<PAGE>
--------------------------------
STATE STREET RESEARCH
--------------------------------
STRATEGIC INCOME FUND
--------------------------------
SEMIANNUAL REPORT
October 31, 1999
---------------------
WHAT'S INSIDE
---------------------
INVESTMENT UPDATE
About the Fund,
economy and markets
FUND INFORMATION
Facts and figures
PLUS, COMPLETE PORTFOLIO HOLDINGS
AND FINANCIAL STATEMENTS
-------------------
[DALBAR LOGO]
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For Excellence
[logo] STATE STREET RESEARCH in
Shareholder Service
<PAGE>
STATE STREET RESEARCH STRATEGIC INCOME FUND
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INVESTMENT UPDATE
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INVESTMENT ENVIRONMENT
THE ECONOMY
o U.S. economic growth slowed considerably in the first half of the period, then
picked up again, suggesting an annualized increase in the gross domestic
product of 4.0% for 1999.
o Although inflation remains low compared to its long-term historical rate, it
rose from approximately 1.6% to 2.6%, fanned by rising commodity prices --
notably oil and gold.
o The Federal Reserve Board raised interest rates twice during the period,
making good on its promise to fight back at the earliest signs of inflation.
THE MARKETS
o The S&P 500(1), a broad measure of common stock performance, gained a modest
2.74% for the six-month period. However, Russell 1000 Growth and Russell
Mid-Cap Growth(1) indices rose 7.46% and 8.08% respectively, as investors
continued to focus on a narrow band of stocks that delivered above-average
earnings growth.
o Foreign stock markets outperformed the U.S. markets during the period. The
Morgan Stanley Capital International EAFE Index(1), which tracks stock market
performance in major developed countries outside the U.S., gained 6.73%.
o The bond market slumped during the period as short-term interest rates moved
higher. The Lehman Brothers Aggregate Bond Index(1), a broad measure of bond
market performance, returned -0.15%. The yield on the 30 year U.S. Treasury
bond edged up from 5.8% to 6.1% at the end of the period.
THE FUND
OVER THE PAST SIX MONTHS
o For the six months ended October 31, 1999, Strategic Income Fund Class A
shares lost -3.07% [does not reflect sales charge](2). The Fund underperformed
the Lehman Brothers Aggregate Bond Index, which ended the same period at
-0.15%.
o Rising interest rates did not help the Fund's performance, but hurt the Fund
in 1999.
o The Federal Reserve Board raised the Federal Funds rate twice during the six
month period ended October 31, 1999, which did not help the fund's
performance.
CURRENT STRATEGY
o We increased the Fund's holdings in investment grade bonds.
o After the end of 1999, we will invest in the emerging market sector.
October 31, 1999
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.
(1) The S&P 500 (officially the "Standard and Poor's 500 Stock Price Index") is
an unmanaged index of 500 U.S. stocks. The Morgan Stanley Capital
International EAFE Index is comprised of stocks from Europe, Australasia,
and the Far East. 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. Russell
1000 Growth and Russell Mid-Cap Growth indices include stocks from the
Russell 1000 Index. The indicies do not take transaction charges into
consideration. It is not possible to invest directly in the indices.
(2) -3.58% for Class B(1) shares; -3.58% for Class B shares; -3.58% for Class C
shares; -3.24% 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 gain distributions and income dividends at net asset value.
(4) Performance reflects a maximum 4.50% 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.
- --------------------------------------------------------------------------------
FUND INFORMATION (all data are for periods ended October 31, 1999, except
where noted)
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
FOR PERIODS ENDED 9/30/99
(at maximum applicable sales charge)(3)(4)(5)
- ------------------------------------------------------------------------
LIFE OF FUND
(since 8/30/96) 3 YEARS 1 YEAR
- ------------------------------------------------------------------------
Class A 4.46% 4.60% -4.35%
- ------------------------------------------------------------------------
Class B(1) 4.36% 3.86% -5.20%
- ------------------------------------------------------------------------
Class B 4.41% 3.91% -5.05%
- ------------------------------------------------------------------------
Class C 5.22% 4.75% -1.36%
- ------------------------------------------------------------------------
Class S 6.29% 5.78% 0.41%
- ------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
(does not reflect sales charge)(3)(5)
- ------------------------------------------------------------------------
LIFE OF FUND
(since 8/30/96) 3 YEAR 1 YEAR
- ------------------------------------------------------------------------
Class A 5.91% 5.16% 1.84%
- ------------------------------------------------------------------------
Class B(1) 5.05% 4.34% 0.95%
- ------------------------------------------------------------------------
Class B 5.05% 4.34% 0.94%
- ------------------------------------------------------------------------
Class C 5.05% 4.34% 0.94%
- ------------------------------------------------------------------------
Class S 6.12% 5.37% 1.94%
- ------------------------------------------------------------------------
YIELD
- ------------------------------------------------------------------------
Class A 6.47%
- ------------------------------------------------------------------------
Class B(1) 6.05%
- ------------------------------------------------------------------------
Class B 6.05%
- ------------------------------------------------------------------------
Class C 6.05%
- ------------------------------------------------------------------------
Class S 7.04%
- ------------------------------------------------------------------------
Yield is based on the net investment income produced for the 30 days ended
October 31, 1999.
ASSET ALLOCATION
(by percentage of net assets)
High-Yield Corporate 51%
U.S Government 26%
International 8%
Finance/Mortgage 8%
Cash 5%
Equities 2%
<PAGE>
<TABLE>
STATE STREET RESEARCH STRATEGIC INCOME FUND
- -----------------------------------------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------
October 31, 1999 (Unaudited)
- -----------------------------------------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL MATURITY VALUE
AMOUNT DATE (NOTE 1)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FIXED INCOME SECURITIES 92.5%
U.S. TREASURY 7.3%
U.S. Treasury Bond, 11.625% .................... $ 625,000 11/15/2004 $ 771,094
U.S. Treasury Bond, 8.125% ..................... 375,000 5/15/2021 444,844
U.S. Treasury Bond, 8.125% ..................... 2,725,000 8/15/2021 3,235,093
U.S. Treasury Bond, 6.125% ..................... 50,000 8/15/2029 49,781
U.S. Treasury Note, 5.875% ..................... 675,000 9/30/2002 674,892
U.S. Treasury Note, 7.875% ..................... 825,000 11/15/2004 888,938
U.S. Treasury STRIPS, 0.00% .................... 1,000,000 11/15/2001 889,220
U.S. Treasury TIPS, 3.875% ..................... 304,893 4/15/2029 291,934
------------
7,245,796
------------
U.S. AGENCY MORTGAGE 18.6%
Federal Home Loan Mortgage Corp., 6.50% ........ 865,825 7/01/2029 830,110
Federal National Mortgage Association, 8.50% ... 1,000,000 2/01/2005 1,005,160
Federal National Mortgage Association, 5.25% ... 200,000 1/15/2009 179,968
Federal National Mortgage Association, 9.00% ... 551,019 5/01/2009 574,013
Federal National Mortgage Association, 5.50% ... 168,239 2/01/2014 158,407
Federal National Mortgage Association, 5.50% ... 724,051 3/01/2014 681,282
Federal National Mortgage Association, 6.50% ... 255,982 9/01/2028 245,261
Federal National Mortgage Association, 6.50% ... 1,068,051 11/01/2028 1,023,321
Federal National Mortgage Association, 6.50% ... 1,410,957 12/01/2028 1,351,866
Federal National Mortgage Association, 6.50% ... 922,564 12/01/2028 859,995
Federal National Mortgage Association, 6.50% ... 292,249 3/01/2029 280,010
Federal National Mortgage Association, 7.50% ... 731,610 7/01/2029 733,205
Federal National Mortgage Association TBA, 7.00% 3,575,000 11/15/2029 3,510,221
Federal National Mortgage Association TBA, 7.00% 300,000 11/15/2029 287,484
Federal National Mortgage Association TBA, 7.50% 1,525,000 1/19/2030 1,524,055
Government National Mortgage Association, 6.50% 1,135,221 11/15/2028 1,086,259
Government National Mortgage Association, 7.00% 492,499 6/15/2029 483,107
Government National Mortgage Association TBA,
8 00% ........................................ 1,325,000 1/25/2030 1,347,976
Government National Mortgage Association TBA,
8 00% ........................................ 2,400,000 1/25/2030 2,345,748
------------
18,507,448
------------
CANADIAN-YANKEE 0.4%
Province of Quebec, 7.50% ...................... 200,000 9/15/2029 200,960
Province of Quebec Deb., 5.75% ................. 250,000 2/15/2009 227,653
------------
428,613
------------
FOREIGN GOVERNMENT 7.5%
Greek Drachma
Republic of Greece, 8.80% ...................... 1,101,300,000 6/19/2007 3,829,372
New Zealand Dollar
Government of New Zealand, 10.00% .............. 1,525,000 3/15/2002 834,399
Government of New Zealand, 8.00% ............... 1,775,000 4/15/2004 939,168
Government of New Zealand, 8.00% ............... 3,475,000 11/15/2006 1,858,954
------------
7,461,893
------------
FINANCE/MORTGAGE 8.2%
A T & T Capital Corp. Note, 6.75% .............. $ 500,000 2/04/2002 498,360
American Express Credit Account Trust Series
1999 Cl. A, 5.95% ............................ 175,000 12/15/2006 169,750
American Express Credit Account Trust Series
1999 Cl. A, 5.60% ............................ 400,000 11/15/2006 382,872
Capital One Bank Note, 6.28% ................... 250,000 2/20/2001 248,720
Capital One Bank Note, 6.15% ................... 325,000 6/01/2001 319,966
Capital One Bank Note, 6.48% ................... 225,000 1/28/2002 221,249
Capital One Bank Note, 6.62% ................... 525,000 8/04/2003 509,612
Chase Credit Card Owner Trust Note 99-3-A,
6.66% ........................................ 150,000 1/15/2007 149,408
Citibank Credit Card Master Trust Series 1997-2
Cl. A, 6.55% ................................. 225,000 2/15/2004 224,858
Citibank Credit Card Master Trust Series 1998
Cl. A, 5.30% ................................. 375,000 1/09/2006 354,724
Citibank Credit Card Master Trust Series 1999
Cl. A, 5.875% ................................ 200,000 3/10/2011 183,562
Countrywide Funding Corp. Note, 6.58% .......... 575,000 9/21/2001 572,959
DLJ Commercial Mortgage Corp. 98-C2, 6.24% ..... 400,000 11/12/2031 374,625
DLJ Commercial Mortgage Corp.
98-C2 Cl. A1-A, 5.88% ........................ 686,459 11/12/2031 654,281
DLJ Commercial Mortgage Corp. 99-C1, 6.46% ..... 425,000 1/10/2009 402,090
ERAC USA Finance Co. Note, 6.625%+ ............. 150,000 2/15/2005 144,682
Finova Capital Corp. Note, 6.50% ............... 400,000 7/28/2002 394,980
GMAC Commercial Mortgage Security Inc. 98-C1
Cl. A1, 6.41% ................................ 231,644 11/15/2007 224,984
Intertek Finance PLC Series B Sr. Sub. Note,
Senior Subordinated Note Series B, 10.25% .... 250,000 11/01/2006 235,000
LB Commercial Mortgage Trust 98C1-A1, 6.33% .... 150,789 11/18/2004 147,727
LB Commercial Mortgage Trust 98C4-A1, 5.87% .... 213,695 8/15/2006 204,012
LB Commercial Mortgage Trust 98C4-A1, 6.21% .... 105,000 10/15/2008 97,322
MBNA Corp. Sr. Note, 6.12% ..................... 425,000 8/13/2001 420,359
MBNA Master Credit Card Trust Series 99-G-A,
6.35% ........................................ 375,000 12/15/2006 369,255
MBNA Master Credit Card Trust Series 99-J-A,
7.00% ........................................ 350,000 2/15/2012 347,812
Morgan Stanley Capital Inc. 98-A1, 6.19% ....... 77,240 1/15/2007 74,995
Prudential Home Mortgage Securities Co. Series
93-45 A-2 PAC, 6.75% ......................... 198,608 11/25/2007 197,429
------------
8,125,593
------------
CORPORATE 50.5%
Advanstar Communications Inc. Sr. Sub. Note,
9.25% ........................................ 400,000 5/01/2008 374,000
Airgate PCS Inc. Sr. Sub. Note,
0.00% to 9/30/2004, 13.50% from
10/1/2004 to maturity ........................ 330,000 10/01/2009 200,475
Alaska Steel Corp. Sr. Note, 9.125% ............ 500,000 12/15/2006 495,000
Albertsons Inc. Sr. Deb., 7.45% ................ 475,000 8/01/2029 468,573
Allied Waste North America Inc. Sr. Note,
7.625% ....................................... 150,000 1/01/2006 131,063
Allied Waste North America Inc. Sr. Note,
7.875% ....................................... 350,000 1/01/2009 297,938
American Pacific Corp. Sr. Note, 9.25% ......... 550,000 3/01/2005 555,500
Ametek Inc. Sr. Note, 7.20% .................... 500,000 7/15/2008 456,510
Archibald Candy Corp. Sr. Sec. Note, 10.25% .... 450,000 7/01/2004 436,500
Aurora Foods Inc. Sr. Sub. Note Series E, 8.75% 500,000 7/01/2008 478,750
Ball Corp. Sr. Note, 7.75% ..................... 1,250,000 8/01/2006 1,218,750
Ball Corp. Sr. Sub. Note, 8.25% ................ 715,000 8/01/2008 697,125
British Sky Broadcasting Group Note, 6.875% .... 400,000 2/23/2009 355,980
BTI Telecom Corp. Sr. Note, 10.50% ............. 250,000 9/15/2007 212,500
Buckeye Cellulose Corp. Sr. Sub. Note, 9.25% ... 150,000 9/15/2008 148,500
California Infrastructure Development Series
1997-A6, 6.38% ............................... 675,000 9/25/2008 658,969
Call-Net Enterprises Inc. Sr. Note, 8.00% ...... 500,000 8/15/2008 425,000
Calpine Corp. Sr. Note, 7.625% ................. 350,000 4/15/2006 331,051
Calpine Corp. Sr. Note, 7.75% .................. 100,000 4/15/2009 93,870
Canadian First Oil Ltd. Sr. Sub. Note, 8.75% ... 150,000 9/15/2007 142,500
Capstar Broadcasting Partners Sr. Note, 0.00%
to 1/31/2002, 12.75% from 2/1/2002 to
maturity ..................................... 1,000,000 2/01/2009 855,000
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 151,875
Century Communications Corp. Sr. Note, 8.375% .. 500,000 12/15/2007 465,000
Charter Communication Holding LLC Sr. Note,
8.625%+ ...................................... 500,000 4/01/2009 473,750
Coca-Cola Enterprises Inc. Deb., 6.95% ......... 275,000 11/15/2026 254,950
Columbia/HCA Healthcare Corp. Note, 8.12% ...... 575,000 8/04/2003 560,849
Columbia/HCA Healthcare Corp. Note, 6.91% ...... 750,000 6/15/2005 668,640
Columbia/HCA Healthcare Corp. Note, 7.69% ...... 175,000 6/15/2025 138,250
Columbia/HCA Healthcare Corp. Note, 7.75% ...... 400,000 7/15/2036 308,024
Drypers Corp. Series B Sr. Note, 10.25% ........ 650,000 6/15/2007 539,500
E. Spire Communications Sr. Note, 0.00% to
3/31/2001, 12.75% from 4/1/2001 to maturity .. 50,000 4/01/2006 27,750
Econophone Inc. Sr. Note, 13.50% ............... 1,000,000 7/15/2007 1,042,500
Econophone Inc. Sr. Note, 0.00% to 2/14/2003,
11.00% from 2/15/2003 to maturity ............ 500,000 2/15/2008 287,500
El Paso Energy Corp. Sr. Note, 6.625% .......... 425,000 7/15/2001 423,002
Elgar Holdings Inc. Sr. Sub. Note, 9.875% ...... 500,000 2/01/2008 342,500
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 885,000
Envirosource Inc. Sr. Note Series B, 9.75% ..... 250,000 6/15/2003 145,000
Facilicom International Inc. Sr. Note, 10.50% .. 500,000 1/15/2008 430,000
Falcon Holding Group LP Series B Sr. Deb.,
8.375% ....................................... 500,000 4/15/2010 500,000
First Wave Marine Inc. Sr. Note, 11.00% ........ 250,000 2/01/2008 188,750
Fisher Scientific International Inc. Sr. Sub.
