<PAGE>
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STATE STREET RESEARCH
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STRATEGIC INCOME FUND
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SEMIANNUAL REPORT
October 31, 2000
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WHAT'S INSIDE
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INVESTMENT UPDATE
About the fund,
economy and markets
FUND INFORMATION
Facts and figures
PLUS, COMPLETE PORTFOLIO HOLDINGS
AND FINANCIAL STATEMENTS
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[DALBAR LOGO]
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For Excellence
in
Service
[Logo] STATE STREET RESEARCH
<PAGE>
STATE STREET RESEARCH STRATEGIC INCOME FUND
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INVESTMENT UPDATE
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INVESTMENT ENVIRONMENT
THE ECONOMY
o The Federal Reserve has orchestrated a modest slowdown of the U.S. economy.
Gross domestic product grew at a 2.7% pace during the third quarter of 2000,
down significantly from previous quarters.
o Inflation remained tame -- though higher than six months ago -- at 3.5%.
o Consumer confidence has remained high in spite of soaring energy prices.
o Unemployment was at a 30-year low of 3.9%.
THE MARKETS
o Equity market performance was rocky during the six-month period, as
investors expressed concern about third quarter earnings reports and the
effects of rising oil prices. The Nasdaq sunk into bear market territory,
ending the period at -12.72%, while the S&P 500 returned -1.03%(1).
o The yield on the bond market's new benchmark, the 10-year intermediate
Treasury bond, fell from 6.31% to 5.75%, helped by optimism about the
economic slowdown plus a federal buyback of bonds. Other areas of the bond
market struggled, especially high-yield bonds.
THE FUND
OVER THE PAST SIX MONTHS
o For the six months ended October 31, 2000, Class A shares of State Street
Research Strategic Income Fund returned -3.21% [does not reflect sales
charge](2). The fund underperformed the Lipper Multi-Sector Income Funds
Average, which returned -0.58% for the same period.
o In an environment of falling interest rates, the fund's performance was hurt
by its shorter-than-market duration.
o The fund's emphasis on high-yield bonds and foreign bonds also hurt
performance.
o The fund's investment in emerging market debt was a positive factor.
CURRENT STRATEGY
o We reduced the fund's high-yield exposure; however, we believe valuations
are attractive.
o We shifted some assets to emerging market debt.
o We plan to lengthen the fund's duration, a measure of sensitivity to
changing interest rates, when and if yield moves up.
October 31, 2000
(1) The S&P 500 (officially the "S&P 500 Composite Stock Price Index") is an
unmanaged index of 500 U.S. stocks. The index does not take transaction
charges into consideration. It is not possible to invest directly in the
index. Lipper Flexible Income Funds Average shows the performance of a
category of mutual funds with similar goals. The Lipper average shows how
well the fund has done compared with competing funds.
(2) -3.55% for Class B(1) shares; -3.71% for Class B shares; -3.71% for Class C
shares; -3.23% for Class S shares.
(3) Keep in mind that past performance is no guarantee of future results. The
fund's share price, yield and return will fluctuate, and you may have a gain
or loss when you sell your shares. All returns assume reinvestment of
capital gains distributions and income dividends at net asset value.
(4) Performance reflects a maximum 4.50% 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.
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.
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FUND INFORMATION (all data are for periods ended October 31, 2000, except
where noted)
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AVERAGE ANNUAL TOTAL RETURN
FOR PERIODS ENDED 9/30/00
(at maximum applicable sales charge)(3)(4)(5)
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LIFE OF FUND
(since 8/30/96) 3 YEARS 1 YEAR
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Class A 3.19% -0.14% -5.12%
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Class B(1) 3.15% -0.19% -5.97%
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Class B 3.15% -0.19% -6.12%
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Class C 3.53% 0.61% -2.44%
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Class S 4.62% 1.66% -0.38%
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AVERAGE ANNUAL TOTAL RETURN
(does not reflect sales charge)(3)(5)
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LIFE OF FUND
(since 8/30/96) 3 YEARS 1 YEAR
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Class A 3.88% 0.68% -2.30%
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Class B(1) 3.06% -0.10% -3.01%
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Class B 3.06% -0.10% -3.02%
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Class C 3.06% -0.10% -3.01%
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Class S 4.10% 0.89% -2.05%
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YIELD
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Class A 8.19%
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Class B(1) 7.79%
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Class B 7.89%
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Class C 7.90%
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Class S 8.90%
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Yield is based on the net investment income produced for the 30 days ended
October 31, 2000.
ASSET ALLOCATION
(by percentage of net assets)
High-Yield Corporate 49%
U.S. Government 26%
International 14%
Finance/Mortgage 7%
Equities 2%
Cash 2%
<PAGE>
STATE STREET RESEARCH STRATEGIC INCOME FUND
<TABLE>
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INVESTMENT PORTFOLIO
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October 31, 2000 (Unaudited)
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<CAPTION>
PRINCIPAL MATURITY VALUE
AMOUNT DATE (NOTE 1)
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<S> <C> <C> <C>
FIXED INCOME SECURITIES 96.6%
U.S. TREASURY 7.5%
U.S. Treasury Bond, 11.625% ....................... $ 325,000 11/15/2004 $ 390,507
U.S. Treasury Bond, 11.25% ........................ 125,000 2/15/2015 187,421
U.S. Treasury Bond, 10.625% ....................... 800,000 8/15/2015 1,159,248
U.S. Treasury Bond, 8.875% ........................ 200,000 2/15/2019 262,844
U.S. Treasury Bond, 6.75% ......................... 800,000 8/15/2026 880,752
U.S. Treasury Bond, 6.125% ........................ 175,000 11/15/2027 178,773
U.S. Treasury Bond, 6.125% ........................ 75,000 8/15/2029 77,672
U.S. Treasury Bond, 6.25% ......................... 100,000 5/15/2030 106,500
U.S. Treasury Note, 6.125% ........................ 600,000 8/31/2002 601,122
U.S. Treasury Note, 5.875% ........................ 800,000 11/15/2004 800,752
U.S. Treasury Note, 6.75% ......................... 50,000 5/15/2005 51,836
U.S. Treasury Note, 5.75% ......................... 150,000 8/15/2010 149,859
U.S. Treasury STRIPS, 0.00% ....................... 600,000 2/15/2021 179,412
U.S. Treasury TIPS, 3.875% ........................ 288,890 4/15/2029 289,973
------------
5,316,671
------------
U.S. AGENCY MORTGAGE 18.7%
Federal National Mortgage Association, 7.125% ..... 575,000 2/15/2005 587,575
Federal National Mortgage Association, 7.00% ...... 150,000 7/15/2005 152,837
Federal National Mortgage Association, 6.625% ..... 400,000 10/15/2007 400,124
Federal National Mortgage Association, 9.00% ...... 448,269 5/01/2009 461,403
Federal National Mortgage Association, 7.25% ...... 50,000 1/15/2010 51,828
Federal National Mortgage Association, 7.125% ..... 425,000 6/15/2010 437,818
Federal National Mortgage Association, 6.50% ...... 233,347 9/01/2028 224,386
Federal National Mortgage Association, 6.50% ...... 942,334 11/01/2028 906,111
Federal National Mortgage Association, 6.00% ...... 390,753 12/01/2028 366,452
Federal National Mortgage Association, 6.50% ...... 268,050 3/01/2029 257,746
Federal National Mortgage Association, 7.50% ...... 627,462 7/01/2029 627,268
Federal National Mortgage Association, 7.00% ...... 2,658,382 12/01/2029 2,604,363
Federal National Mortgage Association, 7.00% ...... 832,777 2/01/2030 816,122
Federal National Mortgage Association, 7.00% ...... 294,241 5/01/2030 288,262
Federal National Mortgage Association, 7.25% ...... 25,000 5/15/2030 26,563
Federal National Mortgage Association TBA, 7.50% .. 1,625,000 12/01/2030 1,622,465
Federal National Mortgage Association TBA, 7.50% .. 600,000 12/01/2030 596,250
Government National Mortgage Association, 7.00% ... 224,307 6/15/2028 221,084
Government National Mortgage Association, 7.00% ... 395,700 7/15/2028 390,014
Government National Mortgage Association, 7.00% ... 224,699 10/15/2028 221,451
Government National Mortgage Association, 6.50% ... 888,326 11/15/2028 857,510
Government National Mortgage Association, 7.00% ... 447,377 6/15/2029 440,943
Government National Mortgage Association TBA, 8.00% 375,000 12/15/2030 381,210
Government National Mortgage Association TBA, 8.00% 325,000 12/15/2030 320,330
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13,260,115
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YANKEE 2.8%
Bombardier Capital Inc. Note, 7.30%+ .............. 375,000 12/15/2002 374,606
Province of Quebec, 7.50% ......................... 150,000 9/15/2029 152,064
Republic of South Africa, 9.125% .................. 325,000 5/19/2009 316,469
United Mexican States, 10.375% .................... 550,000 2/17/2009 584,925
United Mexican States, 10.375% .................... 275,000 2/17/2009 291,527
Woodside Finance Ltd. Note, 6.60%+ ................ 300,000 4/15/2008 283,389
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2,002,980
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FOREIGN GOVERNMENT 11.5%
Brazilian Cruzado
Republic of Brazil, 8.00%> ........................ 461,778 4/15/2014 347,341
Greek Drachma
Republic of Greece, 8.80% ......................... 846,500,000 6/19/2007 2,442,411
New Zealand Dollar
Government of New Zealand, 8.00% .................. 350,000 4/15/2004 144,669
Government of New Zealand, 8.00% .................. 1,250,000 11/15/2006 529,064
Peruvian Sol
Republic of Peru, 4.50% ........................... 500,000 3/07/2017 298,832
Romanian Leu
Republic of Bulgaria, 7.75%(+) .................... 900,000 1/29/2001 673,875
Spanish Peseta
Government of Spain, 6.00% ........................ 1,650,000 1/31/2008 1,444,227
Morocco A Loan Participation, 7.50% ............... $ 725,000 4/02/2001 634,375
Republic of Philippines, 7.938% ................... 551,000 12/01/2009 490,390
Republic of Brazil, 11.625%> ...................... 400,000 4/15/2004 406,500
Republic of Panama, 7.875%(+) ..................... 750,000 2/13/2002 742,500
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8,154,184
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FINANCE/MORTGAGE 6.6%
Capital One Bank Note, 6.62% ...................... 150,000 8/04/2003 145,428
Citibank Credit Card Issuance Trust, 7.05% ........ 375,000 9/15/2005 371,310
Citibank Credit Card Issuance Trust, 6.90% ........ 275,000 10/17/2007 275,730
Citibank Credit Card Master Trust Series 1999 Cl.
A, 5.875% ....................................... 200,000 3/10/2011 186,062
Commerce 1999-1 A1, Mortgage Pass thru Certificate,
6.145% .......................................... 153,687 2/15/2008 149,677
Countrywide Funding Corp. Note, 6.58% . 575,000 9/21/2001 571,331
DLJ Commercial Mortgage Corp., 7.50% . 75,000 9/10/2010 75,363
DLJ Commercial Mortgage Corp. 98-C2 Cl. A1-A,
5.88% ........................................... 642,319 11/12/2031 617,429
ERAC USA Finance Co. Note, 6.625%+ ................ 150,000 2/15/2005 143,814
Ford Motor Credit Owner Trust, 6.58% .............. 125,000 11/15/2004 124,590
Household Finance Corp., 7.875% ................... 225,000 3/01/2007 229,019
Intertek Finance PLC Series B Sr. Sub. Note,
10.25% .......................................... 250,000 11/01/2006 113,750
J P Morgan Commercial Mortgage Finance Corp.,
7.238% .......................................... 150,000 9/15/2029 148,441
LB Commercial Mortgage Trust 98C4-A1, 5.87% ....... 200,723 8/15/2006 194,011
LB Commercial Mortgage Trust 98C4-A1, 6.21% ....... 105,000 10/15/2008 99,684
MBNA Master Credit Card Trust II, 6.60% ........... 225,000 4/16/2007 222,891
MBNA Corp. Sr. Note, 6.12% ........................ 425,000 8/13/2001 421,141
MBNA Master Credit Card Trust II, 6.90% ........... 300,000 1/15/2008 302,063
Morgan Stanley Capital Inc. 98-A1, 6.19% .......... 59,424 1/15/2007 59,461
RBF Finance Co. Sr. Note, 11.375% ................. 200,000 3/15/2009 229,500
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4,680,695
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CORPORATE 49.5%
Abbey Healthcare Group Inc. Note, 9.50% ........... 125,000 11/01/2002 124,063
Advanced Radio Telecom Corp. Sr. Note, 14.00% ..... 300,000 2/15/2007 180,000
AES Corp. Sr. Sec. Note, 9.375% ................... 195,000 9/15/2010 190,222
AES Drax Energy Ltd. Sr. Sec. Note, 11.50%+ ....... 100,000 8/30/2010 105,883
Agriculture Minerals & Chemicals Sr. Note, 10.75% . 50,000 9/30/2003 32,250
Airgate PCS, Inc. Sr. Sub. Note 0.00% to 9/30/2004,
13.50% from 10/1/2004 to maturity ............... 225,000 10/01/2009 129,375
Alaska Steel Corp. Sr. Note, 9.125% ............... 125,000 12/15/2006 123,125
Albertsons Inc. Sr. Deb., 7.45% ................... 225,000 8/01/2029 201,546
Ametek Inc. Sr. Note, 7.20% ....................... 400,000 7/15/2008 367,520
Anchor Gaming Sr. Sub. Note, 9.875%+ .............. 100,000 10/15/2008 101,000
Apple South Inc. Sr. Note, 9.75% .................. 100,000 6/01/2006 75,000
Archibald Candy Corp. Sr. Sec. Note, 10.25% ....... 325,000 7/01/2004 190,125
AT&T Corp. Note, 6.50% ............................ 75,000 3/15/2029 58,902
Ball Corp. Sr. Note, 7.75% ........................ 1,000,000 8/01/2006 940,000
British Sky Broadcasting Group PLC Note, 6.875% ... 620,000 2/23/2009 528,916
Buckeye Cellulose Corp. Sr. Sub. Note, 9.25% ...... 150,000 9/15/2008 148,500
Buckeye Technologies Inc. Sr. Sub. Note, 8.00% .... 125,000 10/15/2010 116,250
Call-Net Enterprises Inc. Sr. Note, 8.00% ......... 500,000 8/15/2008 175,000
Charter Communication Holding LLC Sr. Note, 8.625% 375,000 4/01/2009 334,687
Cheasapeake Energy Corp. Sr. Note Series B, 9.625% 350,000 5/01/2005 351,312
Citigroup Inc. Note, 7.25% ........................ 150,000 10/01/2010 149,045
Clear Channel Communications Sr. Note, 7.21% ...... 125,000 6/15/2002 124,788
Coca-Cola Enterprises Inc. Deb., 6.95% ............ 275,000 11/15/2026 244,469
Columbia/HCA Healthcare Corp. Note, 8.12% ......... 575,000 8/04/2003 564,949
Conseco Inc. Note, 8.75% .......................... 275,000 2/09/2004 174,625
Conseco Inc. Note, 9.00% .......................... 150,000 10/15/2006 92,250
Crown Castle International Corp. Sr. Note, 10.75% . 150,000 8/01/2011 153,000
Dover Corp. Deb., 6.65% ........................... 150,000 6/01/2028 129,561
Drypers Corp. Series B Sr. Note, 10.25%[ ] ....... 900,000 6/15/2007 139,500
Echostar Broadband Corp. Sr Note, 10.375%+ ........ 350,000 10/01/2007 351,750
Econophone Inc. Sr. Note, 13.50% .................. 1,000,000 7/15/2007 s505,000
El Paso Energy Corp. Sr. Note, 6.625% ............. 300,000 7/15/2001 298,245
Electronic Data Systems Corp. Note, 7.125% ........ 150,000 10/15/2009 148,667
Empire Gas Corp. Sr. Sec. Note, 12.875%[ ] ........ 375,000 7/15/2004 112,500
Envirosource Inc. Note, 9.75% ..................... 1,500,000 6/15/2003 532,500
Envirosource Inc. Sr. Note Series B, 9.75% ........ 40,000 6/15/2003 11,600
Extended Stay America Inc. Sr. Sub. Note, 9.15% ... 190,000 3/15/2008 177,650
First Wave Marine Inc. Sr. Note, 11.00% ........... 250,000 2/01/2008 66,875
Ford Motor Credit Co., 7.375% ..................... 775,000 10/28/2009 752,486
Four M Corp. Sr. Sec. Note Series B, 12.00% ....... 225,000 6/01/2006 213,187
Fresenius Medical Care Capital Trust, 9.00% ....... 350,000 12/01/2006 347,375
Frontier Corp. Sr. Note, 9.125% ................... 750,000 2/15/2006 675,000
GE Global Insurance Holding Corp. Note, 7.75% ..... 275,000 6/15/2030 276,050
GNI Group Inc. Sr. Note, 10.875%[ ] ............... 300,000 7/15/2005 30,000
Golden Ocean Group Ltd. Sr. Note, 10.00%[ ] ....... 1,000,000 8/31/2001 180,000
Great Central Mines Ltd. Sr. Note, 8.875% ......... 350,000 4/01/2008 301,000
GTE Corp. Deb., 6.94% ............................. 150,000 4/15/2028 136,322
Gulfmark Offshore Inc. Sr. Note, 8.75% ............ 175,000 6/01/2008 165,156
Healthsouth Corp. Sr. Note, 6.875% ................ 100,000 6/15/2005 85,926
Healthsouth Corp. Sr. Note, 7.00% ................. 125,000 6/15/2008 100,955
Henry Co. Sr. Note Series B, 10.00% ............... 350,000 4/15/2008 141,750
Hollinger International Publishing Inc. Sr. Sub.
Note, 9.25% ..................................... 300,000 2/01/2006 294,000
Hollinger International Publishing Inc. Sr. Sub.
