[State Street Logo]
State Street Research
High Income Fund
Semiannual Report
September 30, 1996
[GRAPHIC] MAN FISHING IN STREAM
What's Inside
Investment Update
About the Fund,
economy and markets
Fund Information
Facts and figures
Plus, Complete Portfolio Holdings
and Financial Statements
[GRAPHIC]DALBAR LOGO
For Excellence
in
Shareholder Service
<PAGE>
State Street Research High Income Fund
Investment Update
Investment Environment
The Economy
(bullet) After a stronger than expected second quarter in 1996, economic
growth slowed somewhat in the third quarter.
(bullet) Indicators were mixed. Wages rose during the six-month period and
unemployment remained low. Consumer prices and inflation were well-
contained, however.
(bullet) The Federal Reserve met twice since April, leaving interest rates
unchanged.
The Markets
(bullet) From April 1 to September 30, 1996, stocks and bonds brought in
positive performance overall, peppered with short-term corrections.
(bullet) The stock market continued its rise, with the Dow Jones Industrial
Average nearly reaching the 6000-point mark. The S&P 500 was up
7.71% for the six-month period ended September 30, 1996.1
(bullet) High-yield bonds performed positively, with the First Boston High
Yield Index up 5.40% for the six months ended September 30, 1996.1
Other bond sectors offered less favorable performance, with the
Lehman Brothers Aggregate Bond Index gaining only 2.43% for the same
time period.(1)
The Fund
Over the Past Six Months
(bullet) Class A shares of the Fund provided a total return of +7.75% (not
including sales charge) for the six months ended September 30,
1996.2 The average total return for 143 funds in Lipper Analytical
Services' High Current Yield category was +6.74% for the same time
period (does not reflect sales charge).
(bullet) Low inflation coupled with positive and consistent growth has
created a favorable environment for lower-grade bonds over the last
six months.
(bullet) The Fund's yield has remained relatively steady over the past six
months, tracking slight movements in interest rates.
Current Strategy
(bullet) Our strategy continues to focus on single-B-rated bonds, which tend
to benefit from a healthy economy. We believe this is an area of the
market where we can add the most value through fundamental research.
(bullet) The economic picture is currently mixed, with unemployment low but
personal bankruptcies at extremely high levels. We're positioning
the Fund defensively while still trying to take advantage of the
pockets of strength in the economy.
(1)The Standard & Poor's 500 Composite Index (S&P 500) includes 500 widely
traded common stocks and is a commonly used measure of U.S. stock market
performance. The First Boston High Yield Index is a commonly used measure of
high-yield bond performance. The Lehman Brothers Aggregate Bond Index is a
commonly used measure of bond market performance. The indices are unmanaged
and do not take sales charges into consideration. Direct investment in the
indices is not possible; results are for illustrative purposes only.
(2)+7.21% for Class B shares; +7.92% for Class C shares; +7.38% for Class D
shares.
(3)All returns represent past performance, which is no guarantee of future
results. The investment return and principal value of an investment made in
the Fund will fluctuate, and shares, when redeemed, may be worth more or less
than their original cost. All returns assume reinvestment of capital gain
distributions and income dividends. In January 1994, the Fund changed its
investment objective to include capital appreciation as a secondary
consideration in selecting portfolio securities, to eliminate requirements
that a percentage of the Fund be invested in certain rating categories, and
to allow greater use of convertible and preferred securities. Previously, the
Fund was required to invest at least 65% in securities rated BBB, BB, or B.
Performance for a class includes periods prior to the adoption of class
designations in 1993. "B" and "D" share performance prior to adoption of
multiple class shares reflects annual 12b-1 fees of .25% and thereafter
reflects annual 12b-1 fees of 1%, which will reduce subsequent performance.
(4)Performance reflects maximum 4.5% "A" share front-end sales charge, or 5%
"B" share or 1% "D" share contingent deferred sales charges where applicable.
"C" shares, offered without a sales charge, are available only to certain
employee benefit plans and large institutions.
(5)Cumulative total returns are not annualized and do not reflect sales
charges, which, if reflected, would reduce performance.
Please Note that the discussion throughout
this shareholder report is dated as indicated
and, because of possible changes in view-
point, data and transactions, should not be
relied upon as being current thereafter.
FUND INFORMATION (all data are for periods ended September 30, 1996)
SEC Average Annual Compound Rates of Return
(at maximum applicable sales charge)(3,4)
<TABLE>
<CAPTION>
- ---------- --------- --------- ----------
10 Years 5 Years 1 Year
- ---------- --------- --------- ----------
<S> <C> <C> <C>
Class A +9.82% +12.63% +9.08%
- ---------- --------- --------- ----------
Class B +10.02% +12.79% +8.44%
- ---------- --------- --------- ----------
Class C +10.38% +13.78% +14.58%
- ---------- --------- --------- ----------
Class D +10.03% +13.06% +12.42%
- ---------- --------- --------- ----------
</TABLE>
Cumulative Total Returns
(do not reflect sales charge)(3,5)
<TABLE>
<CAPTION>
- ---------- ----------- --------- ----------
10 Years 5 Years 1 Year
- ---------- ----------- --------- ----------
<S> <C> <C> <C>
Class A +167.41% +89.87% +14.22%
- ---------- ----------- --------- ----------
Class B +159.91% +84.55% +13.44%
- ---------- ----------- --------- ----------
Class C +168.66% +90.76% +14.58%
- ---------- ----------- --------- ----------
Class D +160.21% +84.76% +13.42%
- ---------- ----------- --------- ----------
</TABLE>
SEC Yield
<TABLE>
<CAPTION>
<S> <C>
- ---------- --------
Class A 7.26%
- ---------- --------
Class B 6.90%
- ---------- --------
Class C 7.91%
- ---------- --------
Class D 6.89%
- ---------- --------
</TABLE>
SEC yield is based on the net investment income produced for the 30 days
ended September 30, 1996. Yield does not necessarily reflect the income
stream an investor can expect. A high yield can in part be indicative of the
lower prices of certain high-risk bonds in the Fund's portfolio. Such lower
prices could reflect the increased risk of the financial restructuring or
default of the issuers of such bonds.
Asset Allocation
(by percentage of net assets)
[GRAPHIC]Pie Chart
Bonds*
B
65%
BB
4%
Cash
5%
Common
Stocks
4%
Preferred
stocks
5%
Convertibles
8%
CCC
and
below
9%
Quality ratings based on those provided by Standard & Poor's Corp. and/or
equivalent ratings by Moody's Investors Service, Inc.
*13% of the above bonds were unrated and included among relevant rating
categories as determined by the Fund's manager.
<PAGE>
State Street Research High Income Fund
Investment Portfolio
September 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
- ------------------------------------- -------------- ------------- ---------------
Principal Maturity Value
Amount Date (Note 1)
- ------------------------------------- -------------- ------------- ---------------
<S> <C> <C> <C>
BONDS 77.8%
Aerospace/Defense 4.8%
BE Aerospace Inc. Sr. Sub. Note,
9.875% $ 6,300,000 2/01/2006 $ 6,394,500
Greenwich Air Services Inc., 10.50% 2,000,000 6/01/2006 2,055,000
Haynes International Inc. Sr. Note,
11.625% 8,250,000 9/01/2004 8,497,500
K & F Industries Inc., 11.875% 7,264,000 12/01/2003 7,845,120
Ladish Company, Inc. Sr. Sub. Sec.
Note, 12.00%#++ 188,863 12/22/2000 200,433
Ladish Inc. Sr. Sub. Note, 12.00%++ 921,850 12/22/2000 825,978
Talley Industries Inc. Disc. Deb.,
0.00% to 10/14/98, 12.25% from
10/15/98 to maturity 9,097,000 10/15/2005 7,805,226
Talley Manufacturing & Technology
Inc. Sr. Note, 10.75% 6,350,000 10/15/2003 6,635,750
Wyman-Gordon Co. Sr. Note, 10.75% 3,390,000 3/15/2003 3,610,350
---------------
43,869,857
---------------
Airlines 1.3%
CHC Helicopter Corp. Sr. Sub. Note,
11.50% 11,700,000 7/15/2002 11,641,500
---------------
Automotive Parts 1.4%
Collins & Aikman Products Co. Sr.
Sub. Note, 11.50% 4,000,000 4/15/2006 4,210,000
Exide Corp., 10.75% 750,000 12/15/2002 781,875
Exide Corp. Sr. Note, 10.00% 7,500,000 4/15/2005 7,687,500
Speedy Muffler King Inc. Sr. Note,
10.875% 250,000 10/01/2006 257,500
---------------
12,936,875
---------------
Business Service 1.3%
Packaging Resources Inc. Sr. Sec.
Note, 11.625% 11,250,000 5/01/2003 11,615,625
---------------
Cable Television 7.0%
American Telecasting Inc.
Sr. Disc. Note, 0.00% to
6/14/99, 12.50% from
6/15/99 to maturity 7,730,056 6/15/2004 5,758,892
American Telecasting Inc.
Sr. Disc. Note, 0.00% to
8/14/2000, 14.50% from
8/15/2000 to maturity 2,545,000 8/15/2005 1,641,525
Comcast Corp. Sr. Sub. Note, 9.125% 1,000,000 10/15/2006 995,000
- ------------------------------------- -------------- ------------- ---------------
Principal Maturity Value
Amount Date (Note 1)
- ------------------------------------- -------------- ------------- ---------------
Cable Television (cont'd)
Heartland Wireless Communications,
Inc. Note, 13.00% $ 8,250,000 4/15/2003 $ 8,827,500
Insight Communications Co. L.P. Sr.
Sub. Disc. Note, 11.25% 2,525,000 3/01/2000 2,588,125
Intermedia Capital Partners L.P. Sr.
Disc. Note, 11.25%+ 1,500,000 8/01/2006 1,560,000
Marcus Cable Operating Co. L.P. Sr.
Sub. Disc. Note, 0.00% to 7/31/99,
13.50% from 8/1/99 to maturity 9,000,000 8/01/2004 7,020,000
Marcus Cable Co. L.P. Sr. Deb.,
11.875% 4,500,000 10/01/2005 4,758,750
People's Choice TV Co., 0.00% to
5/31/2000, 13.125% from 6/1/2000 to
maturity+ 2,000,000 6/01/2004 1,235,000
Telewest Communications PLC Sr. Deb.,
9.625% 4,750,000 10/01/2006 4,702,500
Wireless One Inc. Sr. Disc. Note,
13.00% 9,950,000 10/15/2003 10,298,250
Wireless One Inc. Note, 0.00% to
7/31/2001, 13.50% from 8/1/2001 to
maturity 27,250,000 8/01/2006 14,783,125
---------------
64,168,667
---------------
Capital Goods/Equipment 1.9%
Chatwins Group Inc. Sr. Exch. Note,
13.00% 6,250,000 5/01/2003 5,750,000
ICF International Inc. Sr. Sub. Note,
13.00% 4,750,000 12/31/2003 4,607,500
ICF Kaiser International Inc. Units,
13.00% 5,500,000 12/31/2003 5,403,750
Specialty Equipment Companies, Inc.
Sr. Sub. Note, 11.375% 1,250,000 12/01/2003 1,340,625
---------------
17,101,875
---------------
Chemicals/Fertilizers 1.3%
NL Industries, Inc. Sr. Sec. Disc.
Note, 0.00% to
10/14/98, 13.00% from 10/15/98 to
maturity 4,000,000 10/15/2005 3,370,000
Pioneer Americas Acquisition Corp.
First Mortgage Note, 13.375% 8,000,000 4/01/2005 8,800,000
---------------
12,170,000
---------------
Conglomerate 1.1%
Alvey Systems Inc. Sr. Sub. Note,
11.375% 5,750,000 1/31/2003 6,023,125
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
State Street Research High Income Fund
- ------------------------------------- -------------- ------------- ---------------
Principal Maturity Value
Amount Date (Note 1)
- ------------------------------------- -------------- ------------- ---------------
Conglomerate (cont'd)
Axia Inc. Sr. Sub. Note, 11.00% $ 750,000 3/15/2001 $ 765,000
Crown Packaging Enterprises, Inc.
Units, 0.00% to 7/31/2003, 14.00%
from 8/1/2003 to maturity+ 9,000,000 8/01/2006 3,510,000
---------------
10,298,125
---------------
Consumer Goods & Services 4.8%
Carrols Corp. Sr. Note, 11.50% 4,200,000 8/15/2003 4,368,000
E & S Holdings Corp. Sr. Sub. Note,
10.375%+ 750,000 10/01/2006 763,125
La Petite Holdings Corp. Sr. Sec.
Notes, 9.625% 8,000,000 8/01/2001 7,360,000
Norcal Waste Systems Inc. Sr. Note,
12.75% to 11/14/96, 13.00% from
11/15/96 to 5/14/97, 13.25% from
5/15/97 to 11/14/97, 13.50% from
11/15/97 to maturity+ 7,940,000 11/15/1996 8,614,900
Pagemart Inc. Sr. Disc. Exch. Note,
0.00% to 10/31/98, 12.25% from
11/1/98 to maturity 7,400,000 11/01/2003 5,846,000
Pagemart Nationwide Inc. Sr. Disc.
Note, 0.00% to 1/31/2000, 15.00%
from 2/1/2000 to maturity 13,250,000 2/01/2005 9,043,125
Renaissance Cosmetics Inc. Sr. Note,
13.75% 3,750,000 8/15/2001 4,012,500
Shop Vac Corp. Sr. Sec. Note,
10.625%+ 1,500,000 9/01/2003 1,545,000
Town & Country Corp. Sr. Sec. Note,
11.50% 750,000 9/15/1997 735,000
Town & Country Corp. Sr. Sub. Note,
13.00%# 2,061,000 5/31/1998 1,690,020
---------------
43,977,670
---------------
Entertainment/Leisure 0.9%
Live Entertainment Inc. Sr. Sub.
Note, 12.00% 4,936,100 3/23/1999 4,615,254
Premier Parks Inc. Sr. Note, 12.00% 3,300,000 8/15/2003 3,531,000
---------------
8,146,254
---------------
Food & Beverage 0.2%
Cafeteria Operators L.P. Sr. Sec.
Note, 12.00% 2,348,980 12/31/2001 2,161,062
---------------
- ------------------------------------- -------------- ------------- ---------------
Principal Maturity Value
Amount Date (Note 1)
- ------------------------------------- -------------- ------------- ---------------
Gaming & Lodging 1.6%
Argosy Gaming Co. First Mortgage
Note, 13.25%+ $ 2,000,000 6/01/2004 $ 1,990,000
Belle Casinos Inc. First Mortgage
Note, 12.00%+~ 700,000 10/15/2000 255,500
Casino Magic Louisiana Corp. Sr. Sec.
Note, 13.00%+ 4,500,000 8/15/2003 4,567,500
Goldriver Hotel & Casino Corp.
Mortgage Note, 13.375%~ 8,924,000 8/31/1999 1,874,040
Mohegan Tribal Gaming Authority Sr.
Sec. Notes, 13.50% 3,000,000 11/15/2002 3,780,000
President Riverboat Casinos Inc. Sr.
Exch. Note, 13.00% 2,000,000 9/15/2001 1,720,000
Treasure Bay Gaming and Resorts, Inc.
First Mortgage Units, 12.25%+~ 1,000,000 11/15/2000 195,000
---------------
14,382,040
---------------
Grocery 4.5%
Grand Union Co. Sr. Sub. Note, 12.00% 13,000,000 9/01/2004 13,130,000
Jitney-Jungle Stores of America, Inc.
Sr. Note, 12.00% 8,850,000 3/01/2006 9,403,125
Penn Traffic Co. Sr. Note, 8.625% 2,000,000 12/15/2003 1,640,000
Ralphs Grocery Co. Sr. Sub. Note,
13.75% 2,500,000 6/15/2005 2,650,000
Ralphs Grocery Co. Sr. Note, 10.45% 12,000,000 6/15/2004 12,165,000
Safeway Inc. Lease Certificate,
13.50% 90,123 1/15/2009 131,130
Star Market Inc. Sr. Sub. Note,
13.00% 2,500,000 11/01/2004 2,631,250
Victory Markets Inc. Sub. Deb.,
12.50%~ 925,000 3/15/2000 74,000
---------------
41,824,505
---------------
Health Care/Hospital Management 1.0%
Dade International Inc. Sr. Sub.
Note, 11.125%+ 5,000,000 5/01/2006 5,350,000
Owens & Minor Inc. Sr. Sub. Note,
10.875% 3,750,000 6/01/2006 3,918,750
---------------
9,268,750
---------------
Industrial 2.2%
Anacomp Inc. Sr. Sub. Note, 13.00% 12,659,000 6/04/2002 12,595,705
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
State Street Research High Income Fund
- ------------------------------------- -------------- ------------- ---------------
Principal Maturity Value
Amount Date (Note 1)
- ------------------------------------- -------------- ------------- ---------------
Industrial (cont'd)
Tokheim Corp. Sr. Sub. Note, 11.50%+ $ 7,250,000 8/01/2006 $ 7,612,500
---------------
20,208,205
---------------
Media 9.9%
Affinity Group Inc. Sr. Sub. Deb.,
11.50% 9,750,000 10/15/2003 10,042,500
Allbritton Communications Co. Sr.