Note, 9.00% .................................. 250,000 2/01/2008 235,000
Florida Windstorm Underwriting Sr. Sec. Note
Series 1999-A, 7.125%+ ....................... 225,000 2/25/2019 208,994
Ford Motor Credit Co., 7.375% .................. 775,000 10/28/2009 780,115
Frontier Corp. Sr. Note, 9.125% ................ 750,000 2/15/2006 731,250
Gentek Inc. Sr. Sub. Note, 11.00%+ ............. 400,000 8/01/2009 402,000
GNI Group Inc. Sr. Note, 10.875% ............... 300,000 7/15/2005 129,000
Golden Ocean Group Ltd. Sr. Note, 10.00%[ ] .... 1,000,000 8/31/2001 45,000
Great Central Mines Ltd. Sr. Note, 8.875% ...... 500,000 4/01/2008 443,750
Harrah's Operating Inc. Sr. Sub. Note, 7.875% .. 500,000 12/15/2005 476,250
Heller Financial Inc. Note, 7.125% ............. 625,000 9/28/2004 622,281
Henry Co. Sr. Note Series B, 10.00% ............ 200,000 4/15/2008 149,000
Hollywood Casino Note, 13.00%+ ................. 250,000 8/01/2006 260,000
Hyperion Telecommunication Inc. Sr. Sub. Note,
12.00% ....................................... 250,000 11/01/2007 257,500
Iasis Healthcare Corp. Sr. Sub. Note, 13.00%+ .. 250,000 10/15/2009 251,875
ICG Holdings Inc. Sr. Note, 0.00% to 9/14/2000,
13.50% from 9/15/2000 to maturity ............ 350,000 9/15/2005 299,250
Insight Midwest LP Sr. Note, 9.75%+ ............ 100,000 10/01/2009 101,750
International Business Machines Corp. Deb.,
7.00% ........................................ 175,000 10/30/2025 171,271
International Game Technology Sr. Note, 8.375% . 100,000 5/15/2009 95,500
International Knife & Saw Inc. Sr. Sub. Note,
11.375% ...................................... 250,000 11/15/2006 193,750
International Shipholding Corp. Sr. Note Series
B, 7.75% ..................................... 1,000,000 10/15/2007 905,000
Intersil Corp. Sr. Sub. Note, 13.25%+ .......... 250,000 8/15/2009 265,000
J. Crew Group Inc. Sr. Deb. Note, 0.00%to 10/
14/2002, 13.125% from 10/15/2002 to maturity . 500,000 10/15/2008 227,500
J. Crew Operating Corp. Sr. Sub. Note, 10.375% . 475,000 10/15/2007 427,500
J.B. Poindexter Inc. Sr. Note, 12.50% .......... 1,460,000 5/15/2004 1,379,700
J.H. Heafner Inc. Sr. Note Series D, 10.00% .... 500,000 5/15/2008 457,500
Johnstown America Industries Inc. Sr. Sub.
Note, 11.75% ................................. 500,000 8/15/2005 511,250
Kaiser Aluminum & Chemical Corp. Sub. Note,
12.75% ....................................... 600,000 2/01/2003 600,000
Lear Corp., 8.11%+ ............................. 450,000 5/15/2009 432,203
Loehmanns Inc. Sr. Note, 11.875%[ ] ............ 500,000 5/15/2003 50,000
Lyondell Chemical Co. Sr. Sec. Note Series A,
9.625% ....................................... 150,000 5/01/2007 150,375
Mohegan Tribal Gaming Authority Sr. Note,
8.125% ....................................... 1,100,000 1/01/2006 1,061,500
NE Restaurant Inc. Sr. Note, 10.75% ............ 650,000 7/15/2008 575,250
Networks Associates Inc. Sub. Deb., 0.00% ...... 880,000 2/13/2018 303,054
Newpark Resources Inc. Sr. Sub. Note Series B,
8.625% ....................................... 250,000 12/15/2007 232,500
News America Inc. Sr. Note, 6.625% ............. 400,000 1/09/2008 374,836
Nextel Partners Inc. Sr. Note, 0.00% to 1/31/
2004, 14.00% from 2/1/2004 to maturity ....... 400,000 2/01/2009 251,000
North Atlantic Trading Inc. Sr. Note, 11.00% ... 1,000,000 6/15/2004 945,000
Ocean Energy Inc. Series B Sr. Note, 7.625% .... 125,000 7/01/2005 119,375
Ocean Energy Inc. Sr. Sub. Note, 10.375% ....... 500,000 10/15/2005 522,500
Owens-Illinois Inc. Sr. Deb., 7.50% ............ 500,000 5/15/2010 452,060
Packaging Resources Inc. Sr. Sec. Note, 11.625% 700,000 5/01/2003 703,500
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 1,139,500
Pagemart Wireless Inc. Sr. Sub. Note, 0.00% to
1/31/2002, 11.25% from 2/1/2003 to maturity .. 1,375,000 2/01/2008 412,500
Pathmark Stores Inc. Sub. Deb., 12.625% ........ 750,000 6/15/2002 759,375
Peco Energy Transport Trust Series 1999A Cl
A6, 6.05% .................................... 400,000 3/01/2009 378,248
Peco Energy Transport Trust Series 1999-A Cl
A7, 6.13% .................................... 425,000 3/01/2009 397,770
Phase Metrics Inc. Sr. Note, 10.75% ............ 500,000 2/01/2005 80,000
Pioneer Americans Acquisition Corp. Sr. Sec
Note Series B, 9.25% ......................... 750,000 6/15/2007 577,500
Pogo Producing Co. Sr. Sub. Note, 8.75% ........ 250,000 5/15/2007 238,125
Pool Energy Services Co. Sr. Sub. Note, 8.625% . 300,000 4/01/2008 308,250
Primus Telecommunications Group Sr. Note,
11.75% ....................................... 500,000 8/01/2004 492,500
Quest Diagnostics Inc. Sr. Sub. Note, 10.75% ... 1,000,000 12/15/2006 1,035,000
Rose Hills Co. Sr. Sub. Note, 9.50% ............ 500,000 11/15/2004 400,000
RSL Communications Ltd. Sr. Note, 12.25% ....... 1,000,000 11/15/2006 995,000
S.C.G. Holding Corp. Sr. Note, 12.00%+ ......... 250,000 8/01/2009 256,250
Safety Kleen Corp. Sr. Note, 9.25% ............. 250,000 5/15/2009 240,000
Sbarro Inc. Sr. Note, 11.00% ................... 100,000 9/15/2009 98,750
Scotts Co. Sr. Sub. Note, 8.625%+ .............. 230,000 1/15/2009 217,350
Sealed Air Corp. Sr. Note, 6.95%+ .............. 200,000 5/15/2009 188,960
SFX Entertainment Inc. Sr. Note Series B,
9.125% ....................................... 150,000 2/01/2008 137,625
Sheffield Steel Corp., 11.50% .................. 50,000 12/01/2005 41,000
Simonds Industries Inc. Sr. Sub. Note, 10.25% .. 500,000 7/01/2008 380,000
Smiths Food & Drug Note Series 1994 A3, 9.20% .. 700,000 7/02/2018 723,772
Startec Global Communications Corp. Sr. Note,
12.00% ....................................... 750,000 5/15/2008 600,000
Stater Brothers Holdings Inc. Sr. Note, 10.75%+ 500,000 8/15/2006 512,500
Tom's Foods Inc. Sr. Sec. Note, 10.50% ......... 500,000 11/01/2004 432,500
Transdigm Inc. Sr. Sub. Note, 10.375% .......... 200,000 12/01/2008 182,000
Transwestern Publishing Co. Sr. Sub. Note
Series D, 9.625% ............................. 250,000 11/15/2007 241,250
Triad Hospitals Holdings Inc. Sr. Sub. Note,
11.00%+ ...................................... 375,000 5/15/2009 368,438
Unilab Corp. Sr. Note, 11.00% .................. 500,000 4/01/2006 545,000
Unilab Corp. Sr. Sub. Note, 12.75%+ ............ 100,000 10/01/2009 100,500
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 177,550
USA Waste Services Inc. Sr. Note, 7.00% ........ 250,000 10/01/2004 213,290
Viatel Inc. Sr. Note, 11.25% ................... 1,000,000 4/15/2008 945,000
Viatel Inc. Sr. Note, 0.00% to
4/14/2003, 12.50% from 4/15/2003 to maturity . 500,000 4/15/2008 280,000
Westinghouse Air Brake Co. Sr. Note Series B2,
9.375% ....................................... 150,000 6/15/2005 149,250
Westpoint Stevens Inc. Sr. Note, 7.875% ........ 100,000 6/15/2008 89,250
Williams Communications Group Sr. Note, 10.875% 250,000 10/01/2009 257,500
Winstar Communications Inc. Sr. Exch. Note,
14.50% ....................................... 500,000 10/15/2005 670,000
Winstar Equipment Corp. Sr. Sec. Exch. Note,
12.50% ....................................... 375,000 3/15/2004 390,935
Woodside Finance Ltd. Note, 6.60%+ ............. 300,000 4/15/2008 278,383
------------
50,269,854
------------
Total Fixed Income Securities (Cost $99,528,600) ........................................ 92,039,197
------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
VALUE
SHARES (NOTE 1)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS & OTHER 2.2%
Ameriking Inc. Com.*+ .............................................. 300 $ 3,000
Ameriking Inc. Sr. Exch. Pfd.> ..................................... 17,034 298,095
Cluett American Corp. Pfd.> ........................................ 5,638 281,900
Destia Communications Inc. Com.* ................................... 6,358 89,012
Hollinger International, Inc. Cl. A Com. ........................... 96,900 1,005,338
Ionica PLC Wts.*+ .................................................. 1,000 10
Loral Orion Network Systems Inc. Wts.*+ ............................ 1,000 5,750
North Atlantic Trading Inc. Sr. Pfd.> .............................. 13,037 211,851
Primus Telecommunications Group Wts.*+ ............................. 500 10,125
RSL Communications Ltd. Wts.*+ ..................................... 500 45,000
Startec Global Communications Wts.*+ ............................... 750 750
Viatel Inc. Com.* .................................................. 6,083 203,020
Wireless One Inc. Wts.* ............................................ 750 750
------------
Total Common Stocks & Other (Cost $2,633,171) ........................................... 2,154,601
------------
SHORT-TERM INVESTMENTS 6.7%
State Street Navigator Securities
Lending Prime Portfolio .......................................... 6,723,810 6,723,810
------------
Total Short-Term Investments (Cost $6,723,810) .......................................... 6,723,810
------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
PRINCIPAL MATURITY
AMOUNT DATE
- -----------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER 10.3%
<S> <C> <C> <C>
American Express Credit Corp., 5.18% ........... $ 2,987,000 11/01/1999 2,987,000
American Express Credit Corp., 5.28% ........... 367,000 11/03/1999 367,000
Associates First Capital Corp., 5.98% .......... 2,758,000 1/19/2000 2,758,000
General Electric Capital Corp., 5.20% .......... 1,127,000 11/01/1999 1,127,000
General Electric Capital Corp., 5.30% .......... 3,000,000 11/09/1999 3,000,000
------------
Total Commercial Paper (Cost $10,239,000) ............................................... 10,239,000
------------
REPURCHASE AGREEMENTS 0.3%
State Street Bank and Trust Co., dated 10/31/
1999, repurchase proceeds $303,088,
collateralized by $310,000 U.S. Treasury
Note, 6.00%, due 8/15/2000, market value
$314,650 ..................................... 303,000 11/01/1999 303,000
------------
Total Repurchase Agreements (Cost $303,000) ............................................. 303,000
------------
Total Investments (Cost $119,427,581) -- 112.0% ......................................... 111,459,608
Cash and Other Assets, Less Liabilities -- (12.0%) ...................................... (11,978,786)
------------
Net Assets - 100.0% ..................................................................... $ 99,480,822
============
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Federal Income Tax Information:
At October 31, 1999, the net unrealized depreciation of investments based on cost for
Federal income tax purposes of $119,430,499 was as follows:
Aggregate gross unrealized appreciation for all investments in which there is an excess
of value over tax cost ................................................................ $ 658,711
Aggregate gross unrealized depreciation for all investments in which there is an excess
of tax cost over value ................................................................ (8,629,602)
------------
$ (7,970,891)
============
* 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 October 31, 1999 were $4,625,698 and $4,527,270 (4.55% 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.
Futures contracts open at October 31, 1999, are as follows:
<CAPTION>
NOTIONAL EXPIRATION UNREALIZED
TYPE AMOUNT MONTH APPRECIATION
------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
5 Year U.S. Treasury Note $1,500,000 December, 1999 $2,775
Forward currency exchange contracts outstanding at October 31, 1999, are as follows:
<CAPTION>
UNREALIZED
CONTRACT APPRECIATION DELIVERY
TOTAL VALUE PRICE (DEPRECIATION) DATE
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Buy Euro, Sell U.S. dollars 1,158,000 EUR 1.07290 EUR $(22,243) 11/23/99
Buy Euro, Sell U.S. dollars 484,000 EUR 1.05466 EUR (469) 11/23/99
Sell Euro, Buy U.S. dollars 2,455,200 EUR 1.05205 EUR (4,031) 11/23/99
Sell Euro, Buy U.S. dollars 311,200 EUR 1.04756 EUR (2,314) 12/09/99
Sell Euro, Buy U.S. dollars 179,200 EUR 1.08600 EUR 4,897 1/24/00
Sell Greek drachma, Buy U.S. dollars 250,466,000 GRD .00324 GRD 15,312 11/23/99
Sell Greek drachma, Buy U.S. dollars 188,100,000 GRD .00324 GRD 16,614 1/24/00
Sell Greek drachma, Buy U.S. dollars 52,900,000 GRD .00324 GRD 4,561 1/24/00
Buy New Zealand dollars, Sell U.S. dollars 318,000 NZD .51665 NZD (3,008) 11/23/99
Buy New Zealand dollars, Sell U.S. dollars 439,000 NZD .51391 NZD (3,312) 11/23/99
Buy New Zealand dollars, Sell U.S. dollars 722,000 NZD .51520 NZD (5,782) 11/23/99
Sell New Zealand dollars, Buy U.S. dollars 1,040,000 NZD .51580 NZD 8,953 11/23/99
Sell New Zealand dollars, Buy U.S. dollars 493,000 NZD .51815 NZD 5,402 11/23/99
Sell New Zealand dollars, Buy U.S. dollars 4,455,000 NZD .51540 NZD 32,312 1/25/00
Sell New Zealand dollars, Buy U.S. dollars 2,710,000 NZD .51543 NZD 19,723 1/25/00
--------
$ 66,615
========
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
STATE STREET RESEARCH STRATEGIC INCOME FUND
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
October 31, 1999 (Unaudited)
ASSETS
Investments, at value (Cost $119,427,581) (Note 1) ......... $111,459,608
Cash ....................................................... 244
Receivable for securities sold ............................. 8,929,940
Interest and dividends receivable .......................... 2,017,207
Receivable for fund shares sold ............................ 199,025
Receivable for open forward contracts ...................... 107,774
Deferred organization costs and other assets (Note 1) ...... 47,356
------------
122,761,154
LIABILITIES
Payable for securities purchased ........................... 15,732,575
Payable for collateral received on securities loaned ....... 6,723,810
Dividends payable .......................................... 288,196
Payable for fund shares redeemed ........................... 244,382
Accrued management fee (Note 2) ............................ 62,566
Accrued distribution and service fees (Note 4) ............. 56,632
Payable for open forward contracts ......................... 41,159
Accrued transfer agent and shareholder services (Note 2) ... 25,535
Accrued trustees' fees (Note 2) ............................ 8,506
Payable for variation margin (Note 1) ...................... 7,500
Other accrued expenses ..................................... 89,471
------------
23,280,332
------------
NET ASSETS ................................................. $ 99,480,822
============
Net Assets consist of:
Undistributed net investment income ...................... $ 66,842
Unrealized depreciation of investments ................... (7,967,973)
Unrealized appreciation of forward contracts and
foreign currency ....................................... 62,640
Unrealized appreciation of futures contracts ............. 2,775
Accumulated net realized loss ............................ (3,812,481)
Paid-in capital .......................................... 111,129,019
------------
$ 99,480,822
============
Net Asset Value and redemption price per share of Class A
shares ($32,132,285 / 5,001,110 shares) .................. $6.43
=====
Maximum Offering Price per share of Class A
shares ($6.43 / .955) .................................... $6.73
=====
Net Asset Value and offering price per share of
Class B(1) shares ($6,600,111 / 1,030,073 shares)* ....... $6.41
=====
Net Asset Value and offering price per share of
Class B shares ($37,235,960 / 5,809,701 shares)* ......... $6.41
=====
Net Asset Value and offering price per share of
Class C shares ($13,698,593 / 2,137,388 shares)* ......... $6.41
=====
Net Asset Value, offering price and redemption
price per share of Class S shares
($9,813,873 / 1,527,694 shares) .......................... $6.42
=====
- -------------------------------------------------------------------------------
* Redemption price per share for Class B(1), Class B and Class C is equal to
net asset value less any applicable contingent deferred sales charge.
