expense reductions (%) 1.87 (e) 1.96
Ratio of net investment loss to average net assets (%) (1.00)(e) (1.13)
Portfolio turnover rate (%) 42.09 33.23
</TABLE>
The text and notes are an integral part of the financial statements.
18 State Street Research Legacy Fund
<PAGE>
<TABLE>
<CAPTION>
Class B
---------------------------------------------
Years ended April 30
---------------------------------------------
Per Share Data 1998 (a) (f) 1999 (a) 2000 (a)
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of year ($) 10.00 11.64 14.28
----- ----- -----
Net investment loss ($)* (0.03) (0.11) (0.12)
Net realized and unrealized gain
on investments ($) 1.67 2.76 1.58
----- ----- -----
Total from investment operations ($) 1.64 2.65 1.46
----- ----- -----
Distribution from net realized gains ($) -- (0.01) --
----- ----- -----
Total distributions ($) -- (0.01) --
----- ----- -----
Net asset value, end of year ($) 11.64 14.28 15.74
===== ===== =====
Total return (%) (b) 16.40 (d) 22.74 10.22
Ratios/Supplemental Data
-------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year ($ thousands) 19,688 88,383 109,135
Ratio of operating expenses
Expense ratio (%)* 2.00 (e) 1.95 1.77
Expense ratio after expense reductions (%)* 2.00 (e) 1.94 1.76
Ratio of net investment loss to average net assets (%)* (0.76) (e) (0.89) (0.87)
Portfolio turnover rate (%) 6.44 42.09 33.23
*Reflects voluntary reduction of
expenses per share of these amounts ($) 0.04 0.00 --
<CAPTION>
Class C
---------------------------------------------
Years ended April 30
---------------------------------------------
Per Share Data 1998 (a) (f) 1999 (a) 2000 (a)
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of year ($) 10.00 11.63 14.28
----- ----- -----
Net investment loss ($)* (0.03) (0.11) (0.16)
Net realized and unrealized gain
on investments ($) 1.66 2.77 1.59
----- ----- -----
Total from investment operations ($) 1.63 2.66 1.43
----- ----- -----
Distribution from net realized gains ($) -- (0.01) --
----- ----- -----
Total distributions ($) -- (0.01) --
----- ----- -----
Net asset value, end of year ($) 11.63 14.28 15.71
===== ===== =====
Total return (%) (b) 16.30 (d) 22.85 10.01
Ratios/Supplemental Data
-------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year ($ thousands) 4,977 26,399 69,061
Expense ratio (%)* 2.00 (e) 1.95 1.97
Expense ratio after expense reductions (%)* 2.00 (e) 1.94 1.96
Ratio of net investment loss to average net assets (%)* (0.69) (e) (0.90) (1.10)
Portfolio turnover rate (%) 6.44 42.09 33.23
*Reflects voluntary reduction of
expenses per share of these amounts ($) 0.04 0.00 --
</TABLE>
(a) Per-share figures have been calculated using the average shares method.
(b) Does not reflect any front-end or contingent deferred sales charges.
(c) January 1, 1999 (commencement of share class) to April 30, 1999.
(d) Not annualized.
(e) Annualized.
(f) December 31, 1997 (commencement of operations) to April 30, 1998.
The text and notes are an integral part of the financial statements.
19
<PAGE>
Financial Highlights CONTINUED
<TABLE>
<CAPTION>
Class S
----------------------------------------------
Years ended April 30
----------------------------------------------
Per Share Data 1998 (a) (f) 1999 (a) 2000 (a)
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of year ($) 10.00 11.68 14.48
----- ----- -----
Net investment income (loss) ($)* 0.03 0.02 (0.00)
Net realized and unrealized gain
on investments ($) 1.65 2.79 1.61
----- ----- -----
Total from investment operations ($) 1.68 2.81 1.61
----- ----- -----
Distribution from net realized gains ($) -- (0.01) --
----- ----- -----
Total distributions ($) -- (0.01) --
----- ----- -----
Net asset value, end of year ($) 11.68 14.48 16.09
===== ===== =====
Total return (%) (b) 16.80 (d) 24.04 11.12
Ratios/Supplemental Data
-------------------------------------------------------------------------------------------------------------------------------
Net assets at end of year ($ thousands) 4,127 6,367 8,097
Expense ratio (%)* 1.00 (e) 0.95 0.97
Expense ratio after expense reductions (%)* 1.00 (e) 0.94 0.96
Ratio of net investment income (loss) to average net assets (%)* 0.60 (e) 0.16 (0.06)
Portfolio turnover rate (%) 6.44 42.09 33.23
*Reflects voluntary reduction of
expenses per share of these amounts ($) 0.09 0.01 --
</TABLE>
(a) Per-share figures have been calculated using the average shares method.