Sub. Deb., 9.75% 5,000,000 11/30/2007 4,837,500
Benedek Broadcasting Corp. Sr. Note,
11.875% 6,250,000 3/01/2005 6,828,125
Benedek Communications Co. Sr. Sub.
Disc. Note, 0.00% to 5/14/2001,
13.25% from 5/15/2001 to maturity+ 9,250,000 5/15/2006 5,422,813
Granite Broadcasting Corp., 12.75% 5,119,000 9/01/2002 5,630,900
K-III Communications Corp. Sr. Note,
8.50% 2,750,000 2/01/2006 2,557,500
Lamar Advertising Co. Sr. Sec. Notes,
11.00% 750,000 5/15/2003 785,625
Muzak L.P. Sr. Note, 10.00% 3,000,000 10/01/2003 3,018,750
Newcity Communications Inc. Sr. Sub.
Note, 11.375% 1,000,000 11/01/2003 1,105,000
Park Communications Inc. Sr. Note,
13.75%+ 5,500,000 5/15/2004 7,315,000
Park Newspapers Inc. Sr. Note,
11.875%#+ 16,750,000 5/15/2004 19,136,875
Spanish Broadcasting Systems Inc. Sr.
Note, 7.50% 4,500,000 6/15/2002 4,702,500
Telemundo Group Inc. Sr. Disc. Note,
7.00% to 2/14/99, 10.50% from
2/15/99 to maturity 10,600,000 2/15/2006 10,070,000
Universal Outdoor Holdings Inc. Sr.
Sec. Disc. Note, 0.00% to 6/30/99,
14.00% from 7/1/99 to maturity 10,650,000 7/01/2004 9,265,500
---------------
90,718,588
---------------
Metals/Mining/Steel 6.5%
Alpine Group Inc. Sr. Sec. Note,
12.25% 2,500,000 7/15/2003 2,568,750
Bar Technologies Inc. Sr. Sec. Note,
13.50% 2,625,000 4/01/2001 2,638,125
Bayou Steel Corp. First Mortgage
Note, 10.25% 6,250,000 3/01/2001 6,062,500
Crown Resources Corp. Cv. Sub. Deb.,
5.75% 220,000 8/27/2001 182,600
- ------------------------------------- -------------- ------------- ---------------
Principal Maturity Value
Amount Date (Note 1)
- ------------------------------------- -------------- ------------- ---------------
Metals/Mining/Steel (cont'd)
Envirosource Inc. Note, 9.75% $ 8,375,000 6/15/2003 $ 7,956,250
Euramax International PLC Sr. Sub.
Note, 11.25%+ 1,750,000 10/01/2006 1,793,750
GS Technologies Operating Inc. Sr.
Note, 12.00% 5,250,000 9/01/2004 5,512,500
NS Group Inc. Units, 13.50% 17,250,000 7/15/2003 17,250,000
Renco Metals Inc. Sr. Note, 11.50% 3,500,000 7/01/2003 3,648,750
Sheffield Steel Corp. First Mortgage
Note, 12.00% 12,000,000 11/01/2001 11,040,000
UCAR Global Enterprise, Inc. Sr. Sub.
Note, 12.00% 935,000 1/15/2005 1,067,069
---------------
59,720,294
---------------
Oil & Gas 5.0%
Clark U.S.A. Inc. Sr. Note, 10.875% 1,625,000 12/01/2005 1,653,438
Empire Gas Corp. Sr. Sec. Note, 7.00%
to 7/14/99, 12.875% from 7/15/99 to
maturity 5,750,000 7/15/2004 5,016,875
Flores & Rucks, Inc., 9.75% 1,500,000 10/01/2006 1,520,625
Flores & Rucks, Inc., 13.50% 1,372,000 12/01/2004 1,612,100
Moran Energy Inc. Cv. Deb., 8.75% 2,420,000 1/15/2008 2,105,400
Presidio Oil Co. Sr. Sec. Note,
11.50~ 8,102,950 9/15/2000 8,001,663
Presidio Oil Co. Sr. Sub. Gas Indexed
Note, 13.25%~ 6,000,000 7/15/2002 4,380,000
TransTexas Gas Corp. Sr. Sec. Note,
11.50% 13,250,000 6/15/2002 14,078,125
United Meridian Corp. Sr. Sub. Note,
10.375% 7,250,000 10/15/2005 7,703,125
---------------
46,071,351
---------------
Oil Service 0.2%
Tuboscope Vetco International Inc.
Sr. Sub. Note, 10.75% 2,000,000 4/15/2003 2,125,000
---------------
Paper Products 1.3%
Crown Packaging Holdings Ltd. Sr.
Sub. Disc. Note, 0.00% to
10/31/2000, 12.25% from 11/1/2000
to maturity 16,500,000 11/01/2003 6,930,000
Crown Packaging Ltd. Sr. Sec. Note,
10.75% 3,300,000 11/01/2000 3,069,000
Mail-Well Envelope Corp. Sr. Sub.
Note, 10.50% 2,250,000 2/15/2004 2,205,000
---------------
12,204,000
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
State Street Research High Income Fund
- ------------------------------------- -------------- ------------- ---------------
Principal Maturity Value
Amount Date (Note 1)
- ------------------------------------- -------------- ------------- ---------------
Plastics 1.0%
Plastic Specialties & Technology,
Inc. Sr. Note, 11.25% $ 9,750,000 12/01/2003 $ 9,579,375
---------------
Real Estate/Building 1.5%
J.M. Peters, Inc. Sr. Note, 12.75% 3,375,000 5/01/2002 3,172,500
Miles Homes Services Inc. Sr. Note,
12.00% 4,250,000 4/01/2001 3,485,000
Overhead Door Corp. Note, 12.25% 7,000,000 2/01/2000 7,507,500
---------------
14,165,000
---------------
Retail Trade 2.4%
Finlay Enterprises, Inc. Sr. Disc.
Deb., 0.00% to 4/30/98, 12.00% from
5/1/98 to maturity 10,070,000 5/01/2005 8,257,400
Guitar Center Management Co., Inc.
Sr. Note, 11.00%+ 2,250,000 7/01/2006 2,340,000
Mothers Work Inc. Sr. Note, 12.625% 2,000,000 8/01/2005 2,060,000
Phar-Mor, Inc. Note, 11.72% 8,733,000 9/11/2002 9,104,153
---------------
21,761,553
---------------
Shipping/Transportation 0.1%
Eletson Holdings Inc. Mortgage Note,
9.25% 1,000,000 11/15/2003 970,000
---------------
Technology/Communications 13.6%
Brooks Fiber Properties Inc., 0.00%
to 2/28/2001, 10.875% from 3/1/2001
to maturity 4,250,000 3/01/2006 2,613,750
Celcaribe SA Sr. Sec. Note, 0.00% to
3/14/98, 13.50% from 3/15/98 to
maturity 5,810,000 3/15/2004 4,822,300
Clearnet Communications Inc. Sr.
Disc. Note, 0.00% to 12/14/2000,
14.75% from 12/15/2000 to maturity 25,350,000 12/15/2005 14,956,500
Computervision Corp. Sr. Sub. Notes,
11.375% 6,000,000 8/15/1999 6,285,000
Dial Callable Communications Inc. Sr.
Disc. Note, 0.00% to 4/14/99,
12.25% from 4/15/99 to maturity 10,750,000 4/15/2004 7,417,500
Echostar Communications Corp. Sr.
Sec. Disc. Note, 0.00% to 5/31/99,
12.875% from 6/1/99 to maturity 8,750,000 6/01/2004 6,868,750
- ------------------------------------- -------------- ------------- ---------------
Principal Maturity Value
Amount Date (Note 1)
- ------------------------------------- -------------- ------------- ---------------
Technology/Communications (cont'd)
Echostar Satellite Broadcast Corp.
Sr. Sec. Disc. Note, 0.00% to
3/14/2000, 13.125% from 3/15/2000
to maturity $13,250,000 3/15/2004 $ 9,043,125
GenRad Inc. Cv. Sub. Deb., 7.25% 608,000 5/01/2011 723,520
Geotek Communications Inc., 15.00% 7,250,000 7/15/2005 4,712,500
ICG Holdings Inc. Sr. Disc. Note,
0.00% to 9/14/2000, 13.50% from
9/15/2000 to maturity 11,000,000 9/15/2005 7,370,000
Intercel Inc. Units, 0.00% to
1/31/2001, 12.00% from 2/1/2001 to
maturity 26,500 2/01/2006 1,616,500
Ionica PLC Units, 13.50%+ 9,500,000 8/15/2006 9,500,000
Nextel Communications Inc.
Sr. Disc. Note, 0.00% to 2/14/99,
9.75% from 2/15/99 to maturity 18,500,000 8/15/2004 11,932,500
Protection One Alarm Inc. Sr. Sub.
Disc. Note, 0.00% to 6/29/98,
13.375% from 6/30/98 to maturity 4,750,000 6/30/2005 4,227,500
Real Time Data Inc. Units, 0.00% to
8/14/2001, 13.50% from 8/15/2001 to
maturity+ 8,593,000 8/15/2006 4,640,220
RSL Communications Ltd., 12.25%+ 3,500,000 11/15/2006 3,500,000
U.S.A. Mobile Communications Inc. Sr.
Note, 9.50% 7,120,000 2/01/2004 6,835,200
U.S.A. Mobile Communications Inc. Sr.
Note, 14.00% 5,500,000 11/01/2004 6,215,000
Viatel Inc. Sr. Disc. Note, 0.00% to
1/14/2000, 15.00% from 1/15/2000 to
maturity 4,500,000 1/15/2005 2,767,500
Winstar Communications Inc. Sr. Disc.
Note, 14.00% 10,450,000 10/15/2005 5,747,500
Winstar Communications Inc. Sr. Sub.
Cv. Note, 0.00% to 10/14/2000,
14.00% from 10/15/2000 to maturity+ 4,960,000 10/15/2005 3,124,800
---------------
124,919,665
---------------
Textile & Apparel 0.5%
Interface Inc. Sr. Sub. Note, 9.50% 4,500,000 11/15/2005 4,466,250
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
State Street Research High Income Fund
- ------------------------------------- -------------- ------------- ---------------
Principal Maturity Value
Amount Date (Note 1)
- ------------------------------------- -------------- ------------- ---------------
Utility-Electric 0.5%
Calpine Corp. Sr. Note, 9.25% $2,000,000 2/01/2004 $ 1,915,000
Calpine Corp. Sr. Note, 10.50%+ 2,500,000 5/15/2006 2,543,750
---------------
4,458,750
---------------
Total Bonds (Cost $702,742,824) 714,930,836
---------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------- ------------ --------------
Shares
- --------------------------------------------------- ------------ --------------
<S> <C> <C>
PREFERRED STOCKS 13.6%
Automotive 1.0%
Harvard Industries Inc. 14.25% Exch. Pfd.# 423,791 9,323,401
--------------
Bank 0.3%
Riverbank America Pfd.* 110,000 2,750,000
--------------
Business Service 1.3%
La Petite Holdings Corp. Cum. Red. Exch. Pfd.* 361,000 11,913,000
--------------
Chemical 2.1%
Atlantic Richfield Co. 825,800 19,406,300
--------------
Electric 0.1%
Consolidated Hydro Inc. Cv. Pfd.* 2,000 700,000
--------------
Financial Service 0.6%
Gentra Inc. Series G Pfd.* 100,100 1,221,763
Gentra Inc. Series J Pfd.* 264,102 3,271,949
Gentra Inc. Series Q Pfd.* 70,300 632,241
Salomon Inc. Cv. Pfd.* 10,000 282,500
--------------
5,408,453
--------------
Forest Product 0.7%
Equitable Bag Inc. Pfd.* 134,760 2,425,680
S.D. Warren Co. Series B Sr. Exch. Pfd.*# 108,000 3,888,000
--------------
6,313,680
--------------
Hotel & Restaurant 0.5%
Station Casinos Inc. Cv. Pfd. 80,000 4,220,000
--------------
Printing & Publishing 3.0%
Cablevision Systems Corp. Series B Pfd.# 33,877 3,294,538
Hollinger International, Inc. Cv. Pfd. 891,400 9,916,825
K-III Communications Corp. Series B Exch. Pfd.# 69,393 6,939,347
K-III Communications Corp. Series D Exch. Pfd.* 80,000 7,480,000
--------------
27,630,710
--------------
Recreation 2.3%
Granite Broadcasting Corp. Cv. Pfd.# 114,700 8,659,850
Live Entertainment Inc. Cv. Pfd. 256,500 2,212,313
Santa Fe Gaming Corp. Cv. Pfd.* 451,512 197,537
Tyco Toys Inc. Cv. Pfd. 1,560,000 9,750,000
--------------
20,819,700
--------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------- ------------ --------------
Value
Share (Note 1)
- ----------------------------------------------- ------------ --------------
<S> <C> <C>
Retail Trade 1.2%
Supermarkets General Holdings Corp. Exch. Pfd.# 453,540 $ 11,565,270
--------------
Textile & Apparel 0.0%
Town & Country Corp. Cv. Pfd.*# 101,639 177,869
--------------
Telephone 0.4%
ICG Holdings Inc. Pfd.* 3,500 3,815,000
--------------
Truckers 0.1%
Silgan Holdings Inc.+* 1,000 1,065,000
--------------
Total Preferred Stocks (Cost $112,050,671) 125,108,383
--------------
COMMON STOCKS & OTHER 3.2%
American Communications Services, Inc. Wts.*+ 9,500 617,500
American Telecasting Inc. Wts. * 41,130 164,520
Anacomp Inc. Com.* 642,284 5,298,843
Anacomp Inc. Rts. 231,222 202,319
Anacomp Inc. Wts.* 25,848 74,313
Axia Holdings Corp.*++ 2,250 67,500
Bar Technologies Inc. Wts.*+ 4,250 233,750
Belle Casinos Inc. Wts.*+ 1,400 14
Boomtown Inc. Wts.*+ 7,250 181
Celcaribe SA Wts.+* 944,706 1,558,765
Central Rents Inc. Wts.* 5,250 315,000
Chatwins Group Inc. Wts.*+ 7,000 7,000
CHC Helicopter Corp. Wts.*++ 46,000 23,000
Clearnet Communications Inc. Wts.* 83,655 543,758
County Seat Holdings Inc. Wts.*++ 2,000 100
Crown Packaging Holdings Ltd. Wts.*+ 20,750 2,594
Dr Pepper Bottling Holdings Inc. Cl. A* 50,000 387,500
Empire Gas Corp. Wts.*++ 2,760 5,520
Equitable Bag Inc. Com.* 1,347,600 606,420
Federated Department Stores, Inc. Wts.* 46,435 603,655
Fitzgeralds South Inc. Wts.*++ 3,750 37,500
Food 4 Less Holdings Inc. Wts.* 24,223 2,306,030
Goldriver Hotel & Casino Corp. Cl. B Com.*++ 52,500 6,563
Goldriver Hotel & Casino Corp. Liquidation
Trust Units*++ 5,250,000 66,675
Heartland Wireless Communications, Inc. Wts.*++ 37,500 262,500
ICF Kaiser International Inc. Wts.* 22,800 11,400
Indspec Chemical Corp. Wts.*++ 506 1,325,169
Insight Capital Corp. Wts.*++ 25,000 62,500
Intelcom Group, Inc. Wts.*++ 21,450 332,475
Intermedia Communications Inc. Wts.* 1,500 60,000
Jewel Recovery L.P. Units*++ 82,595 826
Ladish Co., Inc. Com.* 520,000 871,000
Little Switzerland Inc. Com.* 94,263 406,509
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
State Street Research High Income Fund
Investment Portfolio (con't)
- ----------------------------------------------- ------------ --------------
Value
Share (Note 1)
- ----------------------------------------------- ------------ --------------
COMMON STOCKS & OTHER (cont'd)
LTX Corp. Com.* 145,000 $ 734,063
Mail-Well Holdings, Inc. Com.*++ 14,205 152,704
Miles Homes Inc. Wts.*++ 51,000 12,750
Motels of America Inc. Com.*+ 5,500 330,000
Nextel Communications Inc. Wts.* 1,250 38
Pagemart Inc. Wts.*+ 21,850 131,100
Pagemart Nationwide Inc. Com.*+ 18,375 179,156
Pegasus Media & Communications Inc. Cl. B
Com.*+ 375 121,875
Petro PSC Properties Inc. Wts. * 2,000 80,000
Plastic Specialties & Technology, Inc. Com.* 45,300 45,300
Protection One Inc. Wts.*+ 10,400 109,200
Renaissance Cosmetics Inc. Units*+ 1,000 1,005,000
Renaissance Cosmetics Inc. Wts.*+ 2,000 100,000
Sabreliner Corp. Wts.*+ 1,750 1,750
SDW Holdings Corp. Wts.* 108,000 324,000
Seven-Up/RC Bottling Company of Southern
California Com.* 472,500 4,606,875
Sheffield Steel Corp. Wts.* 38,750 58,125
Smiths Food & Drug Centers Inc. Cl. B Com. 9,788 259,382
Terex Corp. Rts.*++ 6,300 1,575
Town & Country Corp. Cl. A Com. 371,830 325,352
TransAmerican Refining Corp. Wts.* 12,626 25,252
Universal Outdoor Holdings Inc. Wts.*++ 9,700 2,425,000
Vestar/LPA Investment Corp. Com.*+ 14,250 171,000
Viatel Inc. Com.*+ 162,450 1,299,600
Waxman Industries Inc. Wts.*+ 236,000 708,000
Wireless One Inc. Wts.*+ 16,500 82,500
--------------
Total Common Stocks & Other (Cost $30,919,215) 29,750,996
--------------
<TABLE>
<CAPTION>
- --------------------------------- ------------- ------------- --------------
Principal Maturity
Amount Date
- --------------------------------- ------------- ------------- --------------
<S> <C> <C> <C>
SHORT-TERM OBLIGATIONS 5.4%
American Express Credit Corp.,
5.22% $ 8,536,000 10/08/1996 8,536,000
Beneficial Corp., 5.42% 20,005,000 10/01/1996 20,005,000
Ford Motor Credit Co., 5.36% 1,136,000 10/02/1996 1,136,000
General Electric Capital Corp.,
5.28% 20,145,000 10/03/1996 20,145,000
--------------
Total Short-Term Obligations (Cost $49,822,000) 49,822,000
--------------
Total Investments (Cost $895,534,710) - 100.0% 919,612,215
Cash and Other Assets, Less Liabilities - (0.0)% (198,805)
--------------
Net Assets - 100.0% $919,413,410
==============
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
Federal Income Tax Information (Note 1):
At September 30, 1996, the net unrealized
appreciation of investments based on cost for
Federal income tax purposes of $895,730,221
was as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of
value over tax cost $ 63,817,883
Aggregate gross unrealized depreciation for all
investments in which there is an excess of
value over tax cost (39,935,889)
---------------
$ 23,881,994
===============
</TABLE>
- ------------------------------------------------------------------------------
*Nonincome-producing securities
#Payments of income may be made in cash or in the form of additional
securities.