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATE STREET RESEARCH STRATEGIC INCOME FUND
- -------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- -------------------------------------------------------------------------------
For the six months ended October 31, 1999 (Unaudited)
INVESTMENT INCOME
Interest, net of foreign taxes of $11,401 (Note 1) ......... $ 4,509,893
Dividends .................................................. 82,477
------------
4,592,370
EXPENSES
Management fee (Note 2) .................................... 399,679
Custodian fee .............................................. 70,287
Transfer agent and shareholder services (Note 2) ........... 85,356
Registration fees .......................................... 56,133
Service fee-Class A (Note 4) ............................... 42,583
Distribution and service fees-Class B(1) (Note 4) .......... 27,199
Distribution and service fees-Class B (Note 4) ............. 202,559
Distribution and service fees-Class C (Note 4) ............. 79,007
Audit fee .................................................. 21,607
Reports to shareholders .................................... 18,573
Trustees' fees (Note 2) .................................... 8,506
Amortization of organization costs (Note 1) ................ 8,190
Legal fees ................................................. 2,337
Miscellaneous .............................................. 4,668
------------
1,026,684
Fees paid indirectly (Note 2) .............................. (2,609)
------------
1,024,075
------------
Net investment income ...................................... 3,568,295
------------
Net realized loss on investments (Notes 1 and 3) ........... (1,823,860)
Net realized loss on futures contracts (Note 1) ............ (11,947)
Net realized gain on forward contracts and foreign
currency (Note 1) ........................................ 31,324
------------
Total net realized loss .................................. (1,804,483)
------------
Net unrealized depreciation of investments ............... (5,422,266)
------------
Net unrealized depreciation of forward contracts and foreign
currency ................................................ (81,560)
Net unrealized depreciation of futures contracts ........... (3,282)
------------
Total net unrealized depreciation ........................ (5,507,108)
------------
Net loss on investments, forward contracts, foreign
currency and futures contracts ............................. (7,311,591)
------------
Net decrease in net assets resulting from operations ..... $ (3,743,296)
============
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATE STREET RESEARCH STRATEGIC INCOME FUND
- -------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------
SIX MONTHS ENDED
YEAR ENDED OCTOBER 31, 1999
APRIL 30, 1999 (UNAUDITED)
- -------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income .................. $ 7,814,686 $ 3,568,295
Net realized loss on investments,
foreign currency, foward contracts and
futures contracts .................... (1,598,647) (1,804,483)
Net unrealized depreciation of
investments, foreign currency,
forward contracts and futures
contracts ............................ (3,078,282) (5,507,108)
------------ ------------
Net increase (decrease) resulting
from operations ...................... 3,137,757 (3,743,296)
------------ ------------
Dividends from net investment income:
Class A ............................ (3,329,784) (1,232,947)
Class B(1) ......................... (48,325) (175,517)
Class B ............................ (3,122,662) (1,317,385)
Class C ............................ (1,011,221) (513,984)
Class S ............................ (948,209) (401,686)
------------ ------------
(8,460,201) (3,641,519)
------------ ------------
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 (4,825,230)
------------ ------------
Total increase (decrease) in net assets 7,992,184 (12,210,045)
NET ASSETS
Beginning of period .................... 103,698,683 111,690,867
------------ ------------
End of period (including undistributed
net investment income of $140,066 and
$66,842, respectively) ............... $111,690,867 $ 99,480,822
============ ============
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATE STREET RESEARCH STRATEGIC INCOME FUND
- -------------------------------------------------------------------------------
NOTES TO UNAUDITED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
October 31, 1999
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
Metropolitan Life Insurance Company ("Metropolitan"). 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 dealerships 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.
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 approximately $1,956,000 and
intends to defer and treat such losses as arising in the fiscal year ended
April 30, 2000.
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 October 31, 1999, the value of the securities loaned and the value of
collateral were $6,664,153 and $6,723,810, respectively. During the six months
ended October 31, 1999, income from securities lending amounted to $5,759 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 six months ended October 31, 1999, the fees
pursuant to such agreement amounted to $399,679.
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 Metropolitan, provides
certain shareholder services to the Fund such as responding to inquiries and
instructions from investors with respect to the purchase and redemption of
shares of the Fund. During the six months ended October 31, 1999, the amount
of such expenses was $39,744.
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 six months ended October 31, 1999 the
Fund's transfer agent fees were reduced by $2,609 under this agreement.
The fees of the Trustees not currently affiliated with the Adviser amounted to
$8,506 during the six months ended October 31, 1999.
NOTE 3
For the six months ended October 31, 1999, purchases and sales of securities,
exclusive of short-term obligations, aggregated $88,714,926 and $93,850,021,
(including $55,960,999 and $60,488,995 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 six months ended
October 31, 1999, fees pursuant to such plans amounted to $42,583, $27,199,
$202,559 and $79,007 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 $14,332 and $63,690, respectively, on sales of Class A shares of
the Fund during the six months ended October 31, 1999, and that MetLife
Securities, Inc. earned commissions aggregating $46,495 and $16,252 on sales
of Class B(1) and Class B shares, and that the Distributor collected
contingent deferred sales charges aggregating $6,425, $58,384 and $906 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 October 31, 1999,
Metropolitan 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>
SIX MONTHS ENDED
YEAR ENDED OCTOBER 31, 1999
APRIL 30, 1999 (UNAUDITED)
------------------------------ ------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ..................... 1,663,344 $11,724,754 713,713 $ 4,727,332
Issued upon reinvestment of:
Dividends from net investment
income ...................... 184,480 1,287,946 105,612 692,656
Distribution from net realized
gains ....................... 82,187 588,209 -- --
Shares redeemed ................. (2,311,032) (15,949,011) (1,080,866) (7,166,336)
---------- ----------- ---------- -----------
Net decrease .................... (381,021) $(2,348,102) (261,541) $(1,746,348)
========== =========== ========== ===========
<CAPTION>
CLASS B(1) SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ..................... 553,702 $ 3,800,702 534,514 $ 3,533,028
Issued upon reinvestment of
dividends from net investment
income ........................ 3,640 24,932 18,243 118,891
Shares redeemed ................. (14,780) (101,368) (65,246) (428,342)
---------- ----------- ---------- -----------
Net increase .................... 542,562 $ 3,724,266 487,511 $ 3,223,577
========== =========== ========== ===========
<CAPTION>
CLASS B SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ..................... 2,632,299 $18,607,800 170,958 $ 1,126,257
Issued upon reinvestment of:
Dividends from net investment
income ...................... 229,456 1,595,713 134,901 883,259
Distribution from net realized
gains ....................... 69,847 498,378 -- --
Shares redeemed ................. (1,629,177) (11,427,253) (919,237) (6,051,154)
---------- ----------- ---------- -----------
Net increase (decrease) ......... 1,302,425 $ 9,274,638 (613,378) $(4,041,638)
========== =========== ========== ===========
<CAPTION>
CLASS C SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ..................... 1,162,260 $ 8,135,977 332,101 $ 2,247,301
Issued upon reinvestment of:
Dividends from net investment
income ...................... 36,564 249,739 55,070 360,421
Distribution from net realized
gains ....................... 24,066 171,822 -- --
Shares redeemed ................. (711,904) (5,017,485) (572,144) (3,755,590)
---------- ----------- ---------- -----------
Net increase (decrease) ......... 510,986 $ 3,540,053 (184,973) $(1,147,868)
========== =========== ========== ===========
<CAPTION>
CLASS S SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ..................... 105,621 $ 753,209 11,037 $ 74,937
Issued upon reinvestment of:
Dividends from net investment
income ...................... 26,264 183,457 24,582 159,654
Distribution from net realized
gains ....................... 23,933 171,355 -- --
Shares repurchased .............. (52,964) (375,755) (204,178) (1,347,544)
---------- ----------- ---------- -----------
Net increase (decrease) ......... 102,854 $ 732,266 (168,559) $(1,112,953)
========== =========== ========== ===========
- ------------------------------------------------------------------------------------------------------
* January 1, 1999 (commencement of share class) to April 30, 1999.
</TABLE>
<PAGE>
STATE STREET RESEARCH STRATEGIC INCOME FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
For a share outstanding throughout each period:
<CAPTION>
CLASS A
-------------------------------------------------------------------
AUGUST 30, 1996
(COMMENCEMENT OF YEARS ENDED APRIL 30 SIX MONTHS ENDED
OPERATIONS) TO ------------------------ OCTOBER 31, 1999
APRIL 30, 1997(a) 1998(a) 1999(a) (UNAUDITED)(a)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ($) 7.00 7.06 7.33 6.88
----- ----- ----- -----
Net investment income ($)* 0.38 0.55 0.52 0.23
Net realized and unrealized gain (loss) on investments, foreign
currency, forward contracts and futures contracts ($) 0.01 0.38 (0.30) (0.44)
----- ----- ----- -----
TOTAL FROM INVESTMENT OPERATIONS ($) 0.39 0.93 0.22 (0.21)
----- ----- ----- -----
Dividends from net investment income ($) (0.31) (0.55) (0.56) (0.24)
Distributions from net realized gains ($) (0.02) (0.11) (0.11) --
----- ----- ----- -----
TOTAL DISTRIBUTIONS ($) (0.33) (0.66) (0.67) (0.24)
----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD ($) 7.06 7.33 6.88 6.43
===== ===== ===== =====
Total return(b)(%) 5.60(d) 13.70 3.10 (3.07(d)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period ($ thousands) 36,110 41,348 36,227 32,132
Ratio of operating expenses to average net assets (%)* 1.35(e) 1.35 1.35 1.54(e)
Ratio of operating expenses to average net assets after expense
reductions (%)* 1.35(e) 1.35 1.34 1.53(e)
Ratio of net investment income to average net assets (%)* 7.30(e) 7.51 7.36 7.08(e)
Portfolio turnover rate (%) 110.37 179.82 169.92 87.48
*Reflects voluntary reduction of expenses per share of these
amounts ($) 0.01 0.01 0.01 --
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CLASS B(1)
--------------------------------------------
SIX MONTHS ENDED
PERIOD ENDED OCTOBER 31, 1999
APRIL 30, 1999(a)(c) (UNAUDITED)(a)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ($) 6.91 6.87
----- -----
Net investment income ($) 0.12 0.21
Net realized and unrealized gain (loss) on investments, foreign currency,
forward contracts and futures contracts ($) 0.00 (0.45)
----- -----
TOTAL FROM INVESTMENT OPERATIONS ($) 0.12 (0.24)
----- -----
Dividends from net investment income ($) (0.16) (0.22)
----- -----
TOTAL DISTRIBUTIONS ($) (0.16) (0.22)
----- -----
NET ASSET VALUE, END OF PERIOD ($) 6.87 6.41
===== =====
Total return(b) (%) 1.71 (d) (3.58) (d)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period ($ thousands) 3,726 6,600
Ratio of operating expenses to average net assets (%) 2.10 (e) 2.29 (e)
Ratio of operating expenses to average net assets after expense reductions (%) 2.09 (e) 2.28 (e)
Ratio of net investment income to average net assets (%) 6.54 (e) 6.37 (e)
Portfolio turnover rate (%) 169.92 87.48
- -----------------------------------------------------------------------------------------------------------------------------------
(a) Per-share figures have been calculated using the average shares method.
(b) Does not reflect any front-end or contingent deferred sales charge. Total return would be lower if the Distributor and its
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>
STATE STREET RESEARCH STRATEGIC INCOME FUND
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (cont'd)
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS B
-------------------------------------------------------------------
AUGUST 30, 1996
(COMMENCEMENT OF YEARS ENDED APRIL 30 SIX MONTHS ENDED
OPERATIONS) TO ------------------------ OCTOBER 31, 1999
APRIL 30, 1997(a) 1998(a) 1999(a) (UNAUDITED)(a)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ($) 7.00 7.05 7.31 6.87
----- ----- ----- -----
Net investment income ($)* 0.31 0.49 0.47 0.21
Net realized and unrealized gain (loss) on investments, foreign
currency, forward contracts and futures contracts ($) 0.04 0.38 (0.30) (0.45)
----- ----- ----- -----
TOTAL FROM INVESTMENT OPERATIONS ($) 0.35 0.87 0.17 (0.24)
----- ----- ----- -----
Dividends from net investment income ($) (0.28) (0.50) (0.50) (0.22)
Distributions from net realized gains ($) (0.02) (0.11) (0.11) --
----- ----- ----- -----
TOTAL DISTRIBUTIONS ($) (0.30) (0.61) (0.61) (0.22)
----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD ($) 7.05 7.31 6.87 6.41
===== ===== ===== =====
Total return(b)(%) 4.96(d) 12.74 2.49 (3.58)(d)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period ($ thousands) 19,678 37,432 44,110 37,236
Ratio of operating expenses to average net assets (%)* 2.10(e) 2.10 2.10 2.29(e)
Ratio of operating expenses to average net assets after expense
reductions (%)* 2.10(e) 2.10 2.09 2.28(e)
Ratio of net investment income to average net assets (%)* 6.73(e) 6.77 6.63 6.33(e)
Portfolio turnover rate (%) 110.37 179.82 169.92 87.48
*Reflects voluntary reduction of expenses per share of these
amounts ($) 0.01 0.01 0.01 --
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CLASS C
-------------------------------------------------------------------
AUGUST 30, 1996
(COMMENCEMENT OF YEARS ENDED APRIL 30 SIX MONTHS ENDED
OPERATIONS) TO ------------------------ OCTOBER 31, 1999
APRIL 30, 1997(a) 1998(a) 1999(a) (UNAUDITED)(a)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ($) 7.00 7.05 7.31 6.87
----- ----- ----- -----
Net investment income ($)* 0.32 0.49 0.46 0.21
Net realized and unrealized gain (loss) on investments, foreign
currency, forward contracts and futures contracts ($) 0.03 0.38 (0.29) (0.45)
----- ----- ----- -----
TOTAL FROM INVESTMENT OPERATIONS ($) 0.35 0.87 0.17 (0.24)
----- ----- ----- -----
Dividends from net investment income ($) (0.28) (0.50) (0.50) (0.22)
Distributions from net realized gains ($) (0.02) (0.11) (0.11) --
----- ----- ----- -----
TOTAL DISTRIBUTIONS ($) (0.30) (0.61) (0.61) (0.22
----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD ($) 7.05 7.31 6.87 6.41
===== ===== ===== =====
Total return(b)(%) 4.96(d) 12.74 2.49 (3.58)(d)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period ($ thousands) 8,590 13,243 15,949 13,699
Ratio of operating expenses to average net assets (%)* 2.10(e) 2.10 2.10 2.29(e)
Ratio of operating expenses to average net assets after expense
reductions (%)* 2.10(e) 2.10 2.09 2.28(e)
Ratio of net investment income to average net assets (%)* 6.67(e) 6.77 6.62 6.34(e)
Portfolio turnover rate (%) 110.37 179.82 169.92 87.48
*Reflects voluntary reduction of expenses per share of these
amounts ($) 0.01 0.01 0.01 --
- -----------------------------------------------------------------------------------------------------------------------------------
(a) Per-share figures have been calculated using the average shares method.