(b) Does not reflect any front-end or contingent deferred sales charges.
(c) January 1, 1999 (commencement of share class) to October 31, 1999.
(d) Not annualized.
(e) Annualized.
(f) December 31, 1997 (commencement of operations) to April 30, 1998.
The text and notes are an integral part of the financial statements.
Report of Independent Accountants
--------------------------------------------------------------------------------
To the Trustees of State Street Research
Securities Trust and the Shareholders of
State Street Research Legacy Fund
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio holdings, and the related statements of operations and of changes
in net assets and the financial highlights present fairly, in all material
respects, the financial position of State Street Research Legacy Fund (a series
of State Street Research Securities Trust, hereafter referred to as the "Trust")
at April 30, 2000, and the results of its operations, the changes in its net
assets and the financial highlights for the periods indicated, in conformity
with accounting principles generally accepted in the United States. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Trust's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States, which require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included confirmation
of securities at April 30, 2000 by correspondence with the custodian and
brokers, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
June 5, 2000
20 State Street Research Legacy Fund
<PAGE>
Board of Trustees
Gerard P. Maus
Chief Financial Officer,
Chief Administrative Officer,
Director and Interim Chief Operating Officer
State Street Research & Management Company
Bruce R. Bond
Former Chairman of the Board,
Chief Executive Officer and President,
PictureTel Corporation
Steve A. Garban
Former Senior Vice President
for Finance and Operations and Treasurer,
The Pennsylvania State University
Dean O. Morton
Former Executive Vice President,
Chief Operating Officer and Director,
Hewlett-Packard Company
Susan M. Phillips
Dean, School of Business and Public Management,
George Washington University; former Member of the
Board of Governors of the Federal Reserve System and
Chairman and Commissioner of the Commodity Futures
Trading Commission
Toby Rosenblatt
President, Founders Investments Ltd.
President, The Glen Ellen Company
Michael S. Scott Morton
Jay W. Forrester Professor of Management,
Sloan School of Management,
Massachusetts Institute of Technology
State Street Research Legacy Fund
--------------------------------------------------------------------------------
Report on Special Meeting of Shareholders
A Special Meeting of Shareholders of the State Street Research Legacy Fund
("Fund"), a series of State Street Research Financial Trust, was convened on
February 25, 2000 ("Meeting"). The results of the Meeting are set forth below.
Votes (millions of shares)
Action on Proposal For Against Abstain
--------------------------------------------------------------------------------
Class A Shares
The Fund's current Rule 12b-1
Distribution Plan was amended to
increase the amount that may be
expended for the distribution
of Class A shares 3.3 0.5 0.3
Class B Shares
The Fund's current Rule 12b-1
Distribution Plan was amended to
increase the amount that may be
expended for the distribution
of Class A shares 3.0 0.3 0.2
Class B(1) Shares
The Fund's current Rule 12b-1
Distribution Plan was amended to
increase the amount that may be
expended for the distribution
of Class A shares 2.8 0.4 0.3
21
<PAGE>
Glossary
12b-1 fees -- Fees paid from mutual fund assets for personal services and for
the maintenance of shareholder accounts and distribution and marketing expenses.
The fees are named after the SEC rule that permits them.
Average Shares Method -- The practice of basing a fund's calculations for a
given period on the average number of shares that were outstanding during that
period.