~Security is in default.
++Security valued under consistently applied procedures established by the
Trustees. Security restricted as to public resale. At September 30, 1996,
there were no outstanding unrestricted securities of the same class as
those held. The total cost and market value of restricted securities owned
at September 30, 1996 were $2,490,607 and $5,808,768 (0.63% of net assets),
respectively.
+Security restricted in accordance with Rule 144A under the Securities Act of
1933, which allows for the resale of such securities among certain qualified
institutional buyers. The total cost and market value of Rule 144A
securities owned at September 30, 1996 were $95,315,730 and $104,239,718
(11.34% of net assets), respectively.
ASSET COMPOSITION TABLE
September 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
<S> <C>
Ratings+++ Percentage of
Net Assets*
------------------ -----------------
BB 3.6%
B 64.9
CCC and below 9.3
Equities 16.8
Other 5.4
-----------------
TOTAL 100.0%
=================
</TABLE>
+++As rated by Standard & Poor's Corp. and/or
equivalent rating by Moody's Investors Service, Inc.
*Unrated bonds were included among relevant rating categories as determined
by the Fund's manager.
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
State Street Research High Income Fund
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
<S> <C>
Assets
Investments, at value (Cost $895,534,710) (Note 1) $919,612,215
Cash 641
Interest and dividends receivable 15,745,992
Receivable for securities sold 6,630,752
Receivable for fund shares sold 2,308,650
Other assets 48,598
---------------
944,346,848
Liabilities
Payable for securities purchased 20,610,698
Dividends payable 2,455,497
Accrued transfer agent and shareholder services (Note 2) 532,656
Accrued management fee (Note 2) 480,277
Accrued distribution and service fees (Note 4) 330,554
Payable for fund shares redeemed 321,187
Accrued trustees' fees (Note 2) 8,690
Other accrued expenses 193,879
---------------
24,933,438
---------------
Net Assets $919,413,410
===============
Net Assets consist of:
Undistributed net investment income $ 3,285,986
Unrealized appreciation of investments 24,077,505
Accumulated net realized loss (31,114,970)
Shares of beneficial interest 923,164,889
---------------
$919,413,410
===============
Net Asset Value and redemption price per share of Class A
shares ($669,149,472 / 109,024,150 shares of beneficial
interest) $6.14
===============
Maximum Offering Price per share of Class A shares ($6.14
/ .955) $6.43
===============
Net Asset Value and offering price per share of Class B
shares ($224,813,394 / 36,779,108 shares of beneficial
interest)* $6.11
===============
Net Asset Value, offering price and redemption price per
share of Class C shares ($4,575,313 / 748,877 shares of
beneficial interest) $6.11
===============
Net Asset Value and offering price per share of Class D
shares ($20,875,231 / 3,411,291 shares of beneficial
interest)* $6.12
===============
</TABLE>
- --------------------------------------------------------------------------
* Redemption price per share for Class B and Class D is equal to net asset
value less any applicable contingent deferred sales charge.
STATEMENT OF OPERATIONS
For the six months ended September 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
<S> <C>
Investment Income
Interest, net of foreign taxes of $40,015 $42,746,690
Dividends 2,668,300
--------------
45,414,990
Expenses
Management fee (Note 2) 2,830,152
Transfer agent and shareholder services (Note 2) 636,503
Custodian fee 99,817
Service fee--Class A (Note 4) 809,380
Distribution and service fees--Class B (Note 4) 1,010,606
Distribution and service fees--Class D (Note 4) 86,010
Reports to shareholders 66,350
Registration fees 34,242
Audit fee 25,339
Trustees' fees (Note 2) 14,690
Legal fees 720
Miscellaneous 24,450
--------------
5,638,259
--------------
Net investment income 39,776,731
--------------
Realized and Unrealized Gain (Loss) on Investments
Net realized loss on investments (Notes 1 and 3) (3,416,603)
Net unrealized appreciation of investments 28,391,370
Net gain on investments 24,974,767
--------------
Net increase in net assets resulting from operations $64,751,498
==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
State Street Research High Income Fund
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six months ended
September 30, 1996 Year ended
(Unaudited) March 31, 1996
--------------------------------- ------------------ ---------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations:
Net investment income $ 39,776,731 $ 69,201,345
Net realized loss on investments* (3,416,603) (16,029,655)
Net unrealized appreciation of
investments 28,391,370 43,116,209
------------------ ---------------
Net increase resulting from
operations 64,751,498 96,287,899
------------------ ---------------
Dividends from net investment
income:
Class A (28,188,993) (60,859,257)
Class B (8,071,466) (13,275,143)
Class C (181,336) (319,668)
Class D (684,135) (1,000,485)
------------------ ---------------
(37,125,930) (75,454,553)
------------------ ---------------
Distribution from net realized
gains:
Class A -- (804,838)
Class B -- (159,995)
Class C -- (3,577)
Class D -- (10,572)
------------------ ---------------
-- (978,982)
------------------ ---------------
Net increase from fund share
transactions (Note 5) 40,477,179 85,881,692
------------------ ---------------
Total increase in net assets 68,102,747 105,736,056
Net Assets
Beginning of period 851,310,663 745,574,607
------------------ ---------------
End of period (including
undistributed net investment
income of $3,285,986 and
$635,185, respectively) $919,413,410 $851,310,663
================== ===============
* Net realized loss for Federal
income tax purposes
(Note 1) $ (3,416,603) $(27,502,856)
================== ===============
</TABLE>
NOTES TO UNAUDITED FINANCIAL STATEMENTS
September 30, 1996
Note 1
State Street Research High Income Fund, (the "Fund"), is a series of State
Street Research Income Trust (the "Trust"), which was organized as a
Massachusetts business trust on December 23, 1985 and is registered under the
Investment Company Act of 1940, as amended, as an open-end management
investment company. The Trust commenced operations in August, 1986. The Trust
consists of two separate funds: State Street Research High Income Fund and
State Street Research Managed Assets.
The investment objective of the Fund is to seek, primarily, high current
income and, secondarily, capital appreciation, from investments in fixed
income securities. In selecting investments for the Fund, the investment
manager seeks to identify those fixed income securities which it believes
will not involve undue risk. Certain of the Fund's investments, however, may
be considered predominantly speculative.
The Fund offers four classes of shares. Class A shares are subject to an
initial sales charge of up to 4.50% and an annual service fee of 0.25% of
average daily net assets. Class B shares are subject to a contingent deferred
sales charge on certain redemptions made within five years of purchase and
pay annual distribution and service fees of 1.00%. Class B shares
automatically convert into Class A shares (which pay lower ongoing expenses)
at the end of eight years after the issuance of the Class B shares. Class C
shares are only offered to certain employee benefit plans and large
institutions. No sales charge is imposed at the time of purchase or
redemption of Class C shares. Class C shares do not pay any distribution or
service fees. Class D shares are subject to a contingent deferred sales
charge of 1.00% on any shares redeemed within one year of their purchase.
Class D shares also pay annual distribution and service fees of 1.00%. The
Fund's expenses are borne pro-rata by each class, except that each class
bears expenses, and has exclusive voting rights with respect to provisions of
the Plan of Distribution, related specifically to that class. The Trustees
declare separate dividends on each class of shares.
The following significant accounting policies are consistently followed by
the Fund in preparing its financial statements, and such policies are in
conformity with generally accepted accounting principles for investment
companies.
A. Investment Valuation
Fixed income securities are valued by a pricing service, which utilizes
market transactions, quotations from dealers, and various relationships among
securities in determining value. If not valued by a pricing service, such
securities 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
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
State Street Research High Income Fund
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.
Securities quoted in foreign currencies are translated into U.S. dollars at
the current exchange rate. Gains and losses that arise from changes in
exchange rates are not segregated from gains and losses that arise from
changes in market prices of investments.
B. Security Transactions
Security transactions are accounted for on the trade date (date the order to
buy or sell is executed). Realized gains or losses are reported on the basis
of identified cost of securities delivered.
C. Net Investment Income
Net investment income is determined daily and consists of interest 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. Certain fixed income and preferred
securities held by the Fund pay interest or dividends in the form of
additional securities (payment-in-kind securities). Interest income on
payment-in-kind fixed income securities is recorded using the
effective-interest method. Dividend income on payment-in-kind preferred
securities is recorded at the market value of securities received. The Fund
is charged for expenses directly attributable to it, while indirect expenses
are allocated between both funds in the Trust.
D. Dividends
Dividends are declared daily based upon projected net investment income 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 treatment
of accrued interest on defaulted bonds.
E. Federal Income Taxes
No provision for Federal income taxes is necessary because the Fund has
elected to qualify under Subchapter M of the Internal Revenue Code and its
policy is to distribute all of its taxable income, including net realized
capital gains, within the prescribed time periods. At March 31, 1996, the
Fund had a capital loss carryforward of $27,502,856 available, to the extent
provided in regulations, to offset future capital gains, if any, which
expires on March 31, 2004.
F. Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period.
Actual results could differ from those estimates.
Note 2
The Trust and State Street Research & Management Company (the "Adviser"), an
indirect wholly owned subsidiary of Metropolitan Life Insurance Company
("Metropolitan"), have entered into an agreement under which the Adviser
earns monthly fees at an annual rate of 0.65% 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 September 30, 1996, the fees
pursuant to such agreement amounted to $2,830,152.
State Street Research Shareholder Services, a division of State Street
Research Investment Services, Inc., the Trust's principal underwriter (the
"Distributor"), an indirect wholly owned subsidiary of Metropolitan, provides
certain shareholder services to the Fund such as responding to inquiries and
instructions from investors with respect to the purchase and redemption of
shares of the Fund. During the six months ended September 30, 1996, the
amount of such expenses was $141,003.
The fees of the Trustees not currently affiliated with the Adviser amounted
to $14,690 during the six months ended September 30, 1996.
Note 3
For the six months ended September 30, 1996, purchases and sales of
securities, exclusive of short-term investments, aggregated $491,304,217 and
$469,236,072, respectively.
Note 4
The Trust has adopted a Plan of Distribution Pursuant to Rule 12b-1 (the
"Plan") under the Investment Company Act of 1940. Under the Plan, the Fund
pays annual service fees to the Distributor at a rate of 0.25% of average
daily net assets for Class A, Class B and Class D shares. In addition, the
Fund pays annual distribution fees of 0.75% of average daily net assets for
Class B and Class D shares. The Distributor uses such payments for personal
service and/or the maintenance or servicing of shareholder accounts, to
reimburse securities dealers for distribution and marketing services, to
furnish ongoing assistance to investors and to defray a portion of its
distribution and marketing expenses. For the six months ended September 30,
1996, fees pursuant to such plan amounted to $809,380, $1,010,606, and
$86,010 for Class A, Class B and Class D shares, respectively.
The Fund has been informed that the Distributor and MetLife Securities, Inc.,
a wholly owned subsidiary of Metropolitan, earned initial sales charges
aggregating $143,923 and $855,937 respectively, on sales of Class A shares of
the Fund during the six months ended September 30, 1996, and that MetLife
Securities, Inc. earned commissions aggregating $655,841 on sales of Class B
shares, and that the Distributor collected contingent deferred sales charges
aggregating $252,394 and $2,412 on redemptions of Class B and Class D shares,
respectively, during the same period.
10
<PAGE>
State Street Research High Income Fund
Note 5
The Trustees have the authority to issue an unlimited number of shares of
beneficial interest, $.001 par value per share.
At September 30, 1996, the Distributor owned 7,018 Class A shares of the
Fund. Share transactions were as follows:
<TABLE>
<CAPTION>
Six months ended
September 30, 1996 Year ended
(Unaudited) March 31, 1996
------------------------------- --------------------------------
Class A Shares Amount Shares Amount
- -------------------------------------------------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
Shares sold 7,849,040 $ 47,045,391 18,288,203 $ 107,141,811
Issued upon reinvestment of:
Dividends from net investment income 3,049,570 18,346,962 6,699,217 39,227,013
Distribution from net realized gains -- -- 110,651 647,284
Shares repurchased (10,532,635) (63,053,124) (22,983,923) (134,676,806)
--------------- --------------- --------------- ----------------
Net increase 365,975 $ 2,339,229 2,114,148 $ 12,339,302
=============== =============== =============== ================
Class B Shares Amount Shares Amount
- -------------------------------------------------------- --------------- --------------- ----------------
Shares sold 7,459,670 $ 44,532,246 14,268,713 $ 83,337,086
Issued upon reinvestment of:
Dividends from net investment income 757,303 4,537,910 1,319,995 7,702,343
Distribution from net realized gains -- -- 21,578 125,811
Shares repurchased (2,776,081) (16,557,194) (4,623,289) (27,005,817)
Net increase 5,440,892 $ 32,512,962 10,986,997 $ 64,159,423
=============== =============== =============== ================
Class C Shares Amount Shares Amount
- -------------------------------------------------------- --------------- --------------- ----------------
Shares sold 224,656 $ 1,340,042 458,494 $ 2,676,110
Issued upon reinvestment of:
Dividends from net investment income 21,739 130,282 42,106 245,608
Distribution from net realized gains -- -- 486 2,834
Shares repurchased (145,774) (866,121) (298,694) (1,741,339)
--------------- --------------- --------------- ----------------
Net increase 100,621 $ 604,203 202,392 $ 1,183,213
=============== =============== =============== ================
Class D Shares Amount Shares Amount
- -------------------------------------------------------- --------------- --------------- ----------------
Shares sold 1,039,969 $ 6,217,595 1,922,890 $ 11,234,354
Issued upon reinvestment of:
Dividends from net investment income 64,911 389,917 76,557 447,554
Distribution from net realized gains -- -- 1,314 7,661
Shares repurchased (265,722) (1,586,727) (596,429) (3,489,815)
--------------- --------------- --------------- ----------------
Net increase 839,158 $ 5,020,785 1,404,332 $ 8,199,754
=============== =============== =============== ================
</TABLE>
11
<PAGE>
State Street Research High Income Fund
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
For a share outstanding throughout each period:
Class A
-----------------------------------------------------------------
Six months ended Year ended March 31
September 30, -----------------------------------------------
1996
(Unaudited)* 1996* 1995* 1994 1993 1992
----------------------------- ----------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 5.95 $ 5.80 $ 6.43 $ 6.32 $ 5.95 $ 5.21
Net investment income 0.28 0.52 0.61 0.66 0.67 0.71
Net realized and unrealized
gain (loss) on investments 0.17 0.20 (0.58) 0.22 0.37 0.72
Dividends from net investment
income (0.26) (0.56) (0.60) (0.62) (0.67) (0.69)
Distributions from net
realized gains -- (0.01) (0.06) (0.15) -- --
------------ -------- -------- -------- -------- --------
Net asset value, end of
period $ 6.14 $ 5.95 $ 5.80 $ 6.43 $ 6.32 $ 5.95
============ ======== ======== ======== ======== ========
Total return 7.75%+++ 12.85%+ 1.80%+ 14.58%+ 18.70%+ 28.99%+
Net assets at end of period
(000s) $669,150 $646,473 $618,462 $650,755 $496,352 $308,921
Ratio of operating expenses
to average net assets 1.11%++ 1.17% 1.23% 1.16% 1.15% 1.17%
Ratio of net investment
income to average net assets 9.32%++ 8.88% 10.19% 10.41% 11.25% 12.71%
Portfolio turnover rate 56.60% 56.47% 31.55% 24.36% 79.39% 72.62%
Average commission rate@ $ .0201 -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
Class B
----------------------------------------------
Six months ended Year ended March 31
September 30, ---------------------------------
1996
(Unaudited)* 1996* 1995* 1994**
----------------------------- ----------------- -------- -------- ---------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period $ 5.93 $ 5.79 $ 6.42 $ 6.34
Net investment income 0.26 0.46 0.57 0.51
Net realized and unrealized
gain (loss) on investments 0.16 0.21 (0.58) 0.15
Dividends from net investment
income (0.24) (0.52) (0.56) (0.48)
Distributions from net
realized gains -- (0.01) (0.06) (0.10)
-------- -------- -------- -------
Net asset value, end of
period $ 6.11 $ 5.93 $ 5.79 $ 6.42
======== ======== ======== =======
Total return 7.21%+++ 12.06%+ 0.89%+ 10.76%++
Net assets at end of period
(000s) $224,813 $185,735 $117,767 $67,337
Ratio of operating expenses
to average net assets 1.86%++ 1.92% 1.98% 1.93%++
Ratio of net investment
income to average net assets 8.58%++ 7.95% 9.65% 10.32%++
Portfolio turnover rate 56.60% 56.47% 31.55% 24.36%
Average commission rate@ $ .0201 -- -- --
</TABLE>
<TABLE>
<CAPTION>
Class C
-------------------------------------------------
Year ended March 31
Six months ended -------------------------------
September 30, 1996
(Unaudited)* 1996* 1995* 1994**
- ------------------------------------------------- ------------------ --------- -------- -----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 5.92 $ 5.78 $ 6.42 $ 6.34
Net investment income 0.29 0.53 0.64 0.57
Net realized and unrealized gain (loss) on
investments 0.17 0.20 (0.60) 0.14
Dividends from net investment income (0.27) (0.58) (0.62) (0.53)
Distributions from net realized gains -- (0.01) (0.06) (0.10)
------ ------ ------ ------
Net asset value, end of period $ 6.11 $ 5.92 $ 5.78 $ 6.42
====== ====== ====== ======
Total return 7.92%+++ 13.19%+ 1.73%+ 11.67%+++
Net assets at end of period (000s) $4,575 $3,840 $2,579 $ 851
Ratio of operating expenses to average net assets 0.86%++ 0.92% 0.98% 0.93%++
Ratio of net investment income to average net
assets 9.59%++ 8.97% 10.85% 11.32%++
Portfolio turnover rate 56.60% 56.47% 31.55% 24.36%
Average commission rate@ $.0201 -- -- --
</TABLE>
<TABLE>
<CAPTION>
Class D
----------------------------------------------------
Year ended March 31
Six months ended -------------------------------
SSeptember 30, 1996
(Unaudited)* 1996* 1995* 1994**
- ------------------------------------------------- ------------------ --------- -------- -----------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 5.93 $ 5.79 $ 6.42 $ 6.34
Net investment income 0.25 0.46 0.58 0.51
Net realized and unrealized gain (loss) on
investments 0.18 0.21 (0.59) 0.15
Dividends from net investment income (0.24) (0.52) (0.56) (0.48)
Distributions from net realized gains -- (0.01) (0.06) (0.10)
------- ------- ------ ------
Net asset value, end of period $ 6.12 $ 5.93 $ 5.79 $ 6.42
======= ======= ====== ======
Total return 7.38%+++ 12.05%+ 0.88%+ 10.74%+++
Net assets at end of period (000s) $20,875 $15,262 $6,766 $2,661
Ratio of operating expenses to average net assets 1.86%++ 1.92% 1.98% 1.93%++
Ratio of net investment income to average net
assets 8.60%++ 7.91% 9.81% 10.32%++
Portfolio turnover rate 56.60% 56.47% 31.55% 24.36%
Average commission rate@ $ .0201 -- -- --
</TABLE>
*Per-share figures have been calculated using the average shares method.