Note, 9.25% ..................................... 150,000 3/15/2007 148,500
Hollywood Casino Note, 13.00% ..................... 250,000 8/01/2006 269,375
Horizon PCS Inc. Sr. Note 0.00% to 9/30/2005,
14.00% from 10/01/2005 to maturity+ ............. 350,000 10/01/2010 166,250
Hyperion Telecommunication Inc. Sr. Sub. Note,
12.00% .......................................... 200,000 11/01/2007 90,000
Iaisis Healthcare Corp. Sr. Note, 13.00% .......... 375,000 10/15/2009 343,125
Intermedia Communications Inc. Sr. Note, 8.60% .... 50,000 6/01/2008 46,750
International Game Technology Inc. Sr. Note, 8.375% 400,000 5/15/2009 388,000
International Knife & Saw Inc. Sr. Sub. Note,
11.375% ......................................... 585,000 11/15/2006 310,781
International Paper Co. Note, 8.00%+ .............. 300,000 7/08/2003 303,882
International Shipholding Corp. Sr. Note Series B,
7.75% ........................................... 400,000 10/15/2007 348,500
Intersil Corp. Sr. Note, 13.25% ................... 177,000 8/15/2009 201,780
J. Crew Group Inc. Sr. Note, 0.00% to 10/14/2002,
13.125% from 10/15/2002 to maturity ............. 1,425,000 10/15/2008 819,375
J. Crew Operating Corp. Sr. Sub. Note, 10.375% .... 400,000 10/15/2007 352,000
J.B. Poindexter Inc. Sr. Note, 12.50% ............. 625,000 5/15/2004 584,375
J.H. Heafner Inc. Sr. Note Series D, 10.00% ....... 400,000 5/15/2008 112,000
K-III Communications Corp. Sr. Note, 8.50% ........ 255,000 2/01/2006 242,887
Kaiser Aluminum & Chemical Corp. Sr. Sub. Note,
12.75% .......................................... 500,000 2/01/2003 375,000
Lear Corp. Sr. Note, 7.96% ........................ 380,000 5/15/2005 354,597
LIN Television Corp. Sr. Note, 8.375% ............. 125,000 3/01/2008 116,250
Loehmann's Inc. Sr. Note, 11.875%[ ] .............. 500,000 5/15/2003 129,375
Luiginos Inc. Sr. Sub. Note, 10.00% ............... 130,000 2/01/2006 102,700
Lyondell Chemical Co. Sr. Sec. Note Series A,
9.625% .......................................... 50,000 5/01/2007 48,500
Magellan Health Services Inc. Sr. Sub. Note, 9.00% 150,000 2/15/2008 99,000
Mandalay Resort Group Sr. Sub. Note, 10.25% ....... 150,000 8/01/2007 153,750
MGM Grand Inc. Sr. Sub. Note, 9.75% ............... 150,000 6/01/2007 155,438
MGM Mirage Inc. Sr. Note, 8.50% ................... 160,000 9/15/2010 158,286
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 503,750
New Jersey Economic Development Authority, 7.425% . 175,000 2/15/2029 173,033
Newpark Resources Inc. Sr. Sub. Note Series B,
8.625% .......................................... 540,000 12/15/2007 499,500
Nextel Partners Inc. Sr. Note, 11.00% ............. 200,000 3/15/2010 200,000
North Atlantic Trading Inc. Sr. Note, 11.00% ...... 1,000,000 6/15/2004 835,000
North Point Communications Sr. Note, 12.875% ...... 600,000 2/15/2010 567,000
Ocean Energy Corp. Sr. Sub. Note, 8.625% .......... 100,000 8/01/2005 100,250
Ocean Energy Inc. Series B Sr. Note, 7.625% ....... 125,000 7/01/2005 120,938
Owens Illinois Inc. Sr. Note, 7.85% ............... 500,000 5/15/2004 375,000
Packaging Resources Inc. Sr. Sec. Note, 11.625% ... 300,000 5/01/2003 295,500
Pagemart Nationwide Inc. Sr. Note, 0.00% to
1/31/2000, 15.00% from 2/1/2000 to maturity ..... 995,000 2/01/2005 915,400
Park Place Entertainment Corp. Sr. Sub. Note,
9.375% .......................................... 500,000 2/15/2007 503,750
Peco Energy Transport Trust Series 1999A Cl. A6,
6.05% ........................................... 400,000 3/01/2009 382,584
Pioneer Americans Acquisition Corp. Sr. Sec. Note
Series B, 9.25% ................................. 750,000 6/15/2007 337,500
Plains Resources Inc. Sr. Sub. Note, 10.25%+ ...... 100,000 3/15/2006 100,500
Pogo Producing Co. Sr. Sub. Note,
8.75% ........................................... 500,000 5/15/2007 485,000
Pool Energy Services Co. Sr. Sub. Note, 8.625% .... 225,000 4/01/2008 228,375
Primus Telecommunications Group Sr. Note, 11.75% .. 750,000 8/01/2004 386,250
Primus Telecommunications Inc. Sr. Note, 12.75% ... 75,000 10/15/2009 37,313
PSINet Inc. Sr. Note, 11.00% ...................... 350,000 8/01/2009 169,750
PSINet, Inc. Sr. Note, 10.50% ..................... 165,000 12/01/2006 90,750
Quest Diagnostics Inc. Sr. Sub. Note, 10.75% ...... 1,000,000 12/15/2006 1,058,750
Rhythms Netconnections Inc. Sr. Note, 14.00% ...... 250,000 2/15/2010 115,000
Rose Hills Co. Sr. Sub. Note, 9.50% ............... 500,000 11/15/2004 298,750
RSL Communications Ltd. Sr. Note, 12.25% .......... 475,000 11/15/2006 111,625
Safety-Kleen Services Inc. Sr. Sub. Note,
9.25%[ ] ........................................ 350,000 6/01/2008 5,688
Safeway Inc. Note, 7.00% .......................... 300,000 9/15/2002 300,084
Scotts Co. Sr. Sub. Note, 8.625%+ ................. 70,000 1/15/2009 67,200
Sheffield Steel Corp. Note Series B, 11.50% ....... 250,000 12/01/2005 137,500
Simonds Industries Inc. Sr. Sub. Note, 10.25% ..... 200,000 7/01/2008 141,000
Sprint Capital Corp., 7.625% ...................... 150,000 6/10/2002 150,473
Startec Global Communications Corp. Sr. Note,
12.00% .......................................... 750,000 5/15/2008 558,750
Stater Brothers Holdings Inc. Sr. Note, 10.75% .... 275,000 8/15/2006 217,250
Stericycle Inc. Sr. Sub. Note Series B, 12.375% ... 125,000 11/15/2009 131,875
Tekni Plex Inc. Sr. Sub. Note, 12.75% ............. 155,000 6/15/2010 154,317
Tembec Industries Inc. Sr. Note, 8.625% ........... 250,000 6/30/2009 247,500
Terra Industries Sr. Note, 10.50% ................. 100,000 6/15/2005 62,250
Tom's Foods Inc. Sr. Sec. Note, 10.50% ............ 500,000 11/01/2004 327,500
Transwestern Publishing Co. Sr. Sub. Note Series D,
9.625% .......................................... 250,000 11/15/2007 248,750
U.S. West Capital Funding Inc. Note, 6.375% ....... 175,000 7/15/2008 162,906
US Unwired Inc. Sr. Sub Note, 0.00% to 10/31/2004,
13.375% from 11/01/2004 to maturity ............. 11/01/2009 396,000
USA Waste Services Inc. Sr. Note, 7.00% ........... 750,000 10/01/2004 707,056
Viatel Inc. Sr. Note, 11.50% ...................... 233,000 3/15/2009 122,325
Viatel Inc. Sr. Note, 0.00% to 4/14/2003, 12.50%
from 4/15/2003 to maturity ...................... 500,000 4/15/2008 147,500
Waste Management Inc. Note, 7.70% ................. 1,000,000 10/01/2002 983,880
Westinghouse Air Brake Co. Sr. Note Series B2,
9.375% .......................................... 150,000 6/15/2005 145,500
Williams Communications Group Sr. Note, 11.70%+ ... 40,000 8/01/2008 35,500
Williams Communications Group Sr. Note, 10.875% ... 440,000 10/01/2009 370,700
Winstar Communication Inc. Sr. Note, 12.50% ....... 325,000 4/15/2008 235,625
Winstar Communications Inc. Sr. Note, 12.75%+ ..... 150,000 4/15/2010 107,260
World Access Inc. Sr. Note, 13.25% ................ 500,000 1/15/2008 363,125
------------
35,050,615
------------
Total Fixed Income Securities (Cost $78,635,368) ......................................... 68,465,260
------------
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VALUE
SHARES (NOTE 1)
-----------------------------------------------------------------------------------------------------------------
COMMON STOCKS & OTHER 1.7%
AirGate PCS, Inc. Com.* ............................................. 1,396 $ 54,270
Ameriking Inc. Com.*+ ............................................... 300 3,000
Ameriking Inc. Sr. Exch. Pfd.> ........ 19,357 87,106
Hollinger International, Inc. Cl. A Com. ............................ 34,600 534,147
Loral Space & Communications Ltd. Com.* ............................. 606 3,444
North Atlantic Trading Inc. Sr. Pfd.> . 14,696 253,506
Pathmark Stores Inc. Com.* .......................................... 8,002 125,531
Phase Metrics Inc. Com.* ............................................ 36,136 49,998
Primus Telecommunications Group Wts.*+ .............................. 500 1,313
RSL Communications Ltd. Com. Cl. A* ................................. 1,987 2,484
Startec Global Communications Wts.*+ ................................ 750 188
Viatel Inc. Com.* ................................................... 8,000 77,000
World Access Inc. Com.* ............................................. 1,571 7,659
------------
Total Common Stocks & Other (Cost $2,023,569) ............................................ 1,199,646
------------
SHORT-TERM INVESTMENTS 10.9%
State Street Navigator Securities Lending
Prime Portfolio, ....................................................... 7,701,240 7,701,240
------------
Total Short-Term Investments (Cost $7,701,240) ........................................... 7,701,240
------------
-----------------------------------------------------------------------------------------------------------------
PRINCIPAL MATURITY VALUE
AMOUNT DATE (NOTE 1)
-----------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER 5.4%
American Express Credit Corp., 6.58% .............. $1,821,000 11/02/2000 $ 1,821,000
American Express Credit Corp., 6.47% .............. 243,000 11/16/2000 243,000
Ford Motor Credit Co., 6.50% ...................... 411,000 11/01/2000 411,000
Household Finance Corp., 6.49% .................... 1,183,000 11/13/2000 1,183,000
Merrill Lynch & Company Inc., 6.48% ............... 143,000 11/13/2000 142,691
------------
Total Commercial Paper (Cost $3,800,691) ................................................. 3,800,691
------------
Total Investments (Cost $92,160,868) -- 114.6% ........................................... 81,166,837
Cash and Other Assets, Less Liabilities -- (14.6%) ....................................... (10,315,034)
------------
Net Assets - 100.0% ...................................................................... $ 70,851,803
============
Federal Income Tax Information:
At October 31, 2000, the net unrealized depreciation of investments based on cost for
Federal income tax purposes of $92,164,309 was as follows:
Aggregate gross unrealized appreciation for all investments in which there is an excess of
value over tax cost .................................................................... $ 727,748
Aggregate gross unrealized depreciation for all investments in which there is an excess of
tax cost over value .................................................................... (11,725,220)
------------
$(10,997,472)
============
------------------------------------------------------------------------------------------------------------------
* Nonincome-producing securities.
+ Security restricted in accordance with Rule 144A under the Securities Act of 1933, which allows for the resale of such secur
ities among certain qualified buyers. The total cost and market value of Rule 144A securities owned at October 31, 2000 were
$2,27 0,152 and $2,145,535 (3.03% of net assets), respectively.
(+) Interest rates on these floating-rate bonds will reset annually or biannually based on the six month London Interbank Offere d
Rate (LIBOR) plus .8125%.
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.
</TABLE>
Futures contracts open at October 31, 2000, are as follows:
UNREALIZED
NOTIONAL EXPIRATION APPRECIATION
TYPE AMOUNT MONTH (DEPRECIATION)
------------------------------------------------------------------------------
5 Year U.S. Treasury Note $300,000 December, 2000 $ 448
10 Year U.S. Treasury Note 900,000 December, 2000 (8,188)
-------
$(7,740)
=======
<TABLE>
Forward currency exchange contracts outstanding at October 31, 2000, are as follows:
<CAPTION>
UNREALIZED
CONTRACT APPRECIATION DELIVERY
TOTAL VALUE PRICE (DEPRECIATION) DATE
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Buy New Zealand dollars, Sell U.S. dollars 20,000 NZD 0.44903 NZD $(1,048) 11/20/00
Sell New Zealand dollars, Buy U.S. dollars 836,000 NZD 0.40202 NZD 4,507 11/20/00
Sell New Zealand dollars, Buy U.S. dollars 884,000 NZD 0.40201 NZD 4,762 11/20/00
-------
$ 8,221
=======
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATE STREET RESEARCH STRATEGIC INCOME FUND
--------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
--------------------------------------------------------------------------------
October 31, 2000 (Unaudited)
ASSETS
Investments, at value (Cost $92,160,868) (Note 1) .............. $ 81,166,837
Cash ........................................................... 112,693
Interest and dividends receivable .............................. 1,689,476
Receivable for securities sold ................................. 1,522,468
Receivable for fund shares sold ................................ 29,628
Receivable for open forward contracts .......................... 9,269
Receivable for variation margin (Note 1) ....................... 1,922
Deferred organization costs and other assets (Note 1) 10,723
------------
84,543,016
LIABILITIES
Payable for collateral received on securities loaned ........... 7,701,240
Payable for securities purchased ............................... 4,781,767
Payable for fund shares redeemed ............................... 736,383
Dividends payable .............................................. 225,595
Accrued management fee (Note 2) ................................ 44,733
Accrued distribution and service fees (Note 4) ................. 38,061
Accrued administration fee ..................................... 28,100
Accrued trustees' fees (Note 2) ................................ 4,968
Payable for open forward contracts ............................. 1,048
Other accrued expenses ......................................... 129,318
------------
13,691,213
------------
NET ASSETS $ 70,851,803
============
Net Assets consist of:
Unrealized depreciation of investments ....................... $(10,994,031)
Unrealized depreciation of forward contracts and
foreign currency ........................................... (4,076)
Unrealized depreciation of futures contracts ................. (7,740)
Accumulated net realized loss ................................ (8,417,959)
Paid-in capital .............................................. 90,275,609
------------
$ 70,851,803
============
Net Asset Value and redemption price per share of Class A shares
($23,652,285 / 4,067,436 shares) ............................. $5.82
=====
Maximum Offering Price per share of Class A shares
($5.82 / .955) ............................................... $6.09
=====
Net Asset Value and offering price per share of
Class B(1) shares ($7,278,310 / 1,255,666 shares)* ........... $5.80
=====
Net Asset Value and offering price per share of
Class B shares ($25,044,183 / 4,318,393 shares)* ............ $5.80
=====
Net Asset Value and offering price per share of
Class C shares ($5,766,544 / 994,543 shares)* ............. $5.80
=====
Net Asset Value, offering price and redemption
price per share of Class S shares
($9,110,481 / 1,567,606 shares) .............................. $5.81
=====
--------------------------------------------------------------------------------
* 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, 2000 (Unaudited)
INVESTMENT INCOME
Interest, net of foreign taxes of $73 (Note 1) ............. $ 3,392,054
Dividends .................................................. 49,936
-----------
3,441,990
EXPENSES
Management fee (Note 2) .................................... 292,152
Custodian fee .............................................. 92,552
Distribution and service fees-Class A (Note 4) ............. 39,239
Distribution and service fees-Class B(1) (Note 4) .......... 37,178
Distribution and service fees-Class B (Note 4) ............. 139,341
Distribution and service fees-Class C (Note 4) ............. 34,449
Registration fees .......................................... 58,512
Transfer agent and shareholder services (Note 2) ........... 51,900
Administration fee ......................................... 28,100
Reports to shareholders .................................... 27,784
Audit fee .................................................. 24,840
Amortization of organization costs (Note 1) ................ 8,190
Trustees' fees (Note 2) .................................... 4,968
Legal fees ................................................. 3,496
Miscellaneous .............................................. 2,072
-----------
844,773
Fees paid indirectly (Note 2) .............................. (2,952)
-----------
841,821
-----------
Net investment income ...................................... 2,600,169
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
FOREIGN CURRENCY, FORWARD CONTRACTS AND FUTURES CONTRACTS
Net realized loss on investments (Notes 1 and 3) ........... (3,011,076)
Net realized loss on futures contracts (Note 1) ............ (66,719)
Net realized gain on forward contracts and foreign
currency (Note 1) ........................................ 42,916
-----------
Total net realized loss .................................. (3,034,879)
-----------
Change in unrealized depreciation of investments ........... (2,097,324)
Change in unrealized depreciation of forward contracts
and foreign currency ..................................... (146,260)
Change in unrealized depreciation of futures contracts ..... (3,336)
-----------
Total change in unrealized depreciation .................. (2,246,920)
-----------
Net loss on investments, forward contracts, foreign
currency and futures contracts ............................. (5,281,799)
-----------
Net decrease in net assets resulting from operations ....... $(2,681,630)
===========
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATE STREET RESEARCH STRATEGIC INCOME FUND
--------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED OCTOBER 31, 2000
APRIL 30, 2000 (UNAUDITED)
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income ............................... $ 6,808,233 $ 2,600,169
Net realized loss on investments, foreign currency,
foward contracts and futures contracts ............ (3,303,161) (3,034,879)
Change in unrealized depreciation of investments,
foreign currency, forward contracts and futures
contracts ......................................... (6,363,477) (2,246,920)
------------- -------------
Net decrease resulting from operations .............. (2,858,405) (2,681,630)
------------- -------------
Dividends from net investment income:
Class A ......................................... (2,367,113) (998,670)
Class B(1) ...................................... (419,139) (257,715)
Class B ......................................... (2,474,869) (971,697)
Class C ......................................... (873,066) (242,211)
Class S ......................................... (780,960) (381,698)
------------- -------------
(6,915,147) (2,851,991)
------------- -------------
Net decrease from fund share
transactions (Note 5) ............................. (18,639,036) (6,892,855)
------------- -------------
Total decrease in net assets ........................ (28,412,588) (12,426,476)
NET ASSETS
Beginning of period ................................. 111,690,867 83,278,279
------------- -------------
End of period (including undistributed net investment
income of $119,085 and $0, respectively) .......... $ 83,278,279 $ 70,851,803
============= =============
</TABLE>
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, 2000
NOTE 1
State Street Research Strategic Income Fund (the "Fund") is a series of State
Street Research Securities Trust (the "Trust"), which was organized as a
Massachusetts business trust in January 1994 and is registered under the
Investment Company Act of 1940, as amended, as an open-end management
investment company. The Trust consists presently of five separate funds:
State Street Research Strategic Income Fund, State Street Research Legacy
Fund, State Street Research Galileo Fund, State Street Research Concentrated
Large-Cap Value Fund and State Street Research Tax-Managed Small-Cap 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 uses an asset allocation strategy, investing primarily in
three major categories of fixed-income securities: investment grade, lower
quality and foreign securities.
The Fund offers five classes of shares. Class A shares are subject to an
initial sales charge of up to 4.50% and pay an annual service and distribution
fee of 0.30% of average daily net assets. Class B(1) shares are offered 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 service and distribution 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 service and distribution fees of 1.00%. Class S shares are
only offered through certain employee retirement accounts, advisory accounts
of State Street Research & Management Company (the "Adviser"), an indirect
wholly owned subsidiary of MetLife, Inc. ("MetLife"), 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 service or distribution 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. At April 30, 2000, the Fund had a capital
loss carryforward of $3,860,441 available, to the extent provided in
regulations, to offset future capital gains, if any, which expires April 30,
2008.
In order to meet certain excise tax distribution requirements under Section
4982 of the Internal Revenue Code, the Fund is required to measure and
distribute annually, if necessary, net capital gains realized during a twelve-
month period ending October 31. In this connection, the Fund is permitted to
defer into its next fiscal year any net capital losses incurred between each
November 1 and the end of its fiscal year. From November 1, 1999 through April
30, 2000, the Fund incurred net capital losses of approximately $1,472,000 and
intends to defer and treat such losses as arising in the fiscal year ended
April 30, 2001.
F. DEFERRED ORGANIZATION COSTS
Certain costs incurred in the organization and registration of the Fund were
capitalized and are being amortized under the straight-line method over a
period of five years.
G. FORWARD CONTRACTS AND FOREIGN CURRENCIES
The Fund enters into forward foreign currency exchange contracts in order to
hedge its exposure to changes in foreign currency exchange rates on its
foreign portfolio holdings and to hedge certain purchase and sale commitments
denominated in foreign currencies. A forward foreign currency exchange
contract is an obligation by the Fund to purchase or sell a specific currency
at a future date, which may be any fixed number of days from the origination
date of the contract. Forward foreign currency exchange contracts establish an
exchange rate at a future date. These contracts are transferable in the
interbank market conducted directly between currency traders (usually large
commercial banks) and their customers. Risks may arise from the potential
inability of a counterparty to meet the terms of a contract and from
unanticipated movements in the value of foreign currencies relative to the
U.S. dollar. The aggregate principal amount of forward currency exchange
contracts is recorded in the Fund's accounts. All commitments are marked-to-
market at the applicable transaction rates resulting in unrealized gains or
losses. The Fund records realized gains or losses at the time the forward
contracts are extinguished by entry into a closing contract or by delivery of
the currency. Neither spot transactions nor forward currency exchange
contracts eliminate fluctuations in the prices of the Fund's portfolio
securities or in foreign exchange rates, or prevent loss if the price of these
securities should decline.
H. ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period.
Actual results could differ from those estimates.
I. SECURITIES LENDING
The Fund may seek additional income by lending portfolio securities to
qualified institutions. The Fund will receive cash or securities as collateral
in an amount equal to at least 100% of the current market value of any loaned
securities plus accrued interest. By reinvesting any cash collateral it
receives in these transactions, the Fund could realize additional gains and
losses. If the borrower fails to return the securities and the value of the
collateral has declined during the term of the loan, the Fund will bear the
loss. At October 31, 2000, the value of the securities loaned and the value of
collateral were $7,385,964 and $7,701,240, respectively. During the six months
ended October 31, 2000, income from securities lending amounted to $6,000 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, 2000, the fees
pursuant to such agreement amounted to $292,152.
State Street Research Service Center, a division of State Street Research
Investment Services, Inc., the Trust's principal underwriter (the
"Distributor"), an indirect wholly owned subsidiary of MetLife, provides
certain shareholder services to the Fund such as responding to inquiries and
instructions from investors with respect to the purchase and redemption of
shares of the Fund. During the six months ended October 31, 2000, the amount
of such expenses was $40,731.
The Fund has entered into an arrangement 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, 2000
the Fund's transfer agent fees were reduced by $2,952 under this arrangement.
The fees of the Trustees not currently affiliated with the Adviser amounted to
$4,968 during the six months ended October 31, 2000.
Effective May 3, 2000, the Fund has agreed to pay the Adviser for certain
administrative costs incurred in providing accounting services to the Fund. The
fee was based on a fixed annual amount that has been allocated equally among the
State Street Research Funds. During the six months ended October 31, 2000, the
amount of such expenses was $28,100.
NOTE 3
For the six months ended October 31, 2000, purchases and sales of securities,
exclusive of short-term obligations, aggregated $48,082,499 and $51,985,974,
(including $28,163,463 and $25,482,391 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 pays annual distribution fees of 0.05% of average daily net assets for
Class A shares and 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,
2000, fees pursuant to such plans amounted to $39,239, $37,178, $139,341 and
$34,449 for Class A, Class B(1), Class B and Class C shares, respectively.
The Fund has been informed that the Distributor and MetLife Securities, Inc.,
a wholly-owned subsidiary of MetLife, Inc. earned initial sales charges
aggregating $5,683 and $34,090, respectively, on sales of Class A shares of
the Fund during the six months ended October 31, 2000, and that MetLife
Securities, Inc. earned commissions aggregating $26,916 and $11 on sales of
Class B(1) and Class B shares, and that the Distributor collected contingent
deferred sales charges aggregating $17,256, $38,687 and $913 on redemptions of
Class B(1), Class B and Class C shares, respectively, during the period.
NOTE 5
The Trustees have the authority to issue an unlimited number of shares of
beneficial interest, $.001 par value per share. At October 31, 2000, MetLife
owned 835,085 Class A shares, 72,359 Class B(1) shares and 1,176,759 Class S
shares of the Fund.
These transactions break down by share class as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED OCTOBER 31, 2000
APRIL 30, 2000 (UNAUDITED)
--------------------------------- ---------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ......................... 1,834,786 $ 11,867,202 1,317,109 $ 7,987,927
Issued upon reinvestment of dividends
from net investment income ........ 206,176 1,332,257 95,098 573,748
Shares redeemed ..................... (2,788,366) (18,051,759) (1,860,018) (11,300,376)
------------ ------------ ------------ ------------
Net decrease ........................ (747,404) $ (4,852,300) (447,811) $ (2,738,701)
============ ============ ============ ============
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED OCTOBER 31, 2000
APRIL 30, 2000 (UNAUDITED)
--------------------------------- ---------------------------------
CLASS B(1) SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ......................... 819,604 $ 5,350,587 205,239 $ 1,240,432
Issued upon reinvestment of dividends
from net investment income ........ 48,847 312,994 28,964 174,106
Shares redeemed ..................... (239,390) (1,534,272) (150,160) (904,275)
------------ ------------ ------------ ------------
Net increase ........................ 629,061 $ 4,129,309 84,043 $ 510,263
============ ============ ============ ============
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED OCTOBER 31, 2000
APRIL 30, 2000 (UNAUDITED)
--------------------------------- ---------------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ......................... 302,152 $ 1,967,645 108,281 $ 649,491
Issued upon reinvestment of dividends
from net investment income ........ 256,727 1,656,247 85,941 517,108
Shares redeemed ..................... (2,105,254) (13,596,054) (752,533) (4,557,847)
------------ ------------ ------------ ------------
Net decrease ........................ (1,546,375) $ (9,972,162) (558,311) $ (3,391,248)
============ ============ ============ ============
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED OCTOBER 31, 2000
APRIL 30, 2000 (UNAUDITED)
--------------------------------- ---------------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ......................... 415,772 $ 2,778,632 30,084 $ 182,171
Issued upon reinvestment of dividends
from net investment income ........ 95,290 616,015 14,952 89,974
Shares redeemed ..................... (1,568,941) (10,114,152) (314,975) (1,906,084)
------------ ------------ ------------ ------------
Net decrease ........................ (1,057,879) $ (6,719,505) (269,939) $ (1,633,939)
============ ============ ============ ============
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED OCTOBER 31, 2000
APRIL 30, 2000 (UNAUDITED)
--------------------------------- ---------------------------------
CLASS S SHARES AMOUNT SHARES AMOUNT
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ......................... 27,785 $ 181,729 70,093 $ 432,374
Issued upon reinvestment of dividends
from net investment income ........ 37,789 243,566 14,743 88,865
Shares redeemed ..................... (252,208) (1,649,673) (26,849) (160,469)
------------ ------------ ------------ ------------
Net increase (decrease) ............. (186,634) $ (1,224,378) 57,987 $ 360,770
============ ============ ============ ============
</TABLE>
<PAGE>
STATE STREET RESEARCH STRATEGIC INCOME FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
For a share outstanding throughout each period:
<TABLE>
<CAPTION>
CLASS A
--------------------------------------------------------------------------------------------------
AUGUST 30, 1996
(COMMENCEMENT OF YEARS ENDED APRIL 30 SIX MONTHS ENDED
OPERATIONS) TO -------------------- OCTOBER 31, 2000
APRIL 30, 1997(a) 1998(a) 1999(a) 2000(a) (UNAUDITED)(a)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ($) 7.00 7.06 7.33 6.88 6.25
----- ----- ----- ----- -----
Net investment income ($)* 0.38 0.55 0.52 0.47 0.21
Net realized and unrealized gain
(loss) on investments, foreign
currency, forward contracts and
futures contracts ($) 0.01 0.38 (0.30) (0.62) (0.41)
----- ----- ----- ----- -----
TOTAL FROM INVESTMENT OPERATIONS ($) 0.39 0.93 0.22 (0.15) (0.20)
----- ----- ----- ----- -----
Dividends from net investment
income ($) (0.31) (0.55) (0.56) (0.48) (0.23)
Distributions from capital gains ($) (0.02) (0.11) (0.11) -- --
----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS ($) (0.33) (0.66) (0.67) (0.48) (0.23)
----- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD ($) 7.06 7.33 6.88 6.25 5.82
===== ===== ===== ===== =====
Total return (%)(b) 5.60 (d) 13.70 3.10 (2.16) (3.21)(d)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period
($ thousands) 36,110 41,348 36,227 28,234 23,652
Expense ratio (%)* 1.35 (e) 1.35 1.36 1.59 1.83 (e)
Expense ratio after expense
reductions (%)* 1.35 (e) 1.35 1.35 1.58 1.82 (e)
Ratio of net investment income
to average net assets (%)* 7.30 (e) 7.51 7.36 7.30 7.01 (e)
Portfolio turnover rate (%) 110.37 179.82 169.92 164.29 64.95
*Reflects voluntary reduction
of expenses per share of
these amounts ($) 0.01 0.01 0.01 -- --
<CAPTION>
CLASS B(1)
--------------------------------------------------------------
YEARS ENDED APRIL 30 SIX MONTHS ENDED
------------------------------ OCTOBER 31, 2000
1999(a)(c) 2000(a) (UNAUDITED)(a)
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ($) 6.91 6.87 6.23
---- ---- ----
Net investment income ($) 0.12 0.43 0.19
Net realized and unrealized gain (loss) on
investments, foreign currency,
forward contracts and futures contracts ($) 0.00 (0.64) (0.41)
---- ---- ----
TOTAL FROM INVESTMENT OPERATIONS ($) 0.12 (0.21) (0.22)
---- ---- ----
Dividends from net investment income ($) (0.16) (0.43) (0.21)
---- ---- ----
TOTAL DISTRIBUTIONS ($) (0.16) (0.43) (0.21)
---- ---- ----
NET ASSET VALUE, END OF PERIOD ($) 6.87 6.23 5.80
==== ==== ====
Total return (%)(b) 1.71(d) (3.04) (3.55)(d)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period ($ thousands) 3,726 7,303 7,278
Expense ratio (%) 2.11(e) 2.34 2.53(e)
Expense ratio after expense reductions (%) 2.10(e) 2.33 2.52(e)
Ratio of net investment income to average net assets (%) 6.54(e) 6.60 6.32(e)
Portfolio turnover rate (%) 169.92 164.29 64.95
---------------------------------------------------------------------------------------------------------------------
(a) Per-share figures have been calcuated using the average shares method.
(b) Does not reflect any front-end or contingent deferred sales charge.
(c) January 1, 1999 (commencement of share class) to April 30, 1999.
(d) Not annualized.
(e) Annualized.
</TABLE>
<PAGE>
STATE STREET RESEARCH STRATEGIC INCOME FUND
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B
--------------------------------------------------------------------------------------------------
AUGUST 30, 1996
(COMMENCEMENT OF YEARS ENDED APRIL 30 SIX MONTHS ENDED
OPERATIONS) TO -------------------- OCTOBER 31, 2000
APRIL 30, 1997(a) 1998(a) 1999(a) 2000(a) (UNAUDITED)(a)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ($) 7.00 7.05 7.31 6.87 6.24
---- ---- ---- ---- ----
Net investment income ($)* 0.31 0.49 0.47 0.43 0.19
Net realized and unrealized
gain (loss) on investments,
foreign currency, forward
contracts and futures
contracts ($) 0.04 0.38 (0.30) (0.63) (0.42)
---- ---- ---- ---- ----
TOTAL FROM INVESTMENT OPERATIONS ($) 0.35 0.87 0.17 (0.20) (0.23)
---- ---- ---- ---- ----
Dividends from net investment
income ($) (0.28) (0.50) (0.50) (0.43) (0.21)
Distributions from capital
gains ($) (0.02) (0.11) (0.11) -- --
---- ---- ---- ---- ----
TOTAL DISTRIBUTIONS ($) (0.30) (0.61) (0.61) (0.43) (0.21)
---- ---- ---- ---- ----
NET ASSET VALUE, END OF PERIOD($) 7.05 7.31 6.87 6.24 5.80
==== ==== ==== ==== ====
Total return (%)(b) 4.96 (d) 12.74 2.49 (2.89) (3.71)(d)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period
($ thousands) 19,678 37,432 44,110 30,417 25,044
Expense ratio (%)* 2.10 (e) 2.10 2.11 2.34 2.53 (e)
Expense ratio after expense
reductions (%)* 2.10 (e) 2.10 2.10 2.33 2.52 (e)
Ratio of net investment income
to average net assets (%)* 6.73 (e) 6.77 6.63 6.54 6.32 (e)
Portfolio turnover rate (%) 110.37 179.82 169.92 164.29 64.95
*Reflects voluntary reduction
of expenses per share of
these amounts ($) 0.01 0.01 0.01 -- --
<PAGE>
CLASS C
--------------------------------------------------------------------------------------------------
AUGUST 30, 1996
(COMMENCEMENT OF YEARS ENDED APRIL 30 SIX MONTHS ENDED
OPERATIONS) TO -------------------- OCTOBER 31, 2000
APRIL 30, 1997(a) 1998(a) 1999(a) 2000(a) (UNAUDITED)(a)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD ($) 7.00 7.05 7.31 6.87 6.24
---- ---- ---- ---- ----
Net investment income ($)* 0.32 0.49 0.46 0.43 0.19
Net realized and unrealized
gain (loss) on
investments, foreign
currency, forward
contracts and futures
contracts ($) 0.03 0.38 (0.29) (0.63) (0.42)
---- ---- ---- ---- ----
TOTAL FROM INVESTMENT
OPERATIONS ($) 0.35 0.87 0.17 (0.20) (0.23)
---- ---- ---- ---- ----
Dividends from net
investment income ($) (0.28) (0.50) (0.50) (0.43) (0.21)
Distributions from capital
gains ($) (0.02) (0.11) (0.11) -- --
---- ---- ---- ---- ----
TOTAL DISTRIBUTIONS ($) (0.30) (0.61) (0.61) (0.43) (0.21)
---- ---- ---- ---- ----
NET ASSET VALUE, END OF PERIOD ($) 7.05 7.31 6.87 6.24 5.80
==== ==== ==== ==== ====
Total return (%)(b) 4.96 (d) 12.74 2.49 (2.89) (3.71)(d)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period
($ thousands) 8,590 13,243 15,949 7,887 5,767
Expense ratio (%)* 2.10 (e) 2.10 2.11 2.34 2.53 (e)
Expense ratio after expense
reductions (%)* 2.10 (e) 2.10 2.10 2.33 2.52 (e)
Ratio of net investment income
to average net assets (%)* 6.67 (e) 6.77 6.62 6.52 6.32 (e)
Portfolio turnover rate (%) 110.37 179.82 169.92 164.29 64.95
*Reflects voluntary reduction
of expenses per share of
these amounts ($) 0.01 0.01 0.01 -- --
-----------------------------------------------------------------------------------------------------------------------------------
(a) Per-share figures have been calculated using the average shares method.
(b) Does not reflect any front-end or contingent deferred sales charge.
(c) January 1, 1999 (commencement of share class) to April 30, 1999.
(d) Not annualized.
(e) Annualized.
<PAGE>
<CAPTION>
CLASS S
--------------------------------------------------------------------------------------------------
AUGUST 30, 1996
(COMMENCEMENT OF YEARS ENDED APRIL 30 SIX MONTHS ENDED
OPERATIONS) TO -------------------- OCTOBER 31, 2000
APRIL 30, 1997(a) 1998(a) 1999(a) 2000(a) (UNAUDITED)(a)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ($) 7.00 7.06 7.33 6.89 6.25
---- ---- ---- ---- ----
Net investment income ($)* 0.39 0.57 0.54 0.49 0.27
Net realized and unrealized
gain (loss) on
investments, foreign
currency, forward
contracts and futures
contracts ($) 0.02 0.38 (0.30) (0.63) (0.50)
---- ---- ---- ---- ----
TOTAL FROM INVESTMENT
OPERATIONS ($) 0.41 0.95 0.24 (0.14) (0.23)
---- ---- ---- ---- ----
Dividends from net
investment income ($) (0.33) (0.57) (0.57) (0.50) (0.24)
Distributions from capital
gains ($) (0.02) (0.11) (0.11) -- --
---- ---- ---- ---- ----
TOTAL DISTRIBUTIONS ($) (0.35) (0.68) (0.68) (0.50) (0.24)
---- ---- ---- ---- ----
NET ASSET VALUE, END OF PERIOD ($) 7.06 7.33 6.89 6.25 5.81
==== ==== ==== ==== ====
Total return (%)(b) 5.76 (d) 13.99 3.51 (2.06) (3.23)(d)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period ($
thousands) 10,908 11,675 11,679 9,437 9,110
Expense ratio (%)* 1.10 (e) 1.10 1.11 1.34 1.53 (e)
Expense ratio after expense
reductions (%)* 1.10 (e) 1.10 1.10 1.33 1.52 (e)
Ratio of net investment income
to average net assets (%)* 7.51 (e) 7.74 7.62 7.55 7.32 (e)
Portfolio turnover rate (%) 110.37 179.82 169.92 164.29 64.95
*Reflects voluntary reduction
of expenses per share of
these amounts ($) 0.01 0.01 0.01 -- --
----------------------------------------------------------------------------------------------------------------------------------
(a) Per-share figures have been calculated using the average shares method.
(b) Does not reflect any front-end or contingent deferred sales charge.
(c) January 1, 1999 (commencement of share class) to April 30, 1999.
(d) Not annualized.
(e) Annualized.
</TABLE>
<PAGE>
STATE STREET RESEARCH STRATEGIC INCOME FUND
<TABLE>
-------------------------------------------------------------------------------------------------------------------
FUND INFORMATION, OFFICERS AND TRUSTEES OF STATE STREET RESEARCH SECURITIES TRUST
-------------------------------------------------------------------------------------------------------------------
<CAPTION>
FUND INFORMATION OFFICERS TRUSTEES
<S> <C> <C>
STATE STREET RESEARCH RICHARD S. DAVIS RICHARD S. DAVIS
STRATEGIC INCOME FUND Chairman of the Board, Chairman of the Board, President,
One Financial Center President and Chief Chief Executive Officer
Boston, MA 02111 Executive Officer and Director,
State Street Research &
INVESTMENT ADVISER MAUREEN DEPP Management Company
State Street Research & Vice President
Management Company BRUCE R. BOND
One Financial Center JOHN H. KALLIS Former Chairman of the Board,
Boston, MA 02111 Vice President Chief Executive Officer and
President, PictureTel Corporation
DISTRIBUTOR THOMAS A. SHIVELY
State Street Research Vice President STEVE A. GARBAN
Investment Services, Inc. Former Senior Vice President
One Financial Center JAMES M. WEISS for Finance and Operations and
Boston, MA 02111 Vice President Treasurer, The Pennsylvania
State University
SHAREHOLDER SERVICES ELIZABETH MCCOMBS WESTVOLD
State Street Research Vice President DEAN O. MORTON
Service Center Former Executive Vice
P.O. Box 8408 KENNARD WOODWORTH, JR. President, Chief Operating
Boston, MA 02266-8408 Vice President Officer and Director,
1-87-SSR-FUNDS (1-877-773-8637) Hewlett-Packard Company
GERARD P. MAUS
CUSTODIAN Treasurer SUSAN M. PHILLIPS
State Street Bank and Dean, School of Business
Trust Company DOUGLAS A. ROMICH and Public Management,
225 Franklin Street Assistant Treasurer George Washington University;
Boston, MA 02110 former Member of the Board
FRANCIS J. MCNAMARA, III of Governors of the Federal
LEGAL COUNSEL Secretary and General Counsel Reserve System and Chairman
Goodwin, Procter & Hoar LLP and Commissioner of the
Exchange Place DARMAN A. WING Commodity Futures Trading
Boston, MA 02109 Assistant Secretary and Commission
Assistant General Counsel
TOBY ROSENBLATT
SUSAN E. BREEN President, Founders Investments Ltd.
Assistant Secretary President, The Glen Ellen Company
AMY L. SIMMONS MICHAEL S. SCOTT MORTON
Assistant Secretary Jay W. Forrester Professor of
Management, Sloan School of
Management, Massachusetts
Institute of Technology
</TABLE>
<PAGE>
STATE STREET RESEARCH STRATEGIC INCOME FUND ---------------
One Financial Center PRSRT STD
Boston, MA 02111 AUTO
U.S. POSTAGE PAID
HOLLISTON, MA
PERMIT NO. 20
---------------
QUESTIONS? COMMENTS?