(b) Does not reflect any front-end or contingent deferred sales charge. Total return would be lower if the Distributor and its
affiliates had not voluntarily reduced a portion of the Fund's expenses.
(c) January 1, 1999 (commencement of share class) to April 30, 1999.
(d) Not annualized.
(e) Annualized.
</TABLE>
<PAGE>
STATE STREET RESEARCH STRATEGIC INCOME FUND
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
CLASS S
-------------------------------------------------------------------
AUGUST 30, 1996
(COMMENCEMENT OF YEARS ENDED APRIL 30 SIX MONTHS ENDED
OPERATIONS) TO ------------------------ OCTOBER 31, 1999
APRIL 30, 1997(a) 1998(a) 1999(a) (UNAUDITED)(a)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ($) 7.00 7.06 7.33 6.89
----- ----- ----- -----
Net investment income ($)* 0.39 0.57 0.54 0.24
Net realized and unrealized gain (loss) on investments, foreign
currency, forward contracts and futures contracts ($) 0.02 0.38 (0.30) (0.46)
----- ----- ----- -----
TOTAL FROM INVESTMENT OPERATIONS ($) 0.41 0.95 0.24 (0.22)
----- ----- ----- -----
Dividends from net investment income ($) (0.33) (0.57) (0.57) (0.25)
Distributions from net realized gains ($) (0.02) (0.11) (0.11) --
----- ----- ----- -----
TOTAL DISTRIBUTIONS ($) (0.35) (0.68) (0.68) (0.25)
----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD ($) 7.06 7.33 6.89 6.42
===== ===== ===== =====
Total return(b)(%) 5.76(d) 13.99 3.51 (3.24)(d)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period ($ thousands) 10,908 11,675 11,679 9,814
Ratio of operating expenses to average net assets (%)* 1.10(e) 1.10 1.10 1.29(e)
Ratio of operating expenses to average net assets after expense
reductions (%)* 1.10(e) 1.10 1.09 1.28(e)
Ratio of net investment income to average net assets (%)* 7.51(e) 7.74 7.62 7.32(e)
Portfolio turnover rate (%) 110.37 179.82 169.92 87.48
*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. Total return would be lower if the Distributor and its
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 STRATEGIC INCOME FUND
- ------------------------------------------------------------------------------------------------------------------
FUND INFORMATION, OFFICERS AND TRUSTEES OF STATE STREET RESEARCH SECURITIES TRUST
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FUND INFORMATION OFFICERS TRUSTEES
STATE STREET RESEARCH RALPH F. VERNI RALPH F. VERNI
STRATEGIC INCOME FUND Chairman of the Board, Chairman of the Board,
One Financial Center President and President, Chief Executive
Boston, MA 02111 Chief Executive Officer Officer and Director,
State Street Research &
INVESTMENT ADVISER PETER C. BENNETT Management Company
State Street Research & Vice President
Management Company BRUCE R. BOND
One Financial Center THOMAS J. DILLMAN Former Chairman of the Board,
Boston, MA 02111 Vice President Chief Executive Officer and
President, PicturTel Corporation
DISTRIBUTOR BARTLETT R. GEER
State Street Research Vice President STEVE A. GARBAN
Investment Services, Inc. Former Senior Vice President
One Financial Center JOHN H. KALLIS for Finance and Operations and
Boston, MA 02111 Vice President Treasurer, The Pennsylvania
State University
SHAREHOLDER SERVICES KIM M. PETERS
State Street Research Vice President MALCOLM T. HOPKINS
Service Center Former Vice Chairman of the
P.O. Box 8408 THOMAS A. SHIVELY Board and Chief Financial
Boston, MA 02266-8408 Vice President Officer, St. Regis Corp.
1-800-562-0032
JAMES M. WEISS DEAN O. MORTON
CUSTODIAN Vice President Former Executive Vice
State Street Bank and President, Chief Operating
Trust Company ELIZABETH MCCOMBS WESTVOLD Officer and Director,
225 Franklin Street Vice President Hewlett-Packard Company
Boston, MA 02110
KENNARD WOODWORTH, JR. SUSAN M. PHILLIPS
LEGAL COUNSEL Vice President Dean, School of Business
Goodwin, Procter & Hoar LLP and Public Management,
Exchange Place GERARD P. MAUS George Washington University;
Boston, MA 02109 Treasurer former Member of the Board
of Governors of the Federal
JOSEPH W. CANAVAN Reserve System and Chairman
Assistant Treasurer of the Commodity Futures
Trading Commission
DOUGLAS A. ROMICH
Assistant Treasurer TOBY ROSENBLATT
President,
FRANCIS J. MCNAMARA, III Founders Investments Ltd.
Secretary and General Counsel President,
The Glen Ellen Company
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 STRATEGIC INCOME FUND -------------------
One Financial Center Bulk Rate
Boston, MA 02111 U.S. Postage
PAID
Canton, MA
Permit #313
-------------------
STATE STREET RESEARCH
- ----------------------
75 YEARS
- ----------------------
LASTING VALUES
- ----------------------
LEADING IDEAS
QUESTIONS? COMMENTS?
CALL us at 1-800-562-0032
[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
EMAIL us at:
[email protected]
INTERNET site:
www.ssrfunds.com
[logo] STATE STREET RESEARCH
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 Strategic Income Fund prospectus.
When used after March 31, 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
CONTROL NUMBER: (exp1200)SSR-LD SI-485G-1299
<PAGE>
--------------------------------
STATE STREET RESEARCH
--------------------------------
GALILEO FUND
--------------------------------
SEMIANNUAL REPORT
October 31, 1999
---------------------
WHAT'S INSIDE
---------------------
INVESTMENT UPDATE
About the Fund,
economy and markets
FUND INFORMATION
Facts and figures
PLUS, COMPLETE PORTFOLIO HOLDINGS
AND FINANCIAL STATEMENTS
-------------------
[DALBAR LOGO]
-------------------
For Excellence
[logo] STATE STREET RESEARCH in
Shareholder Service
<PAGE>
STATE STREET RESEARCH GALILEO FUND
- -------------------------------------------------------------------------------
INVESTMENT UPDATE
- -------------------------------------------------------------------------------
INVESTMENT ENVIRONMENT
THE ECONOMY
o U.S. economic growth slowed considerably in the first half of the period, then
picked up again, suggesting an annualized increase in the gross domestic
product of 4.0% for 1999.
o Although inflation remains low compared to its long-term historical rate, it
rose from approximately 1.6% to 2.6%, fanned by rising commodity prices --
notably oil and gold.
o The Federal Reserve Board raised interest twice during the period, making good
on its promise to fight back at the earliest signs of inflation.
THE MARKETS
o The S&P 500(1), a broad measure of common stock performance, gained a modest
2.74%, for the six-month period. However, Russell 1000 Growth and Russell Mid-
Cap Growth(1) indices rose 7.46% and 8.08%(1) respectively, as investors
continued to focus on a narrow band of stocks that delivered above-average
earnings growth.
o Foreign stock markets outperformed the U.S. markets during the period. The
Morgan Stanley Capital International EAFE Index(1), which tracks stock market
performance in major developed countries outside the U.S., gained 6.73%.
o The bond market slumped during the period as short-term interest rates moved
higher. The Lehman Brothers Aggregate Bond Index(1), a broad measure of bond
market performance, returned -0.15%. The yield on the 30 year U.S. Treasury
bond edged up from 5.8% to 6.1% at the end of the period.
THE FUND
OVER THE PAST SIX MONTHS
o For the six months ended October 31, 1999, Galileo Fund Class A shares gained
2.59% [does not reflect sales charge](2). That was slightly lower than the
average large- cap core fund, which gained 3.07%, according to Lipper
Analytical Services. The fund outperformed the Russell 1000 Index(1), which
returned 2.49% for the same period.
o The fund benefited from an overweight in electronics equipment and computer
software and an underweight in chemicals and tobacco. Likewise, an overweight
in apparel & textiles and an underweight in wireless telecommunications, and
media and telephones hindered performance.
CURRENT STRATEGY
o The fund benefited greatly from its stock selection during the six-month
period. Galileo Fund has a sector neutral structure that is utilized to
highlight the stock selection capability of our analysts. The fund will
continue to utilize this strategy as it is believed to be the key to long-
term performance.
o The sector neutral position the fund holds enables it to take advantage of
both strong and weak markets.
October 31, 1999
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.
(1) The S&P 500 (officially the "Standard and Poor's 500 Stock Price Index") is
an unmanaged index of 500 U.S. stocks. The Morgan Stanley Capital
International EAFE Index is comprised of stocks from Europe, Australasia,
and the Far East. The Lehman Brothers Aggregate Bond Index includes fixed
rate debt issues rated investment grade or higher. Russell 1000 Growth and
Russell Mid-Cap Growth indices include stocks from the Russell 1000 index.
The indices do not take transaction charges into consideration. It is not
possible to invest directly in the indices.
(2) 2.19% for Class B(1) shares; 2.19% for Class B shares; 2.27% for Class C
Shares; 2.76% 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 gain 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.
- --------------------------------------------------------------------------------
FUND INFORMATION (all data are for periods ended October 31, 1999, except
where noted)
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
FOR PERIOD ENDED 9/30/99
(at maximum applicable sales charge)(3)(4)(5)
- ----------------------------------------------------------------------
LIFE OF FUND
(since 3/11/98) 1 YEAR
- ----------------------------------------------------------------------
Class A 5.62% 22.06%
- ----------------------------------------------------------------------
Class B(1) 6.36% 23.63%
- ----------------------------------------------------------------------
Class B 6.41% 23.73%
- ----------------------------------------------------------------------
Class C 8.86% 27.56%
- ----------------------------------------------------------------------
Class S 9.97% 29.84%
- ----------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
(does not reflect sales charge)(3)(5)
- ----------------------------------------------------------------------
LIFE OF FUND
(since 3/11/98) 1 YEAR
- ----------------------------------------------------------------------
Class A 15.12% 28.88%
- ----------------------------------------------------------------------
Class B(1) 14.25% 27.83%
- ----------------------------------------------------------------------
Class B 14.24% 27.81%
- ----------------------------------------------------------------------
Class C 14.29% 27.90%
- ----------------------------------------------------------------------
Class S 15.42% 24.15%
- ----------------------------------------------------------------------
TOP 10 STOCK POSITIONS
(by percentage of net assets)
1 MICROSOFT Computer software 3.0%
2 COLT TELECOM Telecommunications 2.3%
3 GENERAL ELECTRIC Multi sector 2.3%
4 WAL-MART STORES Retail 2.2%
5 VOICESTREAM WIRELESS Telecommunications 2.1%
6 NOKIA Electronics 2.1%
7 WARNER-LAMBERT Pharmaceuticals, consumer products 2.1%
8 CISCO SYSTEMS Computer technology 1.9%
9 CVS Drug retailing 1.9%
10 CITIGROUP Financial services 1.9%
These securities represent an aggregate of 21.8% 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 10.4%
DRUGS & BIOTECHNOLOGY 10.2%
MISCELLANEOUS FINANCIAL 7.7%
RETAIL 6.4%
COMPUTER TECHNOLOGY 6.3%
Total: 41.0%
Performance results for the Fund are increased by the voluntary reduction of
fund fees and expenses; without subsidization, performance would have been
lower.