**June 1, 1993 (commencement of share class designations) to March 31, 1994.
++Annualized
+Total return figures do not reflect any front-end or contingent deferred
sales charges.
+++Represents aggregate return for the period without annualization and does
not reflect any front-end or contingent deferred sales charges.
@For fiscal years beginning on or after April 1, 1996, the Fund is required
to disclose its average commission rate per share paid for security trades.
12
<PAGE>
State Street Research High Income Fund
REPORT ON SPECIAL MEETING OF SHAREHOLDERS
A Special Meeting of Shareholders of the State Street Research High Income
Fund ("Fund"), along with shareholders of other series of State Street
Research Income Trust ("Meeting"), was convened on July 19, 1996. The results
of the Meeting are set forth below.
<TABLE>
<CAPTION>
Votes (millions of
shares)
------------------
For Withheld
------ -----------
<S> <C> <C>
1. The following persons were elected as Trustees:
Thomas L. Phillips 97.9 2.6
Toby Rosenblatt 98.2 2.3
Ralph F. Verni 98.0 2.5
</TABLE>
<TABLE>
<CAPTION>
Votes (millions of
shares)
----------------------
Proposal For Against Abstain
- ---------------------------------------------------- ---- ------- --------
<S> <C> <C> <C>
2. The Fund's following investment policies were
reclassified from fundamental to nonfundamental:
a. The policy regarding investments in securities
of companies with less than three (3) years'
continuous operation 67.9 3.7 5.9
c. The policy regarding arbitrage and warrants 67.8 3.2 6.4
3. The Fund's fundamental policy regarding
investments in commodities and commodity
contracts was amended 67.5 4.0 6.0
4. The Fund's fundamental policy on lending was
amended to clarify the permissibility of
securities lending 67.2 3.9 6.3
5. The Fund's fundamental policies regarding
diversification of investments were amended 68.8 2.7 5.9
6. The Fund's fundamental policy regarding industry
concentration was amended 68.4 3.0 6.1
7. The Fund's fundamental policy regarding
participation in underwritings was amended 67.7 3.1 6.6
8. The Master Trust Agreement was amended to permit
the Trustees to reorganize, merge or liquidate a
fund without prior shareholder approval 83.0 9.8 7.6
9. The Master Trust Agreement was amended to
eliminate specified time permitted between the
record date and any shareholders meeting 86.2 6.3 8.0
</TABLE>
13
<PAGE>
State Street Research High Income Fund
FUND INFORMATION,OFFICERS AND TRUSTEES OF STATE STREET RESEARCH INCOME TRUST
Fund Information
State Street Research
High Income Fund
One Financial Center
Boston, MA 02111
Investment Adviser
State Street Research &
Management Company
One Financial Center
Boston, MA 02111
Distributor
State Street Research
Investment Services, Inc.
One Financial Center
Boston, MA 02111
Shareholder Services
State Street Research
Shareholder Services
P.O. Box 8408
Boston, MA 02266-8408
1-800-562-0032
Custodian
State Street Bank and
Trust Company
225 Franklin Street
Boston, MA 02110
Legal Counsel
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
Officers
Ralph F. Verni
Chairman of the Board,
President and
Chief Executive Officer
Bartlett R. Geer
Vice President
John H. Kallis
Vice President
Michael R. Yogg
Vice President
Gerard P. Maus
Treasurer
Joseph W. Canavan
Assistant Treasurer
Douglas A. Romich
Assistant Treasurer
Francis J. McNamara, III
Secretary and General Counsel
Darman A. Wing
Assistant Secretary and
Assistant General Counsel
Amy L. Simmons
Assistant Secretary
Trustees
Ralph F. Verni
Chairman of the Board,
President, Chief Executive
Officer and Director,
State Street Research &
Management Company
Edward M. Lamont
Formerly in banking (Morgan
Guaranty Trust Company of
New York); presently engaged
in private investments and
civic affairs
Robert A. Lawrence
Partner, Saltonstall & Co.
Dean O. Morton
Retired; formerly Executive
Vice President, Chief
Operating Officer and Director,
Hewlett-Packard Company
Thomas L. Phillips
Retired; formerly Chairman of the
Board and Chief Executive
Officer, Raytheon Company
Toby Rosenblatt
President,
The Glen Ellen Company
Vice President,
Founders Investments Ltd.
Michael S. Scott Morton
Jay W. Forrester Professor of
Management, Sloan School of
Management, Massachusetts
Institute of Technology
Jeptha H. Wade
Retired; formerly Of Counsel,
Choate, Hall & Stewart
14
<PAGE>
State Street Research High Income Fund
One Financial Center
Boston, MA 02111
Bulk Rate
U.S. Postate
PAID
Brockton, MA
Permit No. 600
Questions? Comments?
Call us at 1-800-562-0032
or write us at:
State Street Research
Shareholders Services
P.O. 8408
Boston, MA 02266-8408
[LOGO]STATE STREET RESEARCH
This report is prepared for the general information of current shareholders
only. It is not authorized for use as sales material with prospective investors.
The Dalbar awards recognize quality shareholder service and should not be
considered a rating of fund performance. The survey included mutual fund
complexes that volunteered or wre otherwise selected to participate and was not
industry-wide.
CONTROL NUMBER: 3505-961121(1297)SSR-LD
Cover Illustration by Dorothy Cullinan
HI-523E-1196
<PAGE>
[State Street Research Logo]
State Street Research
Managed Assets
{Graphic of a person running up a rock to the stars]
Semiannual Report
September 30, 1996
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 Shareholder Service
<PAGE>
STATE STREET RESEARCH MANAGED ASSETS
- --------------------------------------------------------------------------------
Investment Update
- --------------------------------------------------------------------------------
Investment Environment
The Economy
(bullet) After a stronger than expected second quarter in 1996, economic
growth slowed somewhat in the third quarter.
(bullet) Indicators were mixed. Wages rose during the six-month period and
unemployment remained low. Consumer prices and inflation were
well-contained, however.
(bullet) The Federal Reserve met twice since April, leaving interest rates
unchanged.
The Markets
(bullet) From April 1 to September 30, 1996, stocks and bonds brought in
positive performance overall, peppered with short-term corrections.
(bullet) The stock market continued its rise, with the Dow Jones Industrial
Average nearly reaching the 6000-point mark. The S&P 500 was up
7.71% for the six-month period ended September 30, 1996.
(bullet) High-yield bonds performed positively, with the First Boston High
Yield Index up 5.40% for the six months ended September 30, 1996.(1)
Other bond sectors offered less favorable performance, with the
Lehman Brothers Aggregate Bond Index gaining only 2.43% for the same
time period.(1)
The Fund
Over the Past Six Months
(bullet) Class A shares of the Fund provided a total return of +7.99% (not
including sales charge) for the six months ended September 30,
1996.(2) The average total return for 178 funds in Lipper Analytical
Services' Flexible Portfolio category was +4.80% for the same time
period (does not reflect sales charge).
(bullet) Our superior performance can be attributed to our heavier position
in stocks, which have performed well over the past six
months--especially our small-cap growth holdings. We shifted some
assets into these stocks at the beginning of the time period when
the economy was showing signs of growth. Bonds in the Fund were
slightly underweighted but brought in positive returns--mainly due
to the high-yield and international portions of the portfolio.
(bullet) We're overweighted in inflation-responsive stocks compared to past
periods, primarily because we see increased opportunity in
energy-related stocks.
Current Strategy
(bullet) 54% of the Fund's assets were invested in stocks, 24% in bonds, 13%
in inflation-responsive investments and 9% in cash as of September
30, 1996 (see chart below). The allocation hasn't changed
significantly since March.
(bullet) The equity portion of the portfolio is almost evenly distributed,
with a slightly higher percentage of assets in large-cap and value
stocks, and the rest in international and small-cap stocks.
(bullet) The bond portion of the portfolio is concentrated in high-quality
bonds, with the remaining 8% in high-yield and 3% in international
bonds.
(1) The Standard & Poor's 500 Composite Index (S&P 500) includes 500
widely traded common stocks and is a commonly used measure of U.S.
stock market performance. The First Boston High Yield Index is a
commonly used measure of high-yield bond performance. The Lehman
Brothers Aggregate Bond Index is a commonly used measure of bond
market performance. The indices are unmanaged and do not take sales
charges into consideration. Direct investment in the indices is not
possible; results are for illustrative purposes only.
(2) +7.64% for Class B shares; +8.12% for Class C shares; +7.53% for
Class D shares.
(3) All returns represent past performance, which is no guarantee of
future results. The investment return and principal value of an
investment made in the Fund will fluctuate, and shares, when redeemed,
may be worth more or less than their original cost. All returns assume
reinvestment of capital gain distributions and income dividends.
Performance for a class includes periods prior to the adoption of class
designations in 1993. "B" and "D" share performance prior to adoption
of multiple class shares reflects annual 12b-1 fees of .25% and
thereafter reflects annual 12b-1 fees of 1%, which will reduce
subsequent performance.
(4) Performance reflects maximum 4.5% "A" share front-end sales charge,
or 5% "B" share or 1% "D" share contingent deferred sales charges where
applicable. "C" shares, offered without a sales charge, are available
only to certain employee benefit plans and large institutions.
(5) Cumulative total returns are not annualized and do not reflect
sales charges, which, if reflected, would reduce performance.
Please note that the discussion throughout this shareholder report is dated as
indicated and, because of possible changes in viewpoint, data and transactions,
should not be relied upon as being current thereafter.
Fund Information (all data are for periods ended September 30, 1996)
SEC Average Annual Compound Rates of Return
(at maximum applicable sales charge)(3),(4)
<TABLE>
<CAPTION>
Life of Fund
(since
12/29/88) 5 Years 1 Year
- ---------- --------------- --------- ----------
<S> <C> <C> <C>
Class A +11.07% +11.64% +10.56%
- ---------- --------------- --------- ----------
Class B +11.37% +11.85% +9.89%
- ---------- --------------- --------- ----------
Class C +11.85% +12.85% +16.05%
- ---------- --------------- --------- ----------
Class D +11.37% +12.10% +13.86%
- -------------------------------------------------
</TABLE>
Cumulative Total Returns
(do not reflect sales charge)3,5
<TABLE>
<CAPTION>
Life of Fund
(since
12/29/88) 5 Years 1 Year
- ---------- --------------- --------- ----------
<S> <C> <C> <C>
Class A +136.53% +81.59% +15.77%
- ---------- --------------- --------- ----------
Class B +130.61% +77.04% +14.89%
- ---------- --------------- --------- ----------
Class C +138.44% +83.05% +16.05%
- ---------- --------------- --------- ----------
Class D +130.63% +77.05% +14.86%
- -------------------------------------------------
</TABLE>
Asset Allocation
(by percentage of net assets)
[Pie Data]
Equities 54%
Inflation Responsive 13%
Bonds 24%
Net Cash 9%
Top 5 Equity Industries
(by percentage of net assets)
[Bar Chart Data]
Oil 8.5%
Chemical 3.9%
Metal & Mining 3.8%
Oil Service 3.8%
Hospital Supply 3.7%
Total: 23.7%
<PAGE>
STATE STREET RESEARCH MANAGED ASSETS
- --------------------------------------------------------------------------------
Investment Portfolio
- --------------------------------------------------------------------------------
September 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Principal Maturity Value
Amount Date (Note 1)
------------------------------- ------------------------------- ---------------
<S> <C> <C> <C>
FIXED INCOME SECURITIES 23.9%
U.S. Treasury 5.0%
U.S. Treasury Bond, 12.00% $ 1,825,000 8/15/2013 $ 2,566,406
U.S. Treasury Bond, 8.125% 5,625,000 8/15/2021 6,311,419
U.S. Treasury Bond, 6.25% 2,075,000 8/15/2023 1,874,949
U.S. Treasury Note, 8.50% 575,000 5/15/1997 584,971
U.S. Treasury Note, 5.125% 975,000 6/30/1998 960,073
U.S. Treasury Note, 6.75% 2,825,000 5/31/1999 2,858,985
U.S. Treasury Note, 7.125% 1,925,000 9/30/1999 1,968,312
U.S. Treasury Note, 6.625% 1,225,000 7/31/2001 1,232,460
U.S. Treasury Note, 7.50% 250,000 11/15/2001 260,820
U.S. Treasury Note, 5.75% 750,000 8/15/2003 715,433
U.S. Treasury Note, 7.875% 4,750,000 11/15/2004 5,104,777
---------------
24,438,605
---------------
U.S. Agency Mortgage 5.5%
Federal Home Loan Mortgage
Corp., 7.50% 121,404 4/01/2002 121,404
Federal Home Loan Mortgage
Corp., 6.50% 558,967 4/01/2009 545,692
Federal Home Loan Mortgage
Corp., 6.50% 807,439 5/01/2009 788,262
Federal Home Loan Mortgage
Corp., 6.50% 188,054 7/01/2009 183,588
Federal Home Loan Mortgage
Corp., 8.50% 375 7/01/2009 387
Federal Home Loan Mortgage
Corp., 6.00% 1,150,695 5/01/2011 1,091,722
Federal Home Loan Mortgage
Corp., 7.00% 1,615,878 6/01/2024 1,570,925
Federal Home Loan Mortgage
Corp., 7.50% 1,255,985 8/01/2024 1,248,336
Federal Home Loan Mortgage
Corp., 8.00% 162,429 8/01/2024 164,256
Federal Home Loan Mortgage
Corp., 7.00% 833,330 12/01/2024 810,147
Federal Home Loan Mortgage
Corp., 8.00% 655,741 6/01/2025 663,117
Federal Home Loan Mortgage
Corp., 7.50% 935,254 11/01/2025 927,220
Federal Home Loan Mortgage
Corp., 7.50% 515,883 4/01/2026 511,452
Federal Home Loan Mortgage
Corp. Series 29-H PAC, 6.50% 425,000 3/25/2023 404,014
Federal National Mortgage
Association, 9.50% 2,019,298 10/01/2003 2,117,093
Federal National Mortgage
Association, 8.00% 274,291 4/01/2008 282,174
U.S. Agency Mortgage (cont'd)
Federal National Mortgage
Association, 8.00% $ 354,537 6/01/2008 $ 364,726
Federal National Mortgage
Association, 8.50% 319,694 2/01/2009 336,414
Federal National Mortgage
Association, 9.00% 70,582 5/01/2009 74,155
Federal National Mortgage
Association, 7.50% 2,187,063 6/01/2010 2,206,331
Federal National Mortgage
Association, 9.50% 495,305 7/25/2022 529,665
Federal National Mortgage
Association REMIC, 6.50% 2,500,000 10/25/2018 2,383,575
Government National Mortgage
Association, 8.00% 1,068,174 5/15/2008 1,104,887
Government National Mortgage
Association, 6.50% 686,192 2/15/2009 669,462
Government National Mortgage
Association, 6.50% 244,911 6/15/2009 238,940
Government National Mortgage
Association, 6.50% 1,510,764 7/15/2009 1,473,931
Government National Mortgage
Association, 9.00% 443,647 6/15/2016 470,404
Government National Mortgage
Association, 8.00% 838,119 8/15/2022 849,903
Government National Mortgage
Association, 8.00% 1,235,199 12/15/2022 1,253,139
Government National Mortgage
Association, 6.50% 1,107,879 7/15/2024 1,043,833
Government National Mortgage
Association, 7.00% 1,265,510 1/15/2025 1,225,558
Government National Mortgage
Association, 7.50% 1,357,316 11/15/2025 1,340,350
---------------
26,995,062
---------------
Foreign 0.2%
Hydro Quebec Deb. Series HS,
9.40% 1,025,000 2/01/2021 1,187,627
---------------
Foreign Government 3.2%
Commonwealth of Australia, Australian Dollar
7.50% 6,800,000 7/15/2005 5,309,351
Canadian Dollar
Government of Canada, 7.50% 3,575,000 12/01/2003 2,726,616
French Franc
Government of France, 8.00% 1,925,000 4/25/2003 2,668,772
Danish Krone
Kingdom of Denmark, 8.00% 14,200,000 11/15/2001 2,652,547
Kingdom of Denmark, 8.00% 11,575,000 3/15/2006 2,115,969
---------------
15,473,255
---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
STATE STREET RESEARCH MANAGED ASSETS
- --------------------------------------------------------------------------------
Investment Portfolio (cont'd)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Maturity Value
Amount Date (Note 1)
- ------------------------------------- -------------- ------------- ---------------
<S> <C> <C> <C>
Trust Certificates 0.3%
Cooperative Trust Certificates,
10.11% $ 900,000 12/15/2017 $ 979,092
Cooperative Utility Trust
Certificates, 10.70% 350,000 9/15/2017 381,514
Cooperative Utility Trust
Certificates, 10.125% 225,000 3/15/2019 246,865
---------------
1,607,471
---------------
Corporate 7.8%
Acme Boot Inc. Sr. Note, 11.50% 250,000 12/15/2000 105,000
Affinity Group Inc. Sr. Sub. Deb.,
11.50% 250,000 10/15/2003 257,500
Allbritton Communications Co. Sr.