E-MAIL us at:
[email protected]
INTERNET site:
www.StateStreetResearch.com
CALL us at 1-87-SSR-FUNDS (1-877-773-8637) or
[hearing-impaired 1-800-676-7876]
[Chinese and Spanish-speaking 1-888-638-3193]
WRITE us at:
State Street Research
Service Center
P.O. Box 8408
Boston, MA 02266-8408
[Logo] STATE STREET RESEARCH
(C) State Street Research Investment Services, Inc.,
One Financial Center, Boston, MA 02111
This report is prepared for the general information of current shareholders.
This publication must be preceded or accompanied by a current State Street
Research Strategic Income Fund prospectus.
When used after December 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: (exp1201)SSR-LD SI-2854-1200
<PAGE>
-------------------------------------------------------------------------------
STATE STREET RESEARCH
-------------------------------------------------------------------------------
GALILEO FUND
---------------------
SEMIANNUAL REPORT
October 31, 2000
--------------------
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
in
Service
[Logo] STATE STREET RESEARCH
<PAGE>
STATE STREET RESEARCH GALILEO FUND
--------------------------------------------------------------------------------
INVESTMENT UPDATE
--------------------------------------------------------------------------------
INVESTMENT ENVIRONMENT
THE ECONOMY
o The Federal Reserve has orchestrated a modest slowdown of the U.S. economy.
Gross domestic product grew at a 2.7% pace during the third quarter of 2000,
down significantly from previous quarters.
o Inflation remained tame -- though higher than six months ago -- at 3.5%.
o Consumer confidence has remained high in spite of soaring energy prices.
o Unemployment was at a 30-year low of 3.9%.
THE MARKETS
o Equity market performance was rocky during the six-month period, as
investors expressed concern about third quarter earnings reports and the
effects of rising oil prices. The Nasdaq sunk into bear market territory,
ending the period at -12.72%, while the S&P 500 returned -1.03%.(1)
o The yield on the bond market's new benchmark, the 10-year intermediate
Treasury bond, fell from 6.31% to 5.75%, helped by optimism about the
economic slowdown plus a federal buyback of bonds. Other areas of the bond
market struggled, especially junk bonds.
THE FUND
OVER THE PAST SIX MONTHS
o For the six months ended October 31, 2000, Class A shares of State Street
Research Galileo Fund returned 3.11% (does not reflect sales charge).(2) The
fund outperformed the Lipper Large Cap-Core Funds Average, which returned
1.57% for the same period.
o Stock picking was the largest positive contributor to performance.
o All other performance variables, including our exposure to risk and industry
weightings, contributed modestly to performance.
CURRENT STRATEGY
o Our disciplined process continues to generate above-average returns.
o Our sector-neutral approach places the emphasis on stock picking.
October 31, 2000
(1) The S&P 500 (officially the "S&P 500 Composite Stock Price Index") is an
unmanaged index of 500 U.S. stocks. Lipper Large Cap Core Funds Average
shows the performance of a category of mutual funds with similar goals. The
Lipper average shows how well the fund has done compared with competing
funds.
(2) 2.79% for Class B(1) shares; 2.79% for Class B shares; 2.71% 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 gains distributions and income dividends at net asset value.
(4) Performance reflects a maximum 5.75% Class A share front-end sales charge,
or 5% Class B(1) or Class B share or 1% Class C share contingent deferred
sales charge, where applicable. Performance for Class B(1) reflects Class B
performance through December 31, 1998. Class B (1) was introduced on January
1, 1999.
(5) Class S shares, offered without a sales charge, are available through
certain employee benefit plans and special programs.
PLEASE NOTE THAT THE DISCUSSION THROUGHOUT THIS SHAREHOLDER REPORT IS DATED AS
INDICATED AND, BECAUSE OF POSSIBLE CHANGES IN VIEWPOINT, DATA AND TRANSACTIONS,
SHOULD NOT BE RELIED UPON AS BEING CURRENT THEREAFTER.
-------------------------------------------------------------------------------
FUND INFORMATION (all data are for periods ended October 31, 2000, except
where noted)
-------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
FOR PERIODS ENDED 9/30/00
(at maximum applicable sales charge)(3)(4)(5)
----------------------------------------------------------------------
LIFE OF FUND
(since 3/11/98) 1 YEAR
----------------------------------------------------------------------
Class A 15.26% 24.51%
----------------------------------------------------------------------
Class B(1) 16.14% 26.22%
----------------------------------------------------------------------
Class B 16.16% 26.19%
----------------------------------------------------------------------
Class C 17.08% 30.19%
----------------------------------------------------------------------
Class S 18.27% 32.55%
----------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
(does not reflect sales charge)(3)(5)
----------------------------------------------------------------------
LIFE OF FUND
(since 3/11/98) 1 YEAR
----------------------------------------------------------------------
Class A 16.62% 19.17%
----------------------------------------------------------------------
Class B(1) 15.72% 18.21%
----------------------------------------------------------------------
Class B 15.74% 18.30%
----------------------------------------------------------------------
Class C 15.73% 18.20%
----------------------------------------------------------------------
Class S 16.90% 19.43%
----------------------------------------------------------------------
Performance results for the fund are increased by the voluntary reduction of
fund fees and expenses; without subsidization, performance would have been
lower.
TOP 10 STOCK POSITIONS
(by percentage of net assets)
1 CISCO SYSTEMS Computer Technology 3.1%
2 EXXONMOBIL Oil 2.3%
3 GENERAL ELECTRIC Multi-Sector 2.3%
4 EXELON Electric Utilities 1.9%
5 SBC COMMUNICATIONS Telecommunications 1.9%
6 SUN MICROSYSTEMS Computer Hardware 1.9%
7 EMC Computer Technology 1.8%
8 PHARMACIA Pharmaceuticals 1.8%
9 ACE Insurance 1.7%
10 SAINT PAUL Insurance 1.7%
These securities represent an aggregate of 20.4% 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 above.
TOP 5 INDUSTRIES
(by percentage of net assets)
DRUGS & BIOTECHNOLOGY 10.4%
COMPUTER SOFTWARE 8.0%
MISCELLANEOUS FINANCIAL 6.4%
RETAIL 6.4%
TELECOMMUNICATIONS 6.3%
Total: 37.5%
<PAGE>
STATE STREET RESEARCH GALILEO FUND
--------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
--------------------------------------------------------------------------------
October 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
VALUE
SHARES (NOTE 1)
------------------------------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS 97.0%
AUTOMOBILES & TRANSPORTATION 1.0%
AUTOMOTIVE PARTS 1.0%
Eaton Corp. ....................................................... 10,000 $ 680,625
-----------
Total Automobiles & Transportation ................................ 680,625
-----------
CONSUMER DISCRETIONARY 11.3%
ADVERTISING AGENCIES 0.6%
Omnicom Group Inc. ................................................ 4,700 433,575
-----------
CASINOS/GAMBLING, HOTEL/MOTEL 2.1%
Hilton Hotels Corp. ............................................... 90,000 855,000
International Game Technology Inc.* ............................... 15,000 549,375
-----------
1,404,375
-----------
COMMUNICATIONS, MEDIA & ENTERTAINMENT 2.2%
Clear Channel Communications Inc.* ................................ 8,100 486,506
U.S.A. Networks Inc.* ............................................. 20,900 423,225
Walt Disney Co. ................................................... 16,100 576,582
-----------
1,486,313
-----------
RETAIL 6.4%
Bed Bath & Beyond Inc.* ........................................... 32,200 831,162
Best Buy Company Inc.* ............................................ 10,900 547,044
Costco Wholesale Corp.* ........................................... 8,900 325,962
Gap Inc. .......................................................... 21,900 565,294
Home Depot Inc. ................................................... 10,700 460,100
Jones Apparel Group Inc.* ......................................... 12,300 342,094
Staples Inc.* ..................................................... 33,800 481,650
Wal-Mart Stores, Inc. ............................................. 16,600 753,225
-----------
4,306,531
-----------
Total Consumer Discretionary ...................................... 7,630,794
-----------
CONSUMER STAPLES 4.5%
BEVERAGES 0.7%
Anheuser-Busch Companies,Inc. ..................................... 10,800 494,100
-----------
DRUG & GROCERY STORE CHAINS 3.0%
CVS Corp. ......................................................... 17,400 921,112
Safeway Inc.* ..................................................... 20,400 1,115,625
-----------
2,036,737
-----------
FOODS 0.8%
Quaker Oats Co. ................................................... 6,200 505,687
-----------
Total Consumer Staples ............................................ 3,036,524
-----------
FINANCIAL SERVICES 16.6%
BANKS & SAVINGS & LOAN 3.3%
Bank of New York Company, Inc. .................................... 11,500 661,969
Chase Manhattan Corp. ............................................. 7,800 354,900
Federal Home Loan Mortgage Corp. .................................. 12,600 756,000
Wells Fargo & Co. ................................................. 9,800 453,862
-----------
2,226,731
-----------
FINANCIAL DATA PROCESSING SERVICES & SYSTEMS 0.9%
First Data Corp. .................................................. 11,800 591,475
-----------
INSURANCE 6.0%
Ace Ltd. .......................................................... 29,300 1,150,025
Hartford Financial Services Group, Inc. ........................... 11,200 833,700
Saint Paul Companies, Inc. ........................................ 22,000 1,127,500
XL Capital Ltd. Cl. A ............................................. 12,353 949,637
-----------
4,060,862
-----------
MISCELLANEOUS FINANCIAL 6.4%
Capital One Financial Corp. ....................................... 13,300 839,562
Citigroup, Inc. ................................................... 19,800 1,041,975
Mellon Financial Corp. ............................................ 16,400 791,300
Merrill Lynch & Company Inc. ...................................... 14,800 1,036,000
Metris Companies Inc. ............................................. 19,500 631,313
-----------
4,340,150
-----------
Total Financial Services .......................................... 11,219,218
-----------
HEALTH CARE 12.7%
DRUGS & BIOTECHNOLOGY 10.4%
Abbott Laboratories Inc. .......................................... 7,700 406,656
ALZA Corp.* ....................................................... 7,600 615,125
American Home Products Corp. ...................................... 8,800 558,800
Baxter International Inc. ......................................... 8,150 669,828
Biogen Inc.* ...................................................... 10,200 613,913
Genzyme Corp.* .................................................... 7,400 525,400
Johnson & Johnson ................................................. 6,850 631,056
Pfizer Inc. ....................................................... 11,550 498,816
Pharmacia Corp. ................................................... 22,125 1,216,875
Schering-Plough Corp. ............................................. 15,240 787,717
Teva Pharmaceutical Industries Ltd. ADR ........................... 8,600 508,475
-----------
7,032,661
-----------
HEALTH CARE FACILITIES 1.3%
Tenet Healthcare Corp.* ........................................... 21,900 860,944
-----------
HOSPITAL SUPPLY 1.0%
Guidant Corp.* .................................................... 12,500 661,719
-----------
Total Health Care ................................................. 8,555,324
-----------
INTEGRATED OILS 3.6%
INTEGRATED DOMESTIC 1.3%
Kerr-McGee Corp. .................................................. 7,400 483,312
Unocal Corp. ...................................................... 11,300 385,613
-----------
868,925
-----------
INTEGRATED INTERNATIONAL 2.3%
ExxonMobil Corp. .................................................. 17,600 1,569,700
-----------
Total Integrated Oils ............................................. 2,438,625
-----------
MATERIALS & PROCESSING 1.2%
CHEMICALS 1.2%
Dow Chemical Co. .................................................. 13,800 422,625
Rohm & Haas Co. ................................................... 12,000 360,750
-----------
783,375
-----------
Total Materials & Processing ...................................... 783,375
-----------
OTHER 6.1%
MULTI-SECTOR 6.1%
General Electric Co. .............................................. 28,200 1,545,712
Illinois Tool Works Inc. .......................................... 8,600 477,838
Minnesota Mining & Manufacturing Co. .............................. 3,900 376,838
Standard & Poor's Depositary Receipt .............................. 5,900 843,423
Tyco International Ltd. ........................................... 14,950 847,478
-----------
Total Other ....................................................... 4,091,289
-----------
OTHER ENERGY 2.2%
OIL & GAS PRODUCERS 1.0%
Anadarko Petroleum Corp. .......................................... 10,700 685,335
-----------
OIL WELL EQUIPMENT & SERVICES 1.2%
Baker Hughes Inc. ................................................. 14,800 508,750
Halliburton Co. ................................................... 8,800 326,150
-----------
834,900
-----------
Total Other Energy ................................................ 1,520,235
-----------
PRODUCER DURABLES 4.0%
AEROSPACE 1.1%
United Technologies Corp. ......................................... 10,500 733,032
-----------
MACHINERY 0.6%
Caterpillar Inc. .................................................. 12,500 438,281
-----------
MISCELLANEOUS EQUIPMENT 1.2%
Danaher Corp. ..................................................... 13,000 820,625
-----------
PRODUCTION TECHNOLOGY EQUIPMENT 0.5%
Flextronics International Ltd. .................................... 8,600 326,800
-----------
TELECOMMUNICATIONS EQUIPMENT 0.6%
American Tower Corp. Cl. A* ....................................... 9,500 388,906
-----------
Total Producer Durables ........................................... 2,707,644
-----------
TECHNOLOGY 24.7%
COMMUNICATIONS TECHNOLOGY 6.0%
Cisco Systems Inc.* ............................................... 38,300 2,063,412
Corning Inc. ...................................................... 3,000 229,500
General Motors Corp. Cl. H* ....................................... 14,400 466,560
JDS Uniphase Corp.* ............................................... 6,500 528,938
Nortel Networks Corp. ............................................. 10,400 473,200
Qualcomm Inc.* .................................................... 4,800 312,525
-----------
4,074,135
-----------
COMPUTER SOFTWARE 8.0%
Bea Systems Inc.* ................................................. 5,000 358,750
i2 Technologies Inc.* ............................................. 3,400 578,000
Intuit, Inc.* ..................................................... 12,100 743,394
Mercury Interactive Corp.* ........................................ 6,700 743,700
Microsoft Corp.* .................................................. 15,400 1,060,675
Oracle Systems Corp.* ............................................. 16,800 554,400
Siebel Systems Inc. ............................................... 3,400 356,787
Veritas Software Co.* ............................................. 7,200 1,015,312
-----------
5,411,018
-----------
COMPUTER TECHNOLOGY 6.0%
Electronic Data Systems Corp. ..................................... 13,800 647,738
EMC Corp.* ........................................................ 13,900 1,237,969
Gateway Inc.* ..................................................... 9,100 469,651
International Business Machines Corp. ............................. 4,800 472,800
Sun Microsystems Inc.* ............................................ 11,300 1,252,887
-----------
4,081,045
-----------
ELECTRONICS 0.6%
Solectron Corp.* .................................................. 8,800 387,200
-----------
ELECTRONICS: SEMI-CONDUCTORS/COMPONENTS 4.1%
Altera Corp.* ..................................................... 11,450 468,734
Analog Devices Inc.* .............................................. 9,800 637,000
Applied Micro Circuits Corp.* ..................................... 3,900 297,863
Intel Corp. ....................................................... 21,800 981,000
PMC Sierra Inc.* .................................................. 2,200 372,900
-----------
2,757,497
-----------
Total Technology .................................................. 16,710,895
-----------
UTILITIES 9.1%
ELECTRICAL 1.9%
Exelon Corp. ...................................................... 21,700 1,304,712
-----------
GAS DISTRIBUTION 0.9%
Questar Corp. ..................................................... 23,800 644,088
-----------
TELECOMMUNICATIONS 6.3%
Qwest Communications International Inc.* .......................... 16,452 799,978
SBC Communications Inc. ........................................... 22,000 1,269,125
Verizon Communications ............................................ 10,600 612,812
Vodafone Group PLC ADR ............................................ 12,700 540,544
Worldcom Inc.* .................................................... 18,050 428,688
XO Communications Inc.* ........................................... 17,100 576,858
-----------
4,228,005
-----------
Total Utilities ................................................... 6,176,805
-----------
Total Common Stocks (Cost $51,254,741) ............................ 65,551,353
-----------
<CAPTION>
------------------------------------------------------------------------------------------------------
PRINCIPAL MATURITY
AMOUNT DATE
------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER 2.2%
<S> <C> <C> <C>
American Express Credit Corp., 6.50% .......... $1,500,000 11/01/2000 1,500,000
-----------
Total Commercial Paper (Cost $1,500,000) ....................................... 1,500,000
-----------
Total Investments (Cost $52,754,741) - 99.2% ................................... 67,051,353
Cash and Other Assets, Less Liabilities - 0.8% ................................. 523,335
-----------
Net Assets - 100.0% ............................................................ $67,574,688
===========
Federal Income Tax Information:
At October 31, 2000, the net unrealized appreciation of investments based on
cost for Federal income tax purposes of $53,108,451 was as follows:
Aggregate gross unrealized appreciation for all investments in which there is
an excess of value over tax cost ............................................. $16,410,289
Aggregate gross unrealized depreciation for all investments in which there is
an excess of tax cost over value ............................................. (2,467,387)
-----------
$13,942,902
===========
</TABLE>
--------------------------------------------------------------------------------
* 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.