<PAGE>
<TABLE>
STATE STREET RESEARCH GALILEO FUND
- ------------------------------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
- ------------------------------------------------------------------------------------------------------
October 31, 1999 (Unaudited)
<CAPTION>
- ------------------------------------------------------------------------------------------------------
VALUE
SHARES (NOTE 1)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 99.8%
AUTOMOBILES & TRANSPORTATION 2.1%
AUTOMOTIVE PARTS 1.3%
Delphi Automotive Systems Corp. ................................. 25,436 $ 418,104
Federal-Mogul Corp. ............................................. 12,900 324,113
------------
742,217
------------
RAILROADS 0.8%
Canadian National Railway Co. ................................... 14,000 427,000
------------
Total Automobiles & Transportation .............................. 1,169,217
------------
CONSUMER DISCRETIONARY 12.0%
CASINOS/GAMBLING, HOTEL/MOTEL 1.0%
International Game Technology Inc.* ............................. 15,400 286,825
Mirage Resorts Inc.* ............................................ 18,200 265,037
------------
551,862
------------
COMMERCIAL SERVICES 0.8%
Cendant Corp.* .................................................. 27,700 457,050
------------
COMMUNICATIONS, MEDIA & ENTERTAINMENT 1.4%
Infinity Broadcasting Corp. Cl. A* .............................. 22,400 774,200
------------
CONSUMER PRODUCTS 0.5%
Maytag Corp. .................................................... 7,200 288,450
------------
LEISURE TIME 0.7%
Royal Caribbean Cruises Ltd. .................................... 7,500 397,969
------------
RESTAURANTS 0.5%
McDonald's Corp. ................................................ 6,600 272,250
------------
RETAIL 6.4%
Circuit City Stores Inc. ........................................ 23,900 1,020,231
Costco Wholesale Corp.* ......................................... 3,700 297,041
Home Depot Inc. ................................................. 5,800 437,900
Staples Inc.* ................................................... 25,200 559,125
Wal-Mart Stores, Inc. ........................................... 20,900 1,184,769
------------
3,499,066
------------
SHOES 0.7%
Nike Inc. Cl. B ................................................. 6,800 383,775
------------
Total Consumer Discretionary .................................... 6,624,622
------------
CONSUMER STAPLES 6.4%
BEVERAGES 1.7%
Anheuser-Busch Companies, Inc. .................................. 3,700 265,706
Coca-Cola Co. ................................................... 6,600 389,400
Coca-Cola Enterprises Inc. ...................................... 11,100 283,744
------------
938,850
------------
DRUG & GROCERY STORE CHAINS 2.4%
CVS Corp. ....................................................... 24,600 1,068,562
Kroger Co.* ..................................................... 13,400 278,888
------------
1,347,450
------------
FOODS 0.6%
Quaker Oats Co. ................................................. 4,400 308,000
------------
HOUSEHOLD PRODUCTS 1.7%
Colgate-Palmolive Co. ........................................... 5,000 302,500
Procter & Gamble Co. ............................................ 6,200 650,225
------------
952,725
------------
Total Consumer Staples .......................................... 3,547,025
------------
FINANCIAL SERVICES 16.9%
BANKS & SAVINGS & LOAN 4.0%
Bank of America Corp. ........................................... 9,060 583,238
Chase Manhattan Corp. ........................................... 5,000 436,875
Firstar Corp. ................................................... 24,900 731,437
U.S. Bancorp .................................................... 12,900 478,106
------------
2,229,656
------------
FINANCIAL DATA PROCESSING SERVICES & SYSTEMS 0.7%
First Data Corp. ................................................ 8,500 388,344
------------
INSURANCE 4.5%
Ace Ltd. ........................................................ 15,900 309,056
Hartford Financial Services Group, Inc. ......................... 11,600 601,025
Mutual Risk Management Ltd. ..................................... 19,300 291,913
Saint Paul Companies, Inc. ...................................... 8,900 284,800
Travelers Property Casualty Corp. Cl. A ......................... 10,600 381,600
UNUM Provident Corp. ............................................ 9,200 303,025
XL Capital Ltd. Cl. A ........................................... 5,753 308,864
------------
2,480,283
------------
MISCELLANEOUS FINANCIAL 7.7%
AMBAC Inc. ...................................................... 8,400 501,900
Capital One Financial Corp. ..................................... 12,900 683,700
Citigroup, Inc. ................................................. 19,550 1,058,144
Federal National Mortgage Association ........................... 6,550 463,413
Mellon Financial Corp. .......................................... 16,200 598,387
Merrill Lynch & Company Inc. .................................... 7,400 580,900
Metris Companies Inc. ........................................... 9,600 330,600
------------
4,217,044
------------
Total Financial Services ........................................ 9,315,327
------------
HEALTH CARE 11.3%
DRUGS & BIOTECHNOLOGY 10.2%
Abbott Laboratories Inc. ........................................ 9,200 371,450
American Home Products Corp. .................................... 8,200 428,450
Baxter International Inc. ....................................... 12,800 830,400
Biogen Inc.* .................................................... 11,200 830,200
Pfizer Inc. ..................................................... 19,400 766,300
Pharmacia & Upjohn Inc. ......................................... 4,200 226,537
Schering-Plough Corp. ........................................... 8,640 427,680
SmithKline Beecham PLC .......................................... 9,700 620,800
Warner-Lambert Co. .............................................. 14,300 1,141,319
------------
5,643,136
------------
HOSPITAL SUPPLY 1.1%
Guidant Corp.* .................................................. 11,600 572,750
------------
Total Health Care ............................................... 6,215,886
------------
INTEGRATED OILS 2.1%
INTEGRATED DOMESTIC 1.0%
Amerada Hess Corp. .............................................. 4,800 275,400
Unocal Corp. .................................................... 7,800 269,100
------------
544,500
------------
INTEGRATED INTERNATIONAL 1.1%
Total Fina SA ADR ............................................... 9,200 613,525
------------
Total Integrated Oils ........................................... 1,158,025
------------
MATERIALS & PROCESSING 3.3%
CHEMICALS 0.9%
Dow Chemical Co. ................................................ 4,400 520,300
------------
DIVERSIFIED MANUFACTURING 1.2%
Engelhard Corp. ................................................. 36,600 645,075
------------
PAPER & FOREST PRODUCTS 0.5%
Fort James Corp. ................................................ 10,000 263,125
------------
STEEL 0.7%
Harsco Corp. .................................................... 12,400 365,025
------------
Total Materials & Processing .................................... 1,793,525
------------
OTHER 6.9%
MULTI-SECTOR 6.9%
Allegheny Teledyne Inc. ......................................... 15,100 229,331
General Electric Co. ............................................ 9,200 1,247,175
Seagram Ltd. .................................................... 6,500 320,938
Standard & Poor's Depositary Receipt ............................ 6,700 917,900
Teleflex Inc. ................................................... 6,500 221,406
Tyco International Ltd. ......................................... 22,200 886,612
------------
Total Other ..................................................... 3,823,362
------------
OTHER ENERGY 3.0%
GAS PIPELINES 0.4%
Williams Companies Inc. ......................................... 6,800 255,000
------------
OIL & GAS PRODUCERS 1.2%
Burlington Resources Inc. ....................................... 7,250 252,844
Vastar Resources Inc. ........................................... 6,900 407,531
------------
660,375
------------
OIL WELL EQUIPMENT & SERVICES 1.4%
Baker Hughes Inc. ............................................... 8,900 248,644
Halliburton Co. ................................................. 6,900 260,044
Valero Refining & Marketing Corp. ............................... 13,700 251,737
------------
760,425
------------
Total Other Energy .............................................. 1,675,800
------------
PRODUCER DURABLES 2.6%
AEROSPACE 0.5%
United Technologies Corp. ....................................... 4,800 290,400
------------
ELECTRICAL EQUIPMENT & COMPONENTS 0.6%
Philips Electronics ADR ......................................... 2,868 298,093
------------
MISCELLANEOUS EQUIPMENT 1.0%
Danaher Corp. ................................................... 11,200 541,100
------------
OFFICE FURNITURE & BUSINESS EQUIPMENT 0.5%
Lexmark International Group Inc. Cl. A* ......................... 3,800 296,637
------------
Total Producer Durables ......................................... 1,426,230
------------
TECHNOLOGY 20.7%
COMMUNICATIONS TECHNOLOGY 1.7%
Akamai Technologies Inc.* ....................................... 100 14,519
Lucent Technologies Inc. ........................................ 14,100 905,925
------------
920,444
------------
COMPUTER SOFTWARE 5.4%
Citrix Systems Inc.* ............................................ 6,500 416,813
i2 Technologies Inc.* ........................................... 11,700 923,569
Microsoft Corp.* ................................................ 17,800 1,647,612
------------
2,987,994
------------
COMPUTER TECHNOLOGY 6.3%
Cisco Systems Inc.* ............................................. 14,500 1,073,000
Dell Computer Corp.* ............................................ 10,300 413,287
Electronic Data Systems Corp. ................................... 9,200 538,200
EMC Corp.* ...................................................... 4,600 335,800
Gateway Inc.* ................................................... 5,000 330,313
International Business Machines Corp. ........................... 7,800 767,325
------------
3,457,925
------------
ELECTRONICS 3.5%
Nokia Corp. ADR ................................................. 10,000 1,155,625
Raytheon Co. Cl. B .............................................. 7,100 206,787
Solectron Corp.* ................................................ 7,800 586,950
------------
1,949,362
------------
ELECTRONICS: SEMI-CONDUCTORS/COMPONENTS 3.8%
Altera Corp.* ................................................... 9,300 452,213
Analog Devices Inc.* ............................................ 11,500 610,937
Intel Corp. ..................................................... 13,300 1,029,919
------------
2,093,069
------------
Total Technology ................................................ 11,408,794
------------
UTILITIES 12.5%
ELECTRICAL 1.7%
Illinova Corp. .................................................. 16,000 509,000
Montana Power Co. ............................................... 15,200 432,250
------------
941,250
------------
GAS DISTRIBUTION 0.4%
Questar Corp. ................................................... 14,300 257,400
------------
TELECOMMUNICATIONS 10.4%
Colt Telecom Group PLC ADR* ..................................... 10,800 1,279,800
Equant* ......................................................... 3,700 358,900
Global Crossing Ltd.* ........................................... 9,977 345,454
MCI WorldCom Inc.* .............................................. 11,900 1,021,169
Qwest Communications International Inc.* ........................ 27,052 973,872
Vodafone AirTouch PLC ADR ....................................... 11,900 570,456
Voicestream Wireless Corp.* ..................................... 11,900 1,175,125
------------
5,724,776
------------
Total Utilities ................................................. 6,923,426
------------
Total Common Stocks and Investments
(Cost $46,843,446) - 99.8% .................................... 55,081,239
Other Assets, Less Liabilities - 0.2% ........................... 98,272
------------
Net Assets - 100.0% ............................................. $ 55,179,511
============
Federal Income Tax Information:
At October 31, 1999, the net unrealized appreciation of
investments based on cost for Federal income tax purposes
of $46,949,713 was as follows:
Aggregate gross unrealized appreciation for all investments
in which there is an excess of value over tax cost ............ $ 10,377,414
Aggregate gross unrealized depreciation for all investments
in which there is an excess of tax cost over value ............ (2,245,888)
------------
$ 8,131,526
============
- ------------------------------------------------------------------------------------------------------
* Nonincome-producing securities.
ADR stands for American Depositary Receipt, representing ownership of foreign securities.
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
STATE STREET RESEARCH GALILEO FUND
- -------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- -------------------------------------------------------------------------------
October 31, 1999 (Unaudited)
ASSETS
Investments, at value (Cost $46,843,446) (Note 1) .......... $ 55,081,239
Receivable for securities sold ............................. 1,345,188
Receivable for fund shares sold ............................ 29,214
Receivable from Distributor (Note 3) ....................... 97,623
Dividends and interest receivable .......................... 40,555
Deferred organizational costs and other assets (Note 1) .... 138,260
------------
56,732,079
LIABILITIES
Payable for securities purchased ........................... 1,213,108
Payable to custodian ....................................... 106,208
Payable for fund shares redeemed ........................... 58,200
Accrued management fee (Note 2) ............................ 28,198
Accrued distribution and service fees (Note 5) ............. 25,115
Accrued trustees' fees (Note 2) ............................ 889
Other accrued expenses ..................................... 120,850
------------
1,552,568
------------
NET ASSETS ................................................. $ 55,179,511
============
Net Assets consist of:
Unrealized appreciation of investments ................... $ 8,237,793
Accumulated net realized gain ............................ 716,057
Paid-in capital .......................................... 46,225,661
------------
$ 55,179,511
============
Net Asset Value and redemption price per share of Class A shares
($22,953,694 / 1,912,484 shares) ......................... $12.00
======
Maximum Offering Price per share of Class A
shares ($12.00 / .9425) .................................. $12.73
======
Net Asset Value and offering price per share of
Class B(1) shares ($3,867,066 / 326,405 shares)* ......... $11.85
======
Net Asset Value and offering price per share of
Class B shares ($19,077,315 / 1,609,745 shares)* ......... $11.85
======
Net Asset Value and offering price per share of
Class C shares ($3,339,008 / 281,597 shares)* ............ $11.86
======
Net Asset Value, offering price and redemption
price per share of Class S shares
($5,942,428 / 493,111 shares) ............................ $12.05
======
- -------------------------------------------------------------------------------
*Redemption price per share for Class B(1), Class B and Class C is equal to
net asset value less any applicable contingent deferred sales charge.
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATE STREET RESEARCH GALILEO FUND
- -------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- -------------------------------------------------------------------------------
For the six months ended October 31, 1999 (Unaudited)
INVESTMENT INCOME
Dividends, net of foreign taxes of $2,402 (Note 1) ......... $ 228,797
Interest ................................................... 27,105
------------
255,902
EXPENSES
Management fee (Note 2) .................................... 169,781
Custodian fee .............................................. 91,694
Transfer agent and shareholder services (Note 2) ........... 59,270
Reports to shareholders .................................... 29,591
Service fee-Class A (Note 5) ............................... 26,765
Distribution and service fees-Class B(1) (Note 5) .......... 14,014
Distribution and service fees-Class B (Note 5) ............. 94,756
Distribution and service fees-Class C (Note 5) ............. 16,313
Audit fee .................................................. 12,192
Amortization of organization costs (Note 1) ................ 9,071
Legal fees ................................................. 2,540
Trustees' fees (Note 2) .................................... 889
Miscellaneous .............................................. 635
------------
527,511
Expenses borne by the Distributor (Note 3) ................. (110,691)
Fees paid indirectly (Note 2) .............................. (3,771)
------------
413,049
------------
Net investment loss ........................................ (157,147)
------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments (Notes 1 and 4) ........... 886,981
Net unrealized appreciation of investments ................. 591,205
------------
Net gain on investments .................................... 1,478,186
------------
Net increase in net assets resulting from operations ....... $ 1,321,039
============
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATE STREET RESEARCH GALILEO FUND
- -------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------
SIX MONTHS ENDED
YEAR ENDED OCTOBER 31, 1999
APRIL 30, 1999 (UNAUDITED)
- -------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment loss .................... $ (153,057) $ (157,147)
Net realized gain on investments ....... 90,025 886,981
Net unrealized appreciation
of investments ....................... 7,360,231 591,205
------------ ------------
Net increase resulting
from operations ...................... 7,297,199 1,321,039
------------ ------------
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 .............................. -- (62,973)
Class B(1) ........................... -- (7,209)
Class B .............................. -- (55,820)
Class C .............................. -- (9,776)
Class S .............................. -- (16,841)
------------ ------------
-- (152,619)
------------ ------------
Net increase from fund share
transactions (Note 6) ................ 22,384,425 7,241,197
------------ ------------
Total increase in net assets ........... 29,671,551 8,409,617
NET ASSETS
Beginning of period .................... 17,098,343 46,769,894
------------ ------------
End of period .......................... $ 46,769,894 $ 55,179,511
============ ============
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATE STREET RESEARCH GALILEO FUND
- -------------------------------------------------------------------------------
NOTES TO UNAUDITED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
October 31, 1999
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. Until December 31, 1998, Class A
shares were subject to an initial sales charge of up to 4.50% and effective
January 1, 1999 became subject to an initial sales charge of up to 5.75%.
Class A shares 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 Metropolitan Life Insurance
Company ("Metropolitan"), 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.
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 six months ended October 31, 1999, 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 six months ended October 31, 1999, the fees
pursuant to such agreement amounted to $169,781.
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 Metropolitan, provides
certain shareholder services to the Fund such as responding to inquiries and
instructions from investors with respect to the purchase and redemption of
shares of the Fund. During the six months ended October 31, 1999, the amount
of such expenses was $22,631.
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 six months ended October 31, 1999 the
Fund's transfer agent fees were reduced by $3,771 under this agreement.
The fees of the Trustees not currently affiliated with the Adviser amounted to
$889 during the six months ended October 31, 1999.
NOTE 3
The Distributor and its affiliates may from time to time and in varying
amounts voluntarily assume some portion of fees or expenses relating to the
Fund. During the six months ended October 31, 1999, the amount of such
expenses assumed by the Distributor and its affiliates was $110,691.
NOTE 4
For the six months ended October 31, 1999, purchases and sales of securities,
exclusive of short-term obligations, aggregated $34,489,984 and $25,899,370,
respectively.
NOTE 5
The Trust has adopted plans of distribution pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended. Under the plans, the Fund pays
annual service fees to the Distributor at a rate of 0.25% of average daily net
assets for Class A, Class B(1), Class B and Class C shares. In addition, the
Fund pays annual distribution fees of 0.75% of average daily net assets for
Class B(1), Class B and Class C shares. The Distributor uses such payments for
personal service and/or the maintenance or servicing of shareholder accounts,
to compensate or reimburse securities dealers for distribution and marketing
services, to furnish ongoing assistance to investors and to defray a portion
of its distribution and marketing expenses. For the six months ended October
31, 1999, fees pursuant to such plans amounted to $26,765, $14,014, $94,756
and $16,313 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 $13,513 and $78,797, respectively, on sales of Class A shares of
the Fund during the six months ended October 31, 1999, and that MetLife
Securities, Inc. earned commissions aggregating $20,403 and $22,350 on sales
of Class B(1) and Class B shares, and that the Distributor collected
contingent deferred sales charges aggregating $6,260, $31,524 and $46 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 October 31, 1999,
Metropolitan owned 52,506 Class A shares, 47,172 Class B(1) shares, 5,335
Class B shares, 52,507 Class C shares and 472,546 Class S shares of the Fund.