Sub. Deb., 9.75% 500,000 11/30/2007 483,750
Alvey Systems Inc. Sr. Sub. Note,
11.375% 250,000 1/31/2003 261,875
American Telecasting Inc. Sr. Disc.
Note, 0.00% to 6/14/99, 12.50%
from 6/15/99 to maturity 499,947 6/15/2004 372,461
Anacomp Inc. Sr. Sub. Note, 13.00% 250,000 6/04/2002 248,750
Axia Inc. Sr. Sub. Note, 11.00% 250,000 3/15/2001 255,000
Bar Technologies Inc. Sr. Sec. Note,
13.50% 125,000 4/01/2001 125,625
Bayou Steel Corp. First Mortgage
Note, 10.25% 500,000 3/01/2001 485,000
BE Aerospace Inc. Sr. Sub. Note,
9.875% 250,000 2/01/2006 253,750
Belle Casinos Inc. First Mortgage
Note, 12.00%+(box) 125,000 10/15/2000 45,625
Benedek Broadcasting Corp. Sr. Note,
11.875% 250,000 3/01/2005 273,125
Benedek Communications Co. Sr. Sub.
Disc. Note, 0.00% to 5/14/2001,
13.25% from 5/15/2001 to maturity%+ 1,000,000 5/15/2006 586,250
Calpine Corp. Sr. Note, 9.25% 500,000 2/01/2004 478,750
Carrols Corp. Sr. Note, 11.50% 250,000 8/15/2003 260,000
Casino Magic Louisiana Corp. Sr. Sec.
Note, 13.00%+ 500,000 8/15/2003 507,500
Celcaribe SA Sr. Sec. Note, 0.00% to
3/14/98, 13.50% from 3/15/98 to
maturity 1,830,000 3/15/2004 1,518,900
Corporate (cont'd)
Chatwins Group Inc. Sr. Exch. Note,
13.00% $ 250,000 5/01/2003 $ 230,000
CHC Helicopter Corp. Sr. Sub. Note,
11.50% 600,000 7/15/2002 597,000
Clark U.S.A. Inc. Sr. Note, 10.875% 125,000 12/01/2005 127,188
Clearnet Communications Inc. Sr.
Disc. Note, 0.00% to 12/14/2000,
14.75% from 12/15/2000 to maturity 800,000 12/15/2005 472,000
Columbia/HCA Healthcare Corp. Master
Trust Note, 6.87% 525,000 9/15/2003 521,104
Continental Cablevision Inc. Sr.
Note, 8.30% 400,000 5/15/2006 413,648
Crown Packaging Holdings Ltd. Sr.
Sub. Disc. Note, 0.00% to
10/31/2000, 12.25% from 11/1/2000
to maturity 1,250,000 11/01/2003 525,000
E & S Holdings Corp. Sr. Sub. Note,
10.375%+ 250,000 10/01/2006 254,375
Echostar Communications Corp. Sr.
Sec. Disc. Note, 0.00% to 5/31/99,
12.875% from 6/1/99 to maturity 375,000 6/01/2004 294,375
Echostar Satellite Broadcast Corp.
Sr. Sec. Disc. Note, 0.00% to
3/14/2000, 13.125%
from 3/15/2000 to maturity 500,000 3/15/2004 341,250
Electronic Data Systems Corp. Note,
6.85% 800,000 5/15/2000 803,400
Empire Gas Corp. Sr. Sec. Note, 7.00% 250,000 7/15/1999 218,125
Envirosource Inc. Note, 9.75% 500,000 6/15/2003 475,000
Euramax International PLC Sr. Sub.
Note, 11.25%+ 500,000 10/01/2006 512,500
Exide Corp. Sr. Note, 10.00% 500,000 4/15/2005 512,500
Finlay Enterprises, Inc. Sr. Disc.
Deb., 0.00% to 4/30/98, 12.00% from
5/1/98 to maturity 250,000 5/01/2005 205,000
Goldriver Hotel & Casino Corp.
Mortgage Note, 13.375%(box) 317,000 8/31/1999 66,570
Grand Union Co. Sr. Sub. Note, 12.00% 500,000 9/01/2004 505,000
Guitar Center Management Company,
Inc. Sr. Note, 11.00%+ 250,000 7/01/2006 260,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
STATE STREET RESEARCH MANAGED ASSETS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Maturity Value
Amount Date (Note 1)
- ------------------------------------- -------------- ------------- ---------------
<S> <C> <C> <C>
Corporate (cont'd)
Haynes International Inc. Sr. Note,
11.625% $ 500,000 9/01/2004 $ 515,000
Heartland Wireless Communications,
Inc. Note, 13.00% 250,000 4/15/2003 267,500
ICF International Inc. Sr. Sub. Note,
13.00% 250,000 12/31/2003 242,500
ICF Kaiser International Inc. Units,
13.00% 250,000 12/31/2003 245,625
ICG Holdings Inc. Sr. Disc. Note,
0.00% to 9/14/2000, 13.50% from
9/15/2000 to maturity 500,000 9/15/2005 335,000
Intercel Inc. Units, 0.00% to
1/31/2001, 12.00% from 2/1/2001 to
maturity 3,000 2/01/2006 183,000
Interface Inc. Sr. Sub. Note, 9.50% 250,000 11/15/2005 248,125
J.M. Peters, Inc. Sr. Note, 12.75% 250,000 5/01/2002 235,000
Jitney Jungle Stores of America, Inc.
Sr. Note, 12.00% 250,000 3/01/2006 265,625
K & F Industries Inc. Sr. Sub. Deb.,
10.375%+ 200,000 9/01/2004 207,000
K-III Communications Corp. Sr. Note,
8.50% 375,000 2/01/2006 348,750
Ladish Company, Inc. Sr. Sub. Sec.
Note, 12.00%++ 18,887 12/22/2000 20,044
Mail-Well Envelope Corp. Sr. Sub.
Note, 10.50% 250,000 2/15/2004 245,000
Marcus Cable Operating Co. L.P. Sr.
Sub. Disc. Note, 0.00% to 7/31/99,
13.50% from 8/1/99 to maturity 750,000 8/01/2004 585,000
Merrill Lynch & Company, Inc. Equity
Participation Securities, 0.00% 1,015,000 1/31/2000 1,034,031
Miles Homes Services Inc. Sr. Note,
12.00% 250,000 4/01/2001 205,000
Muzak L.P. Sr. Note, 10.00% 250,000 10/01/2003 251,562
Nextel Communications Inc. Sr. Disc.
Note, 0.00% to 2/14/99, 9.75% from
2/15/99 to maturity 1,250,000 8/15/2004 806,250
NL Industries Inc. Sr. Sec. Disc.
Note, 0.00% to 10/14/98, 13.00%
from 10/15/98 to maturity 500,000 10/15/2005 421,250
Corporate (cont'd)
Norcal Waste Systems Inc. Sr. Note,
12.75% to 11/14/96, 13.00% from
11/15/96 to 5/14/97, 13.25% from
5/15/97 to 11/14/97, 13.50% from
11/15/97 to maturity+ $ 500,000 11/15/1996 $ 542,500
NS Group Inc. Units, 13.50% 900,000 7/15/2003 900,000
Oryx Energy Co. Note, 8.125% 500,000 10/15/2005 493,710
Overhead Door Corp. Note, 12.25% 500,000 2/01/2000 536,250
Owens & Minor Inc. Sr. Sub. Note,
10.875% 250,000 6/01/2006 261,250
Packaging Resources Inc. Sr. Sec.
Note, 11.625% 500,000 5/01/2003 516,250
Pagemart Inc. Sr. Disc. Exch. Note,
0.00% to 10/31/98, 12.25% from
11/1/98 to maturity 500,000 11/01/2003 395,000
Park Newspapers Inc. Sr. Note,
11.875%+(diamond) 750,000 5/15/2004 856,875
Phar-Mor, Inc. Note, 11.72% 750,000 9/11/2002 781,875
Pioneer Americas Acquisition Corp.
First Mortgage Note, 13.375% 250,000 4/01/2005 275,000
Plastic Specialties & Technology,
Inc. Sr. Note, 11.25% 350,000 12/01/2003 343,875
Presidio Oil Co. Sr. Sec. Note,
11.50%(box) 500,000 9/15/2000 493,750
Presidio Oil Co. Sr. Sub. Gas Indexed
Note, 13.25%(box) 200,000 7/15/2002 146,000
Protection One Alarm Inc. Sr. Sub.
Disc. Note, 0.00% to 6/29/98,
13.375% from 6/30/98 to maturity 250,000 6/30/2005 222,500
Ralphs Grocery Co. Sr. Note, 10.45% 500,000 6/15/2004 506,875
Renaissance Cosmetics Inc. Sr. Note,
13.75% 500,000 8/15/2001 535,000
Renco Metals Inc. Sr. Note, 11.50% 500,000 7/01/2003 521,250
Sam Houston Race Park Ltd. Sr. Sec.
Note, 11.00%(box) 132,932 9/01/2001 53,173
Sheffield Steel Corp. First Mortgage
Note, 12.00% 500,000 11/01/2001 460,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
STATE STREET RESEARCH MANAGED ASSETS
- --------------------------------------------------------------------------------
Investment Portfolio (cont'd)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Principal Maturity Value
Amount Date (Note 1)
- ------------------------------------- -------------- ------------- ---------------
<S> <C> <C> <C>
Corporate (cont'd)
Shop Vac Corp. Sr. Sec. Note,
10.625%+ $ 250,000 9/01/2003 $ 257,500
Speedy Muffler King Inc. Sr. Note,
10.875% 250,000 10/01/2006 257,500
Talley Manufacturing & Technology
Inc. Sr. Note, 10.75% 250,000 10/15/2003 261,250
Tele-Communications Inc. Note, 8.25% 2,250,000 1/15/2003 2,266,875
Telemundo Group Inc. Sr. Disc. Note,
7.00% 400,000 2/15/2006 380,000
Telewest Communications PLC Sr. Deb.,
9.625% 250,000 10/01/2006 247,500
Tokheim Corp. Sr. Sub. Note, 11.50%+ 250,000 8/01/2006 262,500
TransTexas Gas Corp. Sr. Sec. Note,
11.50% 500,000 6/15/2002 531,250
Treasure Bay Gaming and Resorts, Inc.
First Mortgage Units, 12.25%+(box) 250,000 11/15/2000 48,750
U.S.A. Mobile Communications Inc. Sr.
Note, 9.50% 150,000 2/01/2004 144,000
U.S.A. Mobile Communications Inc. Sr.
Note, 14.00% 250,000 11/01/2004 282,500
UCAR Global Enterprise, Inc. Sr. Sub.
Note, 12.00% 135,000 1/15/2005 154,069
United Meridian Corp. Sr. Sub. Note,
10.375% 500,000 10/15/2005 531,250
Universal Outdoor Holdings Inc. Sr.
Sec. Disc. Note, 0.00% to 6/30/99,
14.00% from 7/1/99 to maturity 750,000 7/01/2004 652,500
Viacom Inc. Sr. Note, 7.75% 1,000,000 6/01/2005 966,020
Winstar Communications Inc. Sr. Disc.
Note, 14.00% 500,000 10/15/2005 275,000
Winstar Communications Inc. Sr. Sub.
Cv. Note, 0.00% to 10/14/2000,
14.00% from 10/15/2000 to maturity+ 165,000 10/15/2005 103,950
Wireless One Inc. Sr. Disc. Note,
13.00% 400,000 10/15/2003 414,000
Wireless One Inc. Note, 0.00% to
7/31/2001, 13.50% from 8/1/2001 to
maturity 1,250,000 8/01/2006 678,125
Wyman-Gordon Co. Sr. Note, 10.75% 250,000 3/15/2003 266,250
38,336,080
---------------
Finance/Mortgage 1.9%
A.S.F.S. Corp. Series 94-C2 SR A-1,
8.00% $ 329,271 8/25/2010 $ 334,107
Associates Corp. of North America
Note, 6.375% 675,000 10/15/2002 655,499
Beneficial Corp. Note, 9.125% 425,000 2/15/1998 440,258
Countrywide Mortgage Inc. Series
1993-E Class A-1, 6.50% 330,638 1/25/2024 329,915
Countrywide Mortgage Inc. Series
1994-2 Class A-7, 6.50% 650,000 4/25/2008 648,778
First Chicago Master Trust Series
91-D, 8.40% 87,500 6/15/1998 87,609
Fleet Mortgage Group Inc. Note, 7.06% 1,000,000 7/26/2002 990,650
Ford Credit Auto Loan Master Trust
Series 95-1, 6.50% 1,100,000 8/15/2002 1,086,250
GE Global Insurance Holding Corp.
Note, 7.00% 750,000 2/15/2026 699,967
General Motors Acceptance Corp.