<PAGE>
STATE STREET RESEARCH GALILEO FUND
--------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
--------------------------------------------------------------------------------
October 31, 2000 (Unaudited)
ASSETS
Investments, at value (Cost $52,754,741) (Note 1) ................. $67,051,353
Cash .............................................................. 3,363
Receivable for securities sold .................................... 1,307,112
Receivable from Distributor (Note 3) .............................. 81,060
Receivable for fund shares sold ................................... 37,052
Dividends and interest receivable ................................. 14,747
Deferred organizational costs and other assets (Note 1) 124,314
-----------
68,619,001
LIABILITIES
Payable for securities purchased .................................. 792,174
Payable for fund shares redeemed .................................. 41,193
Accrued management fee (Note 2) ................................... 37,395
Accrued distribution and service fees (Note 5) .................... 32,082
Accrued administration fee ........................................ 28,100
Accrued trustees' fees (Note 2) ................................... 3,355
Other accrued expenses ............................................ 110,014
-----------
1,044,313
-----------
NET ASSETS $67,574,688
===========
Net Assets consist of:
Unrealized appreciation of investments .......................... $14,296,612
Accumulated net realized gain ................................... 2,226,325
Paid-in capital ................................................. 51,051,751
-----------
$67,574,688
===========
Net Asset Value and redemption price per share of Class A shares
($27,585,353 / 2,028,012 shares) ............................... $13.60
======
Maximum Offering Price per share of Class A shares ($13.60 / .9425) $14.43
======
Net Asset Value and offering price per share of
Class B(1) shares ($8,294,286 / 622,914 shares)* .............. $13.32
======
Net Asset Value and offering price per share of
Class B shares ($20,488,535 / 1,537,874 shares)* ............... $13.32
======
Net Asset Value and offering price per share of
Class C shares ($3,267,132 / 245,181 shares)* ................... $13.33
======
Net Asset Value, offering price and redemption
price per share of Class S shares
($7,939,382 / 579,703 shares) ................................... $13.70
======
-------------------------------------------------------------------------------
*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, 2000 (Unaudited)
INVESTMENT INCOME
Dividends, net of foreign taxes of $498 ...................... $ 231,538
Interest ..................................................... 53,475
----------
285,013
EXPENSES
Management fee (Note 2) ...................................... 221,921
Transfer agent and shareholder services (Note 2) ............. 130,225
Custodian fee ................................................ 56,658
Reports to shareholders ...................................... 30,697
Distribution and service fees-Class A (Note 5) ............... 41,330
Distribution and service fees-Class B(1) (Note 5) ............ 38,807
Distribution and service fees-Class B (Note 5) ............... 105,880
Distribution and service fees-Class C (Note 5) ............... 20,239
Administration fee ........................................... 28,100
Registration fees ............................................ 22,912
Legal fees ................................................... 12,820
Audit fee .................................................... 12,384
Amortization of organization costs (Note 1) .................. 9,215
Trustees' fees (Note 2) ...................................... 5,127
Miscellaneous ................................................ 7,557
----------
743,872
Expenses borne by the Distributor (Note 3) ................... (190,955)
Fees paid indirectly (Note 2) ................................ (5,244)
----------
547,673
----------
Net investment loss .......................................... (262,660)
----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on investments (Notes 1 and 4) ............. 2,589,772
Change in unrealized depreciation of investments ............. (426,578)
----------
Net gain on investments ...................................... 2,163,194
----------
Net increase in net assets resulting from operations ......... $1,900,534
==========
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATE STREET RESEARCH GALILEO FUND
--------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
October 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED OCTOBER 31, 2000
APRIL 30, 2000 (UNAUDITED)
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment loss ................................. $ (358,201) $ (262,660)
Net realized gain on investments .................... 3,278,655 2,589,772
Change in unrealized appreciation
(depreciation) of investments ..................... 7,076,602 (426,578)
----------- -----------
Net increase resulting
from operations.................................... 9,997,056 1,900,534
----------- -----------
Distributions from capital gains:
Class A ........................................... (353,067) (956,693)
Class B(1) ........................................ (62,081) (267,084)
Class B ........................................... (298,049) (757,885)
Class C ........................................... (53,412) (178,353)
Class S ........................................... (92,063) (263,650)
----------- -----------
(858,672) (2,423,665)
----------- -----------
Net increase from fund share
transactions (Note 6).............................. 11,197,665 991,876
----------- -----------
Total increase in net assets ........................ 20,336,049 468,745
NET ASSETS
Beginning of period ................................. 46,769,894 67,105,943
----------- -----------
End of period ....................................... $67,105,943 $67,574,688
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATE STREET RESEARCH GALILEO FUND
--------------------------------------------------------------------------------
NOTES TO UNAUDITED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
October 31, 2000
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 five separate funds: State Street Research Galileo Fund,
State Street Research Legacy Fund, State Street Research Strategic Income Fund,
State Street Research Concentrated Large-Cap Value Fund and State Street
Research Tax-Managed Small-Cap 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 in other U.S.
and foreign companies of comparable size.
The Fund offers five classes of shares. Class A shares are subject to an initial
sales charge of up to 5.75% and pay a service and distribution fee equal to
0.30% of average daily net assets. Class B(1) shares are offered 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 service and distribution 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 service and
distribution fees of 1.00%. Class S shares are only offered through certain
retirement accounts, advisory accounts of State Street Research & Management
Company (the "Adviser"), an indirect wholly owned subsidiary of MetLife, Inc.
("MetLife"), and special programs. No sales charge is imposed at the time of
purchase or redemption of Class S shares. Class S shares do not pay any service
or distribution 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, 2000, there were no loaned
securities.
NOTE 2
The Trust and the Adviser have entered into an agreement under which the
Adviser earns monthly fees at an annual rate of 0.65% of the Fund's average
daily net assets. In consideration of these fees, the Adviser furnishes the
Fund with management, investment advisory, statistical and research facilities
and services. The Adviser also pays all salaries, rent and certain other
expenses of management. During the six months ended October 31, 2000, the fees
pursuant to such agreement amounted to $221,921.
State Street Research Service Center, a division of State Street Research
Investment Services, Inc., the Trust's principal underwriter (the
"Distributor"), an indirect wholly owned subsidiary of MetLife, provides
certain shareholder services to the Fund such as responding to inquiries and
instructions from investors with respect to the purchase and redemption of
shares of the Fund. During the six months ended October 31, 2000, the amount
of such expenses was $53,203.
The Fund has entered into an arrangement 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, 2000
the Fund's transfer agent fees were reduced by $5,244 under this arrangement.
The fees of the Trustees not currently affiliated with the Adviser amounted to
$5,127 during the six months ended October 31, 2000.
Effective May 3, 2000, the Fund has agreed to pay the Adviser for certain
administrative costs incurred in providing accounting services to the Fund.
The fee was based on a fixed annual amount that has been allocated equally
among the State Street Research Funds. During the six months ended October 31,
2000, the amount of such expenses was $28,100.
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, 2000, the amount of such
expenses assumed by the Distributor and its affiliates was $190,955.
NOTE 4
For the six months ended October 31, 2000, purchases and sales of securities,
exclusive of short-term obligations, aggregated $30,283,809 and $31,341,747,
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 0.05% of average daily net assets for
Class A shares. 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, 2000, fees pursuant to such plans
amounted to $41,330, $38,807, $105,880 and $20,239 for Class A, Class B(1),
Class B and Class C shares, respectively.
The Fund has been informed that the Distributor and MetLife Securities, Inc.,
a wholly owned subsidiary of MetLife, earned initial sales charges aggregating
$3,498 and $16,436, respectively, on sales of Class A shares of the Fund
during the six months ended October 31, 2000, and that MetLife Securities,
Inc. earned commissions aggregating $31,081 and $408 on sales of Class B(1)
and Class B shares, and that the Distributor collected contingent deferred
sales charges aggregating $10,277, $22,811 and $48 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, 2000, MetLife
owned 55,171 Class A shares, 49,610 Class B(1) shares, 5,610 Class B shares,
55,218 Class C shares and 496,395 Class S shares of the Fund.
These transactions break down by share class as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED OCTOBER 31, 2000
APRIL 30, 2000 (UNAUDITED)
---------------------------- ----------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 1,091,104 $ 13,213,898 264,862 $ 3,579,853
Issued upon reinvestment of
distributions from capital gains 28,677 352,277 72,289 938,315
Shares redeemed (553,147) (6,843,631) (258,554) (3,496,552)
------------ ------------ ------------ ------------
Net increase 566,634 $ 6,722,544 78,597 $ 1,021,616
============ ============ ============ ============
<CAPTION>
CLASS B(1) SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 408,824 $ 4,955,974 121,561 $ 1,607,293
Issued upon reinvestment of
distributions from capital gains 5,050 61,289 19,798 252,232
Shares redeemed (58,047) (724,984) (27,022) (358,315)
------------ ------------ ------------ ------------
Net increase 355,827 $ 4,292,279 114,337 $ 1,501,210
============ ============ ============ ============
<CAPTION>
CLASS B SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 233,464 $ 2,848,968 29,967 $ 397,331
Issued upon reinvestment of
distributions from capital gains 24,004 290,910 55,114 702,158
Shares redeemed (339,103) (4,124,433) (125,581) (1,666,207)
------------ ------------ ------------ ------------
Net decrease (81,635) $ (984,555) (40,500) $ (566,718)
============ ============ ============ ============
<CAPTION>
CLASS C SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 192,750 $ 2,394,823 20,493 $ 266,868
Issued upon reinvestment of
distributions from capital gains 4,073 49,381 6,160 78,542
Shares redeemed (111,900) (1,365,111) (181,654) (2,374,835)
------------ ------------ ------------ ------------
Net increase (decrease) 84,923 $ 1,079,093 (155,001) $ (2,029,425)
============ ============ ============ ============
<CAPTION>
CLASS S SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 3,726 $ 47,665 59,673 $ 813,115
Issued upon reinvestment of
distributions from capital gains 7,467 92,063 20,188 263,650
Shares redeemed (4,129) (51,424) (841) (11,572)
------------ ------------ ------------ ------------
Net increase 7,064 $ 88,304 79,020 $ 1,065,193
============ ============ ============ ============
</TABLE>
<PAGE>
STATE STREET RESEARCH GALILEO FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
For a share outstanding throughout the period:
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------------------------------
MARCH 11, 1998 SIX MONTHS ENDED
(COMMENCEMENT OF YEARS ENDED APRIL 30 OCTOBER 31, 2000
OPERATIONS) ----------------------- (UNAUDITED)(a)
TO APRIL 30, 1998(a) 1999(a) 2000(a)
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ($) 9.55 9.92 11.73 13.70
---- ----- ----- -----
Net investment income (loss) ($)* 0.01 (0.01) (0.04) (0.03)
Net realized and unrealized gain on
investments ($) 0.36 1.82 2.20 0.42
---- ----- ----- -----
TOTAL FROM INVESTMENT OPERATIONS ($) 0.37 1.81 2.16 0.39
---- ----- ----- -----
Dividend from net investment income ($) -- (0.00) -- --
Distributions from capital gains ($) -- -- (0.19) (0.49)
---- ----- ----- -----
TOTAL DISTRIBUTIONS ($) -- (0.00) (0.19) (0.49)
---- ----- ----- -----
NET ASSET VALUE, END OF PERIOD ($) 9.92 11.73 13.70 13.60
==== ===== ===== =====
Total return (%)(b) 3.87(d) 18.28 18.57 3.11(d)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period ($ thousands) 6,132 16,220 26,704 27,585
Expense ratio (%)* 1.25(e) 1.27 1.27 1.33(e)
Expense ratio after expense reductions (%)* 1.25(e) 1.25 1.25 1.30(e)
Ratio of net investment income (loss) to
average net assets (%)* 0.45(e) (0.09) (0.29) (0.47)(e)
Portfolio turnover rate (%) 13.04 134.16 106.12 46.41
*Reflects voluntary reduction of expenses per
share of these amounts (Note 3) ($) 0.03 0.08 0.08 0.04
<CAPTION>
CLASS B(1)
-----------------------------------------------
YEARS ENDED APRIL 30 SIX MONTHS ENDED
-------------------------- OCTOBER 31, 2000
1999(a)(c) 2000(a) (UNAUDITED)(a)
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ($) 10.63 11.63 13.46
----- ----- -----
Net investment loss ($)* (0.03) (0.13) (0.08)
Net realized and unrealized gain on investments ($) 1.03 2.15 0.43
----- ----- -----
TOTAL FROM INVESTMENT OPERATIONS ($) 1.00 2.02 0.35
----- ----- -----
Dividend from net investment income ($) (0.00) -- --
Distributions from capital gains ($) -- (0.19) (0.49)
----- ----- -----
TOTAL DISTRIBUTIONS ($) (0.00) (0.19) (0.49)
----- ----- -----
NET ASSET VALUE, END OF PERIOD ($) 11.63 13.46 13.32
===== ===== =====
Total return (%)(b) 9.44(d) 17.52 2.79(d)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period ($ thousands) 1,776 6,847 8,294
Expense ratio (%)* 2.02(e) 2.02 2.03(e)
Expense ratio after expense reductions (%)* 2.00(e) 2.00 2.00(e)
Ratio of net investment loss to average net assets (%)* )
(1.01(e) (1.05) (1.17)(e)
Portfolio turnover rate (%) 134.16 106.12 46.41
*Reflects voluntary reduction of expenses per share of
these amounts (Note 3) ($) 0.02 0.09 0.04
---------------------------------------------------------------------------------------------------------------------------
(a) Per-share figures have been calculated using the average shares method.
(b) Does not reflect any front-end or contingent deferred sales charges. Total return would be lower if the Distributor and
its affiliates had not voluntarily reduced a portion of the Fund's expenses.
(c) January 1, 1999 (commencement of share class) to April 30, 1999.
(d) Not annualized.
(e) Annualized.
</TABLE>
<PAGE>
STATE STREET RESEARCH GALILEO FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (cont'd)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B
-----------------------------------------------------------------------------
MARCH 11, 1998
(COMMENCEMENT OF YEARS ENDED APRIL 30 SIX MONTHS ENDED
OPERATIONS) ----------------------- OCTOBER 31, 2000
TO APRIL 30, 1998(a) 1999(a) 2000(a) (UNAUDITED)(a)
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ($) 9.55 9.90 11.63 13.47
---- ----- ----- -----
Net investment loss ($)* (0.00) (0.09) (0.13) (0.08)
Net realized and unrealized gain on
investments ($) 0.35 1.82 2.16 0.42
---- ----- ----- -----
TOTAL FROM INVESTMENT OPERATIONS ($) 0.35 1.73 2.03 0.34
---- ----- ----- -----
Dividend from net investment income ($) -- (0.00) -- --
Distributions from capital gains ($) -- -- (0.19) (0.49)
---- ----- ----- -----
TOTAL DISTRIBUTIONS ($) -- (0.00) (0.19) (0.49)
---- ----- ----- -----
NET ASSET VALUE, END OF PERIOD ($) 9.90 11.63 13.47 13.32
==== ===== ===== =====
Total return (%)(b) 3.66(d) 17.50 17.61 2.79(d)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period ($ thousands) 5,142 19,300 21,267 20,489
Expense ratio (%)* 2.00(e) 2.02 2.02 2.03(e)
Expense ratio after expense reductions (%)* 2.00(e) 2.00 2.00 2.00(e)
Ratio of net investment loss to average net
assets (%)* (0.31)(e) (0.84) (1.04) (1.16)(e)
Portfolio turnover rate (%) 13.04 134.16 106.12 46.41
*Reflects voluntary reduction of expenses per
share of these amounts (Note 3) ($) 0.03 0.08 0.07 0.04
<PAGE>
<CAPTION>
CLASS C
-----------------------------------------------------------------------------
MARCH 11, 1998
(COMMENCEMENT OF YEARS ENDED APRIL 30 SIX MONTHS ENDED
OPERATIONS) ----------------------- OCTOBER 31, 2000
TO APRIL 30, 1998(a) 1999(a) 2000(a) (UNAUDITED)(a)
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ($) 9.55 9.91 11.63 13.48
---- ----- ----- -----
Net investment loss ($)* (0.00) (0.09) (0.13) (0.08)
Net realized and unrealized gain on
investments ($) 0.36 1.81 2.17 0.42
---- ----- ----- -----
TOTAL FROM INVESTMENT OPERATIONS ($) 0.36 1.72 2.04 0.34
---- ----- ----- -----
Dividend from net investment income ($) -- (0.00) -- --
Distributions from capital gains ($) -- -- (0.19) (0.49)
---- ----- ----- -----
TOTAL DISTRIBUTIONS ($) -- (0.00) (0.19) (0.49)
---- ----- ----- -----
NET ASSET VALUE, END OF PERIOD ($) 9.91 11.63 13.48 13.33
==== ===== ===== =====
Total return (%)(b) 3.77(d) 17.36 17.70 2.71(d)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period ($ thousands) 1,061 3,667 5,393 3,267
Expense ratio (%)* 2.00(e) 2.02 2.02 2.03(e)
Expense ratio after expense reductions (%)* 2.00(e) 2.00 2.00 2.00(e)
Ratio of net investment loss to average net
assets (%)* (0.13)(e) (0.85) (1.08) (1.14)(e)
Portfolio turnover rate (%) 13.04 134.16 106.12 46.41
*Reflects voluntary reduction of expenses per
share of these amounts (Note 3) ($) 0.04 0.08 0.08 0.04
----------------------------------------------------------------------------------------------------------------------------
(a) Per-share figures have been calculated using the average shares method.
(b) Does not reflect any front-end or contingent deferred sales charges. Total return would be lower if the Distributor and its
affiliates had not voluntarily reduced a portion of the Fund's expenses.
(c) January 1, 1999 (commencement of share class) to April 30, 1999.
(d) Not annualized.
(e) Annualized.
<PAGE>
<CAPTION>
CLASS S
-----------------------------------------------------------------------------
MARCH 11, 1998
(COMMENCEMENT OF YEARS ENDED APRIL 30 SIX MONTHS ENDED
OPERATIONS) ----------------------- OCTOBER 31, 2000
TO APRIL 30, 1998(a) 1999(a) 2000(a) (UNAUDITED)(a)
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ($) 9.55 9.92 11.76 13.77
---- ----- ----- -----
Net investment income (loss) ($)* 0.02 0.02 (0.00) (0.01)
Net realized and unrealized gain on
investments ($) 0.35 1.82 2.20 0.43
---- ----- ----- -----
TOTAL FROM INVESTMENT OPERATIONS ($) 0.37 1.84 2.20 0.42
---- ----- ----- -----
Dividend from net investment income ($) -- (0.00) -- --
Distributions from capital gains ($) -- -- (0.19) (0.49)
---- ----- ----- -----
TOTAL DISTRIBUTIONS ($) -- (0.00) (0.19) (0.49)
---- ----- ----- -----
NET ASSET VALUE, END OF PERIOD ($) 9.92 11.76 13.77 13.70
==== ===== ===== =====
Total return (%)(b) 3.87(d) 18.59 18.87 3.24(d)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period ($ thousands) 4,763 5,806 6,895 7,939
Expense ratio (%)* 1.00(e) 1.02 1.02 1.03(e)
Expense ratio after expense reductions (%)* 1.00(e) 1.00 1.00 1.00(e)
Ratio of net investment income (loss) to
average net assets (%)* 0.98(e) 0.18 (0.04) (0.17)(e)
Portfolio turnover rate (%) 13.04 134.16 106.12 46.41
*Reflects voluntary reduction of expenses per
share of these amounts (Note 3) ($) 0.06 0.08 0.07 0.04
-----------------------------------------------------------------------------------------------------------------------------
(a) Per-share figures have been calculated using the average shares method.
(b) Does not reflect any front-end or contingent deferred sales charges. Total return would be lower if the Distributor and its
affiliates had not voluntarily 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 GALILEO FUND
<TABLE>
-------------------------------------------------------------------------------------------------------------------
FUND INFORMATION, OFFICERS AND TRUSTEES OF STATE STREET RESEARCH SECURITIES TRUST
-------------------------------------------------------------------------------------------------------------------
<CAPTION>
FUND INFORMATION OFFICERS TRUSTEES
<S> <C> <C>
STATE STREET RESEARCH RICHARD S. DAVIS RICHARD S. DAVIS
GALILEO FUND Chairman of the Board, Chairman of the Board, President,
One Financial Center President and Chief Chief Executive Officer
Boston, MA 02111 Executive Officer and Director,
State Street Research &
INVESTMENT ADVISER MAUREEN DEPP Management Company
State Street Research & Vice President
Management Company BRUCE R. BOND
One Financial Center JOHN H. KALLIS Former Chairman of the Board,
Boston, MA 02111 Vice President Chief Executive Officer
and President,
DISTRIBUTOR THOMAS A. SHIVELY PictureTel Corporation
State Street Research Vice President
Investment Services, Inc. STEVE A. GARBAN
One Financial Center JAMES M. WEISS Former Senior Vice President
Boston, MA 02111 Vice President for Finance and Operations and
Treasurer, The Pennsylvania
SHAREHOLDER SERVICES ELIZABETH MCCOMBS WESTVOLD State University
State Street Research Vice President
Service Center DEAN O. MORTON
P.O. Box 8408 KENNARD WOODWORTH, JR. Former Executive Vice
Boston, MA 02266-8408 Vice President President, Chief Operating
1-87-SSR-FUNDS (1-877-773-8637) Officer and Director,
GERARD P. MAUS Hewlett-Packard Company
CUSTODIAN Treasurer
State Street Bank and SUSAN M. PHILLIPS
Trust Company DOUGLAS A. ROMICH Dean, School of Business and
225 Franklin Street Assistant Treasurer Public Management, George
Boston, MA 02110 Washington University; former
FRANCIS J. MCNAMARA, III Member of the Board of Governors
LEGAL COUNSEL Secretary and General Counsel of the Federal Reserve System and
Goodwin, Procter & Hoar LLP Chairman and Commissioner of
Exchange Place DARMAN A. WING the Commodity Futures Trading
Boston, MA 02109 Assistant Secretary and Commission
Assistant General Counsel
TOBY ROSENBLATT
SUSAN E. BREEN President, Founders Investments Ltd.