Nasdaq -- The stock price quotation system operated by the National Association
of Securities Dealers. The Nasdaq system operates as a clearing house for
transaction data about stocks that are traded "over the counter" around the U.S.
New York Stock Exchange -- The largest stock exchange in the United States, and
the place where many of the largest company stocks are listed. Unlike the Nasdaq
system, the NYSE is a physical exchange, with all trading occurring on the
exchange's trading floor on Wall Street.
Principal Amount -- With bonds and certain other debt securities, the amount of
the underlying principal of the security. When the security matures, the issuer
is obligated to repay this amount to the holder of the security. Also called
"face value" or "par value."
22 State Street Research Legacy Fund
<PAGE>
[LOGO] STATE STREET RESEARCH ---------------
One Financial Center o Boston, MA 02111 Bulk Rate
U.S. Postage
PAID
Canton, MA
Permit #313
---------------
Contact Information for
Investor Services
--------------------------------------------------------------------------------
New accounts
[HANDS] contact your financial
professional for assistance
[PHONE] phone
1-87-SSR-FUNDS (1-877-773-8637)
Hearing-impaired:
1-800-676-7876
Chinese and Spanish-speaking:
1-888-638-3193
[MAILBOX] mail
State Street Research Service Center
P.O. Box 8408
Boston, MA 02266-8408
State Street Research
Spectrum of Funds
<TABLE>
<CAPTION>
Income Growth & Income Growth
--------------------------------------------------------------------------------------------------
CONSERVATIVE AGGRESSIVE
--------------------------------------------------------------------------------------------------
<S> <C> <C>
High Income Fund Argo Fund Global Resources Fund
Strategic Income Fund Investment Trust Emerging Growth Fund
New York Tax-Free Fund Alpha Fund Mid-Cap Growth Fund
Tax-Exempt Fund Strategic Growth & Income Fund Aurora Fund
Government Income Fund Strategic Income Plus Fund Concentrated International Fund
Money Market Fund International Equity Fund
Concentrated Growth Fund
Growth Fund
Galileo Fund
Legacy Fund
</TABLE>
Mutual fund purchases, exchanges and account information
[INTERNET] internet
www.ssrfunds.com
[COMPUTER] e-mail
[email protected]
[PHONE] phone
1-87-SSR-FUNDS (1-877-773-8637)
7 days a week, 24 hours a day
Hearing-impaired:
1-800-676-7876
Chinese and Spanish-speaking:
1-888-638-3193
[FAX] fax
1-617-737-9722
(request confirmation number
first from Service Center:
1-87-SSR-FUNDS)
[MAILBOX] mail
State Street Research Service Center
P.O. Box 8408
Boston, MA 02266-8408
---------------------------
[LOGO]
DALBAR
HONORS COMMITMENT TO:
INVESTORS
1999
---------------------------
for Excellence in Service
For 24-hour Automated Access to Your Account
[INTERNET] www.ssrfunds.com
[PHONE] 1-87-SSR-FUNDS
OverView
--------------------------------------------------------------------------------
For more information on the products and services mentioned in OverView, our
shareholder newsletter, visit our Web site at www.ssrfunds.com
State Street Research
FYI
o Did you know that you can give a State Street Research mutual fund as a
gift? Call a service center representative at 1-87-SSR-FUNDS
(1-877-773-8673), Monday through Friday, 8am - 6pm Eastern Time, to learn
more.
--------------------------------------------------------------------------------
This report must be accompanied or preceded by a current State Street Research
Legacy Fund prospectus and a current Quarterly Performance Update.
To obtain a prospectus on any State Street Research fund call 1-87-SSR-FUNDS
(1-877-773-8637). The prospectus contains more complete information, including
sales charges and expenses. Please read the prospectus carefully before
investing or sending money.
The Dalbar awards recognize quality shareholder service and should not be
considered a rating of fund performance. The survey included mutual fund
complexes that volunteered or were otherwise selected to participate and was not
industry-wide.
(C)2000 State Street Research Investment Services, Inc., One Financial Center,
Boston, MA 02111
Control Number:(exp0601)SSR-LD LF-1890-0600
