[Front cover]
[State Street Research logo]
STATE STREET RESEARCH
HIGH INCOME FUND
ANNUAL REPORT
[graphic of fisherman by stream]
March 31, 1996
WHAT'S INSIDE
From the Chairman:
Favorable markets reward
investors
Portfolio Manager's Review:
Solid performance
from high-yield bonds
Fund Information:
Facts and figures
Plus, Complete Portfolio Holdings
and Financial Statements
[Dalbar logo]
Dalbar
Honors Commitment To:
Investors
For Excellence
in
Shareholder Services
<PAGE>
FROM THE CHAIRMAN
[photo of Ralph F. Verni]
Dear Shareholders:
Over the past 12 months, the markets continued to reward investors. The
environment was extremely favorable: The economy was growing at a slow but
reasonable pace, corporate earnings were strong, and inflation was low. More
recently, we've seen mounting evidence that the economy is picking up speed.
Job growth and sales of homes and autos have picked up, and consumer
confidence is higher.
Stocks
Over the past 12 months, large-company stocks--the household names we all
recognize--performed best. The Standard & Poor's 500 Composite Index, which
represents the 500 largest stocks, provided an impressive return of +32.07%
for the 12 months ended March 31, 1996.(1) A stronger economy is generally
considered to be good for the stock market, as it can result in higher
profits for corporations.
Bonds
Bonds provided solid results over the past year. For the 12 months ended
March 31, 1996, the Lehman Brothers Government/Corporate Index gained
+10.93%.(1) These results include a slump over the first three months of
1996, as bonds reacted negatively to a stronger economy and the Federal
Reserve's reluctance to cut interest rates further. For high-yield bonds,
such as those High Income Fund invests in, a stronger economy is considered a
positive sign.
Looking ahead
Our outlook continues to call for moderate economic growth and low
inflation--which should be positive for both stocks and bonds. We don't
believe the economy will start to overheat. In fact, with interest rates
moving higher recently, the economy could begin to slow down again. Although
there could be short-term bumps in the road for the markets, the prospects
appear favorable for long-term investors.
Sincerely,
/s/ Ralph F. Verni
Ralph F. Verni
Chairman
April 30, 1996
(1)The Standard & Poor's 500 Composite Index (S&P 500) includes 500 widely
traded common stocks and is a commonly used measure of U.S. stock market
performance. The Lehman Brothers Government/Corporate Bond Index is a
commonly used measure of bond market performance. The indices are unmanaged
and do not take sales charges into consideration. Direct investment in the
indices is not possible; results are for illustrative purposes only.
(2)Investment results are based on an assumed $10,000 investment at "A" share
maximum sales charge of 4.5%; thus, the net amount invested was $9,550. Also
assumes capital gain distributions accepted in shares and income dividends
invested at net asset value. No adjustment has been made for income taxes
payable by shareholders on income dividends or capital gain distributions.
(3)+12.06% for Class B shares; +13.19% for Class C shares; +12.05% for Class
D shares.
(4)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.
(5)Performance reflects maximum 4.5% "A" share front-end, or 5% "B" share or
1% "D" share contingent deferred, sales charges. "C" shares, offered without
a sales charge, are available only to certain employee benefit plans and
institutions.
(6)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 March 31, 1996)
Total value of $10,000 invested at Fund's inception(2)
(Class A shares, at maximum applicable sales charge)
[typeset representation of mountain chart]
8/25/86 9550
3/87 10631
3/88 11136
3/89 12509
3/90 11670
3/91 11926
3/92 15378
3/93 18252
3/94 20912
3/95 21289
3/96 24023
[end mountain chart]
SEC Yield
Class A 7.51%
- -------- ----
Class B 7.15%
- -------- ----
Class C 8.18%
- -------- ----
Class D 7.14%
SEC yield is calculated according to Securities and Exchange Commission
requirements and is based on the net investment income produced for the 30
days ended March 31, 1996. Yield does not necessarily reflect the income
stream an investor can expect. A high yield is in part indicative of the
lower prices of the high-risk bonds in the Fund's portfolio. Such lower
prices reflect the increased risk of the financial restructuring or default
of the issuers of such bonds.
SEC Average Annual Compound
Rates of Return
(at maximum applicable sales charge)(4,5)
Life of Fund
(since 8/25/86) 5 years 1 year
- -------- --------------- --------------- ----------------
Class A +9.55% +13.98% +7.77%
- -------- ------------- ------------- ---------------
Class B +9.81% +14.26% +7.06%
- -------- ------------- ------------- ---------------
Class C +10.11% +15.11% +13.19%
- -------- ------------- ------------- ---------------
Class D +9.80% +14.49% +11.05%
- -------- ------------- ------------- ---------------
Cumulative Total Returns
(do not reflect sales charge)(4,6)
Life of Fund
(since 8/25/86) 5 years 1 year
- -------- --------------- --------------- ----------------
Class A +151.73% +101.54% +12.85%
- -------- ------------- ------------- ---------------
Class B +145.91% +96.88% +12.06%
- -------- ------------- ------------- ---------------
Class C +152.50% +102.16% +13.19%
- -------- ------------- ------------- ---------------
Class D +145.80% +96.79% +12.05%
- -------- ------------- ------------- ---------------
<PAGE>
PORTFOLIO MANAGER'S REVIEW
[photo of Bartlett R. Geer, Portfolio Manager]
The following is a discussion with High Income Fund portfolio manager
Bartlett R. Geer. Bart is the lead portfolio manager for our equity group's
value team. He has 16 years of investment experience.
Q: The bond market was strong over the past 12 months. How did the Fund
perform?
A: A look at the Fund's total return suggests a good year. Class A shares
provided a return of +12.85% for the 12 months ended March 31, 1996 (does not
reflect sales charge).3 However, we were somewhat disappointed by performance
versus our peer group. The 131 funds in Lipper Analytical Service's High
Current Yield Funds category had an average total return of +14.99%. We were
encouraged by the Fund's rebound in the first quarter of 1996.
Q: What contributed to Fund performance?
A: A healthy bond market and a weak economy had the greatest influence on
Fund performance over the past 12 months. For much of the period, the economy
experienced slow growth, low inflation and declining interest rates, which
helped make a strong bond market. Conversely, these three factors also
indicate economic weakness. In a weak economy, there is often a "flight to
quality" in the market, which occurs because investors believe companies
issuing lower-rated bonds will do poorly. In 1995, the B-rated bonds in High
Income Fund's portfolio weren't as attractive to the market, so they
underperformed.
Q: What effect did interest-rate movements have on Fund performance?
A: In general, the lower-quality bonds the Fund invests in are less sensitive
to interest-rate movements than higher-quality bonds. Lower-grade bonds
weather declining bond markets, such as early 1996, better than higher-grade
bonds because of their "yield cushion." In fact, in the first quarter of
1996, many bond funds had negative returns, while High Income Fund was up
+5.41% (Class A shares).
The decline in interest rates in 1995 drove bond prices up, helping the
Fund's return. Higher bond prices resulted in lower yields, however, and we
had to lower the Fund's dividend slightly in January. The yield was +7.51% on
March 31, 1996 for Class A shares.
Q: How was the Fund's portfolio structured over the past 12 months?
A: We maintained our emphasis on B-rated bonds. This investment style has
served us well over time. Unfortunately, in 1995, B-rated bonds were out of
favor. We didn't see this as a long-term trend, however, so we didn't change
approaches. In the first quarter of 1996, B-rated bonds came back into market
favor and performed well.
We did make some changes to the portfolio based on opportunities or
attractive values our research uncovered. We built a position in paging and
sold most of it when it reached our price target. We also liked wireless
communications and maintained a substantial amount in that area. We reduced
our position in industries sensitive to economic cycles, such as paper and
metals.
Q: What is your strategy for the Fund and your outlook for the market?
A: Our style is a mix of company-specific credit research and top-down sector
allocations. The Fund's performance picked up in early 1996, when B-rated
bonds once again came into favor. The economy appears to be strengthening,
which should be good news for high-yield bonds. With the bond market showing
more volatility recently and interest rates on the rise, we will continue to
concentrate on B-rated bonds for their higher yields and lower vulnerability
to interest-rate movements.
March 31, 1996
Asset Allocation
(by percentage of net assets)
[typeset representation of pie chart]
Bonds*
B 66%
BB 5%
Cash 5%
Common stocks 3%
Preferred stocks 11%
CCC and below 10%
[end pie chart]
Quality ratings based on those provided by Standard & Poor's Corp. and/or
equivalent ratings by Moody's Investors Service, Inc.
*21% of the above bonds were unrated and included among relevant rating
categories as determined by the Fund's manager.
5 Largest Industry Positions
(by percentage of net assets)
[typeset representation of bar chart]
Technology 12.9%
Media 12.6%
Metal and mining 6.2%
Retail 5.4%
Aerospace 5.4%
Total: 42.5%
[end bar chart]
2
<PAGE>
STATE STREET RESEARCH HIGH INCOME FUND
INVESTMENT PORTFOLIO
March 31, 1996
- --------------------------------- ---------- --------- -------------
Principal Maturity Value
Amount Date (Note 1)
- --------------------------------- ---------- --------- -------------
BONDS 80.5%
Aerospace 4.8%
BE Aerospace, Inc. Sr. Notes,
9.875%+ $ 6,300,000 2/01/2006 $ 6,363,000
K&F Industries, Inc. Sr. Sub.
Deb., 13.75% 5,743,000 8/01/2001 5,972,720
K&F Industries, Inc. Sr. Sec.
Notes, 11.875% 7,264,000 12/01/2003 7,881,440
Ladish Co., Inc. Sr. Sub. Units,
12.00%++ 181,135 12/22/2000 189,157
Sabreliner Corp. Sr. Note,
12.50%+ 1,750,000 4/15/2003 1,653,750
Talley Manufacturing and
Technology, Inc. Sr. Notes,
10.75% 7,000,000 10/15/2003 7,035,000
Talley Industries, Inc. Disc.
Deb., 0.00% to 10/14/98, 12.25%
from 10/15/98 to maturity 10,590,000 10/15/2005 8,260,200
Wyman-Gordon Co. Sr. Notes,
10.75% 3,390,000 3/15/2003 3,525,600
-----------
40,880,867
-----------
Airlines 1.3%
CHC Helicopter Corp. Sr. Sub.
Note, 11.50% 11,700,000 7/15/2002 11,115,000
-----------
Automotive 0.8%
Exide Corp. Sr. Notes, 10.75% 3,000,000 12/15/2002 3,082,500
Harvard Industries, Inc. Sr.
Notes, 12.00% 2,250,000 7/15/2004 2,317,500
Penda Industries, Inc. Sr. Notes,
10.75% 1,750,000 3/01/2004 1,470,000
Venture Holdings Trust Sr. Sub.
Notes, 9.75% 250,000 4/01/2004 200,000
-----------
7,070,000
-----------
Business Service 0.6%
La Petite Holdings Co. Sr. Sec.
Notes, 9.625% 5,000,000 8/01/2001 4,750,000
-----------
Cable 4.3%
American Telecasting, Inc. Sr.
Sub. Units, 0.00% to 6/14/99,
12.50% from 6/15/99 to maturity 5,480,056 6/15/2004 4,000,441
CAI Wireless Systems, Inc. Sr.
Disc. Note, 12.25% 1,050,000 9/15/2002 1,113,000
Heartland Wireless
Communications, Inc. Units,
13.00% 8,250,000 4/15/2003 9,033,750
Insight Communications Co., L.P.
Sr. Sub. Disc. Note, 8.25% to
2/29/96, 11.25% from 3/1/96 to
maturity $ 1,525,000 3/01/2000 $ 1,563,125
Marcus Cable Operating Co. L.P.
Sr. Deb., 11.875% 3,500,000 10/01/2005 3,727,500
Marcus Cable Operating Co. L.P.
Sr. Disc. Note, 0.00% to
7/31/99, 13.50% from 8/1/99 to
maturity 9,000,000 8/01/2004 6,525,000
Telewest Communications PLC Sr.
Deb., 9.625% 4,750,000 10/01/2006 4,738,125
Wireless One, Inc. Sr. Disc.
Note, 13.00% 5,500,000 10/15/2003 5,802,500
-----------
36,503,441
-----------
Capital Goods/Equipment 2.1%
Axia Holdings Corp. Sr. Sub.
Notes, 11.00% 750,000 3/15/2001 735,000
Chatwins Group, Inc. Sr. Exch.
Note, 13.00% 6,250,000 5/01/2003 5,187,500
Consolidated Hydro Inc. Sr. Disc.
Note, 0.00% to 1/14/99, 12.00%
from 1/15/99 to maturity 2,525,000 7/15/2003 1,648,774
ICF Kaiser International, Inc.
Sr. Sub. Notes, 12.00% 4,750,000 12/31/2003 4,476,875
ICF Kaiser International, Inc.
Units, 12.00% 3,750,000 12/31/2003 3,562,500
Specialty Equipment Companies,
Inc. Sr. Sub. Note, 11.375% 1,250,000 12/01/2003 1,309,375
Waters Corp. Sr. Sub. Note,
12.75% 1,125,000 9/30/2004 1,350,000
-----------
18,270,024
-----------
Chemical 1.2%
Pioneer Americas Acquisition
Corp. Sr. Note, 13.375% 9,500,000 4/01/2005 10,188,750
-----------
Conglomerate 0.9%
Alvey Systems, Inc. Sr. Sub.
Note, 11.375%+ 7,750,000 1/31/2003 8,060,000
-----------
Consumer Goods 2.5%
Carrols Corp. Sr. Notes, 11.50% 7,200,000 8/15/2003 7,380,000
Central Rents, Inc. Sr. Notes,
12.875% 5,250,000 12/15/2003 5,276,250
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)
- --------------------------------- ---------- --------- -------------
Consumer Goods (cont'd)
Norcal Waste Systems, Inc. Sr.
Sub. Note, 12.50% to 5/14/96,
12.75% from 5/15/96 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+ $ 6,750,000 11/15/2005 $ 6,986,250
Town & Country Corp. Sr. Sub.
Notes, 13.00%(open diamond) 2,561,000 5/31/1998 1,562,210
-----------
21,204,710
-----------
Cosmetics 0.1%
Renaissance Cosmetics, Inc. Sr.
Notes, 13.75% 1,000,000 8/15/2001 1,005,000
-----------
Drug 0.5%
Phar-Mor, Inc. Sr. Note, 11.72% 4,725,000 9/11/2002 4,583,250
-----------
Entertainment 2.6%
Live Entertainment Inc. Sr. Sub.
Notes, 10.00% to 3/22/96,
12.00% from 3/23/96 to maturity 7,936,100 3/23/1999 6,666,324
Plitt Theatres, Inc. Sr. Sub.
Note, 10.875% 5,750,000 6/15/2004 5,865,000
Premier Parks, Inc. Sr. Note,
12.00% 1,750,000 8/15/2003 1,855,000
United Artists Theatre Series
1995, 9.30%+ 8,000,000 7/01/2015 7,680,000
-----------
22,066,324
-----------
Food & Beverage 4.7%
Doskocil Companies, Inc. Sr. Sub.
Red. Notes, 9.75% 11,155,000 7/15/2000 11,601,200
Fresh DelMonte Produce N.V. Note,
10.00% 6,325,000 5/01/2003 5,882,250
MAFCO Inc. Sr. Sub. Notes,
11.875% 1,500,000 11/15/2002 1,567,500
Seven-Up/RC Bottling Co. of
Southern California, Inc.
Notes, 11.50% (open box) 13,500,000 8/01/1999 8,100,000
Smittys Super Value Inc. Sr. Sub.
Notes, 12.75% 3,250,000 6/15/2004 3,542,500
Specialty Foods Corp. Sr. Note,
11.125% 4,250,000 10/01/2002 3,973,750
Specialty Foods Corp. Sr. Sub.
Notes, 11.25% 6,150,000 8/15/2003 4,981,500
-----------
39,648,700
-----------
Gaming & Lodging 5.0%
AZTAR Corp. Sr. Sub. Notes,
11.00% $ 3,000,000 10/01/2002 $ 3,030,000
Belle Casinos, Inc. First
Mortgage Notes, 12.00%+(open
box) 700,000 10/15/2000 245,000
Boomtown Inc. First Mortgage
Notes, 11.50% 3,175,000 11/01/2003 3,063,875
Grand Casinos, Inc. First
Mortgage Note, 10.125% 1,500,000 12/01/2003 1,590,000
Goldriver Hotel & Casino Corp.
Mortgage Notes, 13.375%(open
box) 8,924,000 8/31/1999 4,908,200
Great Bay Property Funding Corp.
First Mortgage Note, 10.875% 6,000,000 1/15/2004 5,340,000
Griffin Gaming & Entertainment,
Inc. Sec. Note, 0.00% 6,950,000 6/30/2000 6,496,860
Mohegan Tribal Gaming Authority
Sr. Sec. Notes, 13.50%+ 3,000,000 11/15/2002 3,570,000
Motels of America, Inc. Sr. Sub.