Master Trust Note, 7.85% 675,000 11/17/1997 687,758
General Motors Acceptance Corp. Note,
8.625% 1,000,000 6/15/1999 1,047,630
Prudential Home Mortgage Series 93-29
A-6, 6.75% 1,167,188 8/25/2008 1,167,188
Residential Funding Corp. Series
1993-S25 A-1, 6.50% 183,060 7/25/2008 182,258
Sears Credit Account Master Trust
Series 1995-2A, 8.10% 650,000 6/15/2004 676,000
---------------
9,033,867
---------------
Total Fixed Income Securities (Cost $116,092,784) 117,071,967
---------------
</TABLE>
<TABLE>
<CAPTION>
Shares
- ----------------------------------- --------- --------------
<S> <C> <C>
Equity Securities 53.7%
Basic Industries 8.5%
Chemical 3.6%
Cambrex Corp.+++ 56,250 1,905,469
Daicel Chemical Industries, Inc. 260,000 1,374,552
General Chemical Group Inc. 28,300 562,463
Hoechst AG* 117,750 4,293,876
IMC Global Inc. 48,460 1,895,997
Monsanto Co.* 105,000 3,832,500
Rohm & Haas Co. 57,200 3,746,600
--------------
17,611,457
--------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
STATE STREET RESEARCH MANAGED ASSETS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (Note 1)
- -------------------------------------------------- --------------- ---------------
<S> <C> <C>
Diversified 0.5%
Axia Holding Corp.*++ 750 $ 22,500
Plastic Specialties & Technology, Inc. 7,500 7,500
Tenma Corp.* 119,000 2,452,509
---------------
2,482,509
---------------
Electrical Equipment 0.6%
Philips Electronics NV 87,000 3,139,254
Protection One Inc. Wts.*+ 800 8,400
---------------
3,147,654
---------------
Forest Product 0.4%
Aracruz Celulose SA ADR 94,000 822,500
Crown Packaging Holdings Ltd. Wts.*+ 3,750 469
Equitable Bag Inc. 47,600 21,420
Equitable Bag Inc. Pfd. 4,760 85,680
Mail-Well Holdings, Inc.*++ 14,205 152,703
S.D. Warren Co. Series B Sr. Exch. Pfd.(diamond) 18,000 648,000
SDW Holdings Corp. Wts.* 18,000 54,000
---------------
1,784,772
---------------
Machinery 1.5%
Case Corp. 59,600 2,905,500
Chatwins Group Inc. Wts.*+ 500 500
Kajima Corp.* 126,000 1,162,903
Sundstrand Corp. 60,200 2,347,800
Terex Corp. Rts.*++ 750 188
US Filter Corp.* 29,500 1,006,687
---------------
7,423,578
---------------
Metal & Mining 1.9%
Alumax Inc.* 62,200 2,083,700
Aluminum Company of America+++ 50,800 2,997,200
Bar Technologies Inc. Wts.*+ 250 13,750
Bohler Uddeholm AG* 12,000 958,570
Carbide/Graphite Group Inc.* 16,700 306,863
RTZ Corp.* 51,952 795,665
SGL Carbon AG* 10,700 1,247,364
Sheffield Steel Corp. Wts.* 1,250 1,875
Wyman-Gordon Co.* 30,900 706,837
---------------
9,111,824
---------------
Total Basic Industries 41,561,794
---------------
Consumer Cyclical 8.5%
Airline 0.3%
Atlas Air Inc.* 33,100 1,415,025
CHC Helicopter Corp. Wts.*++ 2,000 1,000
---------------
1,416,025
---------------
Automotive 1.7%
Exide Corp. 90,500 $ 2,341,688
Ford Motor Co. 52,900 1,653,125
Harvard Industries Inc. 14.25% Exch. Pfd.(diamond) 11,534 253,738
Honda Motor Co. 73,000 1,831,541
Lear Corp. 12,200 402,600
Suzuki Motor Corp. 160,000 1,949,821
---------------
8,432,513
---------------
Building 0.5%
Lafarge Corp. 116,600 2,171,675
Miles Homes Inc. Wts.*++ 3,000 750
Waxman Industries Inc. Wts.*+ 29,500 88,500
---------------
2,260,925
---------------
Hotel & Restaurant 1.1%
Harrahs Entertainment Inc.* 82,400 1,534,700
Mirage Resorts Inc.* 121,900 3,123,688
Motels of America Inc.*+ 500 30,000
Primadonna Resorts Inc.* 30,800 562,100
Station Casinos Inc.* 31,600 379,200
---------------
5,629,688
---------------
Recreation 1.2%
America Group Inc. 80,300 1,809,350
American Radio Systems Corp. Cl. A* 16,900 629,525
American Telecasting Inc. Wts.* 1,250 5,000
Anchor Gaming* 10,900 678,525
Boomtown Inc. Wts.*+ 500 13
Cox Radio Inc. Cl. A* 1,900 41,800
Fitzgeralds South Inc. Wts.*++ 1,250 12,500
Goldriver Hotel & Casino Corp. Cl. B*++ 20,000 2,500
Goldriver Hotel & Casino Corp. Liquidation Trust
Units++* 500,000 6,350
Heartland Wireless Communications, Inc. Wts.*++ 1,500 10,500
Sharp Equity Inc. 37 185
Silver King Communications Inc.* 17,100 401,850
Walt Disney Co. 40,000 2,535,000
Wireless One Inc. Wts.*+ 750 3,750
---------------
6,136,848
---------------
Retail Trade 3.6%
Central Rents Inc. Wts.* 250 15,000
CUC International Inc. 14,455 576,393
Food 4 Less Holdings Inc. Wts.* 584 55,597
Global DirectMail Corp.* 25,600 1,222,400
Gucci Group NV* 35,300 2,559,250
Gymboree Corp.* 7,900 239,963
Home Depot Inc. 79,700 4,532,938
Intimate Brands Inc. Cl. A* 105,900 1,932,675
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
STATE STREET RESEARCH MANAGED ASSETS
- --------------------------------------------------------------------------------
Investment Portfolio (cont'd)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (Note 1)
- -------------------------------------------------- --------------- ---------------
<S> <C> <C>
Retail Trade (cont'd)
Kroger Co. 51,100 $ 2,286,725
Loehmann's, Inc.* 13,200 353,925
Sears Roebuck & Co. 56,100 2,510,475
Supermarkets General Holdings Corp. Exch. Pfd. 18,200 464,100
Viking Office Products Inc.* 24,700 741,000
---------------
17,490,441
---------------
Textile & Apparel 0.1%
Acme Boot Co.+ 250 250
Authentic Fitness Corp. 22,100 270,725
---------------
270,975
---------------
Total Consumer Cyclical 41,637,415
---------------
Consumer Staple 11.1%
Business Service 1.4%
ADT Ltd.* 102,200 1,954,575
Anacomp Inc. 14,306 118,025
Anacomp Inc. Rts. 5,150 4,506
Anacomp Inc. Wts.* 4,941 14,205
ATC Communications Group Inc. 32,800 574,000
Carriage Services Inc. Cl. A 25,500 490,875
HA-LO Industries, Inc.* 34,850 1,010,650
ICF Kaiser International Inc. Wts.* 1,200 600
La Petite Holdings Corp. 22,000 726,000
PageMart Inc. Wts.*+ 2,300 13,800
Personnel Group of America Inc.* 31,500 819,000
Right Management Consultants Inc. 7,400 179,450
Technology Solutions Co.* 18,750 653,906
Universal Outdoor Holdings Inc. Wts.*++ 1,000 250,000
Vestar/LPA Investment Corp.*+ 1,375 16,500
---------------
6,826,092
---------------
Drug 2.3%
Biovail Corp. International* 27,000 965,250
CytoTherapeutics, Inc.* 21,700 184,450
Pfizer Inc. 30,300 2,397,487
Roussel-Uclaf* 13,700 3,302,004
Sandoz AG* 2,700 3,239,484
Yamanouchi Pharmaceutical Co. 60,000 1,268,817
---------------
11,357,492
---------------
Food & Beverage 1.8%
Coca-Cola Enterprises Inc. 91,200 4,126,800
Dr. Pepper Bottling Holdings Inc. Cl. A* 56,000 434,000
LVMH Moet Hennessy Louis Vuitton* 4,400 954,874
Seven-Up/RC Bottling Company of Southern
California 26,250 255,938
Whitman Corp. 131,900 3,050,187
---------------
8,821,799
---------------
Hospital Supply 3.7%
Allegiance Corp. 8,220 $ 145,905
American Medical Response, Inc.* 16,900 608,400
Baxter International Inc. 91,100 4,258,925
Columbia/HCA Healthcare Corp.* 42,900 2,439,937
Genesis Health Ventures Inc. 18,200 511,875
Healthdyne Technologies Inc.* 76,600 641,525
Imagyn Medical Inc. 71,400 767,550
Karrington Health Inc. 35,000 455,000
Lincare Holdings Inc.* 15,400 616,000
Mariner Health Group Inc. 45,600 701,100
Physio-Control International Corp. 13,200 333,300
Respironics Inc.* 21,100 511,675
Roche Holdings AG 475 3,494,762
Rural/Metro Corp.* 18,500 675,250
Shimadzu Corp. 295,000 1,826,568
Ultra-Fem Inc.* 17,100 395,438
---------------
18,383,210
---------------
Personal Care 0.6%
Avon Products Inc. 48,500 2,406,812
U.S.A. Detergents Inc.* 11,650 463,088
---------------
2,869,900
---------------
Printing & Publishing 1.0%
General Media Inc. Wts.*++ 250 250
Heritage Media Corp. Cl. A* 24,200 456,775
Hollinger International Inc. Cl. A* 252,400 2,839,500
K-III Communications Corp. Series B Exch. Pfd.(diamond) 5,122 512,153
K-III Communications Corp. Series D Exch. Pfd. 2,500 233,750
Providence Journal Co. Cl. A 24,100 707,938
Sullivan Holdings Inc.* 149 53,467
---------------
4,803,833
---------------
Tobacco 0.3%
Philip Morris Companies, Inc. 8,500 762,875
Schweitzer-Mauduit International Inc. 22,400 750,400
---------------
1,513,275
---------------
Total Consumer Staple 54,575,601
---------------
Energy 3.4%
Oil 2.5%
Imperial Oil Ltd. 25,700 1,092,250
Mercantile Petroleum International, Inc. 95,500 250,210
Oryx Energy Co.+++ 159,800 2,836,450
Repsol SA 48,000 1,576,588
Royal Dutch Petroleum Co. 17,000 2,654,125
Tosco Corp. 55,900 3,067,512
Total SA* 12,909 1,015,876
---------------
12,493,011
---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
STATE STREET RESEARCH MANAGED ASSETS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (Note 1)
- -------------------------------------------------- --------------- ---------------
<S> <C> <C>
Oil Service 0.9%
Coflexip 31,763 $ 1,358,944
Schlumberger Ltd. 34,900 2,949,050
---------------
4,307,994
---------------
Total Energy 16,801,005
---------------
Finance 7.9%
Bank 3.3%
Bank of New York Inc. 100,600 2,955,125
BankAmerica Corp. 43,000 3,531,375
Citicorp 35,000 3,171,875
Fleet Financial Group Inc. 65,900 2,932,550
Riverbank America Pfd. 20,000 500,000
Sparbanken Sverige AB* 203,700 2,950,971
---------------
16,041,896
---------------
Financial Service 1.2%
Alex Brown Inc. 6,800 393,550
CMAC Investment Corp. 9,000 571,500
Federal Home Loan Mortgage Corp. 24,200 2,368,575
Federal National Mortgage Association 75,000 2,615,625
---------------
5,949,250
---------------
Insurance 3.4%
ACE Ltd.* 88,900 4,700,587
Ambac Inc. 23,800 1,326,850
Delphi Financial Group Inc.* 10,080 282,240
Mid Ocean Ltd.* 57,200 2,438,150
Mutual Risk Management Ltd. 23,400 678,600
NAC Re Corp. 21,600 777,600
National Re Corp. 14,300 756,113
Travelers/Aetna Property Casualty Corp. Cl. A* 76,700 2,109,250
Travelers Group Inc. 70,950 3,485,419
---------------
16,554,809
---------------
Total Finance 38,545,955
---------------
Science & Technology 11.1%
Aerospace 1.9%
Boeing Co. 21,400 2,022,300
Bombardier, Inc. Cl. B* 85,200 1,213,479
General Dynamics Corp. 34,800 2,396,850
Ladish Company, Inc. 52,000 87,100
Rockwell International Corp. 39,200 2,209,900
Rolls Royce PLC 400,000 1,499,452
---------------
9,429,081
---------------
Computer Software & Service 3.7%
Applied Graphics Technologies, Inc. 17,100 $ 254,363
Cisco Systems Inc.* 70,500 4,375,406
Datastream Systems Inc.* 7,800 235,950
Desktop Data Inc.* 11,300 327,700
Electronic Data Systems Corp. 53,800 3,301,975
Integrated Measurement Systems Inc. 11,200 184,800
Manugistics Group Inc. 5,900 237,475
National Processing Inc. 40,000 780,000
Optical Data Systems Inc.* 24,800 421,600
Oracle Systems Corp. 71,700 3,051,731
Planning Sciences International PLC ADR 8,700 128,325
Systemsoft Corp.* 12,900 441,825
Ultratech Stepper Inc.* 26,100 492,638
Vantive Corp. 1,000 64,750
Videoserver Inc.* 15,100 524,725
Wang Laboratories Inc. 39,100 762,450
Western Digital Corp.* 62,300 2,499,787
---------------
18,085,500
---------------
Electronic Components 1.6%
ABB AG 775 947,140
Amp Inc.* 59,400 2,301,750
Augat Inc. 27,300 580,125
Encad Inc.* 9,300 389,438
Rohm Co. 32,000 2,015,771
VLSI Technology Inc.* 28,800 468,000
Xicor Inc. 21,800 253,425
Zebra Technologies Corp. Cl. A 29,900 766,187
---------------
7,721,836
---------------
Electronic Equipment 3.3%
Advanced Fibre Communications, Inc.* 400 10,000
Berg Electronics Corp.* 27,900 760,275
L.M. Ericsson Telephone Co. ADR* 128,480 3,260,180
L.M. Ericsson Telephone Co. Cl. B* 96,800 2,439,464
Nokia Corp.* 23,300 1,039,305
Perkin-Elmer Corp. 60,000 3,472,500
Toolex Alpha NV 125,900 2,866,877
United News & Media PLC 200,000 2,156,832
---------------
16,005,433
---------------
Office Equipment 0.6%
Compaq Computer Corp. 38,400 2,462,400
Filenet Corp.* 29,600 754,800
---------------
3,217,200
---------------
Total Science & Technology 54,459,050
---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
STATE STREET RESEARCH MANAGED ASSETS
- --------------------------------------------------------------------------------
Investment Portfolio (cont'd)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
Shares (Note 1)
- -------------------------------------------------- --------------- ---------------
<S> <C> <C>
Utility 3.2%
Electric 0.7%
Allegheny Power Systems Inc. 61,300 $ 1,777,700
American Electric Power Inc. 35,800 1,454,375
---------------
3,232,075
---------------
Natural Gas 0.6%
ENSERCH Corp.+++ 85,500 1,784,812
Tenneco Inc. 21,500 1,077,688
---------------
2,862,500
---------------
Telephone 1.9%
Airtouch Communications Inc.* 110,700 3,058,087
Allen Group Inc. 33,400 617,900
BCE Inc. 30,000 1,282,500
Celcaribe SA+ 297,558 490,971
Clearnet Communications Inc. Wts. 2,640 17,160
Geotek Communications Inc.* 51,100 427,963
Intelcom Group, Inc. Wts.*++ 1,650 25,575
Netcom Systems AB 164,800 1,852,747
Tel-Save Holdings Inc.* 33,000 948,750
Trescom International Inc.* 54,700 711,100
---------------
9,432,753
---------------
Total Utility 15,527,328
---------------
Total Equity Securities (Cost $223,977,685) 263,108,148
---------------
EQUITY SECURITIES--INFLATION RESPONSIVE INVESTMENTS 13.0%
Basic Industries 2.4%
Chemical 0.3%
Agrium Inc.* 100,000 1,357,812
---------------
Metal & Mining 1.9%
Aber Resources Ltd.* 50,000 856,250
AUR Resources Inc.* 50,000 267,969
Campbell Resources Inc. 250,000 250,000
Carpenter Technology Corp. 20,000 700,000
Coeur d'Alene Mines Corp. 70,000 1,146,250
Crown Resources Corp.* 125,000 718,750
Cyprus Amax Minerals Co. 25,000 537,500
De Beers Consolidated Mines Ltd. ADR 19,600 607,600
Dia Met Minerals Ltd. Cl. B* 20,000 313,854
Freeport-McMoRan Copper & Gold, Inc.* 20,000 625,000
Kinross Gold Corp.* 60,000 405,000
Maxxam Inc.* 25,000 1,106,250
Royal Oak Mines Inc.* 100,000 393,750
Santa Fe Pacific Gold Corp.* 10,000 125,000
Southernera Resources Ltd.* 100,000 697,452
Metal & Mining (cont'd)
TVX Gold Inc.* 60,000 $ 405,000
Western Garnet Ltd. 100,000 422,142
---------------
9,577,767
---------------
Railroad 0.2%
OMI Corp. 132,500 944,063
---------------
Total Basic Industries 11,879,642
---------------
Consumer Staple 0.3%
Business Service 0.3%
Commodore Applied Technologies, Inc. 150,000 993,750
Commodore Applied Technologies, Inc. Wts.* 150,000 262,500
---------------
1,256,250
---------------
Total Consumer Staple 1,256,250
---------------
Energy 8.9%
Oil 6.0%
Abacan Resource Corp.*@ 332,400 2,285,250
Apache Corp. 37,500 1,115,625
Barrington Petroleum Ltd. 91,400 342,222
Basin Exploration Inc.* 65,000 455,000
Canadian 88 Energy Corp. 16,600 68,857
Canadian Conquest Exploration Inc. 173,600 267,646
Clayton Williams Energy Inc. 41,498 420,167
Coho Energy Inc.* 139,300 992,512
Crystal Oil Co.* 10,000 360,000
CS Resources Ltd.* 100,000 759,856
Global Natural Resources Inc.*@ 162,600 2,825,175
Intensity Resources Ltd.* 161,300 219,077
Mercantile International Inc. 85,600 224,272
Morgan Hydrocarbons Inc.* 198,100 676,283
Morrison Middlefield Ltd.* 43,800 530,578
Nuevo Energy Co.*@ 93,100 3,782,187
Oil Search Ltd. 1,598,100 1,986,239
Optima Petroleum Corp.* 43,100 142,769
Plains Resources Inc.*@ 126,200 1,751,025
Ranger Oil Ltd.*@ 428,200 3,211,500
Southwestern Energy Co. 58,600 871,675
Stampeder Exploration Ltd. 119,100 485,284
Summit Resources Ltd. 50,000 190,882
Tarragon Oil & Gas Ltd. 116,357 1,114,792
Tom Brown, Inc.* 89,800 1,694,975
Triton Energy Ltd. 45,600 2,040,600
Ulster Petroleum Ltd. 89,000 588,063
---------------
29,402,511
---------------
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
STATE STREET RESEARCH MANAGED ASSETS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Value
Shares (Note 1)
- -------------------------------------------------- ------------- ---------------
<S> <C> <C>
Oil Service 2.9%
Atwood Oceanics Inc.*@ 39,100 $ 1,720,400
Dailey Petroleum Services Corp.* 34,200 299,250
Dreco Energy Services Ltd. Cl. A@ 53,700 1,308,937
Energy Ventures Inc.* 34,300 1,389,150
Ensco International Inc.* 46,187 1,501,077
Global Industries Inc.* 80,800 1,282,700
J. Ray McDermott SA 21,600 629,100
Marine Drilling Companies, Inc. 19,900 191,538
Nabors Industries Inc.* 23,600 321,550
Newpark Resources, Inc.* 20,000 727,500
Noble Drilling Corp.* 83,200 1,258,400
Patterson Energy, Inc. 8,584 150,220
Pool Energy Services Co. 87,300 1,102,163
Rowan Companies, Inc.* 62,100 1,156,612
TMBR/Sharp Drilling, Inc. 20,500 228,063
Tuboscope Vetco International Corp.* 40,000 625,000
---------------
13,891,660
---------------
Total Energy 43,294,171
---------------
Utility 1.4%
Natural Gas 1.4%
KCS Energy, Inc.@ 73,300 2,611,312
Louis Dreyfus Natural Gas Corp.* 42,400 625,400
Seagull Energy Corp. 33,300 653,512
TransTexas Gas Corp.*@ 265,300 3,050,950
---------------
6,941,174
---------------
Total Utility 6,941,174
---------------
Total Equity Securities--Inflation Responsive Investments
(Cost $46,356,750) 63,371,237
---------------
</TABLE>
<TABLE>
<CAPTION>
Principal Maturity Value
Amount Date (Note 1)
--------------------------------- -------------- ------------- ---------------
CASH EQUIVALENTS 9.1%
<S> <C> <C> <C>
American Express Credit Corp.,
5.00% $10,663,000 10/02/1996 $ 10,663,000
Commercial Credit Co., 5.35% 6,000,000 10/03/1996 6,000,000
Ford Motor Credit Co., 5.28% 5,969,000 10/07/1996 5,969,000
Ford Motor Credit Co., 5.22% 9,255,000 10/08/1996 9,255,000
General Electric Capital Corp.,
5.25% 3,392,000 10/02/1996 3,392,000
Norwest Financial Inc., 5.41% 9,192,000 10/02/1996 9,192,000
---------------
Total Cash Equivalents (Cost $44,471,000) 44,471,000
---------------
Total Investments (Cost $430,898,219)--99.7% 488,022,352
Cash and Other Assets, Less Liabilities--0.3% 1,624,072
---------------
Net Assets--100.0% $489,646,424
===============
Federal Income Tax Information:
At September 30, 1996, the net unrealized appreciation of
investments based on cost for Federal income tax purposes of
$431,183,516 was as follows:
Aggregate gross unrealized appreciation for all investments in
which there is an excess of value over tax cost $ 66,167,143
Aggregate gross unrealized depreciation for all investments in
which there is an excess of tax cost over value (9,328,307)
---------------
$ 56,838,836
===============
</TABLE>
ADR stands for American Depositary Receipt, representing ownership of
foreign securities.