Assistant Secretary President, The Glen Ellen Company
AMY L. SIMMONS MICHAEL S. SCOTT MORTON
Assistant Secretary Jay W. Forrester Professor of
Management, Sloan School of
Management, Massachusetts
Institute of Technology
</TABLE>
<PAGE>
STATE STREET RESEARCH GALILEO FUND -----------------
One Financial Center PRSRT STD
Boston, MA 02111 AUTO
U.S. POSTAGE PAID
HOLLISTON, MA
PERMIT NO. 20
------------------
QUESTIONS? COMMENTS?
E-MAIL us at:
[email protected]
INTERNET site:
www.statestreetresearch.com
CALL us at 1-87-SSR-FUNDS (1-877-773-8637) or
[hearing-impaired 1-800-676-7876]
[Chinese and Spanish-speaking 1-888-638-3193]
WRITE us at:
State Street Research
Service Center
P.O. Box 8408
Boston, MA 02266-8408
[Logo] STATE STREET RESEARCH
(C) State Street Research Investment Services, Inc.,
One Financial Center, Boston, MA 02111
This report is prepared for the general information of current shareholders.
This publication must be preceded or accompanied by a current State Street
Research Galileo Fund prospectus.
When used after December 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: (exp1201)SSR-LD GA-2855-1200
<PAGE>
[LOGO] STATE STREET RESEARCH
Legacy Fund
--------------------------------------------------------------------------------
Annual Report to Shareholders
October 31, 2000
In this Report The Great Divide
How Diversification
Can Help You Get More from
a Tax-Managed Fund
[GRAPHIC]
plus
Super-Low Cap Gains
Tax Rate Kicks in Next Year
U.S. Economy Glides to a Slower Pace
Fund Portfolio and Financials
<PAGE>
--------------------------------------------------------------------------------
Contents
2 6 Month Review
A look at the fund and its market
environment over the past 6 months
6 Performance in Perspective
The most recent performance in the
context of the fund's track record
8 The Fund in Detail
Portfolio holdings, financials and notes
--------------------------------------------------------------------------------
Introducing our New President
We are pleased to announce that Richard "Dick" S. Davis has joined State Street
Research & Management Company as president and chief executive officer. Dick
comes to his new position from our parent company, MetLife, where he has served
as senior vice president of fixed income investments and was responsible for the
firm's $110 billion fixed income portfolio.
[PHOTO]
Richard S. Davis
Dick began his professional investment career 30 years ago at First Boston
Corporation. He spent eight years at J.P. Morgan Investment Management and J.P.
Morgan Securities, where he held positions in global fixed income sales
management, client sales and service, risk management and product development.
Dick holds a BA from Georgetown University and an MBA from Columbia University.
We are delighted to welcome a new leader with such an exceptional track record
and outstanding business acumen. You can look forward to hearing from Dick in
the communications you receive from State Street Research in the months ahead.
[GRAPHIC]
--------------------------------------------------------------------------------
6 Month Review Management's Discussion of Fund Performance Part 1
--------------------------------------------------------------------------------
How State Street Research
Legacy Fund Performed
State Street Research Legacy Fund delivered strong performance and maintained
its record of tax efficiency during the year. The fund returned 12.03% for the
12-month period ended October 31, 2000.(1) That was significantly better than
both the S&P 500 Index, which returned 6.08% over the same period.(2)
Reasons for the Fund's Performance
Since we do not consciously emphasize or avoid any sector in the stock market,
the fund's outperformance was the result of stock selection. Research helped us
uncover opportunities among high-quality companies such as General Electric and
Honeywell, as well as more aggressive growth companies such as American Tower
and Veritas.
In order to preserve the fund's sector diversification, we bought stocks with
similar characteristics in the same industry when we reduced the fund's exposure
to stocks that had had a considerable run-up or when we sold some of our losing
positions to offset gains taken in other parts of the portfolio. For example,
when we sold Bank of America for a loss, we invested in Citigroup, which has
been a better performer and has experienced faster growth.
Looking Ahead
We are optimistic that continued, slower economic growth could provide an
attractive environment for the stock market. As a result, we continue to focus
the fund's investments in growth areas of the market. We would become more
defensive in our investments in a more severe slowdown, which we do not expect
to materialize given the current indicators of business strength and consumer
optimism.
Class A Shares(1)
12.03% [UP ARROW]
"We continue to
focus the fund's
investments in
growth areas of
the market."
[PHOTO]
Kennard "Pete"
Woodworth
Portfolio Manager,
State Street Research
Legacy Fund
S&P 500 Index(2)
6.08% [UP ARROW]
More Management's Discussion of Fund Performance on pages 6 and 7.
Because financial markets and mutual fund strategies are constantly evolving,
it's possible that the fund's holdings, market stance, outlook for various
industries or securities and other matters discussed in this report have changed
since this information was prepared. Portfolio changes should not be considered
recommendations for action by individual investors.
2 State Street Research Legacy Fund
<PAGE>
[GRAPHIC] The Fund at a Glance as of 10/31/00
State Street Research Legacy Fund: a tax-managed approach to investing in stocks
for long-term growth.
Analog Devices
One of the nation's leading semiconductor manufacturers, Analog Devices produced
dramatic sales and earnings growth as a result of excellent product positioning
in the semiconductor industry. We trimmed our investment and took gains, but we
are holding on to a substantial position in the stock.
[GRAPHIC]
Hits & Misses
[GRAPHIC]
MCI WorldCom
Growth has slowed dramatically for this major telecommunications company because
of competitive forces in the industry. As a result, we sold the stock.
Total Net Assets: $526 million
--------------------------------------------------------------------------------
Top 10 Holdings
Issuer/Security % of fund assets
(1) General Electric 5.3%
(2) Cisco Systems 4.7%
(3) Total Fina 4.4%
(4) EMC 4.0%
(5) Tyco International 3.9%
(6) Amgen 3.6%
(7) American Express 3.6%
(8) Honeywell 3.5%
(9) Citigroup 3.3%
(10) Danaher 3.3%
Total 39.6%
See page 11 for more detail.
--------------------------------------------------------------------------------
Performance: Class A
Fund average annual total return as of 10/31/00(1,4)
Life of Fund
1 Year (12/31/97)
--------------------------------
12.03% 19.04%
S&P 500 as of 10/31/00(2)
Life of Fund
1 Year (12/31/97)
--------------------------------
6.08% 16.15%
Fund average annual total return as of 9/30/00(3,4)
Life of Fund
1 Year (12/31/97)
--------------------------------
12.21% 17.73%
S&P 500 as of 9/30/00(2)
Life of Fund
1 Year (12/31/97)
--------------------------------
13.27% 16.86%
See pages 6 and 7 for data on other share classes.
--------------------------------------------------------------------------------
Top 5 Industries
% of fund assets
[THE FOLLOWING INFORMATION WAS REPRESENTED AS A BAR CHART IN THE PRINTED
MATERIAL]
October 31, 1999
Drugs & Biotechnology 12.2%
Computer Technology 9.9%
Multi-Sector Companies 8.2%
Miscellaneous Financial 6.7%
Retail 5.7%
October 31, 2000
Multi-Sector Companies 12.7%
Drugs & Biotechnology 11.6%
Miscellaneous Financial 10.1%
Communications Technology 9.8%
Computer Technology 6.9%
--------------------------------------------------------------------------------
Ticker Symbols
State Street Research Legacy Fund
Class A: SRLAX Class B(1): SRLPX Class B: SRLBX Class C: SRLCX Class S: SRLSX*
--------------------------------------------------------------------------------
1 Does not reflect sales charge.
2 The S&P 500 (officially the "S&P 500 Stock Price Index") is an unmanaged
index of 500 U.S. stocks. The index does not take transaction charges into
consideration. It is not possible to invest directly in the index.
3 At maximum applicable sales charge.
4 Keep in mind that past performance is no guarantee of future results. The
fund's share price and return will fluctuate and you may have a gain or
loss when you sell your shares.
* Proposed.
3
<PAGE>
[GRAPHIC] The Way We Think
The Great Divide
How Diversification
Can Help You Get More from
a Tax-Managed Fund
[GRAPHIC]
The potential for lower taxes is the headliner for any tax-efficient mutual
fund, especially in a year when so many funds are scheduled to pay high capital
gains distributions while they report lackluster performance.
But tax efficiency is only one of the advantages of a core fund such as State
Street Research Legacy Fund, says portfolio manager Pete Woodworth. "In building
our portfolio, we also focus on diversification because we believe it has the
potential to lower volatility." Here's how diversification figures into the
management of Legacy Fund--and why it should matter to long-term investors.
Sector Neutral by Design
For a stock mutual fund, diversification means a strategic division of assets by
industry group. But Woodworth's approach is even more disciplined. The fund's
assets are divided to reflect the S&P 500. That means if technology is 30% of
the S&P 500, Legacy Fund invests approximately 30% of its assets in technology.
Says Woodworth, "we maintain sector weightings that are similar to the market,
whether the sector is in or out of favor."
Woodworth's approach offers shareholders two potential advantages:
1 Exposure to the market's best performing sectors.
When the market favors a particular sector, Legacy Fund shareholders are
automatically exposed to it as they were when technology had a big run up at the
end of 1999 and the beginning of 2000. The fund's investments in technology
stars made a significant contribution to performance early in the year.
U.S. Economy Glides to a Slower Pace
With no further interest rate changes since May, it appears that the Federal
Reserve has managed to orchestrate a modest slowdown of the U.S. economy without
harsh effects on consumers, workers or the markets. Third-quarter gross domestic
product, the nation's total output of goods and services, was down significantly
from previous quarters--+2.7% versus +5.6% in the second quarter. As a result,
the Fed has let interest rates stand in its past two meetings. However, it
continues to warn that it is not entirely satisfied with the tight labor market,
relatively high consumer spending and rising energy prices, any of which could
threaten higher inflation.
More Share in Good Times
Prosperity has broadened its reach across the income spectrum. Poverty dropped
to a 20-year low last year. Real median house hold income rose to a record high
of $40,800 as personal income, in general, continued to climb. Consumer
confidence also remained high.
Financial Markets Reflect Uncertainty
The rocky performance by the U.S. stock market in the second half of the year
had less to do with the economy than a string of disappointing announcements
about sales and earnings from both old and new economy market leaders. The S&P
500 returned 6.08% over the 12 months ended in October. However, mid-cap growth
companies, as measured by the Russell Midcap Growth Index, soared 38.67% over
the same period. Long-term U.S. Treasury bonds were helped by optimism about the
economic slowdown plus a federal buyback of bonds. Foreign markets were
generally disappointing. Canada was the bright spot on the globe, as energy and
telecommunication companies have brought its stock market to life.
--------------------------------------------------------------------------------
Key Indicators Point to Slower Growth
--------------------------------------------------------------------------------
[DOWN ARROW] Corporate profit growth slowed from 4.8% to 3.0%
[DOWN ARROW] GDP growth declined from 5.6% to 2.7%
--------------------------------------------------------------------------------
But Pockets of Strength Keep Fed on Vigil
--------------------------------------------------------------------------------
[UP ARROW] Consumer spending 4.5%
[UP ARROW] Personal income 5.5%
[UP ARROW] New home sales 9.2%
[DOWN ARROW] Jobless rate 3.9%
--------------------------------------------------------------------------------
Source: U.S. Department of Commerce.
All figures are for third quarter of October 2000.
4 State Street Research Legacy Fund
<PAGE>
2 A strategy to lower volatility.
After the fund's technology exposure had swelled as the result of strong
performance, Woodworth sold off some of his position in top performers such as
i2 and Analog Devices, locked in the fund's gains, and lowered its exposure to
risk. "We follow one of the market's most revered principles: we sell high and
buy low."
Strategies to Manage Gains
What happens to the fund's tax efficiency when Woodworth sells stocks for big
gains? No problem, says Woodworth. He goes back through the portfolio and looks
for stocks that have not met his expectations. He tries to sell them for a loss
to help offset gains and replaces them with stocks in the same industry group in
order to maintain the fund's diversification. "In an ideal world, you want to
invest in the very best companies and own their stocks forever." But in the real
world, even the best companies can stumble. And some stumble permanently. "Look
at what has happened to Xerox, one of the great technology companies of the 20th
century. And Sears & Roebuck, perhaps the greatest retail company of all time,"
says Woodworth.
Woodworth sold the fund's investment in Bank of America and replaced it with
Citigroup.
Weekly prices Oct. 29, 1999--Oct. 27, 2000
<PLOT POINTS NEEDED>
o Citigroup
o Bank of America
Source: Bloomberg
This year Woodworth sold the fund's investment in Bank of America, which had
been bought for its turnover potential. However, it had failed to demonstrate
the kind of progress that Woodworth was looking for, so he sold it and replaced
it with Citigroup, which had a more diversified line-up of businesses--it's
added insurance, investment banking and other financial services to its banking
operations--and a higher growth rate. Woodworth also sold Lucent, DuPont and
Bank One because of their disappointing business prospects.
Woodworth has banked some $12 million in realized capital losses, or
approximately 40 cents a share, to carry over to years when he has an outsized
number of gains to offset. Banked losses may sound like a negative, but they
actually offer Woodworth both flexibility and control so that he doesn't have to
worry about day-to-day gains in managing the portfolio.
Tax Efficiency Starts at Home
While most investors seek out tax-efficient funds so that they can keep more of
their investment earnings, they sometimes forget that their own investment
behavior can work either for or against tax efficiency. "Frequent buying and
selling can more than offset the benefits of a tax-efficient fund," says
Woodworth. "It's important for shareholders to take a long-term view even when
the markets are volatile, or, especially when the markets are volatile. If you
feel like you've been on a roller coaster this year, just remember: if you get
off at the bottom, you've missed half of the ride," says Woodworth. His credo is
fairly straightforward: pay attention to taxes, diversify to help manage risk,
and rely on research to identify stocks with long-term potential. "That's the
Legacy story," says Woodworth, chapter and verse.
--------------------------------------------------------------------------------
A Closer Look [GRAPHIC]
Super-Low Cap Gains Tax Rate Kicks in Next Year
Beginning in 2001, an obscure provision of the Taxpayer Relief Act of 1997 will
create a super-low capital gains tax rate for investments purchased after 2000
and held for at least five years. Future capital gains on investments made after
December 31, 2000 will be taxed at 18% versus today's 20% rate.
If you're in the 15% tax bracket--most likely if you are a minor, a new college
grad or retired and living on Social Security--the capital gains rate falls to
8% on investments held for five years and sold after 2000, regardless of when
they were purchased.
You can still take advantage of the lower capital gains tax rate even if you
have owned shares for more than 5 years and you don't want to sell them to meet
the criteria for the new rate. The IRS will allow you to treat your shares as if
you had sold them and repurchased them as of January 1, 2001. You'll pay 20%
capital gains tax on any gains realized by this treatment. However, the cost
basis of the shares will then reset to their market value as of January 1, and
the five-year clock starts ticking. If the security is in a loss position, the
loss cannot be recognized.
Be sure to consult a tax adviser to help you decide whether this strategy makes
sense for you. A tax professional can help you weigh your choices and make a
decision that is both tax savvy and financially sound.
5
<PAGE>
[GRAPHIC]
--------------------------------------------------------------------------------
Performance in Perspective Management's Discussion of Fund Performance Part 2
--------------------------------------------------------------------------------
Performance Figures as of October 31, 2000
These two pages focus on the fund's long-term track record. While a mutual
fund's past performance is never a guarantee of future results, long-term
returns can serve as an important context for evaluating recent performance.
Three ways of measuring long-term performance are cumulative returns, average
annual returns and the change in dollar value over time of a given investment.
Information about these measures follows, while the share class boxes contain
the results of these measures for each share class.
Cumulative Total Return
This represents the total percentage you would have earned or lost if you had
invested a lump sum in the fund and left it there until the end of the period
indicated. Performance would be lower if sales charges were reflected.
Average Annual Total Return
Average annual total return percentage is the rate you would have had to earn
during each year of a given time period -- say, five years -- in order to end up
with the fund's actual cumulative return for those five years. In reality, of
course, fund performance varies from year to year. Because of this, a fund's
actual performance for a given year may be higher or lower than an average
annual performance figure.
$10,000 Over Life of Fund
This example is similar to cumulative total return, but uses dollars rather than
percentages, and assumes that the lump sum you invested was $10,000. It also
compares fund performance to the performance of a market index.
--------------------------------------------------------------------------------
Class A Front Load
o Initial sales charge of 5.75% or less, with lower sales charges for larger
investments (see a prospectus for details)
o Lower annual expenses than Class B(1) or Class C shares because of lower
service (12b-1) fee of 0.30%
Life of Fund
Cumulative Total Return 1 Year (12/31/97)
(does not reflect -----------------------
sales charge) 12.03% 63.98%
Life of Fund
Average Annual Total Return 1 Year (12/31/97)
(at maximum applicable -----------------------
sales charge) 5.59% 16.58%
$10,000 Over Life of Fund
[THE FOLLOWING INFORMATION WAS DEPICTED AS A LINE CHART IN THE PRINTED MATERIAL]
Class A S&P 500 Index
"97" 9425 10000
"98" 10829 11465
"99" 13796 14407
"00" 15455 15283
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class B(1) Back Load for accounts opened after 1/1/99
o No initial sales charge
o Deferred sales charge of 5% or less on shares you sell within six years
o Annual distribution/service (12b-1) fee of 1.00%
o Automatic conversion to Class A shares after eight years, reducing future
annual expenses
Life of Fund
Cumulative Total Return 1 Year (12/31/97)
(does not reflect -----------------------
sales charge) 11.16% 60.48%
Life of Fund
Average Annual Total Return 1 Year (12/31/97)
(at maximum applicable -----------------------
sales charge) 6.16% 17.37%
$10,000 Over Life of Fund
[THE FOLLOWING INFORMATION WAS DEPICTED AS A LINE CHART IN THE PRINTED MATERIAL]
Class B(1) S&P 500 Index
"97" 10000 10000
"98" 11420 11465
"99" 14437 14407
"00" 15748 15283
--------------------------------------------------------------------------------
6 State Street Research Legacy Fund
<PAGE>
--------------------------------------------------------------------------------
Class B Back Load for accounts opened before 1/1/99
o No initial sales charge
o Deferred sales charge of 5% or less on shares you sell within five years
o Annual distribution/service (12b-1) fee of 0.71% (effective June 2000,
this fee was increased from 0.34%)
o Automatic conversion to Class A shares after eight years, reducing future
annual expenses
Life of Fund
Cumulative Total Return 1 Year (12/31/97)
(does not reflect -----------------------
sales charge) 11.64% 61.18%
Life of Fund
Average Annual Total Return 1 Year (12/31/97)
(at maximum applicable -----------------------
sales charge) 6.64% 17.55%
$10,000 Over Life of Fund
[THE FOLLOWING INFORMATION WAS DEPICTED AS A LINE CHART IN THE PRINTED MATERIAL]
Class B S&P 500 Index
"97" 10000 10000
"98" 11420 11465
"99" 14437 14407
"00" 15818 15283
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class C Level Load
o No initial sales charge
o Deferred sales charge of 1%, paid if you sell shares within one year of
purchase
o Lower deferred sales charge than Class B(1) shares
o Annual distribution/service (12b-1) fee of 1.00%
o No conversion to Class A shares after eight years, so annual expenses do
not decrease
Life of Fund
Cumulative Total Return 1 Year (12/31/97)
(does not reflect -----------------------
sales charge) 11.23% 60.58%
Life of Fund
Average Annual Total Return 1 Year (12/31/97)
(at maximum applicable -----------------------
sales charge) 10.23% 18.18%
$10,000 Over Life of Fund
[THE FOLLOWING INFORMATION WAS DEPICTED AS A LINE CHART IN THE PRINTED MATERIAL]
Class C S&P 500 Index
"97" 10000 10000
"98" 11420 11465
"99" 14437 14407
"00" 16058 15283
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Class S Special Programs
o Available through certain retirement accounts, advisory accounts of the
investment manager and other programs that usually involve special
conditions and separate fees (see a prospectus for details)
o No sales charges of any kind
o No distribution/service (12b-1) fees; annual expenses are lower than for
other share classes
Life of Fund
Cumulative Total Return 1 Year (12/31/97)
(does not reflect -----------------------
sales charge) 12.99% 66.18%
Life of Fund
Average Annual Total Return 1 Year (12/31/97)
(at maximum applicable -----------------------
sales charge) 12.99% 19.60%
$10,000 Over Life of Fund
[THE FOLLOWING INFORMATION WAS DEPICTED AS A LINE CHART IN THE PRINTED MATERIAL]
Class S S&P 500 Index
"97" 10000 10000
"98" 11520 11465
"99" 14707 14407
"00" 16618 15283
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
A Closer Look [GRAPHIC]
12b-1 fees
12b-1 fees are named after the SEC rule that permits them.