These transactions break down by share class as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED OCTOBER 31, 1999
APRIL 30, 1999 (UNAUDITED)
-------------------------------- -------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ........................ 1,300,910 $12,827,023 720,444 $8,423,984
Issued upon reinvestment of:
Dividend from net investment
income ....................... 346 3,871 -- --
Distribution from net realized
gains ........................ -- -- 5,257 62,761
Shares redeemed .................... (536,633) (5,339,004) (195,998) (2,256,701)
--------- ----------- --------- ----------
Net increase ....................... 764,623 $ 7,491,890 529,703 $6,230,044
========= =========== ========= ==========
<CAPTION>
CLASS B(1) SHARES* AMOUNT* SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ........................ 155,558 $ 1,695,333 187,865 $2,154,772
Issued upon reinvestment of:
Dividend from net investment
income ....................... 25 278 -- --
Distribution from net realized
gains ........................ -- -- 609 7,200
Shares redeemed .................... (2,833) (31,548) (14,819) (168,518)
--------- ----------- --------- ----------
Net increase ....................... 152,750 $ 1,664,063 173,655 $1,993,454
========= =========== ========= ==========
<CAPTION>
CLASS B SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ........................ 1,541,674 $15,031,738 87,701 $1,007,439
Issued upon reinvestment of:
Dividend from net investment
income ....................... 273 3,041 -- --
Distribution from net realized
gains ........................ -- -- 4,611 54,508
Shares redeemed .................... (401,173) (4,085,786) (142,576) (1,633,350)
--------- ----------- --------- ----------
Net increase (decrease) ............ 1,140,774 $10,948,993 (50,264) ($ 571,403)
========= =========== ========= ==========
<CAPTION>
CLASS C SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ........................ 251,953 $ 2,568,968 24,723 $ 278,520
Issued upon reinvestment of:
Dividend from net investment
income ....................... 5 55 -- --
Distribution from net realized
gains ........................ -- -- 771 9,112
Shares redeemed .................... (43,795) (422,874) (59,156) (693,101)
--------- ----------- --------- ----------
Net increase (decrease) ............ 208,163 $ 2,146,149 (33,662) ($ 405,469)
========= =========== ========= ==========
<CAPTION>
CLASS S SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ........................ 16,658 $ 166,409 126 $ 1,500
Issued upon reinvestment of:
Dividend from net investment
income ....................... 9 85 -- --
Distribution from net realized
gains ........................ -- -- 1,406 16,841
Shares redeemed .................... (3,136) (33,164) (2,040) (23,770)
--------- ----------- --------- ----------
Net increase (decrease) ............ 13,531 $ 133,330 (508) ($ 5,429)
========= =========== ========= ==========
- -------------------------------------------------------------------------------------------------------
* 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 period:
<CAPTION>
CLASS A CLASS B(1)
--------------------------------------------------------- -----------------------------
SIX MONTHS SIX MONTHS
MARCH 11, 1998 ENDED ENDED
(COMMENCEMENT OF OCTOBER 31, PERIOD ENDED OCTOBER 31,
OPERATIONS) TO YEAR ENDED 1999 APRIL 30, 1999
APRIL 30, 1998(a) APRIL 30, 1999(a) (UNAUDITED)(a) 1999(a)(c) (UNAUDITED)(a)
- ---------------------------------------------------------------------------------- -----------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ($) 9.55 9.92 11.73 10.63 11.63
----- ----- ----- ----- -----
Net investment income (loss) ($)* 0.01 (0.01) (0.02) (0.03) (0.06)
Net realized and unrealized gain on
investments ($) 0.36 1.82 0.32 1.03 0.31
----- ----- ----- -----
TOTAL FROM INVESTMENT OPERATIONS ($) 0.37 1.81 0.30 1.00 0.25
----- ----- ----- -----
Dividend from net investment income ($) -- (0.00) -- (0.00) --
Distribution from net realized gains ($) .. -- -- (0.03) -- (0.03)
----- ----- ----- -----
TOTAL DISTRIBUTIONS ($) -- (0.00) (0.03) (0.00) (0.03)
----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD ($) 9.92 11.73 12.00 11.63 11.85
===== ===== ===== ===== =====
Total return(b)(%) 3.87(d) 18.28 2.59(d) 9.44(d)) 2.19(d)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period ($ thousands) 6,132 16,220 22,954 1,776 3,867
Ratio of operating expenses to average
net assets (%)* 1.25(e) 1.27 1.26(e) 2.02(e) 2.01)(e)
Ratio of operating expenses to average
net assets after expense reductions (%)* . 1.25(e) 1.25 1.25(e) 2.00(e) 2.00(e)
Ratio of net investment income (loss) to
average net assets (%)* 0.45(e) (0.09) (0.27)(e) (1.01)(e) (1.03)(e)
Portfolio turnover rate (%) 13.04 134.16 51.34 134.16 51.34
* Reflects voluntary reduction of expenses per
share of these amounts (Note 3) ($) 0.03 0.08 0.03 0.02 0.02
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CLASS B
-----------------------------------------------------------
MARCH 11, 1998
(COMMENCEMENT OF SIX MONTHS ENDED
OPERATIONS) TO YEAR ENDED OCTOBER 31, 1999
APRIL 30, 1998(a) APRIL 30, 1999(a) (UNAUDITED)(a)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ($) 9.55 9.90 11.63
------ ------ ------
Net investment loss ($)* (0.00) (0.09) (0.06)
Net realized and unrealized gain on
investments ($) 0.35 1.82 0.31
------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS ($) 0.35 1.73 0.25
------ ------ ------
Dividend from net investment income ($) -- (0.00) --
Distribution from net realized gains ($) -- -- (0.03)
------ ------ ------
TOTAL DISTRIBUTIONS ($) -- (0.00) (0.03)
------ ------ ------
NET ASSET VALUE, END OF PERIOD ($) 9.90 11.63 11.85
====== ====== ======
Total return(b) (%) 3.66(d) 17.50 2.19(d)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period ($ thousands) 5,142 19,300 19,077
Ratio of operating expenses to average
net assets (%)* 2.00(e) 2.02 2.01(e)
Ratio of operating expenses to average net
assets after expense reductions (%)* 2.00(e) 2.00 2.00(e)
Ratio of net investment loss to average net
assets (%)* (0.31)(e) (0.84) (1.02)(e)
Portfolio turnover rate (%) 13.04 134.16 51.34
*Reflects voluntary reduction of expenses
per share of these amounts (Note 3) ($) 0.03 0.08 0.02
- ---------------------------------------------------------------------------------------------------
(a) Per-share figures have been calculated using the average shares method.
(b) Does not reflect any front-end or contigent deferred sales charges. Total return would be lower
if the Distributor and is affiliates had not voluntarily reduced a portion of the Fund's
expenses.
(c) January 1, 1999 (commencement of share class) to April 30, 1999.
(d) Not annualized.
(e) Annualized.
</TABLE>
<PAGE>
<TABLE>
STATE STREET RESEARCH GALILEO FUND
- -----------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (cont'd)
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS C
-----------------------------------------------------------
MARCH 11, 1998
(COMMENCEMENT OF SIX MONTHS ENDED
OPERATIONS) TO YEAR ENDED OCTOBER 31, 1999
APRIL 30, 1998(a) APRIL 30, 1999(a) (UNAUDITED)(a)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ($) 9.55 9.91 11.63
-------- -------- --------
Net investment loss ($)* (0.00) (0.09) (0.06)
Net realized and unrealized gain on investments ($) 0.36 1.81 0.32
-------- -------- --------
TOTAL FROM INVESTMENT OPERATIONS ($) 0.36 1.72 0.26
-------- -------- --------
Dividend from net investment income ($) -- (0.00) --
Distribution from net realized gains ($) -- -- (0.03)
-------- -------- --------
TOTAL DISTRIBUTIONS ($) -- (0.00) (0.03)
-------- -------- --------
NET ASSET VALUE, END OF PERIOD ($) 9.91 11.63 11.86
======== ======== ========
Total return(b) (%) 3.77(d) 17.36 2.27(d)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period ($ thousands) 1,061 3,667 3,339
Ratio of operating expenses to average net assets (%)* 2.00(e) 2.02 2.01(e)
Ratio of operating expenses to average net assets after expense
reductions (%)* 2.00(e) 2.00 2.00(e)
Ratio of net investment loss to average net assets (%)* (0.13)(e) (0.85) (1.02)(e)
Portfolio turnover rate (%) 13.04 134.16 51.34
*Reflects voluntary reduction of expenses per share of
these amounts (Note 3) ($) 0.04 0.08 0.03
</TABLE>
<TABLE>
<CAPTION>
CLASS S
-----------------------------------------------------------
MARCH 11, 1998
(COMMENCEMENT OF SIX MONTHS ENDED
OPERATIONS) TO YEAR ENDED OCTOBER 31, 1999
APRIL 30, 1998(a) APRIL 30, 1999(a) (UNAUDITED)(a)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ($) 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 0.32
-------- -------- --------
TOTAL FROM INVESTMENT OPERATIONS ($) 0.37 1.84 0.32
-------- -------- --------
Dividend from net investment income ($) -- (0.00) --
Distribution from net realized gains ($) -- -- (0.03)
-------- -------- --------
TOTAL DISTRIBUTIONS ($) -- (0.00) (0.03)
-------- -------- --------
NET ASSET VALUE, END OF PERIOD ($) 9.92 11.76 12.05
======== ======== ========
Total return(b) (%) 3.87(d) 18.59 2.76(d)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period ($ thousands) 4,763 5,806 5,942
Ratio of operating expenses to average net assets (%)* 1.00(e) 1.02 1.01(e)
Ratio of operating expenses to average net assets after
expense reductions (%)* 1.00(e) 1.00 1.00(e)
Ratio of net investment income (loss) to average
net assets (%)* 0.98(e) 0.18 (0.02)(e)
Portfolio turnover rate (%) 13.04 134.16 51.34
*Reflects voluntary reduction of expenses per share of
these amounts (Note 3) ($) 0.06 0.08 0.03
- -----------------------------------------------------------------------------------------------------------------------------------
(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
- -----------------------------------------------------------------------------------------------------------------------------------
FUND INFORMATION, OFFICERS AND TRUSTEES OF STATE STREET RESEARCH SECURITIES TRUST
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
FUND INFORMATION OFFICERS TRUSTEES
<S> <C> <C>
STATE STREET RESEARCH RALPH F. VERNI RALPH F. VERNI
GALILEO FUND Chairman of the Board, Chairman of the Board,
One Financial Center President and President, Chief Executive
Boston, MA 02111 Chief Executive Officer Officer and Director,
State Street Research &
INVESTMENT ADVISER PETER C. BENNETT Management Company
State Street Research & Vice President
Management Company BRUCE R. BOND
One Financial Center THOMAS J. DILLMAN Former Chairman of the Board,
Boston, MA 02111 Vice President Chief Executive Officer
and President,
DISTRIBUTOR BARTLETT R. GEER PictureTel Corporation
State Street Research Vice President
Investment Services, Inc. STEVE A. GARBAN
One Financial Center JOHN H. KALLIS Former Senior Vice President
Boston, MA 02111 Vice President for Finance and Operations and
Treasurer, The Pennsylvania
SHAREHOLDER SERVICES KIM M. PETERS State University
State Street Research Vice President
Service Center MALCOLM T. HOPKINS
P.O. Box 8408 THOMAS A. SHIVELY Former Vice Chairman of the
Boston, MA 02266-8408 Vice President Board and Chief Financial
1-800-562-0032 Officer, St. Regis Corp.
JAMES M. WEISS
CUSTODIAN Vice President DEAN O. MORTON
State Street Bank and Former Executive Vice
Trust Company ELIZABETH MCCOMBS WESTVOLD President, Chief Operating
225 Franklin Street Vice President Officer and Director,
Boston, MA 02110 Hewlett-Packard Company
KENNARD WOODWORTH, JR.
LEGAL COUNSEL Vice President SUSAN M. PHILLIPS
Goodwin, Procter & Hoar LLP Dean, School of Business and
Exchange Place GERARD P. MAUS Public Management, George
Boston, MA 02109 Treasurer Washington University; former
Member of the Board of Governors
JOSEPH W. CANAVAN of the Federal Reserve System and
Assistant Treasurer Chairman and Commissioner of
the Commodity Futures Trading
DOUGLAS A. ROMICH Commission
Assistant Treasurer
TOBY ROSENBLATT
FRANCIS J. MCNAMARA, III President,
Secretary and General Counsel Founders Investments Ltd.
President,
DARMAN A. WING The Glen Ellen Company
Assistant Secretary and
Assistant General Counsel MICHAEL S. SCOTT MORTON
Jay W. Forrester Professor of
AMY L. SIMMONS Management, Sloan School of
Assistant Secretary Management, Massachusetts
Institute of Technology
</TABLE>
<PAGE>
STATE STREET RESEARCH GALILEO FUND -------------------
One Financial Center Bulk Rate
Boston, MA 02111 U.S. Postage
PAID
Canton, MA
Permit #313
-------------------
STATE STREET RESEARCH
- ----------------------
75 YEARS
- ----------------------
LASTING VALUES
- ----------------------
LEADING IDEAS
QUESTIONS? COMMENTS?
CALL us at 1-800-562-0032
[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
EMAIL us at:
[email protected]
INTERNET site:
www.ssrfunds.com
[logo] STATE STREET RESEARCH
This report is prepared for the general information of current shareholders.
This publication must be preceded or accompanied by a current State Street
Galileo Fund prospectus.
When used after March 31, 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
CONTROL NUMBER: (exp1200)SSR-LD GA-487G-1299
<PAGE>
--------------------------------
STATE STREET RESEARCH
--------------------------------
LEGACY FUND
--------------------------------
SEMIANNUAL REPORT
October 31, 1999
---------------------
WHAT'S INSIDE
---------------------
INVESTMENT UPDATE
About the Fund,
economy and markets
FUND INFORMATION
Facts and figures
PLUS, COMPLETE PORTFOLIO HOLDINGS
AND FINANCIAL STATEMENTS
-------------------
[DALBAR LOGO]
-------------------
For Excellence
[logo] STATE STREET RESEARCH in
Shareholder Service
<PAGE>
STATE STREET RESEARCH LEGACY FUND
- --------------------------------------------------------------------------------
INVESTMENT UPDATE
- --------------------------------------------------------------------------------
INVESTMENT ENVIRONMENT
The Economy
o U.S. economic growth slowed considerably in the first half of the period,
then picked up again, suggesting an annualized increase in the gross
domestic product of 4.0% for 1999.
o Although inflation remains low compared to its long-term historical rate, it
rose from approximately 1.6% to 2.6%, fanned by rising commodity prices -
notably oil and gold.
o The Federal Reserve Board raised interest rates twice during the period,
making good on its promise to fight back at the earliest signs of inflation.
The Markets
o The S&P 500(1), a broad measure of common stock performance, gained a modest
2.74% for the six-month period. However, Russell 1000 Growth and Russell
Mid-cap Growth indices rose 7.46% and 8.08%1 respectively, as investors
continued to focus on a narrow band of stocks that delivered above-average
earnings growth.
o Foreign stock markets outperformed the U.S. markets during the period. The
Morgan Stanley Capital International EAFE Index(1), which tracks stock market
performance in major developed countries outside the U.S., gained 6.73%.
o The bond market slumped during the period as short-term interest rates moved
higher. The Lehman Brothers Aggregate Bond Index(1), a broad measure of bond
market performance, returned -0.15%. The yield on the 30 year U.S. Treasury
bond edged up from 5.8% to 6.1% at the end of the period.
THE FUND
Over the Past Six Months
o For the six months ended October 31, 1999, Legacy Fund Class A shares gained
1.46% (does not reflect sales charge)(2). The Fund underperformed the S&P
500, which returned 2.74% for the same period(1).
o The Fund's investments in health care, consumer discretionary, and technology
stocks had above average earnings growth. However, investments in producer
durables and financial services hampered the fund's performance.