Notes, 12.00% 5,500,000 4/15/2004 5,335,000
President Riverboat Casinos,
Inc., Sr. Sub. Notes, 13.00% 2,000,000 9/15/2001 1,650,000
Showboat Marina Casino Financing
Corp. First Mortgage Note,
13.50%+ 3,000,000 3/15/2003 3,052,500
Treasure Bay Gaming and Resorts
Inc. First Mortgage Units,
12.25%+(open box) 1,000,000 11/15/2000 245,000
Trump Plaza Funding, Inc. First
Mortgage Notes, 10.875% 2,750,000 6/15/2001 3,052,500
Trump Taj Mahal Funding, Inc.
Mortgage Units, 11.35%(open
diamond) 745,747 11/15/1999 783,967
-----------
42,362,902
-----------
Groceries 4.0%
Almacs, Inc. Sr. Sub. Note,
11.50% 1,000 11/18/2004 100
Grand Union Co. Sr. Sub. Notes,
12.00% 7,250,000 9/01/2004 6,361,875
Jitney-Jungle Stores of America,
Inc. Sr. Note, 12.00% 8,850,000 3/01/2006 8,761,500
Ralphs Grocery Co. Sr. Note,
10.45% 12,000,000 6/15/2004 11,460,000
Ralphs Grocery Co. Sr. Sub. Note,
13.75% 2,500,000 6/15/2005 2,550,000
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
STATE STREET RESEARCH HIGH INCOME FUND
INVESTMENT PORTFOLIO (cont'd)
- --------------------------------- ---------- --------- -------------
Principal Maturity Value
Amount Date (Note 1)
- --------------------------------- ---------- --------- -------------
Groceries (cont'd)
Ralphs Supermarkets, Inc. Sr.
Sub. Note, 11.00% $ 2,000,000 6/15/2005 $ 1,800,000
Safeway Stores, Inc. Lease
Certificates, 13.50% 90,123 1/15/2009 114,795
Star Market Co., Inc. Sr. Sub
Note, 13.00% 2,500,000 11/01/2004 2,575,000
Victory Markets Inc. Sub. Deb.,
12.50%(open box) 925,000 3/15/2000 157,250
-----------
33,780,520
-----------
Media 10.3%
Adams Outdoor Advertising Ltd.
Sr. Note, 10.75%+ 6,250,000 3/15/2006 6,375,000
Allbritton Communications Inc.
Sr. Sub. Notes, 9.75%+ 5,000,000 11/30/2007 4,712,500
Affinity Group, Inc. Sr. Sub.
Deb., 11.50% 9,750,000 10/15/2003 9,993,750
Benedek Broadcasting Corp. Sr.
Notes, 11.875% 6,250,000 3/01/2005 6,593,750
EZ Communications, Inc. Sr. Sub.
Note, 9.75% 1,500,000 12/01/2005 1,485,000
Granite Broadcasting Corp. Sr.
Sub. Deb., 12.75% 5,119,000 9/01/2002 5,682,090
Heritage Media Corp. Notes, 8.75% 500,000 2/15/2006 476,250
Hollinger International, Inc. Sr.
Sub. Notes, 9.25% 2,250,000 2/01/2006 2,182,500
K-III Communications Corp. Sr.
Note, 8.50%+ 2,750,000 2/01/2006 2,612,500
Lamar Advertising Co. Sr. Sec.
Notes, 11.00% 750,000 5/15/2003 791,250
New City Communications Inc. Sr.
Sub. Note, 11.375% 1,000,000 11/01/2003 1,012,500
PageMart, Inc. Sr. Disc. Note,
0.00% to 10/31/98, 12.25% from
11/1/98 to maturity 7,400,000 11/01/2003 5,513,000
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 8,745,000
Telemundo Group, Inc. Sr. Note,
7.00% to 2/14/99, 10.50% from
2/15/99 to maturity 10,600,000 2/15/2006 9,434,000
Universal Outdoor Holdings, Inc.
Sr. Sec. Disc. Note, 0.00% to
6/30/99, 14.00% from 7/1/99 to
maturity 9,700,000 7/01/2004 6,887,000
Media (cont'd)
U.S.A. Mobile Communications,
Inc. Sr. Notes, 9.50% $ 8,620,000 2/01/2004 $ 8,361,400
U.S.A. Mobile Communications,
Inc. Sr. Notes, 14.00% 5,500,000 11/01/2004 6,435,000
-----------
87,292,490
-----------
Metal & Mining 6.0%
Bar Technologies, Inc. Sr. Sec.
Notes, 13.50%+ 4,250,000 4/01/2001 4,196,875
Bayou Steel Corp. First Mortgage
Notes, 10.25% 6,250,000 3/01/2001 5,500,000
Carbide/Graphite Group, Inc.
Sr. Notes, 11.50% 2,500,000 9/01/2003 2,687,500
Crown Resources Corp. Cv. Sub.
Deb., 5.75% 220,000 8/27/2001 182,600
GS Technologies Operating Co. Sr.
Notes, 12.00% 5,250,000 9/01/2004 5,289,375
Haynes International, Inc. Sr.
Sec. Notes, 11.25% 10,025,000 6/15/1998 10,025,000
Haynes International, Inc. Sr.
Sub. Notes, 13.50% 3,525,000 8/15/1999 3,348,750
Kaiser Aluminum & Chemical Corp.
Sr. Sub. Note, 12.75% 2,250,000 2/01/2003 2,385,000
NS Group, Inc. Units, 13.50% 6,500,000 7/15/2003 5,963,750
Sheffield Steel Corp. First
Mortgage Notes, 12.00% 11,750,000 11/01/2001 10,222,500
UCAR Global Enterprises, Inc. Sr.
Sub. Notes, 12.00% 935,000 1/15/2005 1,075,250
-----------
50,876,600
-----------
Oil & Gas 4.4%
Clark U.S.A., Inc. Sr. Note,
10.875%+ 3,500,000 12/01/2005 3,657,500
Dual Drilling Co. Sr. Sub. Notes,
9.875% 6,100,000 1/15/2004 6,557,500
Empire Gas Corp. Sr. Sec. Notes,
7.00% to 7/14/99, 12.875% from
7/15/99 to maturity 5,750,000 7/15/2004 5,146,250
Moran Energy, Inc., Cv. Sub.
Deb., 8.75% 2,420,000 1/15/2008 2,057,000
Presidio Oil Co. Sr. Sec. Notes,
11.50%(open box) 8,102,950 9/15/2000 8,305,524
Presidio Oil Co. Sr. Sub. Gas
Indexed Notes, 13.30%(open box) 6,000,000 7/15/2002 4,560,000
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)
- --------------------------------- ---------- --------- -------------
Oil & Gas (cont'd)
TransAmerican Refining Corp. Sr.
Sec. Notes, 16.50% to 8/14/98,
16.00% from 8/15/98 to maturity $ 250,000 2/15/2002 $ 225,000
Tuboscope Vetco International
Inc. Sr. Sub. Deb., 10.75% 2,000,000 4/15/2003 2,090,000
United Meridian Corp. Sr. Sub.
Note, 10.375% 4,750,000 10/15/2005 4,987,500
-----------
37,586,274
-----------
Paper 1.8%
Crown Packaging Holdings Ltd. Sr.
Sec. Notes, 10.75% 3,300,000 11/01/2000 3,069,000
Crown Packaging Holdings Ltd. Sr.
Sub. Notes, 0.00% to
10/31/2000, 12.25% from
11/1/2000 to maturity 16,500,000 11/01/2003 7,095,000
Equitable Bag Co., Inc. Sr.
Notes, 11.00%(open box) 6,738,000 12/16/2004 3,369,000
Mail-Well Envelope Corp. Sr. Sub.
Note, 10.50% 2,250,000 2/15/2004 2,188,125
-----------
15,721,125
-----------
Plastics 1.1%
Plastics Specialty & Technology
Sr. Note, 11.25% 9,750,000 12/01/2003 9,750,000
-----------
Publishing 0.2%
Bell & Howell Co. Series B Sr.
Disc. Deb., 0.00% to 2/28/2000,
11.50% from 3/1/2000 to
maturity 2,500,000 3/01/2005 1,625,000
-----------
Real Estate/Building 3.2%
Dal-Tile International Inc. Sr.
Sec. Notes, 0.00% 10,500,000 7/15/1998 8,400,000
Miles Home Services, Inc. Sr.
Note, 12.00% 4,250,000 4/01/2001 3,230,000
Overhead Door Corp., 12.25% 3,250,000 2/01/2000 3,185,000
JM Peters, Inc. Sr. Note, 12.75% 3,375,000 5/01/2002 3,206,250
Waxman Industries, Inc. Sr. Sec.
Notes, 12.25% 5,000,000 9/01/1998 5,112,500
Waxman Industries, Inc. Sr. Sec.
Notes, 0.00% to
5/31/99, 12.75% from 6/1/99 to
maturity 7,424,000 6/01/2004 3,712,000
-----------
26,845,750
-----------
Retail Trade 4.1%
Finlay Enterprises, Inc. Sr.
Disc. Deb., 0.00% to 4/30/98,
12.00% from 5/1/98 to maturity $10,570,000 5/01/2005 $ 7,346,150
Finlay Fine Jewelry Corp. Sr.
Note, 10.625% 5,250,000 5/01/2003 5,105,625
Loehmann's Holdings, Inc. Sr.
Sub. Notes, 13.75% 1,500,000 2/15/1999 1,395,000
Mothers Work, Inc. Sr. Note,
12.625% 2,500,000 8/01/2005 2,606,250
Penn Traffic Co. Sr. Sub. Notes,
8.625% 5,000,000 12/15/2003 4,550,000
Penn Traffic Co. Sr. Sub. Notes,
9.625% 16,500,000 4/15/2005 14,066,250
-----------
35,069,275
-----------
Shipping/Transportation 0.6%
Tiphook Finance Corp. Notes,
7.125% 5,333,000 5/01/1998 3,893,090
Tiphook Finance Corp. Notes,
8.00% 595,000 3/15/2000 438,813
Tiphook Finance Corp. Notes,
10.75% 711,000 11/01/2002 533,250
-----------
4,865,153
-----------
Technology 12.7%
American Communications Services,
Inc. Sr. Disc. Note, 13.00%+ 9,500,000 11/01/2005 5,343,750
Anacomp, Inc. Sr. Sub. Notes,
15.00%(open box) 13,929,000 11/01/2000 12,257,520
Anacomp, Inc. Cv. Deb.,
13.875%(open box) 120,000 1/15/2002 8,400
Anacomp International N.V. Cv.
Sub. Deb., 9.00%(open box) 3,100,000 1/15/1997 217,000
Brooks Fiber Properties, Inc. Sr.
Disc. Note, 0.00% to 3/1/2001,
10.875% from 3/2/2001 to
maturity+ 5,500,000 3/01/2006 3,190,000
Celcaribe S.A. Units, 0.00% to
3/14/98, 13.50% from 3/15/98 to
maturity+ 581,000 3/15/2004 5,606,650
Clearnet Communications, Inc.
Units, 0.00% to 12/14/2000,
14.75% from 12/15/2000 to
maturity 253,500 12/15/2005 14,576,250
Computervision Corp. Sr. Sub.
Notes, 11.375% 6,000,000 8/15/1999 6,300,000
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
STATE STREET RESEARCH HIGH INCOME FUND
INVESTMENT PORTFOLIO (cont'd)
- --------------------------------- ---------- --------- -------------
Principal Maturity Value
Amount Date (Note 1)
- --------------------------------- ---------- --------- -------------
Technology (cont'd)
Dial Call Communications Inc. Sr.
Disc. Notes, 12.25% $ 1,250,000 4/15/2004 $ 787,500
Echostar Communications Satellite
Broadcast Co. Sr. Sec. Disc.
Note, 0.00% to 3/14/2000,
13.125% from 3/15/2000 to
maturity+ 13,250,000 3/15/2004 7,983,125
Echostar Communications Co. Sr.
Sec. Disc. Note, 0.00% to
5/31/99, 12.875% from 6/1/99 to
maturity 8,750,000 6/01/2004 6,343,750
Fonorola, Inc. Sr. Sec. Note,
12.50% 5,750,000 8/15/2002 6,267,500
GenRad Inc. Cv. Sub. Deb., 7.25% 608,000 5/01/2011 604,960
IntelCom Group, Inc. Sr. Disc.
Units, 0.00% to 9/14/2000,
13.50% from 9/15/2000 to
maturity 11,000,000 9/15/2005 7,040,000
Intercel, Inc. Units, 0.00% to
1/31/2001, 12.00% from 2/1/2001
to maturity 25,000 2/01/2006 1,512,500
Intermedia Communications, Inc.
Sr. Note, 13.50% 1,500,000 6/01/2005 1,740,000
MFS Communications Sr. Disc.
Note, 0.00% to 1/14/99, 9.375%
from 1/15/99 to maturity 16,750,000 1/15/2004 12,730,000
Nextel Communications, Inc. Sr.
Disc. Note, 0.00% to 2/15/99,
9.75% from 2/16/99 to maturity 2,500,000 8/15/2004 1,462,500
Protection One Alarm Monitoring,
Inc. Units, 0.00% to 6/29/98,
13.375% from 6/30/98 to
maturity 4,000,000 6/30/2005 3,380,000
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 2,385,000
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 3,025,600
Winstar Communications, Inc. Sr.
Disc. Note, 14.00% 9,920,000 10/15/2005 5,629,600
-----------
108,391,605
-----------
Textile & Apparel 0.5%
Interface, Inc. Sr. Sub. Note,
9.50% $ 4,500,000 11/15/2005 $ 4,522,500
-----------
Utility 0.2%
El Paso Electric Co. First
Mortgage Notes, 8.90% 1,250,000 2/01/2006 1,265,625
-----------
Total Bonds (Cost $697,380,012) 685,300,885
-----------
Shares
- --------------------------------------------- ------ -------------
PREFERRED STOCKS 11.0%
Aerospace 0.6%
Panamsat Corp. Sr. Exch. Pfd.(open diamond) 4,934 5,513,745
-----------
Automotive 1.2%
Harvard Industries, Inc. 14.25% Exch.
Pfd.(open diamond) 370,933 9,922,458
-----------
Banking 0.3%
Riverbank American Pfd.* 110,000 2,722,500
-----------
Business Service 1.2%
Anacomp, Inc. Cv. Pfd. 10,000 5,000
La Petite Holdings Co. Cum. Red. Exch. Pfd.* 361,000 10,469,000
-----------
10,474,000
-----------
Drug 0.5%
Fox Meyer Health Corp. Pfd. Series A(open
diamond) 129,293 4,266,669
-----------
Electric 0.1%
Consolidated Hydro, Inc. Cv. Pfd.* 2,000 700,000
-----------
Financial Service 0.6%
Gentra, Inc. Series G Pfd.* 100,100 1,211,332
Gentra, Inc. Series J Pfd.* 264,102 3,292,801
Gentra, Inc. Series Q Pfd.* 70,300 663,816
-----------
5,167,949
-----------
Forest Product 0.4%
S.D. Warren Co. Series B Sr. Exchange Pfd.* 108,000 3,348,000
-----------
Hotel & Restaurant 0.2%
Station Casinos, Inc. Cv. Pfd. 30,000 1,500,000
-----------
Media 2.2%
Cablevision Systems Corp. Series B Pfd.(open
diamond)+ 32,500 3,217,662
K-III Communications Corp. Series C Pfd. 80,000 8,280,000
K-III Communications Corp. Series B Exch.
Pfd.(open diamond) 65,529 6,782,301
-----------
18,279,963
-----------
Metal & Mining 0.1%
Kaiser Aluminum Corp. Cv. Pfd. 82,700 1,147,463
-----------
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
STATE STREET RESEARCH HIGH INCOME FUND
<TABLE>
<CAPTION>
------------------------------------------------------------ -------- -------------
Value
Shares (Note 1)
- ------------------------------------------------------------ -------- -------------
<S> <C> <C>
Recreation 2.1%
Granite Broadcasting Corp. Cv. Exch. Pfd.(open diamond) 253,000 $15,701,813
Live Entertainment Inc. Series B Cv. Pfd. 285,000 1,941,563
Sante Fe Gaming Corp. Cv. Exch. Pfd. 434,147 244,208
-----------
17,887,584
-----------
Retail Trade 1.4%
Loehmanns Holdings, Inc. Series A Pfd.(open diamond) 895,340 402,903
Supermarkets General Holding Corp. Exch. Pfd.*(open diamond) 453,540 11,338,500
-----------
11,741,403
-----------
Textile & Apparel 0.1%
JPS Textile Group, Inc. Series A Sr. Pfd.(open diamond) 52,666 789,990
Town & Country Corp. Exch. Pfd.(open diamond)++ 95,803 119,754
-----------
909,744
-----------
Total Preferred Stocks (Cost $83,156,597) 93,581,478
-----------
COMMON STOCKS & OTHER 3.4%
American Communications Services, Inc. Wts.*+ 9,500 555,750
American Telecasting, Inc. Wts.* 41,130 215,932
Atlantic Richfield Co. 514,600 14,794,750
Axia Holdings Corp. Com.* 2,250 67,500
Belle Casinos, Inc. Wts.*+ 1,400 14
Boomtown, Inc. Wts.* 7,250 362
CHC Helicopter Corp. Wts.* 46,000 23,000
Central Rents, Inc. Wts.* 5,250 315,000
Chattem, Inc. Wts.* 2,000 5,000
Chatwins Group Inc. Wts.*+ 7,000 3,500
County Seat Holdings, Inc. Wts.* 2,000 100
Crown Packaging Holdings Ltd. Wts.*+ 20,750 166,000
Dr. Pepper Bottling Co. Cl. A Com.* 50,000 237,500
Empire Gas Corp. Wts.* 2,760 5,520
Equitable Bag, Inc. Cl. A Com.* 640,117 6,401
Federated Department Stores, Inc.