The fund pays 12b-1 fees to cover service and distribution costs. The fees cover
personal services and the maintenance of shareholder accounts.
The fees also cover selling and marketing expenditures for the sale of fund
shares.
The fund pays 12b-1 fees out of its assets, so shareholders see them as an
indirect charge rather than a direct charge.
All of the performance figures on these pages assume reinvestment of dividends
and distributions.
The average annual total returns for the fund also include the effects of any
fees and sales charges that would apply for each share class.
The S&P 500 (officially, the "S&P 500 Composite Stock Price Index") is an
unmanaged index of 500 U.S. stocks. The index does not take transaction charges
into consideration. It is not possible to invest directly in the index.
Keep in mind that past performance is no guarantee of future results. The fund's
share price and return will fluctuate and you may have a gain or loss when you
sell your shares.
Performance for Class B(1) reflects Class B performance through December 31,
1998. Class B(1) was introduced January 1, 1999.
7
<PAGE>
[GRAPHIC]
--------------------------------------------------------------------------------
The Fund in Detail
--------------------------------------------------------------------------------
The following pages describe the fund in detail as of the date of this report.
They provide a "snapshot" of the fund's holdings at one moment in time (the
report date), describe the financial dimensions of its operations for the past
fiscal year and give a summary of operations on a per share basis for the past
three fiscal years. There's also an overview of the fund and its business
structure, as well as information on the accounting policies the fund uses in
arriving at the figures it presents here.
[PHOTO]
Together, the words and numbers in this section offer a comprehensive picture of
the fund and its recent activities. In fact, the text and notes on pages 9 to 20
are an integral part of the financial statements, which wouldn't be complete
without them.
For more information about the fund's strategies, risks and expenses, check the
fund's prospectus; you'll need to read it before making any investments. The
prospectus also has more details on the fund's share classes and its policies
for shareholder accounts. To get a copy of any State Street Research prospectus,
see the back cover of this report.
Keep in mind that in annual reports, the portfolio holdings and financial
statements are audited, while in semiannual reports they are unaudited.
8 State Street Research Legacy Fund
<PAGE>
About the Fund
--------------------------------------------------------------------------------
Business structure
State Street Research Legacy Fund is a mutual fund that allows shareholders to
pool their assets for investment in a portfolio of securities. This fund is a
series of State Street Research Securities Trust, a Massachusetts business trust
and is an open-end management investment company.
On August 2, 2000, the Board of Trustees voted to change the fiscal year end of
the fund from April 30 to October 31.
Four entities administer the fund's main business functions:
o The board of trustees oversees the fund with its shareholders' interests
in mind and have ultimate responsibility for the fund's activities.
o The investment manager, State Street Research & Management Company, is
responsible for the fund's investment and business activities and receives
the management fee as compensation.
o The distributor, State Street Research Investment Services, Inc., sells
shares of the fund, handles investor inquiries and transaction orders and
provides other shareholder services.
o The custodian, State Street Bank and Trust Company, holds fund securities,
provides data on their market value and handles related services.
The investment manager and the distributor are subsidiaries of MetLife. State
Street Bank and Trust Company is not affiliated with MetLife (the similarity
between its name and the names of the investment manager and distributor is
coincidental). A majority of the trustees consists of people who are not
affiliated with MetLife or any of its subsidiaries. The distributor pays a
portion of its fees to MetLife for services it provides, including maintaining
the accounts of some investors who hold shares through their firm's employee
benefit plans and other sponsored arrangements.
Goal and strategy
The fund seeks to provide long-term growth of capital. In seeking to achieve its
investment objective, the fund invests at least 65% of total assets in stocks
and convertible securities of mid- and large-size companies. The fund employs a
tax-managed strategy, generally seeking to identify stocks with long-term growth
potential and holding them for extended periods.
Share classes
The fund generally offers four share classes, each with its own sales charge and
expense structure. The fund also offers an additional class of shares (Class B)
but only to current Class B shareholders through reinvestment of dividends and
distributions or through exchanges from existing Class B accounts of other State
Street Research funds.
Class A shares are subject to an initial sales charge of up to 5.75% and pay an
annual service and distribution fee equal to 0.30% of average daily net assets.
Class B(1) shares pay annual service and distribution fees of 1.00%. Prior to
June 1, 2000, Class B shares paid annual service and distribution fees of 0.34%
and effective June 1, 2000 began paying annual service and distribution fees of
0.71%. Class B(1) and Class B shares automatically convert into Class A share
(which pay lower ongoing expenses) at the end of eight years. Class B(1) and
Class B shares are subject to a contingent deferred sales charge on certain
redemptions made within six years and five years of purchase, respectively.
Class C shares are subject to a contingent deferred sales charge of 1.00% on any
shares redeemed within one year of their purchase and shares also pay annual
service and distribution fees of 1.00%. Class S shares are only offered through
certain retirement accounts, advisory accounts of the investment manager, and
special programs. No sales charge is imposed at the time of purchase or
redemption of Class S shares. Class S shares do not pay any service or
distribution fees.
The text and notes are an integral part of the financial statements.
9
<PAGE>
The Fund's Accounting Policies
--------------------------------------------------------------------------------
In keeping with accounting principles generally accepted in the United States,
the fund has used the following policies in preparing the portfolio holdings and
financial statements in this report:
The fund values all portfolio securities as of the date of this report (or, if
that day wasn't a business day, then the most recent business day). The fund
uses the following methods for determining the values of various types of
securities:
o Listed securities -- The fund uses the price of the last sale on a
national securities exchange that was quoted before the close of the New
York Stock Exchange.
o Over-the-counter securities -- The fund uses the closing prices quoted on
the Nasdaq system. If a security hasn't traded that day, or if it is not
quoted on the Nasdaq system, the value is set at halfway between the
closing bid and asked quotations.
o Securities maturing within sixty days -- The fund adjusts the value of
these securities daily, moving them closer to the amount due on maturity
as the maturity date approaches.
The fund accounts for each purchase and sale of portfolio securities on the
trade date. In calculating realized gains or losses, the fund takes as its cost
basis the identified cost of securities sold.
The fund records investment income from portfolio securities as follows:
o Interest -- The fund accrues interest daily as it earns it.
o Cash dividends -- The fund accrues these on the ex-dividend date.
The fund may seek additional income by lending portfolio securities to qualified
institutions. The fund will receive cash or securities as collateral in the
amount equal to at least 100% of the current market value of any loaned
securities plus accrued interest. By reinvesting any cash collateral it receives
in theses transactions, the fund could realize additional gains or losses. If
the borrower fails to return the securities and the collateral has declined in
value, the fund could lose money. The fund accounts for income from the lending
of its securities by including it in interest income.
The fund distributes its net earnings to its shareholders. The fund calculates
these distributions using federal income tax regulations. As a result, they may
be different than if the fund used generally accepted accounting principles. The
fund distributes its earnings on the following schedule:
o Dividends from net investment income -- The fund ordinarily declares and
pays these annually, if any.
o Net realized capital gains -- The fund distributes these annually, if any.
If the fund has no earnings to distribute, it won't make a distribution.
The fund does not intend to pay federal income tax. This is because it has
elected to be exempt from taxes under Subchapter M of the Internal Revenue Code,
in part because it makes distributions as described above.
The fund pays expenses as follows:
o Expenses attributed to the fund -- The fund pays these directly. Examples
of these expenses include the management fee, transfer agent fee,
custodian fee and distribution and service fees.
o Expenses attributed to the trust of which the fund is a series -- These
expenses are divided up among all funds in the trust. Each fund pays a
proportional share. Examples of these expenses include the legal fees and
trustees fees.
The fund has used certain estimates and assumptions in preparing this report.
Although they are necessary in order to follow generally accepted accounting
principles, these estimates and assumptions affect several key areas, including
the reported amounts of assets and liabilities and income and expenses. Actual
results could differ from those estimates.
The text and notes are an integral part of the financial statements.
10 State Street Research Legacy Fund
<PAGE>
Portfolio Holdings October 31, 2000
--------------------------------------------------------------------------------
The listings that begin on this page detail the fund's investment holdings as of
the report date. We have grouped the holdings by asset class and by smaller
sub-groups as well. For example, we have grouped this fund's stocks by sector of
the economy, and then by specific industry within each sector.
The solid colored circles (1) show the fund's ten largest holdings, with the
number in the circle showing where the holding ranks in the top ten.
--------------------------------------------------------------------------------
Notes about specific elements of the financials are called out in boxes such as
this.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
KEY TO SYMBOLS
* Denotes a security which has not paid a dividend during the last year.
# Denotes an American Depositary Receipt, a form of ownership of foreign
securities that is traded in the United States and denominated in U.S.
dollars.
--------------------------------------------------------------------------------
Market
Issuer Shares Value
--------------------------------------------------------------------------------
Common Stocks 97.3% of net assets
Consumer Discretionary 8.7%
--------------------------------------------------------------------------------
Advertising Agencies 2.1%
Interpublic Group of Companies, Inc. 259,500 $11,142,281
-----------
Communications, Media & Entertainment 1.6%
Viacom Inc. Cl. B* 152,081 8,649,607
-----------
Retail 5.0%
Home Depot Inc. 320,350 13,775,050
Target Corp. 451,900 12,483,738
-----------
26,258,788
-----------
Total Consumer Discretionary 46,050,676
-----------
Consumer Staples 9.2%
--------------------------------------------------------------------------------
Beverages 2.3%
Coca-Cola Co. 196,700 11,875,763
-----------
Drug & Grocery Store Chains 4.9%
CVS Corp. 289,600 15,330,700
Kroger Co.* 455,600 10,279,475
-----------
25,610,175
-----------
Household Products 2.0%
Procter & Gamble Co. 150,700 10,765,631
-----------
Total Consumer Staples 48,251,569
-----------
Financial Services 12.3%
--------------------------------------------------------------------------------
Insurance 2.2%
Ace Ltd. 301,600 11,837,800
-----------
Miscellaneous Financial 10.1%
American Express Co. 312,500 18,750,000(7)
Financial services
Citigroup, Inc. 332,666 17,506,548(9)
Financial services
Federal National Mortgage Association 217,500 16,747,500
-----------
53,004,048
-----------
Total Financial Services 64,841,848
-----------
The text and notes are an integral part of the financial statements.
11
<PAGE>
Portfolio Holdings October 31, 2000 CONTINUED
Market
Issuer Shares Value
--------------------------------------------------------------------------------
Health Care 14.6%
--------------------------------------------------------------------------------
Drugs & Biotechnology 11.6%
Amgen Inc.* 324,000 $18,771,750(6)
Biotechnology
Johnson & Johnson 179,400 16,527,225
Pfizer Inc. 295,600 12,766,225
Pharmacia Corp. 234,100 12,875,500
------------
60,940,700
------------
Hospital Supply 3.0%
Medtronic Inc. 290,400 15,772,350
------------
Total Health Care 76,713,050
------------
Integrated Oils 4.4%
--------------------------------------------------------------------------------
Integrated International 4.4%
Total Fina SA # 322,100 23,070,413(3)
Oil services
------------
Total Integrated Oils 23,070,413
------------
Other 12.7%
--------------------------------------------------------------------------------
Multi-Sector 12.7%
General Electric Co. 507,600 27,822,825(1)
Consumer and industrial products
Honeywell International Inc.* 340,000 18,296,250(8)
Technology and manufacturing
Tyco International Ltd. 365,200 20,702,275(5)
Diversified manufacturer/service
------------
Total Other 66,821,350
------------
Producer Durables 6.3%
--------------------------------------------------------------------------------
Machinery 1.3%
Caterpillar Inc. 199,800 7,005,488
------------
Miscellaneous Equipment 3.3%
Danaher Corp. 273,100 17,239,437(10)
Appliance and tool
------------
Telecommunications Equipment 1.7%
American Tower Corp. Cl. A* 219,800 8,998,062
------------
Total Producer Durables 33,242,987
------------
Technology 27.9%
--------------------------------------------------------------------------------
Communications Technology 9.8%
Cisco Systems Inc.* 459,800 24,771,725(2)
Data networking
Corning Inc. 141,600 10,832,400
General Motors Corp. Cl. H* 495,300 16,047,720
------------
51,651,845
------------
Computer Software 5.6%
i2 Technologies Inc.* 59,000 10,030,000
Microsoft Corp.* 187,600 12,920,950
Veritas Software Co.* 45,600 6,430,312
------------
29,381,262
------------
Computer Technology 6.9%
EMC Corp.* 234,700 20,902,969(4)
Memory devices
International Business Machines Corp. 156,300 15,395,550
------------
36,298,519
------------
Electronics 3.1%
Solectron Corp.* 361,900 15,923,600
------------
Electronics: Semi-Conductors/Components 2.5%
Analog Devices Inc.* 204,500 13,292,500
------------
Total Technology 146,547,726
------------
Utilities 1.2%
--------------------------------------------------------------------------------
Telecommunications 1.2%
SBC Communications Inc. 111,200 6,414,850
------------
Total Utilities 6,414,850
------------
Total Common Stocks 511,954,469(a)
------------
--------------------------------------------------------------------------------
(a) The fund paid a total of $408,822,443 for these securities.
--------------------------------------------------------------------------------
The text and notes are an integral part of the financial statements.
12 State Street Research Legacy Fund
<PAGE>
<TABLE>
<CAPTION>
Coupon Maturity Amount of Market
Issuer Rate Date Principal Value
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial Paper 2.7% of net assets
American Express Credit Corp. 6.57% 11/01/2000 $252,000 $252,000
Exxon Corp. 6.50% 11/03/2000 13,834,000 13,834,000
------------
Total Commercial Paper 14,086,000(1)
------------
<CAPTION>
% of
Net Assets
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Summary of Portfolio Assets
Investments 100.0% $526,040,469(2)
Cash and Other Assets, Less Liabilities 0.0% (12,408)
----- ------------
Net Assets 100.0% $526,028,061
===== ============
</TABLE>
--------------------------------------------------------------------------------
(1) The fund paid a total of $14,086,000 for these securities.
--------------------------------------------------------------------------------
(2) The fund paid a total of $422,908,443 for these securities.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Federal Income Tax Information
At October 31, 2000, the net unrealized appreciation of
investments based on cost for Federal income tax purposes of
$423,245,937 was as follows:
Aggregate gross unrealized appreciation for all investments in
which there is an excess of value over tax cost $114,315,995
Aggregate gross unrealized depreciation for all investments in
which there is an excess of tax cost over value (11,521,463)
------------
$102,794,532
============
--------------------------------------------------------------------------------
At October 31, 2000, the fund had a capital loss carryforward of $18,514,084
available, to the extent provided in regulations, to offset future capital
gains, if any, of which $353,559, $2,301,316 and $15,859,209 expire on April 30,
2007, April 30, 2008 and October 31, 2008, respectively.
The text and notes are an integral part of the financial statements.
13
<PAGE>
Statement of
Assets and Liabilities October 31, 2000
--------------------------------------------------------------------------------
This is the fund's balance sheet as of the report date. It shows the fund's
assets, its liabilities and, by subtraction, its net assets. It also shows the
share price for each share class as of the report date.
Assets
Investments, at market value $526,040,469(1)
Cash 601
Receivable for securities sold 5,917,565
Receivable for fund shares sold 1,343,597
Dividends and interest receivable 265,443
Deferred organization costs and other assets 60,998
------------
533,628,673
Liabilities
Payable for securities purchased 6,252,531
Payable for fund shares redeemed 405,118
Accrued distribution and service fees 319,278
Accrued management fee 290,533
Accrued transfer agent and shareholder services 228,802
Accrued administration fee 28,100
Accrued trustees' fees 13,722
Other accrued expenses 62,528
------------
7,600,612
------------
Net Assets $526,028,061
============
Net Assets consist of:
Unrealized appreciation of investments $103,132,026
Accumulated net realized loss (18,851,578)
Paid-in capital 441,747,613
------------
$526,028,061(2)
============
--------------------------------------------------------------------------------
(1) The fund paid a total of $422,908,443 for these securities.
--------------------------------------------------------------------------------
(2) Net Asset Value (NAV) of Each Share Class
Except where noted, the NAV is the offering and the redemption price for each
class.
Net Assets / Number of Shares = NAV
A $151,920,280 9,269,699 $16.39*
B(1) $184,818,473 11,524,075 $16.04**
B $106,026,887 6,582,225 $16.11**
C $76,136,797 4,745,201 $16.05**
S $7,125,624 429,125 $16.61
* Maximum offering price per share $17.39 ($16.39 / .9425)
** When you sell Class B(1), Class B or Class C shares, you receive the net
asset value minus deferred sales charge, if any.
--------------------------------------------------------------------------------
The text and notes are an integral part of the financial statements.
14 State Street Research Legacy Fund
<PAGE>
Statement of
Operations For the six months ended October 31, 2000
--------------------------------------------------------------------------------
This shows what the fund earned and lost over the report period, and what its
expenses were.
Investment Income
Dividends, net of foreign taxes $1,697,427(1)
Interest 372,262
-----------
2,069,689
Expenses
Management fee 1,691,984(2)
Transfer agent and shareholder services 701,032(3)
Custodian fee 78,921
Reports to shareholders 74,245
Distribution and service fees-Class A 227,135(4)
Distribution and service fees-Class B(1) 874,223(4)
Distribution and service fees-Class B 357,639(4)
Distribution and service fees-Class C 372,767(4)
Registration fees 65,855
Audit fee 37,232
Administration fee 28,100(5)
Trustees' fees 13,722(6)
Legal fees 12,552
Amortization of organization costs 9,214(7)
Miscellaneous 2,613
-----------
4,547,234
Fees paid indirectly (8,985)(8)
-----------
4,538,249
-----------
Net investment loss (2,468,560)
-----------
Realized and Unrealized Gain
(Loss) on Investments
Net realized loss on investments (16,195,116)(9)
Change in unrealized appreciation of investments 30,175,907
-----------
Net gain on investments 13,980,791
-----------
Net increase in net assets resulting from operations $11,512,231
===========
--------------------------------------------------------------------------------
(1) The fund paid foreign taxes of $51,509.
--------------------------------------------------------------------------------
(2) The management fee is 0.65% of fund net assets, annually.
--------------------------------------------------------------------------------
(3) Includes a total of $236,649 paid to the distributor for the services it
provided and to MetLife for similar services it provided, including
maintaining the accounts of some investors who hold shares through that
firm's employee benefit plans and other sponsored arrangements.