Current Strategy
o The Fund continues to invest upwards of 95% of its assets in growth companies
across a variety of industry sectors.
o The weighting amongst the sectors closely mirrors that of the S&P 500.
o The Fund is managed using a buy-and-hold strategy, which enables the manager
to minimize or eliminate realized capital gains.
October 31, 1999
(1)The S&P 500 (officially the "Standard and Poor's 500 Stock Price Index") is
an unmanaged index of 500 U.S. stocks. The Morgan Stanley Capital International
EAFE index is comprised of stocks from Europe, Australasia, and the Far East.
The Lehman Brothers Aggregate Bond Index includes fixed rate debt issues rated
investment grade or higher. Russell 1000 Growth and Russell Mid Cap Growth
indices include stocks from the Russell 1000 index. The indices do not take
transaction charges into consideration. It is not possible to invest directly in
the indices.
(2)1.05% for Class B(1) shares; 1.05% for Class B shares; 1.05% for Class C
shares; 1.52% 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 gain
distributions and income dividends at net asset value.
(4)Performance reflects 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 view-
point, data and transactions, should not be
relied upon as being current thereafter.
- --------------------------------------------------------------------------------
FUND INFORMATION (all data are for periods ended October 31, 1999, except where
noted)
- --------------------------------------------------------------------------------
Average Annual Total Return for period ended 9/30/99
(at maximum applicable sales charge)(3),(4),(5)
<TABLE>
<CAPTION>
Life of Fund
(since 12/31/97) 1 Year
------------------ -----------
<S> <C> <C>
Class A 17.00% 23.03%
- ------------ ----- -----
Class B(1) 18.11% 24.36%
- ------------ ----- -----
Class B 18.16% 24.46%
- ------------ ----- -----
Class C 20.12% 28.36%
- ------------ ----- -----
Class S 21.32% 30.73%
</TABLE>
Average Annual Total Return
(Does not reflect sales charge)(3),(5)
<TABLE>
<CAPTION>
Life of Fund
(since 12/31/97) 1 Year
------------------ -----------
<S> <C> <C>
Class A 23.07% 27.39%
- ------------ ----- -----
Class B(1) 22.15% 26.42%
- ------------ ----- -----
Class B 22.15% 26.42%
- ------------ ----- -----
Class C 22.15% 26.42%
- ------------ ----- -----
Class S 23.39% 27.67%
</TABLE>
Top 10 Stock Positions
(by percentage of net assets)
<TABLE>
<S> <C> <C>
1 General Electric Multi-sector 5.4%
2 Cisco Systems Computer technology 5.1%
3 Total Fina Oil company 4.4%
4 Bristol-Myers Squibb Drugs & biotechnology 3.7%
5 Johnson & Johnson Medical products 3.7%
6 Bank of America Money center banks 3.5%
7 American Express Miscellaneous financial 3.4%
8 Microsoft Computer software 3.4%
9 Procter & Gamble Household products 3.4%
10 FNMA Mortgages 3.3%
</TABLE>
These securities represent an aggregate of 39.3% 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 these tables or in the
text above.
Top 5 Industries
(by percentage of net assets)
<TABLE>
<S> <C>
Drugs & Biotechnology 12.2%
Computer Technology 9.9%
Multi-Sector 8.2%
Miscellaneous Financial 6.7%
Retail 5.7%
</TABLE>
Total: 42.7%
<PAGE>
STATE STREET RESEARCH LEGACY FUND
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
- --------------------------------------------------------------------------------
October 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Value
Shares (Note 1)
---------- ---------------
<S> <C> <C>
COMMON STOCKS 96.3%
Consumer Discretionary 13.4%
Advertising Agencies 2.0%
Interpublic Group of Companies, Inc. .......... 170,000 $ 6,906,250
------------
Communications, Media & Entertainment 3.0%
CBS Corp.* .................................... 204,900 10,001,681
------------
Consumer Services 0.7%
Apollo Group Inc. Cl. A* ...................... 86,000 2,262,875
------------
Restaurants 2.0%
McDonald's Corp. .............................. 164,200 6,773,250
------------
Retail 5.7%
Dayton Hudson Corp. ........................... 131,100 8,472,338
Home Depot Inc. ............................... 139,900 10,562,450
------------
19,034,788
------------
Total Consumer Discretionary ........................... 44,978,844
------------
Consumer Staples 9.5%
Beverages 2.2%
Coca-Cola Co. ................................. 124,900 7,369,100
------------
Drug & Grocery Store Chains 3.9%
CVS Corp. ..................................... 180,900 7,857,844
Kroger Co.* ................................... 242,500 5,047,031
------------
12,904,875
------------
Household Products 3.4%
Procter & Gamble Co. .......................... 108,500 11,378,937
------------
Total Consumer Staples ................................. 31,652,912
------------
Financial Services 12.4%
Banks & Savings & Loan 3.6%
Bank of America Corp. ......................... 183,637 11,821,632
------------
Insurance 2.1%
Ace Ltd. ...................................... 143,100 2,781,506
UNUM Provident Corp. .......................... 128,700 4,239,056
------------
7,020,562
------------
Miscellaneous Financial 6.7%
American Express Co. .......................... 74,200 11,426,800
Federal National Mortgage Association ......... 156,600 11,079,450
------------
22,506,250
------------
Total Financial Services ............................... 41,348,444
------------
</TABLE>
<TABLE>
<CAPTION>
Value
Shares (Note 1)
---------- ---------------
<S> <C> <C>
Health Care 14.2%
Drugs & Biotechnology 12.2%
Amgen Inc.* ................................... 110,500 $ 8,812,375
Bristol-Myers Squibb Co. ...................... 160,300 12,313,044
Johnson & Johnson ............................. 117,400 12,297,650
Pfizer Inc. ................................... 193,700 7,651,150
------------
41,074,219
------------
Hospital Supply 2.0%
Medtronic Inc. ................................ 190,300 6,589,137
------------
Total Health Care .......................................................
47,663,356
------------
Integrated Oils 4.4%
Integrated International 4.4%
Total Fina SA ADR ............................. 221,400 14,764,613
------------
Total Integrated Oils ...................................................
14,764,613
------------
Materials & Processing 2.5%
Chemicals 2.5%
E.I. Du Pont De Nemours & Co. ................. 128,900 8,305,994
------------
Total Materials & Processing ............................................
8,305,994
------------
Other 8.2%
Multi-Sector 8.2%
General Electric Co. .......................... 132,300 17,934,919
Tyco International Ltd. ....................... 239,200 9,553,050
------------
Total Other .............................................................
27,487,969
------------
Producer Durables 5.1%
Machinery 2.4%
Caterpillar Inc. .............................. 149,000 8,232,250
------------
Miscellaneous Equipment 2.7%
Danaher Corp. ................................. 185,800 8,976,462
------------
Total Producer Durables .................................................
17,208,712
------------
Technology 21.4%
Communications Technology 3.2%
Lucent Technologies Inc. ...................... 165,600 10,639,800
------------
Computer Software 5.5%
i2 Technologies Inc.* ......................... 66,300 5,233,556
Microsoft Corp.* .............................. 123,000 11,385,187
Red Hat, Inc.* ................................ 21,100 1,869,988
------------
18,488,731
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
STATE STREET RESEARCH LEGACY FUND
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO (cont'd) STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
October 31, 1999 (Unaudited)
<TABLE>
<CAPTION>
Value
Shares (Note 1)
--------- --------------
<S> <C> <C>
Computer Technology 9.9%
Cisco Systems Inc.* ........................... 229,900 $ 17,012,600
EMC Corp.* .................................... 83,800 6,117,400
International Business Machines Corp. ......... 102,400 10,073,600
------------
33,203,600
------------
Electronics: Semi-Conductors/Components 2.8%
Analog Devices Inc.* .......................... 173,500 9,217,188
------------
Total Technology ...................................... 71,549,319
------------
Utilities 5.2%
Cable Television & Radio 2.2%
MediaOne Group Inc.* .......................... 103,600 7,362,075
------------
Telecommunications 3.0%
MCI WorldCom Inc.* ............................ 118,500 10,168,781
------------
Total Utilities ....................................... 17,530,856
------------
Total Common Stocks (Cost $279,867,107) ............... 322,491,019
------------
</TABLE>
<TABLE>
<CAPTION>
Principal Maturity
Amount Date
------------ ------------
<S> <C> <C> <C>
COMMERCIAL PAPER 3.0%
American Express Credit Corp.,
5.28% .......................... $ 824,000 11/02/1999 824,000
Ford Motor Credit Co., 5.18% ..... 960,000 11/02/1999 960,000
Ford Motor Credit Co., 5.28% ..... 5,705,000 11/02/1999 5,705,000
Merrill Lynch & Company Inc.,
5.28% .......................... 2,513,000 11/02/1999 2,512,632
------------
</TABLE>
<TABLE>
<S> <C>
Total Commercial Paper (Cost $10,001,632) ............. 10,001,632
----------
Total Investments (Cost $289,868,739)--99.3% .......... 332,492,651
Cash and Other Assets, Less Liabilities--0.7% ......... 2,354,065
-----------
Net Assets--100.0% .................................... $334,846,716
============
</TABLE>
<TABLE>
<S> <C>
Federal Income Tax Information:
At October 31, 1999, the net unrealized
appreciation of investments based on cost
for Federal income tax purposes of
$289,868,763 was as follows:
Aggregate gross unrealized appreciation
for all investments in which there is an
excess of value over tax cost ............ $ 50,513,882
Aggregate gross unrealized depreciation
for all investments in which there is an
excess of tax cost over value ............ (7,889,994)
------------
$ 42,623,888
============
</TABLE>
- --------------------------------------------------------------------------------
*Nonincome-producing securities
ADR stands for American Depositary Receipt, representing ownership of foreign
securities.
<TABLE>
<S> <C>
Assets
Investments, at value (Cost $289,868,739) (Note 1) ................ $332,492,651
Cash .............................................................. 732
Receivable for fund shares sold ................................... 2,597,713
Dividends and interest receivable ................................. 211,013
Deferred organization costs and other assets (Note 1) ............. 264,715
------------
335,566,824
Liabilities
Payable for fund shares redeemed .................................. 295,652
Accrued management fee (Note 2) ................................... 170,394
Accrued distribution and service fees (Note 4) .................... 197,077
Accrued trustees' fees (Note 2) ................................... 5,899
Other accrued expenses ............................................ 51,086
------------
720,108
------------
Net Assets $334,846,716
============
Net Assets consist of:
Unrealized appreciation of investments ........................... $ 42,623,912
Accumulated net realized loss .................................... (6,431,795)
Paid-in capital .................................................. 298,654,599
------------
$334,846,716
============
Net Asset Value and redemption price per share of
Class A shares ($102,239,894 [divided by] 6,989,253 shares) ..... $14.63
======
Maximum Offering Price per share of Class A shares
($14.63 [divided by] .9425) ..................................... $15.52
======
Net Asset Value and offering price per share of
Class B(1) shares ($86,930,928 [divided by] 6,025,394 shares)* $14.43
======
Net Asset Value and offering price per share of
Class B shares ($97,097,307 [divided by] 6,729,266 shares)* ..... $14.43
======
Net Asset Value and offering price per share of
Class C shares ($41,900,797 [divided by] 2,904,210 shares)* ..... $14.43
======
Net Asset Value, offering price and redemption price
per share of Class S shares ($6,677,790 [divided by] 454,273
shares) ......................................................... $14.70
======
</TABLE>
- --------------------------------------------------------------------------------
* 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.
3
<PAGE>
STATE STREET RESEARCH LEGACY FUND
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the six months ended October 31, 1999 (Unaudited)
<TABLE>
<S> <C>
Investment Income
Dividends, net of foreign taxes of $25,499 ............... $1,069,015
Interest ................................................. 236,075
----------
1,305,090
Expenses
Management fee (Note 2) .................................. 879,918
Service fee--Class A (Note 4) ............................ 101,297
Distribution and service fees--Class B(1) (Note 4) ....... 281,682
Distribution and service fees--Class B (Note 4) .......... 466,699
Distribution and service fees--Class C (Note 4) .......... 167,561
Registration fees ........................................ 134,008
Custodian fee ............................................ 56,166
Transfer agent and shareholder services (Note 2) ......... 36,907
Reports to shareholders .................................. 28,399
Legal fees ............................................... 12,968
Audit fee ................................................ 10,683
Amortization of organization costs (Note 1) .............. 9,072
Trustees' fees (Note 2) .................................. 5,899
Miscellaneous ............................................ 1,772
----------
2,193,031
Fees paid indirectly (Note 2) ............................ (6,942)
----------
2,186,089
----------
Net investment loss ...................................... (880,999)
----------
Realized and Unrealized Gain (Loss) on Investments
Net realized loss on investments (Notes 1 and 3) ......... (6,078,212)
Net unrealized appreciation of investments ............... 11,440,468
----------
Net gain on investments .................................. 5,362,256
----------
Net increase in net assets resulting from operations ..... $4,481,257
==========
</TABLE>
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six months ended
Year ended October 31, 1999
April 30, 1999 (Unaudited)
---------------- -----------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations:
Net investment loss .................. $ (665,565) $ (880,999)
Net realized loss on
investments ........................ (353,576) (6,078,212)
Net unrealized appreciation of
investments ........................ 28,621,415 11,440,468
------------ ------------
Net increase resulting from
operations ......................... 27,602,274 4,481,257
------------ ------------
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 (Note 5) .............. 135,924,353 126,120,965
------------ ------------
Total increase in net assets ......... 163,469,170 130,602,222
Net Assets
Beginning of period .................. 40,775,324 204,244,494
------------ ------------
End of period ........................ $204,244,494 $334,846,716
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
STATE STREET RESEARCH LEGACY FUND
- --------------------------------------------------------------------------------
NOTES TO UNAUDITED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
October 31, 1999
Note 1
State Street Research Legacy 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 Legacy
Fund, State Street Research Galileo Fund and State Street Research Strategic
Income Fund.
The investment objective of the Fund is 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.
The Fund offers five classes of shares. Until December 31, 1998, Class A shares
were subject to an initial sales charge of up to 4.50% and effective January 1,
1999 became subject to an initial sales charge of up to 5.75%. Class A shares
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 Metropolitan Life Insurance Company ("Metropolitan"), 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 represent 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 the closing price
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.
E. Federal Income Taxes
No provision for Federal income taxes is necessary because the Fund has elected
to qualify under Subchapter M of the Internal Revenue Code and its policy is to
distribute all of its taxable income, including net realized capital gains,
within the prescribed time periods. At April 30, 1999, the Fund had a capital
loss carryforward of $353,559 available, to the extent provided in regulations,
to offset future capital gains, if any, which expires on April 30, 2007.
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.
5
<PAGE>
STATE STREET RESEARCH LEGACY FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 six months ended October 31, 1999, 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 six months ended October 31, 1999, the fees
pursuant to such agreement amounted to $879,918.
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 Metropolitan, provides
certain shareholder services to the Fund such as responding to inquiries and
instructions from investors with respect to the purchase and redemption of
shares of the Fund. During the six months ended October 31, 1999, the amount of
such expenses was $35,785.
The Fund has entered into agreements with its transfer agent and custodian
whereby credits realized as a result of uninvested cash balances and directed
brokerage commissions, respectively, were used to reduce a portion of the Fund's
expenses. During the six months ended October 31, 1999 the Fund's transfer agent
and custodian fees were reduced by $4,514 and $2,428, respectively, under these
agreements.
The fees of the Trustees not currently affiliated with the Adviser amounted to
$5,899 during the six months ended October 31, 1999.