Series C Wts.* 46,435 574,633
Federated Department Stores, Inc.
Series D Wts.* 46,435 557,220
Finlay Enterprises, Inc. Cl. A Com.* 12,760 181,830
Fitzgerald Gaming Corp. Wts.*+ 3,000 30,000
Food 4 Less Holdings, Inc. Wts.*++ 24,223 1,265,652
Goldriver Hotel & Casino Corp. Cl. B Com.* 52,500 6,562
COMMON STOCKS & OTHER (cont'd)
Goldriver Hotel & Casino Corp. Liquidation Trust Units*++ 5,250,000 $ 66,675
Grand Union Co. Com.* 100,000 600,000
Harvard Industries, Inc. Cl. B Com.* 25,000 559,375
Heartland Wireless Communications, Inc. Wts.* 37,500 281,250
ICF Kaiser International, Inc. Wts.* 22,800 17,100
INDSPEC Chemical Corp. Wts.*++ 506 634,165
Insight Communications Co., L.P. Wts.* 25,000 56,250
IntelCom Group, Inc. Wts.*+ 21,450 214,500
Intermedia Communications Inc. Wts.*+ 1,500 37,500
Jewel Recovery L.P. Units* 82,595 826
Kaiser Aluminum Corp. Com.* 70,000 1,076,250
Ladish Company, Inc. Wts.*++ 520,000 156,000
Little Switzerland, Inc. Com.* 94,263 377,052
LTX Corp. Com.* 250,000 2,031,250
Mail-Well Holdings, Inc. Com.*+ 14,205 115,416
Miles Homes, Inc. Wts.* 51,000 12,750
Motels of America, Inc. Com.*+ 5,500 440,000
Nextel Communications, Inc. Wts.* 1,250 1,250
PageMart, Inc. Wts.*+ 21,850 131,100
PageMart Nationwide, Inc. Com.*+ 18,375 172,266
Pegasus Media & Communications, Inc. Cl. B Com.*+ 375 121,875
Petro PSC Properties, Inc. Wts.* 2,000 68,000
Protection One, Inc. Wts.* 10,400 83,200
PST Holdings, Inc. Com.* 45,300 45,300
Renaissance Cosmetics, Inc. Wts.*+ 2,000 45,000
Sabreliner Corp. Wts.* 1,750 8,750
S.D.W. Holdings Corp. Wts.*+ 108,000 324,000
Sheffield Steel Corp. Wts.* 38,750 58,125
Smittys Supermarkets, Inc. Cl. B Com.* 3,250 32,500
Terex Corp. Rts.* 6,300 1,575
Total Renal Care, Inc. Cl. B Com.* 10,500 326,813
Town & Country Corp. Cl. A Com.* 371,830 232,394
TransAmerican Refining Corp. Wts.* 12,626 28,409
Universal Outdoor Holdings, Inc. Wts.* 9,700 388,000
Vestar/LPA Investment Corp. Com.*+ 14,250 171,000
Viatel, Inc. Com.*+ 162,450 649,800
Waxman Industries, Inc. Wts.*+ 236,000 236,000
Wireless One, Inc. Wts.* 16,500 115,500
-----------
Total Common Stocks & Other (Cost $31,589,061) 28,929,442
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
STATE STREET RESEARCH HIGH INCOME FUND
INVESTMENT PORTFOLIO (cont'd)
<TABLE>
<CAPTION>
Principal Maturity Value
Amount Date (Note 1)
- ------------------------------ --------- -------- -------------------------------
<S> <C> <C> <C>
REPURCHASE AGREEMENTS 0.1%
State Street Bank and Trust
Company, dated 3/29/96,
repurchase proceeds
$470,078, collateralized by
$490,000 U.S. Treasury Bill,
5.625%, due 6/27/96
Market Value $483,691 $ 470,000 4/01/1996 $ 470,000
-----------------------------
Total Repurchase Agreements (Cost $470,000) 470,000
-----------------------------
COMMERCIAL PAPER 3.9%
Deere & Co., 5.35% 3,597,000 4/04/1996 3,597,000
Ford Motor Credit Co., 5.37% 13,000,000 4/01/1996 13,000,000
General Electric Capital
Corp., 5.36% 6,666,000 4/10/1996 6,666,000
Norwest Financial, Inc., 5.36% 10,000,000 4/04/1996 10,000,000
-----------------------------
Total Commercial Paper (Cost $33,263,000) 33,263,000
-----------------------------
Total Investments (Cost $845,858,670)--98.9% 841,544,805
Cash and Other Assets, Less Liabilities--1.1% 9,765,858
-----------------------------
Net Assets--100.0% $851,310,663
=============================
</TABLE>
Federal Income Tax Information (Note 1):
At March 31, 1996, the net unrealized
depreciation of investments based on cost
for Federal income tax purposes of
$846,054,181 was as follows:
Aggregate gross unrealized appreciation for
all investments in which there is an
excess of value over tax cost $ 48,605,257
Aggregate gross unrealized depreciation for
all investments in which there is an
excess of tax cost over value (53,114,633)
-----------
$ (4,509,376)
===========
* Nonincome-producing securities
(open diamond) Payments of income may be made in cash or in the form of
additional securities.
(open box) Security is in default.
++ Security valued under consistently applied procedures
established by the Trustees. Security restricted as to public
resale. At March 31, 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
March 31, 1996 were $2,786,861 and $2,431,403 (0.29% 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
March 31, 1996 were $87,618,783 and $88,164,783 (10.36% of
net assets), respectively.
ASSET COMPOSITION TABLE
March 31, 1996 (Unaudited)
Percentage of
Ratings+++ Net Assets*
-------------- -------------
BB 4.6%
B 66.3
CCC and below 9.6
Equities 14.4
Other 5.1
-----------
TOTAL 100.0%
===========
+++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.
9
<PAGE>
STATE STREET RESEARCH HIGH INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1996
Assets
Investments, at value (Cost $845,858,670) (Note 1) $841,544,805
Cash 4,843
Interest and dividends receivable 15,578,864
Receivable for securities sold 11,040,352
Receivable for fund shares sold 1,225,434
Other assets 987
-----------
869,395,285
Liabilities
Payable for securities purchased 13,545,428
Dividends payable 2,314,527
Payable for fund shares redeemed 687,568
Accrued transfer agent and shareholder services
(Note 2) 547,238
Accrued management fee (Note 2) 465,451
Accrued distribution and service fees (Note 4) 303,353
Accrued trustees' fees (Note 2) 14,000
Other accrued expenses 207,057
-----------
18,084,622
-----------
Net Assets $851,310,663
===========
Net Assets consist of:
Undistributed net investment income $ 635,185
Unrealized depreciation of investments (4,313,865)
Accumulated net realized loss (27,698,367)
Shares of beneficial interest 882,687,710
-----------
$851,310,663
===========
Net Asset Value and redemption price per share of
Class A shares ($646,473,424 / 108,658,175
shares of beneficial interest) $5.95
===========
Maximum Offering Price per share of Class A shares
($5.95 / .955) $6.23
===========
Net Asset Value and offering price per share of
Class B shares ($185,735,283 / 31,338,216 shares
of beneficial interest)* $5.93
===========
Net Asset Value, offering price and redemption
price per share of Class C shares ($3,840,028 /
648,256 shares of beneficial interest) $5.92
===========
Net Asset Value and offering price per share of
Class D shares ($15,261,928 / 2,572,133 shares
of beneficial interest)* $5.93
===========
* 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 year ended March 31, 1996
Investment Income
Interest, net of foreign taxes of $14,099 $ 73,810,134
Dividends, net of foreign taxes of $7,460 5,949,927
-----------
79,760,061
Expenses
Management fee (Note 2) 5,199,204
Transfer agent and shareholder services (Note 2) 1,531,433
Custodian fee 236,935
Reports to shareholders 122,307
Service fee--Class A (Note 4) 1,583,616
Distribution and service fees--Class B (Note 4) 1,516,560
Distribution and service fees--Class D (Note 4) 115,118
Registration fees 106,193
Audit fee 61,622
Trustees' fees (Note 2) 30,991
Legal fees 12,297
Miscellaneous 42,440
-----------
10,558,716
-----------
Net investment income 69,201,345
-----------
Realized and Unrealized Gain (Loss)
on Investments and Foreign Currency
Net realized loss on investments (Notes 1 and 3) (16,029,655)
-----------
Net unrealized appreciation of investments 43,123,164
Net unrealized depreciation of foreign currency (6,955)
-----------
Total net unrealized appreciation 43,116,209
-----------
Net gain on investments and foreign currency 27,086,554
-----------
Net increase in net assets resulting from
operations $ 96,287,899
===========
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
STATE STREET RESEARCH HIGH INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
Year ended March 31
-----------------------------
1996 1995
- ----------------------------- ------------ -------------
Increase (Decrease) in Net Assets
Operations:
Net investment income $ 69,201,345 $ 73,111,882
Net realized loss on
investments* (16,029,655) (10,256,401)
Net unrealized appreciation
(depreciation) of
investments and foreign
currency 43,116,209 (51,717,996)
---------- -----------
Net increase resulting from
operations 96,287,899 11,137,485
---------- -----------
Dividends from net investment
income:
Class A (60,859,257) (68,341,894)
Class B (13,275,143) (9,517,499)
Class C (319,668) (185,611)
Class D (1,000,485) (474,138)
---------- -----------
(75,454,553) (78,519,142)
---------- -----------
Distributions from net realized
gains:
Class A (804,838) (5,956,632)
Class B (159,995) (701,101)
Class C (3,577) (10,576)
Class D (10,572) (29,366)
---------- -----------
(978,982) (6,697,675)
---------- -----------
Net increase from fund share
transactions (Note 5) 85,881,692 98,050,321
---------- -----------
Total increase in net assets 105,736,056 23,970,989
Net Assets
Beginning of year 745,574,607 721,603,618
---------- -----------
End of year (including
undistributed net
investment income of
$635,185 and $1,789,475,
respectively) $851,310,663 $745,574,607
========== ===========
* Net realized gain (loss)
for Federal income tax
purposes (Note 1) $(27,502,856) $ 1,433,108
========== ===========
NOTES TO FINANCIAL STATEMENTS
March 31, 1996
Note 1
State Street Research High Income Fund, formerly MetLife-State Street
Research High Income Fund (the "Fund") is a series of State Street Research
Income Trust, formerly MetLife-State Street 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
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
STATE STREET RESEARCH HIGH INCOME FUND
independent brokers. In the absence of recorded sales, valuations are at the
mean of the closing bid and asked quotations. Short-term securities maturing
within sixty days are valued at amortized cost. Other securities, if any, are
valued at their fair value as determined in good faith under consistently
applied procedures established by and under the supervision of the Trustees.
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.
In order to meet certain excise tax distribution requirements under Section
4982 of the Internal Revenue Code, the Fund is required to measure and
distribute annually, if necessary, net capital gains realized during a
twelve-month period ending October 31. In this connection, the Fund is
permitted to defer into its next fiscal year any net capital losses incurred
between each November 1 and the end of its fiscal year. From November 1, 1994
through March 31, 1995, the Fund incurred net capital losses of $9,299,301
and has deferred and treated such losses as arising in the fiscal year ended
March 31, 1996.
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 year ended March 31, 1996, the fees pursuant to
such agreement amounted to $5,199,204.
State Street Research Shareholder Services, a division of State Street
Research Investment Services, Inc., the Trust's principal underwriter (the
"Distributor"), an indirect wholly owned subsidiary of Metropolitan, provides
certain shareholder services to the Fund such as responding to inquiries and
instructions from investors with respect to the purchase and redemption of
shares of the Fund. During the year ended March 31, 1996, the amount of such
expenses was $316,413.
The fees of the Trustees not currently affiliated with the Adviser amounted
to $30,991 during the year ended March 31, 1996.
Note 3
For the year ended March 31, 1996, purchases and sales of securities,
exclusive of short-term investments, aggregated $631,080,925 and
$434,573,379, 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 of shareholder accounts, to reimburse
securities dealers for distribution and marketing services, to furnish
ongoing assistance to investors and to defray a portion of its distribution
and marketing expenses. For the year ended March 31, 1996, fees pursuant to
such plan amounted to $1,583,616, $1,516,560, and $115,118 for Class A, Class
B and Class D shares, respectively.
12
<PAGE>
STATE STREET RESEARCH HIGH INCOME FUND
NOTES (cont'd)
Note 4 (cont'd)
The Fund has been informed that the Distributor and MetLife Securities, Inc.,
a wholly owned subsidiary of Metropolitan, earned initial sales charges
aggregating $268,551 and $2,059,915 respectively, on sales of Class A shares
of the Fund during the year ended March 31, 1996, and that MetLife
Securities, Inc. earned commissions aggregating $1,560,082 on sales of Class
B shares, and that the Distributor collected contingent deferred sales
charges aggregating $734,173 and $4,449 on redemptions of Class B and Class D
shares, respectively, during the same period.
Note 5
The Trustees have the authority to issue an unlimited number of shares of
beneficial interest, $.001 par value per share.
At March 31, 1996, the Distributor owned 7,018 Class A shares of the Fund.
Share transactions were as follows:
<TABLE>
<CAPTION>
Year ended March 31
------------------------------------------------------------
1996 1995
--------------------------- -----------------------------
Class A Shares Amount Shares Amount
- -------------------------------------- ----------- ------------ ----------- --------------
<S> <C> <C> <C> <C>
Shares sold 18,288,203 $ 107,141,811 21,246,001 $ 128,017,213
Issued upon reinvestment of:
Dividends from net investment income 6,699,217 39,227,013 7,531,344 44,748,968
Distributions from net realized gains 110,651 647,284 721,885 4,490,064
Shares repurchased (22,983,923) (134,676,806) (24,109,224) (144,623,371)
--------- ---------- --------- ------------
Net increase 2,114,148 $ 12,339,302 5,390,006 $ 32,632,874
========= ========== ========= ============
Class B Shares Amount Shares Amount
- -------------------------------------- --------- ---------- --------- ------------
Shares sold 14,268,713 $ 83,337,086 11,897,541 $ 71,267,750
Issued upon reinvestment of:
Dividends from net investment income 1,319,995 7,702,343 978,091 5,757,785
Distributions from net realized gains 21,578 125,811 85,923 533,729
Shares repurchased (4,623,289) (27,005,817) (3,103,165) (18,503,010)
--------- ---------- --------- ------------
Net increase 10,986,997 $ 64,159,423 9,858,390 $ 59,056,254
========= ========== ========= ============
Class C Shares Amount Shares Amount
- -------------------------------------- --------- ---------- --------- ------------
Shares sold 458,494 $ 2,676,110 425,482 $ 2,530,906
Issued upon reinvestment of:
Dividends from net investment income 42,106 245,608 19,434 114,077
Distributions from net realized gains 486 2,834 1,182 7,338
Shares repurchased (298,694) (1,741,339) (132,914) (791,910)
--------- ---------- --------- ------------
Net increase 202,392 $ 1,183,213 313,184 $ 1,860,411
========= ========== ========= ============
Class D Shares Amount Shares Amount
- -------------------------------------- --------- ---------- --------- ------------
Shares sold 1,922,890 $ 11,234,354 1,263,734 $ 7,538,932
Issued upon reinvestment of:
Dividends from net investment income 76,557 447,554 35,765 209,720
Distributions from net realized gains 1,314 7,661 3,762 23,361
Shares repurchased (596,429) (3,489,815) (549,698) (3,271,231)
--------- ---------- --------- ------------
Net increase 1,404,332 $ 8,199,754 753,563 $ 4,500,782
========= ========== ========= ============
</TABLE>
13
<PAGE>
STATE STREET RESEARCH HIGH INCOME FUND
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each year:
<TABLE>
<CAPTION>
Class A
--------------------------------------------------------------
Year ended March 31
--------------------------------------------------------------
1996* 1995* 1994 1993 1992
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $5.80 $6.43 $6.32 $5.95 $5.21
Net investment income .52 .61 .66 .67 .71
Net realized and unrealized gain
(loss) on investments and
foreign currency .20 (.58) .22 .37 .72
Dividends from net investment
income (.56) (.60) (.62) (.67) (.69)
Distributions from net realized
gains (.01) (.06) (.15) -- --
-------- -------- -------- ----- -------
Net asset value, end of year $5.95 $5.80 $6.43 $6.32 $5.95
======== ======== ======== ===== =======
Total return 12.85%+ 1.80%+ 14.58%+ 18.70%+ 28.99%+
Net assets at end of year (000s) $646,473 $618,462 $650,755 $496,352 $308,921
Ratio of operating expenses to
average net assets 1.17% 1.23% 1.16% 1.15% 1.17%
Ratio of net investment income to
average net assets 8.88% 10.19% 10.41% 11.25% 12.71%
Portfolio turnover rate 56.47% 31.55% 24.36% 79.39% 72.62%
</TABLE>
<TABLE>
<CAPTION>
Class B Class C
---------------------------------- ------------------------------------
Year ended March 31 Year ended March 31
---------------------------------- ------------------------------------
1996* 1995* 1994** 1996* 1995* 1994**
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
year $5.79 $6.42 $6.34 $5.78 $6.42 $6.34
Net investment income .46 .57 .51 .53 .64 .57
Net realized and unrealized gain
(loss) on investments and
foreign currency .21 (.58) .15 .20 (.60) .14
Dividends from net investment
income (.52) (.56) (.48) (.58) (.62) (.53)
Distributions from net realized
gains (.01) (.06) (.10) (.01) (.06) (.10)
------- ------- ------- ------- ------- ---------
Net asset value, end of year $5.93 $5.79 $6.42 $5.92 $5.78 $6.42
======= ======= ======= ======= ======= =========
Total return 12.06%+ 0.89%+ 10.76%+++ 13.19%+ 1.73%+ 11.67%+++
Net assets at end of year (000s) $185,735 $117,767 $67,337 $3,840 $2,579 $851
Ratio of operating expenses to
average net assets 1.92% 1.98% 1.93%++ 0.92% 0.98% 0.93%++
Ratio of net investment income to
average net assets 7.95% 9.65% 10.32%++ 8.97% 10.85% 11.32%++
Portfolio turnover rate 56.47% 31.55% 24.36% 56.47% 31.55% 24.36%
</TABLE>
<TABLE>
<CAPTION>
Class D
-----------------------------
Year ended March 31
-----------------------------
1996* 1995* 1994**
- -------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of
year $5.79 $6.42 $6.34
Net investment income .46 .58 .51
Net realized and unrealized gain
(loss) on investments and
foreign currency .21 (.59) .15
Dividends from net investment
income (.52) (.56) (.48)
Distributions from net realized
gains (.01) (.06) (.10)
----- ----- -----
Net asset value, end of year $5.93 $5.79 $6.42
===== ===== =====
Total return 12.05%+ 0.88%+ 10.74%+++
Net assets at end of year (000s) $15,262 $6,766 $2,661
Ratio of operating expenses to
average net assets 1.92% 1.98% 1.93%++
Ratio of net investment income to
average net assets 7.91% 9.81% 10.32%++
Portfolio turnover rate 56.47% 31.55% 24.36%
- -------------------------------------------------------------------
</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.