* Nonincome-producing securities.
[diamond] Payments of income may be made in cash or in the form of additional
securities.
[box] Security is in default.
+++ Security valued under consistently applied procedures established by
the Trustees. Security restricted as to public resale. The total cost
and market value of restricted securities owned at September 30, 1996
were $250,257 and $504,860 (0.10% of net assets), respectively.
+ Security restricted in accordance with Rule 144A under the Securities
Act of 1933, which allows for the resale of such securities among
certain qualified institutional buyers. The total cost and market
value of Rule 144A securities owned at September 30, 1996 were
$4,525,146 and $5,112,228 (1.04% of net assets), respectively.
++ 15,000 shares of Aluminum Company of America, 22,500 shares of
Cambrex Corp., 23,000 shares of ENSERCH Corp. and 30,000 shares of
Oryx Energy Co. are considered by the Adviser to be part of Inflation
Responsive Investments.
@ 1,900 shares of Abacan Resource Corp., 3,400 shares of Atwood
Oceanics, Inc., 17,600 shares of Dreco Energy Services Ltd., 23,100
shares of Global Natural Resources, Inc., 10,200 shares of KCS
Energy, Inc., 20,700 shares of Nuevo Energy Co., 16,400 shares of
Plains Resources, Inc., 51,900 shares of Ranger Oil Ltd. and 55,600
shares of TransTexas Gas Corp. are considered by the Adviser to be
part of Equity Securities.
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
STATE STREET RESEARCH MANAGED ASSETS
- --------------------------------------------------------------------------------
Investment Portfolio (cont'd)
- --------------------------------------------------------------------------------
Forward currency exchange contracts outstanding at September 30, 1996, are as
follows:
<TABLE>
<CAPTION>
Unrealized
Contract Appreciation Delivery
Total Value Price (Depreciation) Date
- -------------------------------------------------- ---------------------------------- --------------- -----------
<S> <C> <C> <C> <C>
Sell Australian dollars, buy U.S. dollars 561,900 AUD .78715 AUD $ (2,069) 10/24/96
Sell Australian dollars, buy U.S. dollars 1,141,000 AUD .78700 AUD (4,373) 10/24/96
Sell Australian dollars, buy U.S. dollars 3,932,000 AUD .77450 AUD (62,195) 11/14/96
Sell Australian dollars, buy U.S. dollars 565,000 AUD .77425 AUD (9,078) 11/14/96
Sell U.S. dollars, buy Australian dollars 132,683 AUD .78690 AUD 629 10/01/96
Sell U.S. dollars, buy Australian dollars 72,042 AUD .79160 AUD 3 10/02/96
Sell U.S. dollars, buy Australian dollars 585,578 AUD .79350 AUD (1,089) 10/03/96
Sell Canadian dollars, buy U.S. dollars 1,632,000 CAD .73153 CAD (6,512) 11/14/96
Sell Canadian dollars, buy U.S. dollars 1,580,000 CAD .73100 CAD (7,149) 11/14/96
Sell Danish krone, buy U.S. dollars 3,032,200 DKK .17464 DKK 11,340 10/24/96
Sell Danish krone, buy U.S. dollars 21,932,000 DKK .17578 DKK 103,277 11/14/96
Sell European currency units, buy U.S. dollars 1,709,000 XEU 1.27480 XEU 41,827 11/14/96
---------------
$ 64,611
===============
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
STATE STREET RESEARCH MANAGED ASSETS
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
September 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
<S> <C>
Assets
Investments, at value (Cost $430,898,219) (Note 1) $488,022,352
Cash 15,491
Receivable for securities sold 3,087,160
Interest and dividends receivable 2,277,192
Receivable for fund shares sold 465,763
Receivable for open forward contracts 157,076
Receivable from Distributor (Note 3) 49,791
Other assets 76,201
---------------
494,151,026
Liabilities
Payable for securities purchased 3,056,913
Accrued management fee (Note 2) 293,684
Accrued transfer agent and shareholder services (Note 2) 260,851
Accrued distribution and service fees (Note 5) 235,898
Payable for fund shares purchased 184,612
Payable for open forward contracts 92,465
Dividends payable 90,749
Accrued trustees' fees (Note 2) 11,573
Other accrued expenses 277,857
---------------
4,504,602
---------------
Net Assets $489,646,424
===============
Net Assets consist of:
Undistributed net investment income $ 3,781,513
Unrealized appreciation of investments 57,124,133
Unrealized appreciation of forward contracts and foreign
currency 61,912
Accumulated net realized gain 22,645,515
Shares of beneficial interest 406,033,351
---------------
$489,646,424
===============
Net Asset Value and redemption price per share of Class A
shares ($229,204,390 / 21,467,443 shares of beneficial
interest) $10.68
===============
Maximum Offering Price per share of Class A shares
($10.68 / .955) $11.18
===============
Net Asset Value and offering price per share of Class B
shares ($222,881,412 / 20,949,920 shares of beneficial
interest)* $10.64
===============
Net Asset Value, offering price and redemption price per
share of Class C shares ($22,380,407 / 2,096,290 shares
of beneficial interest) $10.68
===============
Net Asset Value and offering price per share of Class D
shares ($15,180,215 / 1,425,072 shares of beneficial
interest)* $10.65
===============
</TABLE>
* Redemption price per share for Class B and Class D is equal to net asset
value less any applicable contingent deferred sales charge.
- --------------------------------------------------------------------------------
Statement of Operations
- --------------------------------------------------------------------------------
For the six months ended September 30, 1996 (Unaudited)
<TABLE>
<S> <C>
Investment Income
Interest, net of foreign taxes of $1,694 $ 5,857,579
Dividends, net of foreign taxes of $116,196 2,115,540
-------------
7,973,119
Expenses
Management fee (Note 2) 1,716,398
Transfer agent and shareholder services (Note 2) 486,737
Custodian fee 184,866
Reports to shareholders 97,651
Service fee-Class A (Note 5) 270,743
Distribution and service fees-Class B (Note 5) 1,031,879
Distribution and service fees-Class D (Note 5) 69,586
Registration fees 32,211
Audit fee 28,348
Trustees' fees (Note 2) 17,387
Miscellaneous 19,107
-------------
3,954,913
Expenses borne by the Distributor (Note 3) (294,176)
-------------
3,660,737
-------------
Net investment income 4,312,382
-------------
Realized and Unrealized Gain (Loss) on Investments,
Foreign Currency and Forward Contracts
Net realized gain on investments (Notes 1 and 4) 22,603,831
Net realized gain on forward contracts and foreign
currency (Note 1) 666,293
-------------
Total net realized gain 23,270,124
-------------
Net unrealized appreciation of investments 7,285,313
Net unrealized depreciation of forward contracts and
foreign currency (145,754)
-------------
Total net unrealized appreciation 7,139,559
-------------
Net gain on investments, foreign currency and forward
contracts 30,409,683
-------------
Net increase in net assets resulting from operations $34,722,065
=============
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
STATE STREET RESEARCH MANAGED ASSETS
- -------------------------------------------------------------------------------
Statement of Changes in Net Assets
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six months ended
September 30, 1996 Year ended
(Unaudited) March 31, 1996
- -------------------------- ------------------ ----------------
Increase (Decrease) in Net Assets
<S> <C> <C>
Operations:
Net investment income $ 4,312,382 $ 8,195,807
Net realized gain on
investments, foreign
currency and forward
contracts* 23,270,124 33,933,659
Net unrealized
appreciation
of investments, foreign
currency and forward
contracts 7,139,559 38,037,693
------------------ ----------------
Net increase resulting
from operations 34,722,065 80,167,159
------------------ ----------------
Dividends from net investment
income:
Class A (2,109,240) (5,148,650)
Class B (1,285,500) (3,355,386)
Class C (234,408) (819,460)
Class D (86,888) (240,897)
------------------ ----------------
(3,716,036) (9,564,393)
------------------ ----------------
Distributions from net realized
gains:
Class A (6,449,746) (3,056,467)
Class B (6,109,961) (2,771,674)
Class C (615,592) (490,395)
Class D (412,622) (194,112)
------------------ ----------------
(13,587,921) (6,512,648)
------------------ ----------------
Net increase (decrease)
from fund share
transactions (Note 6) 38,633,873 (2,678,848)
------------------ ----------------
Total increase in net
assets 56,051,981 61,411,270
Net Assets
Beginning of period 433,594,443 372,183,173
------------------ ----------------
End of period (including
undistributed net
investment income of
$3,781,513 and
$3,185,167,
respectively) $489,646,424 $433,594,443
================== ================
*Net realized gain for
Federal income tax
purposes (Note 1) $ 22,379,315 $ 20,102,035
================== ================
</TABLE>
- -------------------------------------------------------------------------------
Notes to Unaudited Financial Statements
- -------------------------------------------------------------------------------
September 30, 1996
Note 1
State Street Research Managed Assets (the "Fund"), is a series of State
Street Research Income Trust (the "Trust"), which was organized as a
Massachusetts business trust in December, 1985 and is registered under the
Investment Company Act of 1940, as amended, as an open-end management
investment company. The Fund commenced operations in December, 1988. The
Trust consists presently of two separate funds: State Street Research Managed
Assets and State Street Research High Income Fund.
The investment objective of the Fund is to seek a high total return while
attempting to limit investment risk and preserve capital. To achieve its
investment objective, the Fund intends to allocate assets among selected
investments in the following sectors: Fixed Income Securities, Equity
Securities, Inflation Responsive Investments and Cash & Cash Equivalents.
Total return may include current income as well as capital appreciation. The
Fund's investment manager believes that the timely re-allocation of assets
can enhance performance and reduce portfolio volatility.
The Fund offers four classes of shares. Class A shares are subject to an
initial sales charge of up to 4.50% and an annual service fee of 0.25% of
average daily net assets. Class B shares are subject to a contingent deferred
sales charge on certain redemptions made within five years of purchase and
pay annual distribution and service fees of 1.00%. Class B shares
automatically convert into Class A shares (which pay lower ongoing expenses)
at the end of eight years after the issuance of the Class B shares. Class C
shares are only offered to certain employee benefit plans and large
institutions. No sales charge is imposed at the time of purchase or
redemption of Class C shares. Class C shares do not pay any distribution or
service fees. Class D shares are subject to a contingent deferred sales
charge of 1.00% on any shares redeemed within one year of their purchase.
Class D shares also pay annual distribution and service fees of 1.00%. The
Fund's expenses are borne pro-rata by each class, except that each class
bears expenses, and has exclusive voting rights with respect to provisions of
the Plan of Distribution, related specifically to that class. The Trustees
declare separate dividends on each class of shares.
The following significant accounting policies are consistently followed by
the Fund in preparing its financial statements, and such policies are in
conformity with generally accepted accounting principles for investment
companies.
A. Investment Valuation
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. Fixed income securities are valued by a
pricing service, which utilizes
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
STATE STREET RESEARCH MANAGED ASSETS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
market transactions, quotations from dealers, and various relationships among
securities in determining value. Short-term securities maturing within sixty
days are valued at amortized cost. 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. 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.
Securities quoted in foreign currencies are translated into U.S. dollars
at the current exchange rate. Gains and losses that arise from changes in
exchange rates are not segregated from gains and losses that arise from
changes in market prices of investments.
C. 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.
D. 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. Certain fixed income securities held by the
Fund pay interest or dividends in the form of additional securities
(payment-in-kind securities). Interest income on payment-in-kind fixed income
securities is recorded using the effective-interest method. Dividend income
on payment-in-kind preferred securities is recorded at the market value of
securities received. The Fund is charged for expenses directly attributable
to it, while indirect expenses are allocated between both funds in the Trust.
E. Dividends
Dividends from net investment income are declared and paid or reinvested
quarterly. Net realized capital gains, if any, are distributed annually,
unless additional distributions are required for compliance with applicable
tax regulations.
Income dividends and capital gain distributions are determined in
accordance with Federal income tax regulations which may differ from
generally accepted accounting principles. The difference is primarily due to
differing treatments for foreign currency transactions, paydown gains and
losses and wash sale deferrals.
F. Federal Income Taxes
No provision for Federal income taxes is necessary because the Fund has
elected to qualify under Subchapter M of the Internal Revenue Code and its
policy is to distribute all of its taxable income, including net realized
capital gains, within the prescribed time periods.
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.
Note 2
The Trust and State Street Research & Management Company (the "Adviser"),
an indirect wholly owned subsidiary of Metropolitan Life Insurance Company
("Metropolitan"), have entered into an agreement under which the Adviser
earns monthly fees at an annual rate of 0.75% 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 September 30, 1996, the fees
pursuant to such agreement amounted to $1,716,398.