--------------------------------------------------------------------------------
(4) Payments made to the distributor under the fund's 12b-1 plans. The fees
cover personal services and the maintenance of shareholder accounts. The
fees also cover distribution and marketing expenditures for the sale of
fund shares.
--------------------------------------------------------------------------------
(5) Payments made to the investment manager for certain administrative costs
incurred in providing accounting services to the fund.
--------------------------------------------------------------------------------
(6) Paid only to trustees who aren't currently affiliated with the adviser
(the fund doesn't pay trustees fees to affiliated trustees).
--------------------------------------------------------------------------------
(7) Organization costs were capitalized and are being amortized straight-line
over five years.
--------------------------------------------------------------------------------
(8) Represents transfer agent credits earned from uninvested cash balances.
--------------------------------------------------------------------------------
(9) To earn this, the fund sold $55,129,951 of securities. During this same
period, the fund also bought $84,428,635 worth of securities. These
figures don't include short-term obligations or U.S. government
securities.
--------------------------------------------------------------------------------
The text and notes are an integral part of the financial statements.
15
<PAGE>
Statement of
Changes in Net Assets
--------------------------------------------------------------------------------
This shows how the fund's size changed over the report period, including changes
that resulted from investment performance as well as those that resulted from
shareholders buying and selling fund shares.
Year ended Six months ended
April 30, 2000 October 31, 2000
--------------------------------------------------------------------------------
Increase (Decrease) in Net Assets
Operations:
Net investment loss $(2,739,068) $(2,468,560)
Net realized loss on investments (2,302,879) (16,195,116)
Change in unrealized appreciation
of investments 41,772,675 30,175,907
-------------------------------
Net increase resulting
from operations 36,730,728 11,512,231
-------------------------------
Net increase from
fund share transactions 241,714,021 31,826,587(1)
-------------------------------
Total increase in
net assets 278,444,749 43,338,818
-------------------------------
Net Assets
Beginning of year 204,244,494 482,689,243
-------------------------------
End of year $482,689,243 $526,028,061
===============================
The text and notes are an integral part of the financial statements.
16 State Street Research Legacy Fund
<PAGE>
--------------------------------------------------------------------------------
(1) These transactions break down by share class as follows:
<TABLE>
<CAPTION>
Year ended Six months ended
April 30, 2000 October 31, 2000 (a)
----------------------------------------------------------------------------
Class A Shares Amount Shares Amount
===============================================================================================================================
<S> <C> <C> <C> <C>
Shares sold 6,594,156 $99,176,897 1,652,599 $26,859,965*
Shares redeemed (1,713,861) (26,504,520) (1,329,439) (21,712,637)
----------------------------------------------------------------------------
Net increase 4,880,295 $72,672,377 323,160 $5,147,328
============================================================================
<CAPTION>
Class B(1) Shares Amount Shares Amount
===============================================================================================================================
<S> <C> <C> <C> <C>
Shares sold 8,559,352 126,892,143 2,227,577 $35,378,081**
Shares redeemed (509,612) (7,786,415) (465,877) (7,374,061)***
----------------------------------------------------------------------------
Net increase 8,049,740 119,105,728 1,761,700 $28,004,020
============================================================================
<CAPTION>
Class B Shares Amount Shares Amount
===============================================================================================================================
<S> <C> <C> <C> <C>
Shares sold 1,872,246 $27,832,460 149,505 $2,362,763**
Shares redeemed (1,126,376) (16,907,851) (501,834) (8,007,916)***
----------------------------------------------------------------------------
Net increase (decrease) 745,870 $10,924,609 (352,329) ($5,645,153)
============================================================================
<CAPTION>
Class C Shares Amount Shares Amount
===============================================================================================================================
<S> <C> <C> <C> <C>
Shares sold 2,886,082 $43,112,014 609,672 $9,639,851**
Shares redeemed (339,217) (5,111,844) (260,031) (4,109,923)****
----------------------------------------------------------------------------
Net increase 2,546,865 $38,000,170 349,641 $5,529,928
============================================================================
<CAPTION>
Class S Shares Amount Shares Amount
===============================================================================================================================
<S> <C> <C> <C> <C>
Shares sold 126,833 $1,988,265 608,779 $9,967,947
Shares redeemed (63,353) (977,128) (682,958) (11,177,483)
----------------------------------------------------------------------------
Net increase (decrease) 63,480 $1,011,137 (74,179) ($1,209,536)
============================================================================
</TABLE>
The trustees have the authority to issue an unlimited number of fund
shares, with a $.001 par value per share. MetLife owned 50,025 Class A
shares, 11,799 Class B shares, 18,440 Class C shares and 200,886 Class S
share of the Fund.
* Includes $72,713 and $314,899 in sales charges collected by the
distributor and MetLife.
** Like all broker-dealers, MetLife received commissions that were calculated
as a percentage of these sales but the commissions of $343,396 $1,008 and
$2,687 for Class B(1), Class B and Class C, were paid by the distributor,
not the fund.
*** Includes $159,235 and $80,498 in deferred sales charges collected by the
distributor for Class B(1) and Class B.
**** Includes $7,045 in deferred sales charges collected by the distributor.
(a) Effective August 2, 2000, the fiscal year end of the fund has changed from
April 30 to October 31.
--------------------------------------------------------------------------------
The text and notes are an integral part of the financial statements.
17
<PAGE>
Financial Highlights
--------------------------------------------------------------------------------
These provide a summary of each share class's financial performance.
<TABLE>
<CAPTION>
Class A
===============================================================
Years ended April 30
----------------------------------- Six months ended
1998(a)(f) 1999(a) 2000(a) October 31, 2000(a)(g)
====================================================================================================================================
<S> <C> <C> <C> <C>
Net asset value, beginning of period ($) 10.00 11.66 14.42 15.99
------- ------- ------- -------
Net investment income (loss) ($)* 0.00 (0.02) (0.05) (0.04)
Net realized and unrealized gain on investments ($) 1.66 2.79 1.62 0.44
------- ------- ------- -------
Total from investment operations ($) 1.66 2.77 1.57 0.40
------- ------- ------- -------
Distribution from capital gains ($) -- (0.01) -- --
------- ------- ------- -------
Total distributions ($) -- (0.01) -- --
------- ------- ------- -------
Net asset value, end of period ($) 11.66 14.42 15.99 16.39
======= ======= ======= =======
Total return (%) (b) 16.60(d) 23.73 10.89 2.50(d)
Ratios/Supplemental Data
====================================================================================================================================
Net assets at end of period ($ thousands) 11,984 58,642 143,037 151,920
Expense ratio (%)* 1.25(e) 1.20 1.22 1.34(e)
Expense ratio after expense reductions (%)* 1.25(e) 1.19 1.21 1.34(e)
Ratio of net investment income (loss) to average net assets (%)* 0.01(e) (0.14) (0.34) (0.54)(e)
Portfolio turnover rate (%) 6.44 42.09 33.23 11.07
*Reflects voluntary reduction of
expenses per share of these amounts ($) 0.04 0.00 -- --
</TABLE>
<TABLE>
<CAPTION>
Class B(1)
===================================================
Years ended April 30
---------------------- Six months ended
1999(a)(c) 2000(a) October 31, 2000(a)(g)
==========================================================================================================
<S> <C> <C> <C>
Net asset value, beginning of period ($) 13.08 14.28 15.71
------- ------- -------
Net investment loss ($) (0.04) (0.17) (0.10)
Net realized and unrealized gain on investments ($) 1.24 1.60 0.43
------- ------- -------
Total from investment operations ($) 1.20 1.43 0.33
------- ------- -------
Net asset value, end of period ($) 14.28 15.71 16.04
======= ======= =======
Total return (%) (b) 9.17(d) 10.01 2.10(d)
Ratios/Supplemental Data
==========================================================================================================
Net assets at end of period ($ thousands) 24,454 153,359 184,818
Expense ratio (%) 1.88(e) 1.97 2.04(e)
Expense ratio after expense reductions (%) 1.87(e) 1.96 2.04(e)
Ratio of net investment loss to average net assets (%) (1.00)(e) (1.13) (1.25)(e)
Portfolio turnover rate (%) 42.09 33.23 11.07
</TABLE>
The text and notes are an integral part of the financial statements.
18 State Street Research Legacy Fund
<PAGE>
<TABLE>
<CAPTION>
Class B
============================================================
Years ended April 30
--------------------------------- Six months ended
1998(a)(f) 1999(a) 2000(a) October 31, 2000(a)(g)
=====================================================================================================================
<S> <C> <C> <C> <C>
Net asset value, beginning of period ($) 10.00 11.64 14.28 15.74
------- ------- ------- -------
Net investment loss ($)* (0.03) (0.11) (0.12) (0.07)
Net realized and unrealized gain on investments ($) 1.67 2.76 1.58 0.44
------- ------- ------- -------
Total from investment operations ($) 1.64 2.65 1.46 0.37
------- ------- ------- -------
Distribution from capital gains ($) -- (0.01) -- --
------- ------- ------- -------
Total distributions ($) -- (0.01) -- --
------- ------- ------- -------
Net asset value, end of period ($) 11.64 14.28 15.74 16.11
======= ======= ======= =======
Total return (%) (b) 16.40(d) 22.74 10.22 2.35(d)
Ratios/Supplemental Data
=====================================================================================================================
Net assets at end of period ($ thousands) 19,688 88,383 109,135 106,027
Expense ratio (%)* 2.00(e) 1.95 1.77 1.69(e)
Expense ratio after expense reductions (%)* 2.00(e) 1.94 1.76 1.69(e)
Ratio of net investment loss to average net assets (%)* (0.76)(e) (0.89) (0.87) (0.89)(e)
Portfolio turnover rate (%) 6.44 42.09 33.23 11.07
*Reflects voluntary reduction of
expenses per share of these amounts ($) 0.04 0.00 -- --
</TABLE>
<TABLE>
<CAPTION>
Class C
=========================================================
Years ended April 30
-------------------------------- Six months ended
1998(a)(f) 1999(a) 2000(a) October 31, 2000(a)(g)
=================================================================================================================
<S> <C> <C> <C> <C>
Net asset value, beginning of period ($) 10.00 11.63 14.28 15.71
------ ------ ------ ------
Net investment loss ($)* (0.03) (0.11) (0.16) (0.10)
Net realized and unrealized gain on investments ($) 1.66 2.77 1.59 0.44
------ ------ ------ ------
Total from investment operations ($) 1.63 2.66 1.43 0.34
------ ------ ------ ------
Distribution from capital gains ($) -- (0.01) -- --
------ ------ ------ ------
Total distributions ($) -- (0.01) -- --
------ ------ ------ ------
Net asset value, end of period ($) 11.63 14.28 15.71 16.05
====== ====== ====== ======
Total return (%) (b) 16.30(d) 22.85 10.01 2.16(d)
Ratios/Supplemental Data
=================================================================================================================
Net assets at end of period ($ thousands) 4,977 26,399 69,061 76,137
Expense ratio (%)* 2.00(e) 1.95 1.97 2.04(e)
Expense ratio after expense reductions (%)* 2.00(e) 1.94 1.96 2.04(e)
Ratio of net investment loss to average net assets (%)* (0.69)(e) (0.90) (1.10) (1.24)(e)
Portfolio turnover rate (%) 6.44 42.09 33.23 11.07
*Reflects voluntary reduction of
expenses per share of these amounts ($) 0.04 0.00 -- --
</TABLE>
(a) Per-share figures have been calculated using the average shares method.
(b) Does not reflect any front-end or contingent deferred sales charges.
(c) January 1, 1999 (commencement of share class) to April 30, 1999.
(d) Not annualized.
(e) Annualized.
(f) December 31, 1997 (commencement of operations) to April 30 1998.
(g) Effective August 2, 2000, the fiscal year end of the fund has changed from
April 30 to October 31.
The text and notes are an integral part of the financial statements.
19
<PAGE>
Financial Highlights CONTINUED
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class S
=======================================================
Years ended April 30
----------------------------- Six months ended
1998(a)(f) 1999(a) 2000(a) October 31, 2000(a)(g)
=======================================================================================================================
<S> <C> <C> <C> <C>
Net asset value, beginning of period ($) 10.00 11.68 14.48 16.09
----- ----- ----- -----
Net investment income (loss) ($)* 0.03 0.02 (0.00) (0.02)
Net realized and unrealized gain on investments ($) 1.65 2.79 1.61 0.54
----- ----- ----- -----
Total from investment operations ($) 1.68 2.81 1.61 0.52
----- ----- ----- -----
Distribution from capital gains ($) -- (0.01) -- --
----- ----- ----- -----
Total distributions ($) -- (0.01) -- --
----- ----- ----- -----
Net asset value, end of period ($) 11.68 14.48 16.09 16.61
===== ===== ===== =====
Total return (%) (b) 16.80(d) 24.04 11.12 3.23(d)
Ratios/Supplemental Data
=======================================================================================================================
Net assets at end of period ($ thousands) 4,127 6,367 8,097 7,126
Expense ratio (%)* 1.00(e) 0.95 0.97 1.04(e)
Expense ratio after expense reductions (%)* 1.00(e) 0.94 0.96 1.04(e)
Ratio of net investment income (loss) to average net assets (%)* 0.60(e) 0.16 (0.06) (0.24)(e)
Portfolio turnover rate (%) 6.44 42.09 33.23 11.07
*Reflects voluntary reduction of
of expenses per share of these amounts ($) 0.09 0.01 -- --
</TABLE>
(a) Per-share figures have been calculated using the average shares method.
(b) Does not reflect any front-end or contingent deferred sales charges.
(c) January 1, 1999 (commencement of share class) to October 31, 1999.
(d) Not annualized.
(e) Annualized.
(f) December 31, 1997 (commencement of operations) to April 30, 1998.
(g) Effective August 2, 2000, the fiscal year end of the fund has changed from
April 30 to October 31.
The text and notes are an integral part of the financial statements.
Report of Independent Accountants
--------------------------------------------------------------------------------
To the Trustees of State Street Research
Securities Trust and the Shareholders of
State Street Research Legacy Fund
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio holdings, and the related statements of operations and of changes
in net assets and the financial highlights present fairly, in all material
respects, the financial position of State Street Research Legacy Fund (a series
of State Street Research Securities Trust, hereafter referred to as the "Trust")
at October 31, 2000, and the results of its operations, the changes in its net
assets and the financial highlights for the periods indicated, in conformity
with accounting principles generally accepted in the United States of America.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Trust's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States of America,
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 2000 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 15, 2000
<PAGE>
Board of Trustees
Richard S. Davis
Chairman of the Board,
President, Chief Executive Officer and Director,
State Street Research & Management Company
Bruce R. Bond
Former Chairman of the Board,
Chief Executive Officer and President,
PictureTel Corporation
Steve A. Garban
Former Senior Vice President
for Finance and Operations and Treasurer,
The Pennsylvania State University
Dean O. Morton
Former Executive Vice President,
Chief Operating Officer and Director,
Hewlett-Packard Company
Susan M. Phillips
Dean, School of Business and Public Management,
George Washington University; former Member of
the Board of Governors of the Federal Reserve System
and Chairman and Commissioner of the Commodity
Futures Trading Commission
Toby Rosenblatt
President, Founders Investments Ltd.
President, The Glen Ellen Company
Michael S. Scott Morton
Jay W. Forrester Professor of Management,
Sloan School of Management,
Massachusetts Institute of Technology
21
<PAGE>
Glossary
12b-1 fees -- Fees paid from mutual fund assets for personal services and
for the maintenance of shareholder accounts and distribution and marketing
expenses. The fees are named after the SEC rule that permits them.
Average shares method -- The practice of basing a fund's calculations for
a given period on the average number of shares that were outstanding
during that period.
Nasdaq -- The stock price quotation system operated by the National
Association of Securities Dealers. The Nasdaq system operates as a
clearing house for transaction data about stocks that are traded "over the
counter" around the U.S.
New York Stock Exchange -- The largest stock exchange in the United
States, and the place where many of the largest company stocks are listed.
Unlike the Nasdaq system, the NYSE is a physical exchange, with all
trading occurring on the exchange's trading floor on Wall Street.
Principal Amount -- With bonds and certain other debt securities, the
amount of the underlying principal of the security. When the security
matures, the issuer is obligated to repay this amount to the holder of the
security. Also called "face value" or "par value".
22 State Street Research Legacy Fund
<PAGE>
[LOGO] STATE STREET RESEARCH
One Financial Center o Boston, MA 02111
-----------------
PRSRT STD
AUTO
U.S. POSTAGE PAID
HOLLISTON, MA
PERMIT NO. 20
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Contact Information for
INVESTOR SERVICES
--------------------------------------------------------------------------------
New accounts, mutual fund purchases, exchanges and
account information
[INTERNET] internet
www.statestreetresearch.com
[COMPUTER] e-mail
[email protected]
[PHONE] phone
1-87-SSR-FUNDS (1-877-773-8637), 7 days a week, 24 hours a day
Hearing-impaired: 1-800-676-7876
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[FAX] fax
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Center by calling 1-87-SSR-FUNDS or 1-877-773-8637)
[MAILBOX] mail
State Street Research Service Center
P.O. Box 8408, Boston, MA 02266-8408
For 24-hour
Automated Access
to Your Account
[PHONE] 1-87-SSR-FUNDS
----------------
(1-877-773-8637)
www.statestreetresearch.com
OverView
---------------------------------------
For more information on the products
and services mentioned in OverView,
our shareholder newsletter, visit our
Web site at www.statestreetresearch.com
State Street Research
FYI
--------------------------------------------------------------------------------
Did you know that you can give a State Street Research mutual fund as a gift?
Call a service center representative at 1-87-SSR-FUNDS (1-877-773-8637),
Monday through Friday, 8am - 6pm Eastern Time, to learn more.
---------------------------
[LOGO]
DALBAR
HONORS COMMITMENT TO:
INVESTORS
1999
---------------------------
for Excellence in Service
1 An investment in the State Street Research Money Market Fund is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency. Although the fund seeks to preserve the value of
your investment at $1.00 per share, it is possible to lose money by
investing in the fund.
--------------------------------------------------------------------------------
This report must be accompanied or preceded by a current State Street Research
Legacy Fund prospectus. When used after December 31, 2000 this report must be
accompanied by a current Quarterly Performance Update.
To obtain a prospectus of any State Street Research fund call 1-87-SSR-FUNDS
(1-877-773-8637). The prospectus contains more complete information, including
sales charges and expenses. Please read the prospectus carefully before
investing or sending money.
The Dalbar awards recognize quality shareholder service and should not be
considered a rating of fund performance. The survey included mutual fund
complexes that volunteered or were otherwise selected to participate and was not
industry-wide.
State Street Research
Spectrum of Funds
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Income Growth & Income Growth
--------------------------------------------------------------------------------------------------
CONSERVATIVE AGGRESSIVE
--------------------------------------------------------------------------------------------------
<S> <C> <C>
High Income Fund Argo Fund Global Resources Fund
Strategic Income Fund Investment Trust Emerging Growth Fund
New York Tax-Free Fund Alpha Fund Health Sciences Fund
Tax-Exempt Fund Strategic Growth & Income Fund Mid-Cap Growth Fund
Government Income Fund Strategic Income Plus Fund Aurora Fund
Money Market Fund(1) Concentrated International Fund
International Equity Fund
Concentrated Growth Fund
Growth Fund
Galileo Fund
Legacy Fund
</TABLE>
(C)2000 State Street Research Investment Services, Inc.,
One Financial Center, Boston, MA 02111
Control Number:(exp1201)SSR-LD LF-2851-1200