14
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of State Street Research Income Trust and
the Shareholders of State Street Research High Income Fund:
In our opinion, the accompanying statement of assets and liabilities,
including the investment portfolio, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in
all material respects, the financial position of State Street Research High
Income Fund (formerly MetLife - State Street Research High Income Fund) (a
series of State Street Research Income Trust, hereafter referred to as the
"Trust") at March 31, 1996, and the results of its operations, the changes in
its net assets and the financial highlights for the periods indicated, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Trust's management; our
responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at March 31, 1996 by correspondence with the
custodian and brokers and the application of alternative procedures where
confirmations from brokers were not received, provide a reasonable basis for
the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
May 10, 1996
15
<PAGE>
STATE STREET RESEARCH HIGH INCOME FUND
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
A healthy bond market and a weak economy had the greatest influence on High
Income Fund's performance over the past 12 months. Returns were good from a
historical standpoint, but the Fund didn't do well versus its peers. A
"flight to quality" in the bond market occurred because investors believed
companies issuing lower-rated bonds would do poorly. The B-rated bonds in
High Income Fund's portfolio weren't as attractive to the market, so they
underperformed.
The decline in interest rates in 1995 drove bond prices up, helping the
Fund's return. Higher bond prices resulted in lower yields, however, and the
Fund had to lower its yield slightly in January. The yield was 7.51% on March
31, 1996, for Class A shares.
The Fund maintained its emphasis on B-rated bonds. In 1995, B-rated bonds
were out of the market's favor. The Fund's adviser didn't see this as a
long-term trend, however, so didn't change approaches. In the first quarter
of 1996, B-rated bonds came back into market favor and performed well.
The Fund built a position in paging and sold most of it when it reached the
price target. High Income Fund also invested in wireless communications and
maintained a substantial amount in that area, but reduced its position in
industries sensitive to economic cycles, such as paper and metals.
March 31, 1996
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. Performance reflects maximum 4.5% "A" share front-end,
or 5% "B" share or 1% "D" share contingent deferred, sales charges. "C"
shares, offered without a sales charge, are available only to certain
employee benefit plans and institutions. "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. The First Boston High Yield Index is a commonly used measure of
high-yield bond performance. The index is unmanaged and does not take sales
charges into consideration. Direct investment in the index is not possible;
results are for illustrative purposes only.
Comparison Of Change In Value Of A $10,000
Investment In High Income Fund and
The First Boston High Yield Index
Class A Shares
Average Annual Total Return
-------------------------------------------------------
1 Year 5 Years Life of Fund
-------------------------------------------------------
+7.77% +13.98% +9.55%
-------------------------------------------------------
High First Boston
Income High Yield
Fund Index
8/86 9550 10000
3/87 10631 10930
3/88 11136 11599
3/89 12509 12690
3/90 11670 12199
3/91 11926 13894
3/92 15378 18233
3/93 18252 21031
3/94 20912 23125
3/95 21289 24236
3/96 24023 27758
Class B Shares
Average Annual Total Return
-------------------------------------------------------
1 Year 5 Years Life of Fund
-------------------------------------------------------
+7.06% +14.26% +9.81%
-------------------------------------------------------
High First Boston
Income High Yield
Fund Index
8/86 10000 10000
3/87 11132 10930
3/88 11661 11599
3/89 13099 12690
3/90 12220 12199
3/91 12488 13894
3/92 16102 18233
3/93 19113 21031
3/94 21736 23125
3/95 21930 24236
3/96 24575 27758
Class C Shares
Average Annual Total Return
-------------------------------------------------------
1 Year 5 Years Life of Fund
-------------------------------------------------------
+13.19% +15.11% +10.11%
-------------------------------------------------------
High First Boston
Income High Yield
Fund Index
8/86 10000 10000
3/87 11132 10930
3/88 11661 11599
3/89 13099 12690
3/90 12220 12199
3/91 12488 13894
3/92 16102 18233
3/93 19113 21031
3/94 21913 23125
3/95 22292 24236
3/96 25233 27758
Class D Shares
Average Annual Total Return
-------------------------------------------------------
1 Year 5 Years Life of Fund
-------------------------------------------------------
+11.05% +14.49% +9.80%
-------------------------------------------------------
High First Boston
Income High Yield
Fund Index
8/86 10000 10000
3/87 11132 10930
3/88 11661 11599
3/89 13099 12690
3/90 12220 12199
3/91 12488 13894
3/92 16102 18233
3/93 19113 21031
3/94 21731 23125
3/95 21922 24236
3/96 24564 27758
16
<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
Exchange Place
Boston, MA 02109
Independent Accountants
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110
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
17
<PAGE>
[Back Cover]
State Street Research High Income Fund
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: 3147-960522(0697)SSR-LD
Cover Illustration by Dorothy Cullinan HI-271D-596
<PAGE>
[Front cover]
[State Street Research logo]
STATE STREET RESEARCH
MANAGED ASSETS
ANNUAL REPORT
[graphic of figure reaching for stars]
March 31, 1996
WHAT'S INSIDE
From the Chairman:
Favorable markets
reward investors
Portfolio Manager's Review:
Strong returns from a
diversified portfolio
Fund Information:
Facts and figures
Plus, Complete Portfolio Holdings
and Financial Statements
[Dalbar logo]
Dalbar
Honors Commitment To:
Investors
For Excellence
in
Shareholder Services
<PAGE>
FROM THE CHAIRMAN
[Photo of Ralph F. Verni, Chairman]
Dear Shareholder:
Over the past 12 months, the markets continued to reward investors. The
environment was extremely favorable: The economy was growing at a slow but
reasonable pace, corporate earnings were strong, and inflation was low. More
recently, we've seen mounting evidence that the economy is picking up speed.
Job growth and sales of homes and autos have picked up, and consumer
confidence is higher.
Stocks
Over the past 12 months, large-company stocks--the household names we all
recognize--performed best. The Standard & Poor's 500 Composite Index, which
represents the 500 largest stocks, provided an impressive return of +32.07%
for the 12 months ended March 31, 1996.1 A stronger economy is generally
considered to be good for the stock market, as it can result in higher
profits for corporations.
Bonds
Bonds provided solid results over the past year. For the 12 months ended
March 31, 1996, the Lehman Brothers Government/Corporate Index gained
+10.93%.(1) These results include a slump over the first three months of 1996,
as bonds reacted negatively to a stronger economy and the Federal Reserve's
reluctance to cut interest rates further.
Looking ahead
Our outlook continues to call for moderate economic growth and low
inflation--which should be positive for both stocks and bonds. We don't
believe the economy will start to overheat. In fact, with interest rates
moving higher recently, the economy could begin to slow down again. Although
there could be short-term bumps in the road for the markets, the prospects
appear favorable for long-term investors.
Sincerely,
/s/ Ralph F. Verni
Ralph F. Verni
Chairman
April 30, 1996
(1)The Standard & Poor's 500 Composite Index (S&P 500) includes 500 widely
traded common stocks and is a commonly used measure of U.S. stock market
performance. The Lehman Brothers Government/Corporate Bond Index is a
commonly used measure of bond market performance. The indices are unmanaged
and do not take sales charges into consideration. Direct investment in the
indices is not possible; results are for illustrative purposes only.
(2)Investment results are based on an assumed $10,000 investment at "A" share
maximum sales charge of 4.5%; thus, the net amount invested was $9,550. Also
assumes capital gain distributions accepted in shares and income dividends
invested at net asset value. No adjustment has been made for income taxes
payable by shareholders on income dividends or capital gain distributions.
(3)+21.48% for Class B shares; +22.70% for Class C shares; +21.54% for Class D
shares.
(4)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.
(5)Performance reflects maximum 4.5% "A" share front-end, or 5% "B" share or 1%
"D" share contingent deferred, sales charges. "C" shares, offered without a
sales charge, are available only to certain employee benefit plans and
institutions.
(6)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 bein current thereafter.
-----------------------------------------------------------------------------
Fund Information (all data are for periods ended March 31, 1996)
-----------------------------------------------------------------------------
Total value of $10,000 invested at Fund's inception(2)
(Class A shares, at maximum applicable sales charge)
[DESCRIPTION OF MOUNTAIN CHART]
12/29/88 $ 9550
3/89 9957
3/90 11030
3/91 11478
3/92 13003
3/93 15154
3/94 16815
3/95 17070
3/96 20913
SEC Average Annual Compound Rates of Return
(at maximum applicable sales charge)(4,5)
<TABLE>
<CAPTION>
---------------------------------------------------------
Life of Fund
(since 12/29/88) 5 years 1 year
---------------------------------------------------------
<S> <C> <C> <C>
Class A +10.70% +11.72% +17.03%
---------------------------------------------------------
Class B +11.07% +12.00% +16.48%
---------------------------------------------------------
Class C +11.51% +12.91% +22.70%
---------------------------------------------------------
Class D +11.08% +12.28% +20.54%
---------------------------------------------------------
</TABLE>
Cumulative Total Returns
(do not reflect sales charge)(4,6)
<TABLE>
<CAPTION>
---------------------------------------------------------
Life of Fund
(since 12/29/88) 5 years 1 year
---------------------------------------------------------
<S> <C> <C> <C>
Class A +119.04% +82.26% +22.55%
---------------------------------------------------------
Class B +114.25% +78.27% +21.48%
---------------------------------------------------------
Class C +120.53% +83.50% +22.70%
---------------------------------------------------------
Class D +114.49% +78.47% +21.54%
---------------------------------------------------------
</TABLE>
<PAGE>
PORTFOLIO MANAGER'S REVIEW
[Photo of Michael R. Yogg, Portfolio Manager]
Michael R. Yogg
Portfolio Manager
The following is a discussion with portfolio manager Michael R. Yogg. Michael
has 18 years of investment experience and serves as chairman of our Asset-
Allocation Committee.
Q: How did the Fund perform over the past 12 months?
A: We had a good year. Class A shares of Managed Assets posted a total return
of 22.55% for the 12 months ended March 31, 1996 (does not reflect sales
charge).3 We also outperformed the average for Lipper Analytical Services'
Flexible Portfolio Funds category, which was 21.20% for 156 funds.
Q: What contributed to Fund performance?
A: Simply put, the stock and bond markets had strong years. In Managed
Assets, we diversified the portfolio over a variety of stocks and bonds that
provided a range of returns over the period. For most of the past 12 months,
stocks provided the greatest boost, particularly larger domestic issues.
Although they represented a small part of the portfolio, inflation-responsive
securities proved to be the strongest performers.
Our bond holdings also enjoyed positive returns in all areas, getting
exceptional performance from high-yield bonds. International bonds rebounded
from a disappointing performance the year before.
Q: What changes did you make to the portfolio during the past 12 months?
A: We maintained our emphasis on stocks and made only minor adjustments to
the Fund's asset allocation. We felt comfortable that our allocation was
rewarding shareholders without excessive risk. In April 1995, we had 52% in
stocks, 35% in bonds, 10% in inflation-responsive securities and 3% in cash.
In July, we moved about 5% of the portfolio from bonds to stocks, profiting
from the sale of high-grade bonds. On March 31, 1996, the portfolio contained
54% stocks, 27% bonds, 12% inflation-responsive securities, and 7% in cash.
Q: Interest rates and the stock market were a roller-coaster at the
beginning of 1996. How has this affected the Fund?
A: The Fund's diversified portfolio helped it weather the volatility. Even
though high-grade bonds declined in the first quarter of 1996--as the market
reacted to interest-rate spikes and stronger economic growth--indications of
a growing economy helped boost the performance of the portfolio's high-yield
bonds; and stocks also did well. In short, its diversification limited the
effect that any single market had on its performance. Investing in a variety
of securities helps Managed Assets benefit from those that prosper while
minimizing the negative impact of those that don't.
Q: What is your strategy for the Fund and your outlook for the market?
A: Again, diversification will help us navigate a variety of market and
economic possibilities. We plan to stay the course, emphasizing stocks
because we still see a lot of potential corporate earnings growth reflected
in the stock market. We see bonds as a good value and the bond market as
having a favorable outlook, although not like last year. Looking forward, we
think the economy will demonstrate steady, moderate growth.