Note 3
For the six months ended October 31, 1999, purchases and sales of securities,
exclusive of short-term obligations, aggregated $151,443,268 and $28,386,478,
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 pays
annual service fees to the Distributor at a rate of 0.25% of average daily net
assets for Class A, Class B(1), Class B and Class C shares. In addition, the
Fund pays annual distribution fees of 0.75% of average daily net assets for
Class B(1), Class B and Class C shares. The Distributor uses such payments for
personal service and/or the maintenance or servicing of shareholder accounts,
to compensate or reimburse securities dealers for distribution and marketing
services, to furnish ongoing assistance to investors and to defray a portion of
its distribution and marketing expenses. For the six months ended October 31,
1999, fees pursuant to such plans amounted to $101,297, $281,682, $466,699 and
$167,561 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 $92,100 and $294,264, respectively, on sales of Class A shares of
the Fund during the six months ended October 31, 1999, and that MetLife
Securities, Inc. earned commissions aggregating $332,330 and $157,052 on sales
of Class B(1) and Class B shares, and that the Distributor collected contingent
deferred sales charges aggregating $25,311, $60,106 and $577 on redemptions of
Class B(1), Class B and Class C shares, respectively, during the same period.
6
<PAGE>
STATE STREET RESEARCH LEGACY FUND
- --------------------------------------------------------------------------------
NOTES (cont'd)
- --------------------------------------------------------------------------------
Note 5
The Trustees have the authority to issue an unlimited number of shares of
beneficial interest, $.001 par value per share. At October 31, 1999,
Metropolitan owned 50,026 Class A shares, 11,799 Class B shares, 50,026 Class C
shares and 387,909 Class S shares of the Fund.
Share transactions were as follows:
<TABLE>
<CAPTION>
Six months ended
Year ended October 31, 1999
April 30, 1999 (Unaudited)
------------------------------ -----------------------------
Class A Shares Amount Shares Amount
- ---------------------------------------------------------------- -------------- --------------- -------------- --------------
<S> <C> <C> <C> <C>
Shares sold .................................................... 3,622,168 $ 45,842,648 3,306,172 $ 47,496,396
Issued upon reinvestment of distribution from net realized gains 919 11,400 -- --
Shares repurchased ............................................. (584,292) (7,001,947) (383,163) (5,501,073)
--------- ------------ --------- ------------
Net increase ................................................... 3,038,795 $ 38,852,101 2,923,009 $ 41,995,323
========= ============ ========= ============
Class B(1) Shares* Amount* Shares Amount
- ---------------------------------------------------------------- ----------- ------------- --------- ------------
Shares sold .................................................... 1,782,571 $ 24,178,751 4,403,021 $ 62,585,749
Shares repurchased ............................................. (69,936) (989,900) (90,262) (1,272,542)
----------- ------------- --------- ------------
Net increase ................................................... 1,712,635 $ 23,188,851 4,312,759 $ 61,313,207
=========== ============= ========= ============
Class B Shares Amount Shares Amount
- ---------------------------------------------------------------- ----------- ------------- --------- ------------
Shares sold .................................................... 5,151,707 $ 63,062,399 936,071 $ 13,298,234
Issued upon reinvestment of distribution from net realized gains 1,370 16,880 -- --
Shares repurchased ............................................. (656,476) (8,053,180) (395,489) (5,587,748)
----------- ------------- --------- ------------
Net increase ................................................... 4,496,601 $ 55,026,099 540,582 $ 7,710,486
=========== ============= ========= ============
Class C Shares Amount Shares Amount
- ---------------------------------------------------------------- ----------- ------------- --------- ------------
Shares sold .................................................... 1,558,281 $ 19,296,668 1,183,540 $ 16,737,837
Issued upon reinvestment of distribution from net realized gains 227 2,800 -- --
Shares repurchased ............................................. (137,612) (1,639,209) (128,025) (1,849,425)
----------- ------------- --------- ------------
Net increase ................................................... 1,420,896 $ 17,660,259 1,055,515 $ 14,888,412
=========== ============= ========= ============
Class S Shares Amount Shares Amount
- ---------------------------------------------------------------- ----------- ------------- --------- ------------
Shares sold .................................................... 87,078 $ 1,205,796 21,792 $ 318,506
Issued upon reinvestment of distribution from net realized gains 184 2,294 -- --
Shares repurchased ............................................. (902) (11,047) (7,343) (104,969)
----------- ------------- --------- ------------
Net increase ................................................... 86,360 $ 1,197,043 14,449 $ 213,537
=========== ============= ========= ============
</TABLE>
- --------------------------------------------------------------------------------
*January 1, 1999 (commencement of share class) to April 30, 1999.
7
<PAGE>
STATE STREET RESEARCH LEGACY FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
For a share outstanding throughout each period:
<TABLE>
<CAPTION>
Class A
----------------------------------------------------------
December 31, 1997
(Commencement of Six months ended
Operations) to Year ended October 31, 1999
April 30, 1998(a) April 30, 1999(a) (Unaudited)(a)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period ($) 10.00 11.66 14.42
----- ----- -----
Net investment income (loss) ($)* 0.00 (0.02) (0.01)
Net realized and unrealized gain on investments ($) 1.66 2.79 0.22
----- ------ ------
Total from investment operations ($) 1.66 2.77 0.21
----- ------ ------
Distribution from net realized gains ($) -- (0.01) --
----- ------ ------
Total distributions ($) -- (0.01) --
----- ------ ------
Net asset value, end of period ($) 11.66 14.42 14.63
===== ====== ======
Total return(b) (%) 16.60(d) 23.73 1.46(d)
Ratios/supplemental data:
Net assets at end of period ($ thousands) 11,984 58,642 102,240
Ratio of operating expenses to average net assets (%)* 1.25(e) 1.20 1.12(e)
Ratio of operating expenses to average net assets after
expense reductions (%)* 1.25(e) 1.19 1.12(e)
Ratio of net investment income (loss) to average net assets (%)* 0.01(e) (0.14) (0.15)(e)
Portfolio turnover rate (%) 6.44 42.09 11.08
*Reflects voluntary reduction of expenses per share of these
amounts ($) 0.04 0.00 --
<CAPTION>
Class B(1)
----------------------------------------
Six months ended
Period ended October 31, 1999
April 30, 1999(a)(c) (Unaudited)(a)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period ($) 13.08 14.28
----- -----
Net investment income (loss) ($)* (0.04) (0.07)
Net realized and unrealized gain on investments ($) 1.24 0.22
------ ------
Total from investment operations ($) 1.20 0.15
------ ------
Distribution from net realized gains ($) -- --
------ ------
Total distributions ($) -- --
------ ------
Net asset value, end of period ($) 14.28 14.43
====== ======
Total return(b) (%) 9.17(d) 1.05(d)
Ratios/supplemental data:
Net assets at end of period ($ thousands) 24,454 86,931
Ratio of operating expenses to average net assets (%)* 1.88(e) 1.87(e)
Ratio of operating expenses to average net assets after
expense reductions (%)* 1.87(e) 1.87(e)
Ratio of net investment income (loss) to average net assets (%)* (1.00)(e) (0.91)(e)
Portfolio turnover rate (%) 42.09 11.08
*Reflects voluntary reduction of expenses per share of these
amounts ($) -- --
</TABLE>
<TABLE>
<CAPTION>
Class B
--------------------------------------------------------
December 31, 1997
(Commencement of Six months ended
Operations) to Year ended October 31, 1999
April 30, 1998(a) April 30, 1999(a) (Unaudited)(a)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period ($) 10.00 11.64 14.28
----- ----- -----
Net investment loss ($)* (0.03) (0.11) (0.06)
Net realized and unrealized gain on investments ($) 1.67 2.76 0.21
------ ------ ------
Total from investment operations ($) 1.64 2.65 0.15
------ ------ ------
Distribution from net realized gains ($) -- (0.01) --
------ ------ ------
Total distributions ($) -- (0.01) --
------ ------ ------
Net asset value, end of period ($) 11.64 14.28 14.43
====== ====== ======
Total return(b) (%) 16.40(d) 22.74 1.05(d)
Ratios/supplemental data:
Net assets at end of period ($ thousands) 19,688 88,383 97,097
Ratio of operating expenses to average net assets (%)* 2.00(e) 1.95 1.87(e)
Ratio of operating expenses to average net assets after
expense reductions (%)* 2.00(e) 1.94 1.87(e)
Ratio of net investment loss to average net assets (%)* (0.76)(e) (0.89) (0.89)(e)
Portfolio turnover rate (%) 6.44 42.09 11.08
*Reflects voluntary reduction of expenses per share of these
amounts ($) 0.04 0.00 --
</TABLE>
- --------------------------------------------------------------------------------
(a) Per share figures have been calculated using the average shares method.
(b) Does not reflect any front-end or contingent deferred sales charges.
(c) January 1, 1999 (commencement of share class) to April 30, 1999.
(d) Not annualized.
(e) Annualized.
8
<PAGE>
STATE STREET RESEARCH LEGACY FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class C
-------------------
December 31, 1997
(Commencement
of Operations) to
April 30, 1998(a)
- -----------------------------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period ($) 10.00
-----
Net investment loss ($)* (0.03)
Net realized and unrealized gain on investments ($) 1.66
------
Total from investment operations ($) 1.63
------
Distribution from net realized gains ($) --
------
Total distributions ($) --
------
Net asset value, end of period ($) 11.63
======
Total return(b) (%) 16.30(d)
Ratios/supplemental data:
Net assets at end of period ($ thousands) 4,977
Ratio of operating expenses to average net assets (%)* 2.00(e)
Ratio of operating expenses to average net assets after expense reductions (%)* 2.00(e)
Ratio of net investment loss to average net assets (%)* (0.69)(e)
Portfolio turnover rate (%) 6.44
*Reflects voluntary reduction of expenses per share of these amounts ($) 0.04
<CAPTION>
Class C
---------------------------------------
Six months ended
Year ended October 31, 1999
April 30, 1999(a) (Unaudited)(a)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period ($) 11.63 14.28
----- -----
Net investment loss ($)* (0.11) (0.06)
Net realized and unrealized gain on investments ($) 2.77 0.21
------ ------
Total from investment operations ($) 2.66 0.15
------ ------
Distribution from net realized gains ($) (0.01) --
------ ------
Total distributions ($) (0.01) --
------ ------
Net asset value, end of period ($) 14.28 14.43
====== ======
Total return(b) (%) 22.85 1.05(d)
Ratios/supplemental data:
Net assets at end of period ($ thousands) 26,399 41,901
Ratio of operating expenses to average net assets (%)* 1.95 1.87(e)
Ratio of operating expenses to average net assets after expense reductions (%)* 1.94 1.87(e)
Ratio of net investment loss to average net assets (%)* (0.90) (0.90)(e)
Portfolio turnover rate (%) 42.09 11.08
*Reflects voluntary reduction of expenses per share of these amounts ($) 0.00 --
</TABLE>
<TABLE>
<CAPTION>
Class S
-------------------
December 31, 1997
(Commencement of
Operations) to
April 30, 1998(a)
- -----------------------------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period ($) 10.00
-----
Net investment income ($)* 0.03
Net realized and unrealized gain on investments ($) 1.65
-----
Total from investment operations ($) 1.68
-----
Distribution from net realized gains ($) --
-----
Total distributions ($) --
-----
Net asset value, end of period ($) 11.68
=====
Total return(b) (%) 16.80(d)
Ratios/supplemental data:
Net assets at end of period ($ thousands) 4,127
Ratio of operating expenses to average net assets (%)* 1.00(e)
Ratio of operating expenses to average net assets after expense reductions (%)* 1.00(e)
Ratio of net investment income to average net assets (%)* 0.60(e)
Portfolio turnover rate (%) 6.44
*Reflects voluntary reduction of expenses per share of these amounts ($) 0.09
<CAPTION>
Class S
-------------------------------------
Six months ended
Year ended October 31, 1999
April 30, 1999(a) (Unaudited)(a)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period ($) 11.68 14.48
----- -----
Net investment income ($)* 0.02 0.01
Net realized and unrealized gain on investments ($) 2.79 0.21
----- -----
Total from investment operations ($) 2.81 0.22
----- -----
Distribution from net realized gains ($) (0.01) --
------ -----
Total distributions ($) (0.01) --
------ -----
Net asset value, end of period ($) 14.48 14.70
====== =====
Total return(b) (%) 24.04 1.52(d)
Ratios/supplemental data:
Net assets at end of period ($ thousands) 6,367 6,678
Ratio of operating expenses to average net assets (%)* 0.95 0.87(e)
Ratio of operating expenses to average net assets after expense reductions (%)* 0.94 0.87(e)
Ratio of net investment income to average net assets (%)* 0.16 0.11(e)
Portfolio turnover rate (%) 42.09 11.08
*Reflects voluntary reduction of expenses per share of these amounts ($) 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 April 30, 1999.
(d) Not annualized.
(e) Annualized.
9
<PAGE>
<TABLE>
STATE STREET RESEARCH LEGACY FUND
- --------------------------------------------------------------------------------
FUND INFORMATION, OFFICERS AND TRUSTEES OF STATE STREET RESEARCH SECURITIES
TRUST
- --------------------------------------------------------------------------------
<CAPTION>
Fund Information Officers Trustees
<S> <C> <C>
State Street Research Ralph F. Verni Ralph F. Verni
Legacy Fund Chairman of the Board, Chairman of the Board,
One Financial Center President and President, Chief Executive
Boston, MA 02111 Chief Executive Officer Officer and Director,
State Street Research &
Investment Adviser Peter C. Bennett Management Company
State Street Research & Vice President
Management Company Bruce R. Bond
One Financial Center Thomas J. Dillman Former Chairman of the Board,
Boston, MA 02111 Vice President Chief Executive Officer and
President, PictureTel Corporation
Distributor Bartlett R. Geer
State Street Research Vice President Steve A. Garban
Investment Services, Inc. Former Senior Vice President
One Financial Center John H. Kallis for Finance and Operations and
Boston, MA 02111 Vice President Treasurer, The Pennsylvania
State University
Shareholder Services Kim M. Peters
State Street Research Vice President Malcolm T. Hopkins
Service Center Former Vice Chairman of the
P.O. Box 8408 Thomas A. Shively Board and Chief Financial
Boston, MA 02266-8408 Vice President Officer, St. Regis Corp.
1-800-562-0032
James M. Weiss Dean O. Morton
Custodian Vice President Former Executive Vice President,
State Street Bank and Chief Operating Officer
Trust Company Elizabeth McCombs Westvold and Director, Hewlett-Packard
225 Franklin Street Vice President Company
Boston, MA 02110
Kennard Woodworth, Jr. Susan M. Phillips
Legal Counsel Vice President Dean, School of Business and
Goodwin, Procter & Hoar LLP Public Management, George
Exchange Place Gerard P. Maus Washington University; former
Boston, MA 02109 Treasurer Member of the Board of Governors
of the Federal Reserve System and
Joseph W. Canavan Chairman and Commissioner of
Assistant Treasurer the Commodity Futures Trading
Commission
Douglas A. Romich
Assistant Treasurer Toby Rosenblatt
President,
Francis J. McNamara, III Founders Investments, Ltd.
Secretary and General Counsel President,
The Glen Ellen Company
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
10
</TABLE>
<PAGE>
[back cover]
State Street Research Legacy Fund ------------
One Financial Center Bulk Rate
Boston, MA 02111 U.S. Postage
PAID
Canton, MA
Permit #313
------------
Questions? Comments?
Call us at 1-800-562-0032, 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
E-mail us at:
[email protected]
Internet site:
www.ssrfunds.com
[State Street Research logo]
This report is prepared for the general information of current shareholders.
This publication must be preceded or accompanied by a current State Street
Research Legacy Fund prospectus. The prospectus contains more complete
information, including sales charges and expenses. Please read the prospectus
carefully before investing.
When used after March 31, 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: (exp1200)SSR-LD LF-486G-1299