State Street Research Shareholder Services, a division of State Street
Research Investment Services, Inc., the Trust's principal underwriter (the
"Distributor"), an indirect wholly owned subsidiary of Metropolitan, provides
certain shareholder services to the Fund such as responding to inquiries and
instructions from investors with respect to the purchase and redemption of
shares of the Fund. In addition, Metropolitan receives a fee for maintenance
of the accounts of certain shareholders who are participants in sponsored
arrangements, such as employee benefit plans, through or under which shares
of the Fund may be purchased. During the six months ended September 30, 1996,
the amount of such expenses was $135,566.
The fees of the Trustees not currently affiliated with the Adviser
amounted to $17,387 during the six months ended September 30, 1996.
Note 3
The Distributor and its affiliates may from time to time and in varying
amounts voluntarily assume some portion of fees or expenses relating to the
Fund. During the six months ended September 30, 1996, the
14
<PAGE>
STATE STREET RESEARCH MANAGED ASSETS
- --------------------------------------------------------------------------------
Notes (cont'd)
- --------------------------------------------------------------------------------
amount of such expenses assumed by the Distributor and its affiliates was
$294,176.
Note 4
For the six months ended September 30, 1996, purchases and sales of
securities, exclusive of short-term obligations and forward foreign currency
exchange contracts, aggregated $254,495,909 and $244,427,303 (including
$33,885,813 and $22,428,380 of U.S. Government obligations), respectively.
Note 5
The Trust has adopted a Plan of Distribution Pursuant to Rule 12b-1 (the
"Plan") under the Investment Company Act of 1940. Under the Plan, the Fund
pays annual service fees to the Distributor at a rate of 0.25% of average
daily net assets for Class A, Class B and Class D shares. In addition, the
Fund pays annual distribution fees of 0.75% of average daily net assets for
Class B and Class D shares. The Distributor uses such payments for personal
services and/or the maintenance or servicing of shareholder accounts, to
reimburse securities dealers for distribution and marketing services, to
furnish ongoing assistance to investors and to defray a portion of its
distribution and marketing expenses. For the six months ended September 30,
1996, fees pursuant to such plan amounted to $270,743, $1,031,879 and $69,586
for Class A, Class B and Class D shares, respectively.
The Fund has been informed that the Distributor and MetLife Securities,
Inc., a wholly owned subsidiary of Metropolitan, earned initial sales charges
aggregating $76,859 and $497,773, respectively, on sales of Class A shares of
the Fund during the six months ended September 30, 1996, and that MetLife
Securities, Inc. earned commissions aggregating $856,703 on sales of Class B
shares, and the Distributor collected contingent deferred sales charges
aggregating $193,481 and $311 on redemptions of Class B and Class D shares,
respectively, during the same period.
Note 6
The Trustees have the authority to issue an unlimited number of shares of
beneficial interest, $.001 par value per share.
At September 30, 1996 the Distributor owned one Class A share of the Fund.
Share transactions were as follows:
<TABLE>
<CAPTION>
Six months ended
September 30, 1996 Year ended
(Unaudited) March 31, 1996
------------------------------ -------------------------------
Class A Shares Amount Shares Amount
------------------------------------------ -------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
Shares sold 2,193,741 $ 22,696,392 3,142,066 $ 30,625,584
Issued upon reinvestment of:
Dividends from net investment income 198,319 2,083,721 505,011 4,934,090
Distributions from net realized gains 597,305 6,223,914 307,042 2,969,095
Shares repurchased (1,713,728) (17,740,559) (4,460,168) (43,019,460)
-------------- -------------- -------------- ---------------
Net increase (decrease) 1,275,637 $ 13,263,468 (506,049) $ (4,490,691)
============== ============== ============== ===============
Class B Shares Amount Shares Amount
------------------------------------------ -------------- -------------- -------------- ---------------
Shares sold 2,789,614 $ 28,771,295 3,862,169 $ 37,612,607
Issued upon reinvestment of:
Dividends from net investment income 122,312 1,285,500 332,475 3,235,190
Distributions from net realized gains 571,581 5,928,102 281,171 2,710,479
Shares repurchased (1,380,432) (14,241,223) (3,052,294) (29,408,533)
-------------- -------------- -------------- ---------------
Net increase 2,103,075 $ 21,743,674 1,423,521 $ 14,149,743
============== ============== ============== ===============
Class C Shares Amount Shares Amount
------------------------------------------ -------------- -------------- -------------- ---------------
Shares sold 355,106 $ 3,682,955 1,072,850 $ 10,385,513
Issued upon reinvestment of:
Dividends from net investment income 22,082 232,090 84,178 819,983
Distributions from net realized gains 59,077 615,592 50,697 489,441
Shares repurchased (240,076) (2,484,883) (2,251,394) (22,256,352)
-------------- -------------- -------------- ---------------
Net increase (decrease) 196,189 $ 2,045,754 (1,043,669) $(10,561,415)
============== ============== ============== ===============
Class D Shares Amount Shares Amount
------------------------------------------ -------------- -------------- -------------- ---------------
Shares sold 264,194 $ 2,715,354 252,653 $ 2,474,692
Issued upon reinvestment of:
Dividends from net investment income 8,267 86,888 22,570 219,580
Distributions from net realized gains 37,563 389,960 18,905 182,432
Shares repurchased (157,038) (1,611,225) (482,326) (4,653,189)
-------------- -------------- -------------- ---------------
Net increase (decrease) 152,986 $ 1,580,977 (188,198) $ (1,776,485)
============== ============== ============== ===============
</TABLE>
15
<PAGE>
STATE STREET RESEARCH MANAGED ASSETS
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a share outstanding throughout each period:
<TABLE>
<CAPTION>
Class A
-----------------------------------------------------------------------
Six months
ended
September Year ended March 31
30, 1996 -----------------------------------------------------------
(Unaudited)*** 1996*** 1995 1994 1993 1992
--------------------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $10.29 $ 8.76 $8.94 $8.94 $8.22 $7.61
Net investment
income* 0.12 0.23 0.27 0.22 0.27 0.37
Net realized and
unrealized gain
(loss) on
investments, forward
contracts and
foreign currency 0.69 1.72 (0.14) 0.72 1.01 0.62
Dividends from net
investment income (0.10) (0.26) (0.17) (0.22) (0.25) (0.38)
Distributions from
net realized gains (0.32) (0.16) (0.14) (0.72) (0.31) --
----------- ----------- ----------- ----------- ----------- -----------
Net asset value, end
of period $10.68 $10.29 $8.76 $8.94 $8.94 $8.22
=========== =========== =========== =========== =========== ===========
Total return 7.99%+++ 22.55%+ 1.52%+ 10.96%+ 16.54%+ 13.29%+
Net assets at end of
period (000s) $229,204 $207,713 $181,358 $166,011 $93,537 $78,483
Ratio of operating
expenses to average
net assets* 1.25%++ 1.25% 1.25% 1.25% 1.25% 1.25%
Ratio of net
investment income to
average net assets* 2.23%++ 2.34% 3.11% 2.75% 3.26% 4.60%
Portfolio turnover
rate 58.63% 109.20% 89.58% 105.17% 142.86% 97.76%
Average commission
rate@ $.0171 -- -- -- -- --
*Reflects voluntary
assumption of fees
or expenses per
share in each period
(Note 3) $0.01 $0.02 $0.03 $0.02 $0.02 $0.02
</TABLE>
<TABLE>
<CAPTION>
Class B
-------------------------------------------------
Six months
ended
September Year ended March 31
30, 1996 -----------------------------------
(Unaudited)*** 1996*** 1995 1994**
--------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $10.25 $ 8.74 $8.92 $8.78
Net investment
income* 0.08 0.15 0.20 0.16
Net realized and
unrealized gain
(loss) on
investments, forward
contracts and
foreign currency 0.69 1.71 (0.13) 0.39
Dividends from net
investment income (0.06) (0.19) (0.11) (0.18)
Distributions from
net realized gains (0.32) (0.16) (0.14) (0.23)
----------- ----------- ----------- -----------
Net asset value, end
of period $10.64 $10.25 $8.74 $8.92
=========== ========== =========== ===========
Total return 7.64%+++ 21.48%+ 0.82%+ 6.26%+++
Net assets at end of
period (000s) $222,881 $193,272 $152,251 $83,244
Ratio of operating
expenses to average
net assets* 2.00%++ 2.00% 2.00% 2.00%++
Ratio of net
investment income to
average net assets* 1.48%++ 1.59% 2.38% 2.03%++
Portfolio turnover
rate 58.63% 109.20% 89.58% 105.17%
Average commission
rate@ $.0171 -- -- --
*Reflects voluntary
assumption of fees
or expenses per
share in each period
(Note 3) $0.01 $0.02 $0.03 $0.03
</TABLE>
++Annualized
**June 1, 1993 (commencement of share class designations) to March 31, 1994.
***Per share figures have been calculated using the average shares method.
+Total return figures do not reflect any front-end or contingent deferred
sales charges. Total return would be lower if the Distributor and its
affiliates had not voluntarily assumed a portion of the Fund's expenses.
+++Represents aggregate return for the period without annualization and does
not reflect any front-end or contingent deferred sales charges. Total
return would be lower if the Distributor and its affiliates had not
voluntarily assumed a portion of the Fund's expenses.
@For fiscal years beginning on or after April 1, 1996, the Fund is required
to disclose its average commission rate per share paid for security trades.
16
<PAGE>
STATE STREET RESEARCH MANAGED ASSETS
- --------------------------------------------------------------------------------
Financial Highlights (cont'd)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Class C
--------------------------------------------------------------
Six months
ended
September 30,
1996 Year ended March 31
-----------------------------------------------
(Unaudited)*** 1996*** 1995 1994**
- -------------------------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period $10.29 $8.77 $8.95 $8.78
Net investment income* 0.13 0.25 0.29 0.21
Net realized and unrealized gain
(loss) on investments, forward
contracts and foreign currency 0.69 1.71 (0.14) 0.43
Dividends from net investment
income (0.11) (0.28) (0.19) (0.24)
Distributions from net realized
gains (0.32) (0.16) (0.14) (0.23)
--------------- --------------- --------------- ---------------
Net asset value, end of period $10.68 $10.29 $8.77 $8.95
=============== =============== =============== ===============
Total return 8.12%+++ 22.70%+ 1.77%+ 7.27%+++
Net assets at end of period
(000s) $22,380 $19,548 $25,803 $21,434
Ratio of operating expenses to
average net assets* 1.00%++ 1.00% 1.00% 1.00%++
Ratio of net investment income
to average net assets* 2.48%++ 2.59% 3.37% 3.03%++
Portfolio turnover rate 58.63% 109.20% 89.58% 105.17%
Average commission rate@ $.0171 -- -- --
*Reflects voluntary assumption
of fees or expenses per share
in each period (Note 3) $0.01 $0.02 $0.03 $0.02
</TABLE>
<TABLE>
<CAPTION>
Class D
--------------------------------------------------------------
Six months
ended
September 30,
1996 Year ended March 31
-----------------------------------------------
(Unaudited)*** 1996*** 1995 1994**
- -------------------------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period $ 10.27 $ 8.75 $ 8.93 $ 8.78
Net investment income* 0.08 0.15 0.20 0.16
Net realized and unrealized gain
(loss) on investments, forward
contracts and foreign currency 0.68 1.72 (0.13) 0.40
Dividends from net investment
income (0.06) (0.19) (0.11) (0.18)
Distributions from net realized
gains (0.32) (0.16) (0.14) (0.23)
--------------- --------------- --------------- ---------------
Net asset value, end of period $ 10.65 $ 10.27 $ 8.75 $ 8.93
=============== =============== =============== ===============
Total return 7.53%+++ 21.54%+ 0.82%+ 6.31%+++
Net assets at end of period
(000s) $15,180 $13,061 $12,772 $ 7,117
Ratio of operating expenses to
average net assets* 2.00%++ 2.00% 2.00% 2.00%++
Ratio of net investment income
to average net assets* 1.48%++ 1.60% 2.39% 2.03%++
Portfolio turnover rate 58.63% 109.20% 89.58% 105.17%
Average commission rate@ $ .0171 -- -- --
*Reflects voluntary assumption
of fees or expenses per share
in each period (Note 3) $ 0.01 $ 0.02 $ 0.03 $ 0.03
</TABLE>
++Annualized
**June 1, 1993 (commencement of share class designations) to March 31, 1994.
***Per share figures have been calculated using the average shares method.
+Total return figures do not reflect any front-end or contingent deferred
sales charges. Total return would be lower if the Distributor and its
affiliates had not voluntarily assumed a portion of the Fund's expenses.
+++Represents aggregate return for the period without annualization and does
not reflect any front-end or contingent deferred sales charges. Total
return would be lower if the Distributor and its affiliates had not
voluntarily assumed a portion of the Fund's expenses.
@For fiscal years beginning on or after April 1, 1996, the Fund is required
to disclose its average commission rate per share paid for security trades.
17
<PAGE>
STATE STREET RESEARCH MANAGED ASSETS
- --------------------------------------------------------------------------------
Report on Special Meeting of Shareholders
- --------------------------------------------------------------------------------
A Special Meeting of Shareholders of State Street Research Managed Assets
("Fund"), along with shareholders of other series of State Street Research
Income Trust ("Meeting"), was convened on July 19, 1996. The results of the
Meeting are set forth below.
Votes (millions of
shares)
------------------
For Withheld
------ -----------
1. The following persons were elected as Trustees:
Thomas L. Phillips 97.9 2.6
Toby Rosenblatt 98.2 2.3
Ralph F. Verni 98.0 2.5
<TABLE>
<CAPTION>
Votes (millions of shares)
--------------------------
Proposal For Against Abstain
---- ------- -------
<S> <C> <C> <C>
2. The Fund's following investment policies were reclassified from fundamental to nonfundamental:
a. The policy regarding investments in securities of companies with less than three (3) years' continuous
operation 19.9 1.3 1.8
b. The policy regarding investments in illiquid securities. 19.7 1.4 1.9
3. The Fund's fundamental policy regarding investments in commodities and commodity contracts was amended. 19.6 1.4 1.9
5. The Fund's fundamental policies regarding diversification of investments were amended 20.1 1.1 1.8
6. The Fund's fundamental policy regarding industry concentration was amended. 19.8 1.2 2.0
8. The Master Trust Agreement was amended to permit the Trustees to reorganize, merge or liquidate a fund
without prior shareholder approval. 83.0 9.8 7.6
9. The Master Trust Agreement was amended to eliminate specified time permitted between the record date
and any shareholders meeting. 86.2 6.3 8.0
</TABLE>
18
<PAGE>
State Street Research Managed Assets
Fund Information, Officers and Trustees of State Street Research Income Trust
Fund Information
State Street Research
Managed Assets
One Financial Center
Boston, MA 02111
Investment Adviser
State Street Research &
Management Company
One Financial Center
Boston, MA 02111
Distributor
State Street Research
Investment Services, Inc.
One Financial Center
Boston, MA 02111
Shareholder Services
State Street Research
Shareholder Services
P.O. Box 8408
Boston, MA 02266-8408
1-800-562-0032
Custodian
State Street Bank and
Trust Company
225 Franklin Street
Boston, MA 02110
Legal Counsel
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
Officers
Ralph F. Verni
Chairman of the Board,
President and
Chief Executive Officer
Bartlett R. Geer
Vice President
John H. Kallis
Vice President
Michael R. Yogg
Vice President
Gerard P. Maus
Treasurer
Joseph W. Canavan
Assistant Treasurer
Douglas A. Romich
Assistant Treasurer
Francis J. McNamara, III
Secretary and General Counsel
Darman A. Wing
Assistant Secretary and
Assistant General Counsel
Amy L. Simmons
Assistant Secretary
Trustees
Ralph F. Verni
Chairman of the Board,
President, Chief Executive
Officer and Director,
State Street Research &
Management Company
Edward M. Lamont
Formerly in banking (Morgan
Guaranty Trust Company of
New York); presently engaged
in private investments and
civic affairs
Robert A. Lawrence
Partner, Saltonstall & Co.
Dean O. Morton
Retired; formerly Executive
Vice President, Chief
Operating Officer and Director,
Hewlett-Packard Company
Thomas L. Phillips
Retired; formerly Chairman of the
Board and Chief Executive
Officer, Raytheon Company
Toby Rosenblatt
President,
The Glen Ellen Company
Vice President,
Founders Investments Ltd.
Michael S. Scott Morton
Jay W. Forrester Professor of
Management, Sloan School of
Management, Massachusetts
Institute of Technology
Jeptha H. Wade
Retired; formerly Of Counsel,
Choate, Hall & Stewart
19
<PAGE>
State Street Research Managed Assets
One Financial Center
Boston, MA 02111
Bulk Rate
U.S. Postage
PAID
Brockton, MA
Permit No. 600
Questions? Comments?
Call us at 1-800-562-0032,
or write us at:
State Street Research
Shareholder Services
P.O. Box 8408
Boston, MA 02266-8408
[State Street Research Logo]
This report is prepared for the general information of current shareholders
only. It is not authorized for use as sales material with prospective investors.
The Dalbar awards recognize quality shareholder service and should not be
considered a rating of fund performance. The survey included mutual fund
complexes that volunteered or were otherwise selected to participate and was
not industry-wide.
CONTROL NUMBER: 3502-961121(1297)SSR-LD Cover Illustration by Dorothy Cullinan
MA-273D-1196