March 31, 1996
Asset Allocation
(by percentage of net assets)
[Description of Pie Chart]
Equities 54%
Bonds 27%
Inflation Responsive 12%
Net Cash 7%
Top 5 Equity Industries
(by percentage of net assets)
[Description of Bar Chart]
Oil 9.3%
Chemicals 5.3%
Oil service 4.0%
Metals and mining 3.8%
Computer software 3.5%
Total: 25.9%
2
<PAGE>
STATE STREET RESEARCH MANAGED ASSETS
-----------------------------------------------------------------------------
Investment Portfolio
-----------------------------------------------------------------------------
March 31, 1996
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
Principal Maturity Value
Amount Date (Note 1)
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fixed Income Securities 27.2%
U.S. Treasury 4.5%
U.S. Treasury Bond, 12.00% $ 2,100,000 8/15/2013 $ 3,031,539
U.S. Treasury Bond, 8.125% 3,625,000 8/15/2021 4,158,564
U.S. Treasury Bond, 6.25% 2,075,000 8/15/2023 1,918,400
U.S. Treasury Note, 8.50% 575,000 5/15/1997 592,877
U.S. Treasury Note, 6.75% 750,000 5/31/1999 766,170
U.S. Treasury Note, 7.125% 1,250,000 9/30/1999 1,293,362
U.S. Treasury Note, 6.875% 2,400,000 3/31/2000 2,466,744
U.S. Treasury Note, 6.25% 575,000 8/31/2000 577,875
U.S. Treasury Note, 7.50% 2,100,000 11/15/2001 2,228,625
U.S. Treasury Note, 5.75% 225,000 8/15/2003 217,300
U.S. Treasury Note, 7.875% 2,125,000 11/15/2004 2,331,189
-----------
19,582,645
-----------
U.S. Agency Mortgage 5.7%
Federal Home Loan Mortgage Corp., 7.50% 142,062 4/01/2002 143,172
Federal Home Loan Mortgage Corp., 6.50% 594,284 4/01/2009 584,253
Federal Home Loan Mortgage Corp., 6.50% 873,572 5/01/2009 858,826
Federal Home Loan Mortgage Corp., 8.50% 414 7/01/2009 430
Federal Home Loan Mortgage Corp., 6.50% 201,768 7/01/2009 198,363
Federal Home Loan Mortgage Corp. TBA, 6.00% 2,000,000 4/19/2011 1,918,125
Federal Home Loan Mortgage Corp., 9.50% 569,640 7/25/2022 606,706
Federal Home Loan Mortgage Corp., 6.50% 425,000 3/25/2023 412,114
Federal Home Loan Mortgage Corp., 7.00% 1,676,591 6/01/2024 1,635,195
Federal Home Loan Mortgage Corp., 7.50% 1,327,313 8/01/2024 1,325,229
Federal Home Loan Mortgage Corp., 8.00% 180,197 8/01/2024 183,406
Federal Home Loan Mortgage Corp., 7.00% 867,783 12/01/2024 846,357
Federal Home Loan Mortgage Corp., 8.00% 732,624 6/01/2025 745,672
Federal Home Loan Mortgage Corp., 7.50% 973,202 11/01/2025 971,674
Federal Home Loan Mortgage Corp. TBA, 7.50% 2,700,000 4/18/2026 2,700,000
Federal National Mortgage Association, 8.00% 302,628 4/01/2008 312,082
--------------------------------------------------------------------------------------------------
Principal Maturity Value
Amount Date (Note 1)
--------------------------------------------------------------------------------------------------
U.S. Agency Mortgage (cont'd)
Federal National Mortgage Association, 8.00% $ 390,823 6/01/2008 $ 403,032
Federal National Mortgage Association, 8.50% 354,155 2/01/2009 377,126
Federal National Mortgage Association, 9.00% 79,789 5/01/2009 84,675
Government National Mortgage Association, 8.00% 1,182,894 5/15/2008 1,231,688
Government National Mortgage Association, 6.50% 728,783 2/15/2009 717,618
Government National Mortgage Association, 6.50% 271,932 6/15/2009 267,598
Government National Mortgage Association, 6.50% 1,629,993 7/15/2009 1,605,022
Government National Mortgage Association, 9.00% 485,464 6/15/2016 520,811
Government National Mortgage Association, 8.00% 297 10/15/2017 308
Government National Mortgage Association, 8.50% 1,045,139 10/15/2017 1,112,414
Government National Mortgage Association, 8.00% 1,340,322 12/15/2022 1,372,783
Government National Mortgage Association, 6.50% 1,149,971 7/15/2024 1,089,230
Government National Mortgage Association, 7.00% 1,328,303 1/15/2025 1,293,847
Government National Mortgage Association, 7.50% 1,374,835 11/15/2025 1,371,824
-----------
24,889,580
-----------
Foreign 0.4%
Hydro Quebec Deb., 9.40% 1,025,000 2/01/2021 1,201,741
Laidlaw Inc. Deb., 8.75% 400,000 4/15/2025 435,252
-----------
1,636,993
-----------
Foreign Government 5.3%
Australian Dollar
Commonwealth of Australia, 9.50% 7,400,000 8/15/2003 5,993,208
Canadian Dollar
Government of Canada, 7.50% 5,375,000 12/01/2003 3,946,713
Danish Krone
Kingdom of Denmark, 8.00% 14,200,000 11/15/2001 2,652,925
Kingdom of Denmark, 8.00% 24,075,000 3/15/2006 4,362,683
Deutsche Mark
German Unity Fund, 8.00% 5,875,000 1/21/2002 4,406,151
French Franc
Government of France, 8.00% 1,150,000 4/25/2003 1,538,307
-----------
22,899,987
-----------
</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>
Trust Certificates 0.4%
Cooperative Utility Trust Certificates, 10.70% $ 350,000 9/15/2017 $ 388,696
Cooperative Utility Trust Certificates, 10.125% 225,000 3/15/2019 250,884
Cooperative Trust Certificates, 10.11% 900,000 12/15/2017 993,942
-----------
1,633,522
-----------
Corporate 7.9%
Acme Boot, Inc. Sr. Notes, 11.50% 250,000 12/15/2000 105,000
Adams Outdoor Advertising Ltd. Sr. Notes, 10.75%+ 250,000 3/15/2006 255,000
Affinity Group, Inc. Sr. Sub. Deb., 11.50% 250,000 10/15/2003 256,250
Allbritton Communications, Inc. Sr. Sub. Notes,
9.75%+ 500,000 11/30/2007 471,250
Alvey Systems, Inc. Sr. Sub. Notes, 11.375%+ 250,000 1/31/2003 260,000
American Telecasting, Inc. Sr. Sub. Units, 0.00% to
6/14/99, 12.50% from 6/15/99 to maturity 223,947 6/15/2004 163,481
Anacomp, Inc. Cv. Deb., 13.875%(Box) 395,000 1/15/2002 27,650
Anacomp International N.V. Cv. Sub. Deb., 9.00%(Box) 250,000 1/15/1997 17,500
Axia Holdings Corp. Sr. Sub. Note, 11.00% 250,000 3/15/2001 245,000
B.E. Aerospace, Inc. Sr. Notes, 9.875%+ 250,000 2/01/2006 252,500
Bar Technologies, Inc. Sec. Notes, 13.50%+ 250,000 4/01/2001 246,875
Bayou Steel Corp. First Mortgage Note, 10.25% 500,000 3/01/2001 440,000
Bell & Howell Co. Series B Sr. Disc. Deb., 0.00% to
2/28/2000, 11.50% from 3/1/2000 to maturity 250,000 3/01/2005 162,500
Belle Casinos, Inc. First Mortgage Note, 12.00%+(Box) 125,000 10/15/2000 43,750
Benedek Broadcasting Corp. Sr. Notes, 11.875% 250,000 3/01/2005 263,750
CHC Helicopter Corp. Sr. Sub. Note, 11.50% 600,000 7/15/2002 570,000
Carrols Corp. Sr. Notes, 11.50% 250,000 8/15/2003 256,250
--------------------------------------------------------------------------------------------------
Principal Maturity Value
Amount Date (Note 1)
--------------------------------------------------------------------------------------------------
Corporate (cont'd)
Celcaribe S.A. Units, 0.00% to 3/14/98, 13.50% from
3/15/98 to maturity+ $ 183,000 3/15/2004 $ 1,765,950
Central Rents, Inc. Sr. Notes, 12.875% 250,000 12/15/2003 251,250
Chatwins Group Inc. Sr. Exch. Note, 13.00% 250,000 5/01/2003 207,500
Clark USA, Inc. Sr. Note, 10.875%+ 500,000 12/01/2005 522,500
Clearnet Communications, Inc. Units, 0.00% to
12/14/2000, 14.75% from 12/15/2000 to maturity 8,000 12/15/2005 460,000
Columbia/HCA Healthcare Corp. Note, 6.87% 525,000 9/15/2003 523,803
Consolidated Hydro Inc. Sr. Disc. Notes, 0.00% to
1/14/99, 12.00% from 1/15/99 to maturity 500,000 7/15/2003 326,490
Continental Cablevision, Inc. Sr. Notes, 8.30%+ 400,000 5/15/2006 414,000
Crown Packaging Holdings Ltd., 0.00% to 10/31/2000,
12.25% from 11/1/2000 to maturity 1,250,000 11/01/2003 537,500
Dell Computer Corp. Sr. Notes, 11.00% 500,000 8/15/2000 537,500
Doskocil Companies Inc. Sr. Sub. Red. Notes, 9.75% 500,000 7/15/2000 520,000
Dual Drilling Co. Sr. Sub. Notes, 9.875% 250,000 1/15/2004 268,750
EZ Communications, Inc. Sr. Sub. Notes, 9.75% 250,000 12/01/2005 247,500
Echostar Satellite Broadcast Co. Sr. Sec. Disc.
Note, 0.00% to 3/14/2000, 13.125% from 3/15/2000
to maturity+ 500,000 3/15/2004 301,250
Echostar Communications Co. Sr. Sec. Disc. Note,
0.00% to 5/31/99, 12.875% from 6/1/99 to maturity 375,000 6/01/2004 271,875
El Paso Electric Co. First Mortgage Bonds Series D,
8.90% 500,000 2/01/2006 506,250
Electronic Data Systems Corp. Note, 6.85%+ 800,000 5/15/2000 811,312
</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>
Investment Portfolio (cont'd)
Corporate (cont'd)
Empire Gas Corp. Sr. Sec. Notes, 7.00% to 7/14/99,
12.875% from 7/15/99 to maturity $ 250,000 7/15/2004 $ 223,750
Equitable Bag Co. Inc. Sr. Notes, 11.00%(Box) 238,000 12/16/2004 119,000
Finlay Enterprises, Inc. Sr. Disc. Deb., 0.00% to
4/30/98, 12.00% from 5/1/98 to maturity 500,000 5/01/2005 347,500
Finlay Fine Jewelry Corp. Sr. Note, 10.625% 250,000 5/01/2003 243,125
Fonorola, Inc. Sr. Sec. Note, 12.50% 250,000 8/15/2002 272,500
Goldriver Hotel & Casino Corp. Mortgage Notes,
13.375%(Box) 317,000 8/31/1999 174,350
Grand Casinos, Inc. First Mortgage Notes, 10.125% 250,000 12/01/2003 265,000
Grand Union Co. Sr. Sub. Notes, 12.00%(Box) 250,000 9/01/2004 219,375
Great Bay Property Funding Corp. First Mortgage
Notes, 10.875% 250,000 1/15/2004 222,500
Griffin Gaming & Entertainment, Inc. Note, 0.00% 250,000 6/30/2000 233,700
Harvard Industries, Inc. Sr. Notes, 12.00% 250,000 7/15/2004 257,500
Haynes International Inc. Sr. Sec. Notes, 11.25% 500,000 6/15/1998 500,000
Haynes International Inc. Sr. Sub. Notes, 13.50% 125,000 8/15/1999 118,750
Heartland Wireless Communications, Inc. Units,
13.00% 250,000 4/15/2003 273,750
ICF Kaiser International, Inc. Sr. Sub. Notes,
12.00% 250,000 12/31/2003 235,625
IntelCom Group, Inc. Sr. Disc. Note, 0.00% to
9/14/2000, 13.50% from 9/15/2000 to maturity 500,000 9/15/2005 320,000
Intercel Inc. Units, 0.00% to 1/31/2001, 12.00%
from 2/1/2001 to maturity 3,000 2/01/2006 181,500
Interface, Inc. Sr. Sub. Notes, 9.50% 250,000 11/15/2005 251,250
Jitney-Jungle Stores of America, Inc. Sr. Notes,
12.00% 250,000 3/01/2006 247,500
JM Peters, Inc. Sr. Notes, 12.75% 250,000 5/01/2002 237,500
--------------------------------------------------------------------------------------------------
Principal Maturity Value
Amount Date (Note 1)
--------------------------------------------------------------------------------------------------
Corporate (cont'd)
K-III Communications Corp. Sr. Note, 8.50%+ $ 375,000 2/01/2006 $ 356,250
K&F Industries Inc. Sr. Sub. Deb., 13.75% 428,000 8/01/2001 445,120
Ladish Co. Sr. Sub. Units, 12.00%++ 18,114 12/22/2000 18,916
Mail-Well Corp. Sr. Sub. Notes, 10.50% 250,000 2/15/2004 243,125
Marcus Cable Operating Co. L.P. Sr. Disc. Note,
0.00% to 7/31/99, 13.50% from 8/1/99 to maturity 750,000 8/01/2004 543,750
Merrill Lynch & Co., Inc. Equity Partnership, 0.00% 1,015,000 1/31/2000 1,041,644
MFS Communications Company, Inc. Sr. Disc. Notes,
0.00% to 1/14/99, 9.375% from 1/15/99 to maturity 500,000 1/15/2004 380,000
Miles Home Services, Inc. Sr. Notes, 12.00% 250,000 4/01/2001 190,000
Motels of America, Inc. Sr. Sub. Notes, 12.00% 500,000 4/15/2004 485,000
Mothers Work, Inc. Sr. Note, 12.625% 250,000 8/01/2005 260,625
Norcal Waste Systems, Inc. Sr. Sub. Notes, 12.50%
to 5/14/96, 12.75% from 5/15/96 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 11/15/2005 517,500
NS Group, Inc. Units, 13.50% 500,000 7/15/2003 458,750
Oryx Energy Co. Note, 8.125% 500,000 10/15/2005 489,345
PageMart, Inc. Sr. Disc. Note, 0.00% to 10/31/98,
12.25% from 11/1/98 to maturity 500,000 11/01/2003 372,500
Penda Industries, Inc. Sr. Notes, 10.75% 250,000 3/01/2004 210,000
Penn Traffic Co. Sr. Notes, 8.625% 500,000 12/15/2003 455,000
Penn Traffic Co. Sr. Notes, 9.625% 500,000 4/15/2005 426,250
Phar-Mor, Inc. Sr. Notes, 11.72% 250,000 9/11/2002 242,500
Pioneer Americas Acquisition Corp. Sr. Notes,
13.375% 250,000 4/01/2005 268,125
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
STATE STREET RESEARCH MANAGED ASSETS
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
Principal Maturity Value
Amount Date (Note 1)
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Corporate (cont'd)
Plastic Specialties & Technology Sr. Notes, 11.25% $ 350,000 12/01/2003 $ 350,000
Presidio Oil Co. Sr. Sec. Notes, 11.50%(Box) 500,000 9/15/2000 512,500
Presidio Oil Co. Sr. Sub. Gas Indexed Notes,
13.30%(Box) 200,000 7/15/2002 152,000
Protection One Alarm Monitoring, Inc. Sr. Sub.
Disc. Note, 0.00% to 6/29/98, 13.375% from
6/30/98 to maturity 250,000 6/30/2005 211,250
Ralphs Grocery Co. Sr. Note, 10.45% 500,000 6/15/2004 477,500
Sam Houston Race Park Ltd. Sr. Sec. Note, 11.00%(Box) 126,184 9/01/2001 50,474
Sappi BVI Finance Ltd. Cv. Note, 7.50%+ 1,000,000 8/01/2002 952,500
Seven-Up/RC Bottling Co. of Southern California,
Inc. Notes, 11.50%(Box) 750,000 8/01/1999 450,000
Sheffield Steel Corp. First Mortgage Notes, 12.00% 250,000 11/01/2001 217,500
Showboat Marina Casino Financing Corp. First
Mortgage Note, 13.50%+ 250,000 3/15/2003 254,375
Specialty Foods Corp. Sr. Note, 11.125% 250,000 10/01/2002 233,750
Talley Manufacturing and Technology, Inc. Sr.
Note, 10.75% 250,000 10/15/2003 251,250
Telemundo Group, Inc.
Sr. Disc. Note, 7.00% to 2/14/99, 10.50% from
2/15/99 to maturity 400,000 2/15/2006 356,000
Telewest Communications PLC Sr. Deb., 9.625% 250,000 10/01/2006 249,375
Treasure Bay Gaming and Resorts, Inc. First
Mortgage Units, 12.25%+(Box) 250,000 11/15/2000 61,250
UCAR Global Enterprises, Inc. Sr. Sub. Notes,
12.00% 135,000 1/15/2005 155,250
United Artists Theatre
Series 1995-A, 9.30%+ 500,000 7/01/2015 480,000
United Meridian Corp. Sr. Sub. Notes, 10.375% 250,000 10/15/2005 262,500
--------------------------------------------------------------------------------------------------
Principal Maturity Value
Amount Date (Note 1)
--------------------------------------------------------------------------------------------------
Corporate (cont'd)
Universal Outdoor Holdings, Inc. Units, 0.00% to
6/30/99, 14.00% from 7/1/99 to maturity $1,000,000 7/01/2004 $ 710,000
U.S.A. Mobile Communications, Inc. Sr. Notes, 9.50% 150,000 2/01/2004 145,500
U.S.A. Mobile Communications, Inc. Sr. Notes,
14.00% 250,000 11/01/2004 292,500
Viacom, Inc. Sr. Notes, 6.75% 1,000,000 1/15/2003 952,660
Waxman Industries, Inc. Sr. Sec. Notes, 12.25% 500,000 9/01/1998 511,250
Waxman Industries, Inc. Sr. Sec. Notes, 0.00% to
5/31/99, 12.75% from 6/1/99 to maturity 928,000 6/01/2004 464,000
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 100,650
Winstar Communications, Inc.
Sr. Disc. Note, 14.00% 330,000 10/15/2005 187,275
Wireless One, Inc.
Sr. Disc. Notes, 13.00% 250,000 10/15/2003 263,750
Wyman-Gordon Co. Sr. Notes, 10.75% 250,000 3/15/2003 260,000
-----------
34,423,820
-----------
Finance/Mortgage 3.0%
American Southwest Financial Services Corp., 8.00% 417,446 8/25/2010 424,752
Associates Corp. of North America Notes, 6.375% 675,000 10/15/2002 662,377
Beneficial Corp. Note, 9.125% 425,000 2/15/1998 446,862
Beneficial Corp. Note, 8.17% 200,000 11/09/1999 210,622
Countrywide Mortgage Series 1994-2 Class A-7, 6.50% 650,000 3/25/2008 652,230
Countrywide Mortgage Series 1993-E Class A-1, 6.50% 413,839 1/25/2024 413,710
First Chicago Credit Master Trust Series 1991-D,
8.40% 262,500 6/15/1998 264,631
Fleet Mortgage Group, Inc. Note, 7.06% 1,000,000 7/26/2002 1,003,040
Ford Credit Auto Loan Master Trust Notes, 6.50% 1,100,000 8/15/2002 1,100,000
GE Global Insurance Holdings Corp. Note, 7.00% 750,000 2/15/2026 715,350
General Electric Capital Corp. Note, 7.625% 1,000,000 7/24/1996 1,006,480
</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>
--------------------------------------------------------------------------------------------------
Principal Maturity Value
Amount Date (Note 1)
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Finance/Mortgage (cont'd)
General Motors Acceptance Corp., 7.85% $ 675,000 11/17/1997 $ 694,231
General Motors Acceptance Corp., 8.625% 1,000,000 6/15/1999 1,062,010
Prudential Home Mortgage Series 93-29 A-6, 6.75% 1,269,784 8/25/2008 1,274,939
Prudential Home Mortgage Series 93-54 A-21, 5.50% 425,000 1/25/2024 410,788
Residential Funding Corp. Series 93-S25 A-1, 6.50% 210,879 7/25/2008 210,548
Sears Roebuck & Co. Master Trust Series 95-2, 8.10% 650,000 6/15/2004 687,167
Standard Credit Card Master Trust Series 1993-3A,
5.50% 950,000 2/07/2000 932,482
Standard Credit Card Master
Trust Series 1994-4A, 8.25% 550,000 11/07/2003 590,387
-----------
12,762,606
-----------
Total Fixed Income Securities (Cost $118,738,399) 117,829,153
-----------
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
Shares
--------------------------------------------------------------------------------------------------
<S> <C> <C>
EQUITY SECURITIES 54.0%
Basic Industries 10.3%
Chemical 4.2%
Atlantic Richfield Co. 41,600 1,196,000
Cookson Group PLC* 204,000 976,099
Cytec Industries, Inc. 6,600 557,700
Daicel Chemical Industries, Inc.* 260,000 1,572,517
FMC Corp.* 16,700 1,254,587
Hoechst AG* 5,300 1,877,599
IMC Global, Inc. 27,260 994,990
L'Air Liguide* 5,200 946,787
Mallinckrodt Group, Inc. 10,400 391,300
Monsanto Co.* 26,000 3,991,000
Potash Corp. of Saskatchewan, Inc. 13,900 868,750
Rohm & Haas Co. 55,900 3,717,350
-----------
18,344,679
-----------
Diversified 1.3%
Axia Holdings Corp.* 750 22,500
Hoya Corp* 97,000 3,336,854
Johnson Controls, Inc. 7,300 544,762
Mark IV Industries, Inc. 21,705 477,510
PST Holdings, Inc.* 7,500 7,500
Tenma Corp.* 59,000 1,351,250
-----------
5,740,376
-----------
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
Value
Shares (Note 1)
--------------------------------------------------------------------------------------------------
<S> <C> <C>
Electrical Equipment 0.4%
Baldor Electric Co. 17,400 $ 350,175
Belden, Inc.* 12,200 359,900
Philips Electronics NV 27,000 982,125
Protection One Alarm Monitoring, Inc. Wts.* 800 6,400
-----------
1,698,600
-----------
Forest Product 0.6%
Aracruz Celulose SA ADR 94,000 752,000
Crown Packaging Holdings Ltd. Wts.*+ 3,750 30,000
Equitable Bag, Inc. Cl.A* 22,619 226
Mail-Well Holdings, Inc.*+ 14,205 115,416
Nippon Paper Industries Co. 150,000 1,069,876
S.D. Warren Co. Series B Sr. Exch. Pfd.(Diamond) 18,000 558,000
SDW Holdings Corp. Wts.*+ 18,000 54,000
-----------
2,579,518
-----------
Machinery 2.2%
Briggs & Stratton Corp. 9,400 405,375
Case Corp. 59,600 3,032,150
Chatwins Group, Inc. Wts.*+ 500 250
Kajima Corp.* 126,000 1,354,522
Millipore Corp. 41,600 1,591,200
Minebea Co.* 180,000 1,539,612
Sundstrand Corp. 24,800 1,010,600
Terex Corp. Rts. 750 188
United States Filter Corp.* 14,000 392,000
-----------
9,325,897
-----------
Metal & Mining 1.6%
Alumax, Inc.* 41,800 1,478,675
Bohler Uddeholm 12,000 932,207
Century Aluminum Co.* 13,600 185,300
Reynold Metals Co. 15,900 940,087
RTZ Corp.* 51,500 745,933
SGL Carbon AG* 10,700 1,021,947
Sheffield Steel Corp. Wts.* 1,250 1,875
Toho Titanium Co.* 99,000 1,452,956
Wyman Gordon Co.* 19,000 320,625
-----------
7,079,605
-----------
Total Basic Industries 44,768,675
-----------
Consumer Cyclical 6.0%
Airline 0.2%
Atlas Air 23,100 866,250
CHC Helicopter Corp. Wts.* 2,000 1,000
-----------
867,250
-----------
</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>
Automotive 1.1%
Chrysler Corp. 6,000 $ 373,500
Exide Corp. 56,000 1,309,000
Harvard Industries, Inc. 14.25% Exch. Pfd.(Diamond) 10,095 270,041
Lear Seating Corp.* 52,200 1,703,025
Masland Corp.* 12,600 220,500
Michelin CI. B* 18,000 857,756
-----------
4,733,822
-----------
Building 0.3%
Lafarge Corp. 21,900 413,362
Miles Homes Services, Inc. Wts.* 3,000 750
Owens-Corning Fiberglas Corp.* 16,600 666,075
Waxman Industries, Inc. Wts.*+ 29,500 29,500
-----------
1,109,687
-----------
Hotel & Restaurant 1.6%
Au Bon Pain Company, Inc.* 19,700 167,450
Harrahs Entertainment, Inc.* 105,000 3,084,375
Main Street and Main, Inc.* 33,600 100,800
Mirage Resorts, Inc.* 59,050 2,590,819
Motels of America, Inc.+ 500 40,000
Outback Steakhouse, Inc.* 11,900 448,481
Primadonna Resorts, Inc.* 14,600 222,650
Station Casinos, Inc.* 31,000 360,375
-----------
7,014,950
-----------
Recreation 0.8%
American Radio Systems Corp.* 4,900 165,375
American Telecasting, Inc. Wts.* 1,250 6,562
Argyle Television, Inc., Cl. A* 13,400 291,450
Boomtown, Inc. Wts.* 500 25
Comcast Corp. Cl. A 57,800 1,004,275
Comcast Corp. Cl. A Special 50,700 896,756
Evergreen Media Corp. Cl. A 5,800 208,800
Fitzgerald Gaming Corp. Wts.*+ 1,000 10,000
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 11,250
SHRP Equity, Inc.* 37 185
Sierra On-Line, Inc.* 10,800 363,150
Silver King Communications, Inc.* 10,200 316,200
Taj Mahal Holdings Corp. Cl. A* 3,821 99,346
-----------
3,382,224
-----------
Retail Trade 1.9%
Central Rents, Inc. Wts.* 250 15,000
Corporate Express, Inc.* 4,920 162,360
Federated Department Stores, Inc.* 42,000 1,354,500
Finlay Enterprises, Inc. Cl. A* 1,333 18,995
--------------------------------------------------------------------------------------------------
Value
Shares (Note 1)
--------------------------------------------------------------------------------------------------
Retail Trade (cont'd)
Food 4 Less Holdings, Inc. Wts.*++ 584 $ 30,514
Gymboree Corp.* 13,100 342,238
Home Depot, Inc. 79,700 3,815,637
Home Shopping Network, Inc.* 94,100 952,763
Intimate Brands, Inc. Cl. A 19,000 368,125
May Department Stores Co. 9,400 453,550
Supermarkets General Holding Corp. Exch. Pfd.* 18,200 455,000
Viking Office Products, Inc.* 7,800 433,875
-----------
8,402,557
-----------
Textile & Apparel 0.1%
Acme Boot Co.+ 250 250
Authentic Fitness Corp.* 17,900 463,163
-----------
463,413
-----------
Total Consumer Cyclical 25,973,903
-----------
Consumer Staple 10.9%
Business Service 1.9%
ADT Corp. Ltd. 103,700 1,827,713
ADVO, Inc.* 30,100 293,475
Career Horizons, Inc.* 9,000 267,750
Catalina Marketing Corp.* 5,000 390,625
Data Processing Resources Corp.* 1,600 44,000
Eagle River Interactive, Inc.* 7,200 93,600
Eltron International, Inc.* 12,500 412,500
Encad, Inc.* 8,100 192,375
Global Directmail Corp.* 45,300 1,579,837
HA-LO Industries, Inc. 18,000 497,250
ICF Kaiser International, Inc. Wts.* 1,200 900
La Petite Holdings Corp. Red. Exch. Pfd.* 22,000 638,000
NRP, Inc.* 11,800 99,563
PageMart, Inc. Wts.*+ 2,300 13,800
Personnel Group of America, Inc.* 29,200 532,900
Premenos Technologies Corp.* 30,500 549,000
Profit Recovery Group International, Inc.* 5,800 89,900
Scientific Games Holdings Corp. 8,400 235,200
Superior Services, Inc.* 4,600 60,950
Technology Solutions Co.* 11,500 311,938
Universal Outdoor Holdings, Inc. Wts.* 1,000 40,000
Vestar/LPA Investment Corp.*+ 1,375 16,500
VTEL Corp.* 16,900 177,450
-----------
8,365,226
-----------
Drug 2.5%
Arris Pharmaceutical Corp.* 25,700 326,069
Cyto Therapeutic, Inc.* 19,900 288,550
Foxmeyer Health Corp. Series A Exch. Pfd.(Diamond) 2,900 95,700
Healthdyne Technologies, Inc.* 34,700 431,581
Merck & Company, Inc. 68,600 4,270,350
</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>
Drug (cont'd)
Pfizer, Inc. 30,300 $ 2,030,100
Roussel Uclaf 5,000 1,092,050
Sandoz AG 900 1,055,574
Yamanouchi Pharmaceutical Co. 60,000 1,334,891
-----------
10,924,865
-----------
Food & Beverage 2.5%
Coca-Cola Enterprises, Inc. 70,100 2,164,338
Dr. Pepper Bottling Co. Cl. A* 56,000 266,000
General Mills, Inc. 3,400 198,475
LVMH Moet Hennessy Louis Vuitton* 4,400 1,116,512
PepsiCo, Inc. 60,600 3,832,950
Ralcorp Holdings, Inc.* 45,600 1,168,500
Whitman Corp. 78,600 1,906,050
-----------
10,652,825
-----------
Hospital Supply 2.3%
American Medical Response, Inc.* 10,700 379,850
Baxter International, Inc. 50,000 2,262,500
Circon Corp.* 14,100 206,213
Columbia/HCA Healthcare Corp.* 42,900 2,477,475
Community Care of America, Inc.* 27,300 279,825
Community Health Systems, Inc. 9,300 381,300
Cytyc Corp.* 4,700 78,725
Integra Lifesciences Corp.* 11,200 131,600
I-Stat Corp.* 10,600 270,300
Lincare Holdings, Inc.* 24,800 806,000
Orthologic Corp.* 10,300 261,362
Physicians Support Systems, Inc.* 13,600 232,900
Respironics, Inc.* 10,000 210,000
Roche Holdings AG 175 1,453,674
Rotech Medical Corp.*. 11,300 418,100
Total Renal Care, Inc.* 3,000 93,375
Ultram-Fem, Inc. 15,700 204,100
-----------
10,147,299
-----------
Personal Care 0.5%
Procter & Gamble Co. 22,500 1,906,875
U.S.A. Detergents, Inc.* 10,650 346,125
-----------
2,253,000
-----------
Printing & Publishing 0.6%
General Media Inc. Wts.*+ 250 250
Heritage Media Corp. Cl. A* 5,600 200,900
Hollinger International, Inc.* 88,400 1,060,800
K-III Communications Corp. Series B Exch. Pfd.(Diamond) 4,837 500,668
K-III Communications Corp. Series C. Pfd. 2,500 258,750
Knight-Ridder, Inc. 8,700 592,688
Sullivan Holdings, Inc.* 148 53,467
-----------
2,667,523
-----------
--------------------------------------------------------------------------------------------------
Value
Shares (Note 1)
--------------------------------------------------------------------------------------------------
Tobacco 0.6%
Philip Morris Companies, Inc. 24,200 $ 2,123,550
Schweitzer-Maudit International, Inc.* 11,100 305,250
-----------
2,428,800
-----------
Total Consumer Staple 47,439,538
-----------
Energy 5.0%
Oil 3.4%
Amerada Hess Corp. 9,200 506,000
Broken Hill Proprietary Ltd. ADR 18,000 1,021,500
Broken Hill Proprietary Ltd. 74,800 1,064,981
Imperial Oil Ltd. 25,700 1,015,150
MOL Magyar Olaj ES Gazipar GDR*+ 100,100 1,063,562
Oryx Energy Co.+++ 83,300 1,155,788
Phillips Petroleum Co. 22,400 884,800
Repsol SA ADR 26,500 990,438
Repsol SA 48,000 1,809,934
Royal Dutch Petroleum Co. 17,000 2,401,250
Tosco Corp. 35,500 1,664,062
Total SA ADR 10,400 353,600
Total SA 12,909 871,468
-----------
14,802,533
-----------
Oil Service 1.6%
Baker Hughes, Inc. 7,100 207,675
Coflexip 31,763 1,355,938
Halliburton Co. 3,500 199,063
Schlumberger Ltd. 34,900 2,761,462
Transocean AS* 109,000 2,379,504
-----------
6,903,642
-----------
Total Energy 21,706,175
-----------
Finance 7.2%
Bank 3.4%
Banco Industrial Colombiano ADR 106,500 1,970,250
Bank of New York, Inc. 7,300 375,950
BankAmerica Corp. 33,000 2,557,500
Chase Manhattan Corp. 18,000 1,323,000
Citicorp* 35,000 2,800,000
Fleet Financial Group, Inc. 25,200 1,020,600
Mellon Bank Corp. 5,500 303,188
National City Corp. 3,900 136,988
PNC Bank Corp. 11,100 341,325
Riverbank America Non-cum. Pfd. 20,000 495,000
South Trust Corp. 6,500 179,562
Sparbanken Sverige AB+ 203,700 2,288,147
U.S. Bancorp 24,919 847,246
-----------
14,638,756
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
9
<PAGE>
STATE STREET RESEARCH MANAGED ASSETS
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
Value
Shares (Note 1)
--------------------------------------------------------------------------------------------------
<S> <C> <C>
Financial Service 1.3%
Alex Brown, Inc. 8,000 $ 415,000
Bear Stearns Companies, Inc.* 25,300 626,175
Federal Home Loan Mortgage Corp. 19,900 1,696,475
Federal National Mortgage Association 65,500 2,087,812
First USA Paymentech, Inc.* 500 17,625
Piper Jaffrey Companies, Inc. 13,700 188,375
RAC Financial Group, Inc.* 5,300 119,250
Raymond James Financial, Inc.* 8,400 189,000
Salomon, Inc. 5,700 213,750
-----------
5,553,462
-----------
Insurance 2.5%
Ace Ltd.* 39,300 1,753,763
AMBAC, Inc. 10,000 481,250
American Travellers Corp.* 6,500 192,562
Delphi Financial Group, Inc. Cl. A* 7,700 187,110
IPC Holdings, Inc.* 7,100 148,212
Mid Ocean Ltd.*. 43,200 1,668,600
Mutual Risk Management Ltd. 9,900 409,613
NAC Re Corp. 23,600 769,950
National Re Corp. 13,100 442,125
Penn Treaty American Corp.* 4,700 89,300
PMI Group, Inc.* 22,400 977,200
Safeco Corp. 39,800 1,333,300
Travelers, Inc. 37,300 2,461,800
-----------
10,914,785
-----------
Total Finance 31,107,003
-----------
Science & Technology 10.8%
Aerospace 1.8%
Boeing Co. 51,200 4,435,200
Bombardier, Inc. Cl. B* 85,200 1,257,536
Honeywell, Inc. 7,500 414,375
Ladish Company, Inc. Wts.*++ 52,000 15,600
Rolls Royce PLC 400,000 1,315,629
Sequa Corp.* 12,500 426,563
-----------
7,864,903
-----------
Computer Software & Service 3.5%
Boca Research, Inc.* 17,300 315,725
Cerner Corp.* 21,600 502,200
Cisco Systems, Inc.* 46,500 2,156,438
Computervision Corp.* 181,800 1,886,175
Comshare, Inc.* 14,600 335,800
Datastream Systems, Inc.* 18,700 406,725
Desktop Data, Inc. 11,600 426,300
Discreet Logic, Inc.* 12,000 165,000
Enterprise Systems, Inc.* 6,400 176,800
General Motors Corp. Cl. E 20,200 1,151,400
--------------------------------------------------------------------------------------------------
Value
Shares (Note 1)
--------------------------------------------------------------------------------------------------
Computer Software & Service (cont'd)
Hyperion Software Corp.* 38,400 $ 835,200
Inso Corp.* 2,100 96,862
Intersolv, Inc.* 50,300 584,738
On Technologies Corp.* 35,300 388,300
Pixar* 8,200 182,450
SAP AG ADR+ 34,300 1,637,825
Spyglass, Inc.* 4,600 99,475
Sync Research, Inc.* 5,500 86,625
System Soft Corp.* 23,200 371,200
Teltrend, Inc.* 13,200 600,600
Videoserver, Inc.* 18,300 462,075
Western Digital Corp.* 76,000 1,463,000
Wonderware Corp.* 31,000 728,500
-----------
15,059,413
-----------
Electronic Components 0.6%
AMP, Inc. 15,500 641,313
BBC Brown Boveri AG* 775 942,849
Mosaid Technologies, Inc.* 9,100 170,187
Thomas & Betts Corp. 7,800 585,000
U.S. Order, Inc.* 10,900 223,450
-----------
2,562,799
-----------
Electronic Equipment 3.1%
Alcatel Alsthom 16,000 1,483,282
Berg Electronics Corp.* 5,000 117,500
Itron, Inc.* 15,400 689,150
L.M. Ericsson Telephone Co. Cl. B ADR* 109,780 2,346,548
L.M. Ericsson Telephone Co. Cl. B 96,800 2,131,201
Nokia Corp.* 23,300 804,558
Perkin-Elmer Corp. 96,200 5,206,825
Tokyo Electronics Ltd. 22,000 750,642
Wireless One, Inc. Wts.* 750 5,250
-----------
13,534,956
-----------
Office Equipment 1.8%
Digital Equipment Corp.* 60,600 3,340,575
Filenet Corp.* 9,400 542,850
HMT Technology Corp.* 15,000 156,563
International Business Machines Corp. 34,500 3,833,812
-----------
7,873,800
-----------
Total Science & Technology 46,895,871
-----------
Utility 3.8%
Electric 0.4%
Allegheny Power Systems, Inc. 13,200 400,950
American Electric Power, Inc. 19,300 805,775
Texas Utilities Co. 8,400 347,550
-----------
1,554,275
-----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
10
<PAGE>
STATE STREET RESEARCH MANAGED ASSETS
-----------------------------------------------------------------------------
INVESTMENT PORTFOLIO (cont'd)
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
Value
Shares (Note 1)
--------------------------------------------------------------------------------------------------
<S> <C> <C>
Natural Gas 0.8%
Coastal Corp. 30,300 $ 1,196,850
ENSERCH Corp.+++ 154,700 2,513,875
-----------
3,710,725
-----------
Telephone 2.6%
Air Touch Communications, Inc.* 110,700 3,445,538
Allen Group, Inc. 19,100 370,062
BCE, Inc. 30,000 1,061,250
Colonial Data Technologics, Inc.* 19,200 424,800
Geotek Communications, Inc.* 19,200 196,800
IntelCom Group, Inc. Wts.*+ 1,650 16,500
Orange PLC* 532,800 1,797,143
Rural Cellular Corp. Cl. A* 6,100 70,150
Southern New England Telecom Corp. 17,300 696,325
Sprint Corp.* 18,200 705,250
Tele Danmark AS Cl. B ADR 19,750 1,028,989
Telecom Italia Mobile SPA* 925,000 1,017,927
Tel-Save Holdings, Inc.* 22,200 374,625
-----------
11,205,359
-----------
Total Utility 16,470,359
-----------
Total Equity Securities (Cost $194,944,319) 234,361,524
-----------
EQUITY SECURITIES--INFLATION RESPONSIVE INVESTMENTS 12.2%
Basic Industries 3.4%
Chemical 1.1%
Agrium, Inc.*@ 137,200 1,762,163
Arcadian Corp.* 23,800 470,050
Cambrex Corp.@ 28,100 1,296,113
CFC International, Inc.* 50,000 587,500
Mississippi Chemical Corp. 8,200 166,050
Sociedad Quimicay Minera ADR* 8,000 418,000
-----------
4,699,876
-----------
Forest Product 0.1%
St. Laurent Paperboard, Inc.* 25,000 327,741
-----------
Metal & Mining 2.2%
Aber Resources Ltd.* 60,000 735,000
Aluminum Co. of America 15,000 939,375
AUR Resources, Inc.* 50,000 371,287
Coeur d'Alene Mines Corp. 70,000 1,478,750
Crown Resources Corp.* 125,000 812,500
Cyprus Amax Minerals Co. 25,000 706,250
Dia Met Minerals Ltd. Cl. A* 2,000 24,936
Dia Met Minerals Ltd. Cl. B* 20,000 278,694
Freeport-McMoRan Copper & Gold, Inc.* 20,000 632,500
Kinross Gold Corp.* 60,000 487,500
Maxxam Inc.* 25,000 1,221,875
--------------------------------------------------------------------------------------------------
Value
Shares (Note 1)
--------------------------------------------------------------------------------------------------
Metal & Mining (cont'd)
Royal Oaks Mines Ltd.* 100,000 $ 418,750
Santa Fe Pacific Gold Corp.* 10,000 160,000
Southernera Resources Ltd.* 100,000 550,055
TVX Gold, Inc.* 60,000 540,000
Western Garnet Ltd.* 100,000 337,367
-----------
9,694,839
-----------
Total Basic Industries 14,722,456
-----------
Energy 8.3%
Oil 5.9%
Abacan Resource Corp.*@ 446,100 1,895,925
Barrett Resources Corp.* 7,100 177,500
Basin Exploration, Inc.* 65,000 333,125
Benton Oil & Gas Co.* 14,400 226,800
Tom Brown Inc.*@ 104,100 1,470,413
Clayton Williams Energy, Inc. 41,498 160,805
Coho Energy, Inc.* 42,900 268,125
Crystal Oil Co.* 10,000 332,500
CS Resources Ltd.* 100,000 797,580
Discovery West Corp.* 50,000 165,016
Elan Energy, Inc.* 15,000 133,388
Flores & Rucks, Inc.* 18,100 334,850
Garnet Resources Corp.* 25,000 25,000
Gerrity Oil & Gas Corp.* 48,000 150,000
Global Natural Resources, Inc.*@ 186,200 2,467,150
Intensity Resources Ltd.* 161,300 350,164
Morgan Hydrocarbons, Inc.* 250,000 715,072
Morrison Middlefield Ltd.* 43,800 409,571
Nuevo Energy Co.*@ 94,400 2,714,000
Optima Petroleum Corp.* 43,100 123,912
Phoenix Resource Cos., Inc.*@ 252,800 6,035,600
Plains Resources Inc.*@ 150,000 1,359,375
Ranger Oil Ltd.*@ 370,700 2,594,900
Strike Energy, Inc.* 34,800 88,053
Summit Resources Ltd. 50,000 233,773
Swift Energy Co.@ 78,860 1,035,037
Triton Energy Corp. Cl. A 4,400 245,300
Ulster Petroleum Ltd. 178,000 669,050
United Meridian Corp.* 1,600 38,200
-----------
25,550,184
-----------
Oil Service 2.4%
Atwood Oceanics, Inc.@ 38,000 1,368,000
Dual Drilling Co.* 20,000 342,500
Energy Ventures, Inc.* 55,900 1,488,337
Falcon Drilling, Inc.* 18,900 420,525
Global Industries, Inc.* 45,800 961,800
Grant Geophysical, Inc.* 30,000 93,750
J. Ray McDermott SA* 17,000 329,375
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
STATE STREET RESEARCH MANAGED ASSETS
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
Value
Shares (Note 1)
--------------------------------------------------------------------------------------------------
<S> <C> <C>
Oil Service (cont'd)
Landmark Graphics Corp.*@ 52,300 $ 869,488
Nabors Industries, Inc.* 23,600 336,300
Noble Drilling Corp.* 112,000 1,428,000
Nowsco Well Service Ltd. 80,000 1,180,000
Rowan Companies, Inc. 89,100 1,136,025
Scientific Software-Intercomp Inc.* 40,000 110,000
Tuboscope Vetco International Corp.* 40,000 390,000
-----------
10,454,100
-----------
Total Energy 36,004,284
-----------
Utility 0.5%
Natural Gas 0.5%
Louis Dreyfus Natural Gas Corp.* 27,300 296,887
TransTexas Gas Corp.*@ 199,600 1,996,000
-----------
2,292,887
-----------
Total Utility 2,292,887
-----------
Total Equity Securities--Inflation Responsive Investments (Cost
$41,688,766) 53,019,627
-----------
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
Principal Maturity
Amount Date
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REPURCHASE AGREEMENTS 0.1%
State Street Bank and Trust Company, dated 3/29/96,
repurchase proceeds $340,057, collateralized by
$355,000 U.S. Treasury Bill, 5.625%, due 6/27/96,
market value $350,429 $340,000 4/01/1996 340,000
-----------
Total Repurchase Agreements (Cost $340,000) 340,000
-----------
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
Principal Maturity Value
Amount Date (Note 1)
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH EQUIVALENTS 7.3%
American Express Credit Corp., 5.50% $11,238,000 4/01/1996 $ 11,238,000
American Express Credit Corp., 5.45% 8,702,000 4/01/1996 8,702,000
American Express Credit Corp., 5.38% 1,181,000 4/03/1996 1,181,000
Deere & Co., 5.35% 7,463,000 4/03/1996 7,463,000
Ford Motor Credit Co., 5.27% 2,938,000 4/18/1996 2,938,000
-----------
Total Cash Equivalents (Cost $31,522,000) 31,522,000
-----------
Total Investments (Cost $387,233,484)--100.8% 437,072,304
Cash and Other Assets, Less Liabilities--(0.8)% (3,477,861)
-----------
Net Assets--100.0% $433,594,443
===========
Federal Income Tax Information:
At March 31, 1996, the net unrealized appreciation of investments based on cost
for Federal income tax purposes of $387,743,297 was as follows:
Aggregate gross unrealized appreciation for all investments in which there is an
excess of value over tax cost $ 59,828,643
Aggregate gross unrealized depreciation for all investments in which there is an
excess of tax cost over value (10,499,636)
-----------
$ 49,329,007
===========
</TABLE>
ADR and GDR stand for American Depositary Receipt and Global
Depositary Receipt, respectively, 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 March 31, 1996 were
$212,122 and $71,380 (0.02% 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 March 31, 1996 were
$12,791,682 and $13,282,262 (3.06% of net assets), respectively.
+++60,000 shares of ENSERCH Corp. and 30,000 shares of Oryx Energy Co.
are considered by the Adviser to be part of Inflation Responsive
Investments.
@113,700 shares of Abacan Resource Corp., 37,200 shares of Agrium
Inc., 5,500 shares of Atwood Oceanics, Inc., 14,300 shares of
Tom Brown, Inc., 13,100 shares of Cambrex Corp., 21,200 shares of
Global Natural Resources, Inc., 13,900 shares of Landmark Graphics
Corp., 22,000 shares of Nuevo Energy Co., 12,800 shares of Phoenix
Resource Companies, Inc., 23,700 shares of Plains Resources, Inc.,
66,600 shares of Ranger Oil Ltd., 36,800 shares of Swift Energy Co.
and 55,600 shares of TransTexas Gas Corp. are considered by the
Adviser to be part of Equity Securities.
TBA Represents "TBA" (to be announced) purchase commitment to purchase
securities for a fixed unit price at a future date beyond customary
settlement time. Although the unit price has been established, the
principal value has not been finalized and may vary by no more than 2%.
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
STATE STREET RESEARCH MANAGED ASSETS
-----------------------------------------------------------------------------
INVESTMENT PORTFOLIO (cont'd)
-----------------------------------------------------------------------------
Forward currency exchange contracts outstanding at March 31, 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 .72895 AUD $ (28,845) 4/24/96
Sell Australian dollars, buy U.S. dollars 1,141,000 AUD .74103 AUD (44,796) 4/24/96
Sell Australian dollars, buy U.S. dollars 5,033,000 AUD .75070 AUD (143,995) 5/15/96
Sell Australian dollars, buy U.S. dollars 451,500 AUD .75220 AUD (12,240) 5/15/96
Sell Canadian dollars, buy U.S. dollars 114,000 CAD .73276 CAD (100) 4/24/96
Sell Canadian dollars, buy U.S. dollars 1,631,977 CAD .72661 CAD (11,741) 5/15/96
Sell Canadian dollars, buy U.S. dollars 535,926 CAD .72648 CAD (3,926) 5/15/96
Sell Canadian dollars, buy U.S. dollars 2,845,074 CAD .73473 CAD 2,618 5/15/96
Sell Danish krone, buy U.S. dollars 1,233,200 DKK .17524 DKK (417) 4/24/96
Sell Danish krone, buy U.S. dollars 3,314,000 DKK .17783 DKK 7,451 4/24/96
Sell Danish krone, buy U.S. dollars 3,460,000 DKK .17513 DKK (1,541) 4/24/96
Sell U.S. dollars, buy Danish krone 1,514,900 DKK .17548 DKK 149 4/24/96
Sell Danish krone, buy U.S. dollars 32,335,000 DKK .17621 DKK 16,447 5/15/96
Sell Deutsche marks, buy U.S. dollars 3,269,911 DEM .67645 DEM (2,997) 4/01/96
Sell Deutsche marks, buy U.S. dollars 1,880,000 DEM .69867 DEM 39,293 4/09/96
Sell Deutsche marks, buy U.S. dollars 225,000 DEM .67916 DEM 193 4/24/96
Sell Deutsche marks, buy U.S. dollars 58,000 DEM .68937 DEM 642 4/24/96
Sell Deutsche marks, buy U.S. dollars 4,720,000 DEM .69334 DEM 70,951 4/24/96
Sell Deutsche marks, buy U.S. dollars 604,000 DEM .68169 DEM 1,517 5/15/96
Sell Deutsche marks, buy U.S. dollars 3,075,400 DEM .68381 DEM 14,230 5/15/96
Sell Deutsche marks, buy U.S. dollars 564,000 DEM .68311 DEM 2,215 5/15/96
Sell U.S. dollars, buy Deutsche marks 3,106,400 DEM .67820 DEM 3,058 5/15/96
Buy European currency units, sell U.S.
dollars 1,311,794 XEU 1.26200 XEU (6,880) 4/03/96
Sell European currency units, buy U.S.
dollars 1,259,500 XEU 1.26095 XEU 9,579 5/15/96
Sell French francs, buy U.S. dollars 16,735,262 FRF .20402 FRF 90,060 4/09/96
Sell French francs, buy U.S. dollars 6,104,881 FRF .19846 FRF (1,802) 4/24/96
Sell U.S. dollars, buy French francs 6,104,881 FRF .20125 FRF (15,266) 4/24/96
Sell U.S. dollars, buy French francs 9,354,500 FRF .20149 FRF (25,630) 4/24/96
Sell French francs, buy U.S. dollars 9,354,500 FRF .19822 FRF (5,006) 4/24/96
Sell Japanese yen, buy U.S. dollars 474,160,000 JPY .00971 JPY 164,439 4/09/96
Sell Italian lira, buy U.S. dollars 760,880,000 ITL .00062 ITL (9,466) 4/24/96
Sell Italian lira, buy U.S. dollars 233,200,000 ITL .00063 ITL (2,225) 4/24/96
Sell U.S. dollars, buy Italian lira 233,200,000 ITL .00062 ITL 4,385 4/24/96
Sell Pound sterling, buy U.S. dollars 311,800 GBP 1.53650 GBP 3,534 5/15/96
Sell U.S. dollars, buy Pound sterling 311,800 GBP 1.53250 GBP (2,287) 5/15/96
Sell Pound sterling, buy U.S. dollars 1,070,100 GBP 1.53657 GBP 11,994 5/15/96
Sell U.S. dollars, buy Pound sterling 1,070,100 GBP 1.53100 GBP (6,242) 5/15/96
Sell U.S. dollars, buy Pound sterling 1,193,812 GBP 1.52600 GBP 300 4/02/96
Sell Spanish peseta, buy U.S. dollars 121,251,466 ESP .00808 ESP 7,001 4/03/96
Sell Spanish peseta, buy U.S. dollars 149,598,545 ESP .00807 ESP 3,066 4/03/96
Sell Spanish peseta, buy U.S. dollars 106,785,000 ESP .00807 ESP 6,239 4/24/96
Sell Spanish peseta, buy U.S. dollars 131,750,000 ESP .00806 ESP 7,076 4/24/96
Sell Spanish peseta, buy U.S. dollars 100,000,000 ESP .00803 ESP (1,146) 4/24/96
Sell Spanish peseta, buy U.S. dollars 6,785,000 ESP .00807 ESP 221 4/24/96
Sell Spanish peseta, buy U.S. dollars 131,750,000 ESP .00802 ESP (2,105) 4/24/96
Sell Swiss franc, buy U.S. dollars 2,636,000 CHF .86546 CHF 62,638 4/09/96
---------
$ 200,643
=========
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
STATE STREET RESEARCH MANAGED ASSETS
-----------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
-----------------------------------------------------------------------------
March 31, 1996
<TABLE>
<CAPTION>
<S> <C>
Assets
Investments, at value (Cost $387,233,484) (Note 1) $437,072,304
Cash 4,959
Receivable for securities sold 8,448,720
Interest and dividends receivable 2,267,871
Receivable for open forward contracts 529,296
Receivable for fund shares sold 430,603
Receivable from Distributor (Note 3) 36,339
Other assets 12,773
-----------
448,802,865
Liabilities
Payable for securities purchased 13,555,653
Payable for open forward contracts 328,653
Payable for fund shares redeemed 314,144
Accrued management fee (Note 2) 271,556
Accrued transfer agent and shareholder services
(Note 2) 238,808
Accrued distribution fee and service fees (Note 5) 214,017
Dividends payable 88,059
Accrued trustees' fees (Note 2) 8,486
Other accrued expenses 189,046
-----------
15,208,422
-----------
Net Assets $433,594,443
===========
Net Assets consist of:
Undistributed net investment income $ 3,185,167
Unrealized appreciation of investments 49,838,820
Unrealized appreciation of forward contracts
and foreign currency 207,666
Accumulated net realized gain 12,963,312
Shares of beneficial interest 367,399,478
-----------
$433,594,443
===========
Net Asset Value and redemption price per share of
Class A shares ($207,712,953 (Division sign)
20,191,806 shares of beneficial interest) $10.29
===========
Maximum Offering Price per share of Class A shares
($10.29 (Division sign) .955) $10.77
===========
Net Asset Value and offering price per share of
Class B shares ($193,272,356 (Division sign)
18,846,845 shares of beneficial interest)* $10.25
===========
Net Asset Value, offering price and redemption
price per share of Class C shares ($19,547,904
(Division sign) 1,900,101 shares of
beneficial interest) $10.29
===========
Net Asset Value and offering price per share of
Class D shares ($13,061,230 (Division sign)
1,272,086 shares of beneficial interest)* $10.27
===========
</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 year ended March 31, 1996
<TABLE>
<CAPTION>
<S> <C>
Investment Income
Interest, net of foreign taxes of $1,958 $11,112,990
Dividends, net of foreign taxes of $96,738 3,480,290
----------
14,593,280
Expenses
Management fee (Note 2) 3,051,182
Transfer agent and shareholder services (Note 2) 993,574
Custodian fee 379,456
Reports to shareholders 153,286
Service fee--Class A (Note 5) 485,516
Distribution and service fees--Class B (Note 5) 1,715,683
Distribution and service fees--Class D (Note 5) 129,513
Audit fee 67,254
Registration fees 61,824
Trustees' fees (Note 2) 33,588
Miscellaneous 42,336
----------
7,113,212
Expenses borne by the Distributor (Note 3) (715,739)
----------
6,397,473
----------
Net investment income 8,195,807
----------
Realized and Unrealized Gain on Investments,
Foreign Currency and Forward Contracts
Net realized gain on investments (Notes 1 and 4) 32,926,773
Net realized gain on forward contracts and foreign
currency (Note 1) 1,006,886
----------
Total net realized gain 33,933,659
----------
Net unrealized appreciation of investments 37,405,073
Net unrealized appreciation of forward contracts
and foreign currency 632,620
----------
Total net unrealized appreciation 38,037,693
----------
Net gain on investments, foreign currency and
forward contracts 71,971,352
----------
Net increase in net assets resulting from
operations $80,167,159
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
STATE STREET RESEARCH MANAGED ASSETS
-----------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
-----------------------------------------------------------------------------
Notes to Financial Statements
March 31, 1996
<TABLE>
<CAPTION>
Year ended March 31
----------------------------
1996 1995
------------------------------------------------------------
<S> <C> <C>
Increase (Decrease) in Net Assets
Operations:
Net investment income $ 8,195,807 $ 9,683,302
Net realized gain (loss) on
investments, foreign
currency and forward
contracts* 33,933,659 (14,798,019)
Net unrealized appreciation
of investments, foreign
currency and forward
contracts 38,037,693 10,188,263
--------- -----------
Net increase resulting from
operations 80,167,159 5,073,546
--------- -----------
Dividends from net investment income:
Class A (5,148,650) (3,550,468)
Class B (3,355,386) (1,701,801)
Class C (819,460) (551,533)
Class D (240,897) (145,276)
--------- -----------
(9,564,393) (5,949,078)
--------- -----------
Distributions from net realized gains:
Class A (3,056,467) (2,686,125)
Class B (2,771,674) (1,571,333)
Class C (490,395) (352,065)
Class D (194,112) (134,219)
--------- -----------
(6,512,648) (4,743,742)
--------- -----------
Net increase (decrease) from
fund share transactions
(Note 6) (2,678,848) 99,996,131
--------- -----------
Total increase in net assets 61,411,270 94,376,857
Net Assets
Beginning of year 372,183,173 277,806,316
--------- -----------
End of year (including
undistributed net
investment income of
$3,185,167 and $1,018,118,
respectively) $433,594,443 $372,183,173
========= ===========
* Net realized gain (loss)
for Federal income tax
purposes (Note 1) $ 20,102,035 $ (2,823,098)
========= ===========
</TABLE>
-----------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------------------------------------------------------
March 31, 1996
Note 1
State Street Research Managed Assets, formerly MetLife-State Street Research
Managed Assets (the "Fund") is a series of State Street Research Income
Trust, formerly MetLife-State Street 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 market transactions, quotations from dealers,
and various relationships among securities in determining value. Short-term
securities maturing
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
STATE STREET RESEARCH MANAGED ASSETS
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
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 among all 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.
In order to meet certain excise tax distribution requirements under Section
4982 of the Internal Revenue Code, the Fund is required to measure and
distribute annually, if necessary, net capital gains realized during a
twelve-month period ending October 31. In this connection, the Fund is
permitted to defer into its next fiscal year any net capital losses incurred
between each November 1 and the end of its fiscal year. From November 1, 1994
through March 31, 1995, the Fund incurred net capital losses of $9,216,832
and has deferred and treated such losses as arising in the fiscal year ended
March 31, 1996.
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 year ended March 31, 1996, the fees pursuant to
such agreement amounted to $3,051,182.
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 year ended March 31, 1996, the
amount of such expenses was $300,306.
The fees of the Trustees not currently affiliated with the Adviser amounted
to $33,588 during the year ended March 31, 1996.
16
<PAGE>
STATE STREET RESEARCH MANAGED ASSETS
-----------------------------------------------------------------------------
NOTES (cont'd)
-----------------------------------------------------------------------------
Note 3
The Distributor and its affiliates may from time to time and in varying
amounts voluntarily assume some portion of fees or expenses relating to the
Fund. During the year ended March 31, 1996, the amount of such expenses
assumed by the Distributor and its affiliates was $715,739.
Note 4
For the year ended March 31, 1996, purchases and sales of securities,
exclusive of short-term obligations and forward foreign currency exchange
contracts, aggregated $427,699,736 and $420,688,677 (including $85,515,603
and $109,041,576 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 of shareholder accounts, to reimburse
securities dealers for distribution and marketing services, to furnish
ongoing assistance to investors and to defray a portion of its distribution
and marketing expenses. For the year ended March 31, 1996, fees pursuant to
such plan amounted to $485,516, $1,715,683 and $129,513 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 $107,358 and $708,640, respectively, on sales of Class A shares
of the Fund during the year ended March 31, 1996, and that MetLife
Securities, Inc. earned commissions aggregating $1,104,124 on sales of Class
B shares, and the Distributor collected contingent deferred sales charges
aggregating $965,398 and $6,098 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 March 31, 1996 the Distributor owned one Class A share of the Fund.
Share transactions were as follows:
<TABLE>
<CAPTION>
Year ended March 31
--------------------------------------------------------
1996 1995
------------------------- ---------------------------
Class A Shares Amount Shares Amount
- -------------------------------------- ---------- ----------- ---------- -------------
<S> <C> <C> <C> <C>
Shares sold 3,142,066 $ 30,625,584 6,602,965 $ 57,372,536
Issued upon reinvestment of:
Dividends from net investment income 505,011 4,934,090 392,651 3,377,080
Distributions from net realized gains 307,042 2,969,095 297,451 2,584,847
Shares repurchased (4,460,168) (43,019,460) (5,156,516) (44,295,455)
-------- --------- -------- -----------
Net increase (decrease) (506,049) $ (4,490,691) 2,136,551 $ 19,039,008
======== ========= ======== ===========
</TABLE>
<TABLE>
<CAPTION>
Class B Shares Amount Shares Amount
- -------------------------------------- ---------- ------------ ---------- -------------
<S> <C> <C> <C> <C>
Shares sold 3,862,169 $ 37,612,607 10,279,851 $ 88,909,733
Issued upon reinvestment of:
Dividends from net investment income 332,475 3,235,190 189,138 1,630,253
Distributions from net realized gains 281,171 2,710,479 176,093 1,524,943
Shares repurchased (3,052,294) (29,408,533) (2,549,340) (21,785,748)
-------- ---------- -------- -----------
Net increase 1,423,521 $ 14,149,743 8,095,742 $ 70,279,181
======== ========== ======== ===========
Class C Shares Amount Shares Amount
- -------------------------------------- -------- ---------- -------- -----------
Shares sold 1,072,850 $ 10,385,513 1,583,387 $ 13,778,442
Issued upon reinvestment of:
Dividends from net investment income 84,178 819,983 63,889 549,690
Distributions from net realized gains 50,697 489,441 40,418 351,228
Shares repurchased (2,251,394) (22,256,352) (1,139,442) (9,788,334)
-------- ---------- -------- -----------
Net increase (decrease) (1,043,669) $(10,561,415) 548,252 $ 4,891,026
======== ========== ======== ===========
Class D Shares Amount Shares Amount
- -------------------------------------- -------- ---------- -------- -----------
Shares sold 252,653 $ 2,474,692 844,434 $ 7,326,800
Issued upon reinvestment of:
Dividends from net investment income 22,570 219,580 14,873 128,335
Distributions from net realized gains 18,905 182,432 14,278 123,793
Shares repurchased (482,326) (4,653,189) (209,961) (1,792,012)
-------- ---------- -------- -----------
Net increase (decrease) (188,198) $ (1,776,485) 663,624 $ 5,786,916
======== ========== ======== ===========
</TABLE>
17
<PAGE>
STATE STREET RESEARCH MANAGED ASSETS
-----------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------------------
For a share outstanding throughout each year:
<TABLE>
<CAPTION>
Class A
---------------------------------------------------
Year ended March 31
---------------------------------------------------
1996*** 1995 1994 1993 1992
- ----------------------------------------------------- ------- ------- ------- ------ --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $8.76 $8.94 $8.94 $8.22 $7.61
Net investment income* .23 .27 .22 .27 .37
Net realized and unrealized gain (loss) on
investments and forward contracts 1.72 (.14) .72 1.01 .62
Dividends from net investment income (.26) (.17) (.22) (.25) (.38)
Distributions from net realized gains (.16) (.14) (.72) (.31) --
----- ----- ----- ---- ------
Net asset value, end of year $10.29 $8.76 $8.94 $8.94 $8.22
===== ===== ===== ==== ======
Total return 22.55%+ 1.52%+ 10.96%+ 16.54%+ 13.29%+
Net assets at end of year (000s) $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%
Ratio of net investment income to average net assets* 2.34% 3.11% 2.75% 3.26% 4.60%
Portfolio turnover rate 109.20% 89.58% 105.17% 142.86% 97.76%
*Reflects voluntary assumption of fees
or expenses per share in each year (Note 3) $.02 $.03 $.02 $.02 $.02
</TABLE>
<TABLE>
<CAPTION>
Class B Class C
------------------------------------ ------------------------------
Year ended March 31 Year ended March 31
------------------------------------ ------------------------------
1996*** 1995 1994** 1996*** 1995 1994**
- --------------------------------- ------- --------- ------------ ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
year $8.74 $8.92 $8.78 $8.77 $8.95 $8.78
Net investment income* .15 .20 .16 .25 .29 .21
Net realized and unrealized gain
(loss) on investments and
forward contracts 1.71 (.13) .39 1.71 (.14) .43
Dividends from net investment
income (.19) (.11) (.18) (.28) (.19) (.24)
Distributions from net realized
gains (.16) (.14) (.23) (.16) (.14) (.23)
----- ------- ---------- ------ ------ ------
Net asset value, end of year $10.25 $8.74 $8.92 $10.29 $8.77 $8.95
===== ======= ========== ====== ====== ======
Total return 21.48%+ 0.82%+ 6.26%+++ 22.70%+ 1.77%+ 7.27%+++
Net assets at end of year (000s) $193,272 $152,251 $83,244 $19,548 $25,803 $21,434
Ratio of operating expenses to
average net assets* 2.00% 2.00% 2.00%++ 1.00% 1.00% 1.00%++
Ratio of net investment income to
average net assets* 1.59% 2.38% 2.03%++ 2.59% 3.37% 3.03%++
Portfolio turnover rate 109.20% 89.58% 105.17% 109.20% 89.58% 105.17%
*Reflects voluntary assumption of
fees or expenses per share in
each year (Note 3) $.02 $.03 $.03 $.02 $.03 $.02
</TABLE>
<TABLE>
<CAPTION>
Class D
------------------------------------------
Year ended March 31
------------------------------------------
1996*** 1995 1994**
- --------------------------------- ----------- ----------- -------------
<S> <C> <C> <C>
Net asset value, beginning of
year $8.75 $8.93 $8.78
Net investment income* .15 .20 .16
Net realized and unrealized gain
(loss) on investments and
forward contracts 1.72 (.13) .40
Dividends from net investment
income (.19) (.11) (.18)
Distributions from net realized
gains (.16) (.14) (.23)
--------- --------- -----------
Net asset value, end of year $10.27 $8.75 $8.93
========= ========= ===========
Total return 21.54%+ 0.82%+ 6.31%+++
Net assets at end of year (000s) $13,061 $12,772 $7,117
Ratio of operating expenses to
average net assets* 2.00% 2.00% 2.00%++
Ratio of net investment income to
average net assets* 1.60% 2.39% 2.03%++
Portfolio turnover rate 109.20% 89.58% 105.17%
*Reflects voluntary assumption of
fees or expenses per share in
each year (Note 3) $.02 $.03 $.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.
18
<PAGE>
- -----------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
-----------------------------------------------------------------------------
To the Trustees of State Street Research Income Trust and
the Shareholders of State Street Research Managed Assets
In our opinion, the accompanying statement of assets and liabilities,
including the investment portfolio, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in
all material respects, the financial position of State Street Research
Managed Assets (formerly MetLife-State Street Research Managed Assets) (a
series of State Street Research Income Trust, hereafter referred to as the
"Trust") at March 31, 1996, and the results of its operations, the changes in
its net assets and the financial highlights for the periods indicated, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Trust's management; our
responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at March 31, 1996, by correspondence with the
custodian and brokers and the application of alternative procedures where
confirmations from brokers were not received, provide a reasonable basis for
the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
May 10, 1996
19
<PAGE>
STATE STREET RESEARCH MANAGED ASSETS
-----------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
-----------------------------------------------------------------------------
The stock and bond markets both had strong years, which benefited the Fund's
performance. Managed Assets had its portfolio diversified over a variety of
stocks and bonds that provided a range of returns over the period. Stocks
provided the biggest boost, particularly larger domestic issues. Although
they represented a small part of the portfolio, inflation-responsive
securities were the strongest performers in the portfolio. Managed Assets
bond holdings also had positive returns.
The Fund's diversified portfolio helped it weather the volatility in interest
rates and the markets in early 1996. Over the past 12 months, the Fund's
diversification limited the effect that any single market had on its
performance.
The Fund maintained its emphasis on stocks and made only minor adjustments to
its asset allocation. In April 1995, the Fund had 52% in stocks, 35% in
bonds, 10% in inflation-responsive securities and 3% in cash. In July, the
Fund moved about 5% of the portfolio from bonds to stocks, profiting from the
sale of high-grade bonds. On March 31, 1996, the portfolio contained 54%
stocks, 27% bonds, 12% inflation-responsive securities and 7% in cash.
March 31, 1996
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. Performance reflects
maximum 4.5% "A" share front-end, or 5% "B" share or 1% "D" share contingent
deferred, sales charges. "C" shares, offered without a sales charge, are
available only to certain employee benefit plans and institutions. "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. 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. Lehman Brothers
Government/Corporate Index is a commonly used index of bond market
performance. Indices are unmanaged and do not take sales charges into
consideration. Direct investment in the indices are not possible; results are
for illustrative purposes only.
Comparison Of Change In Value Of A $10,000
Investment In Managed Assets, The S&P 500 And
The Lehman Brothers Government/Corporate Index
[Description of Line Chart for Class A Shares]
Class A Shares
- --------------------------------------------
Average Annual Total Return
- --------------------------------------------
1 Year 5 Year Life of Fund
+17.03% +11.72% +10.70%
- --------------------------------------------
Managed LB Gov't/ S&P
Assets Corp Index 500
12/88 $ 9,550 $10,000 $10,000
3/89 9,957 10,111 10,708
3/90 11,030 11,293 12,767
3/91 11,478 12,703 14,603
3/92 13,003 14,149 16,212
3/93 15,154 16,172 18,678
3/94 16,815 16,621 18,951
3/95 17,070 17,381 21,896
3/96 20,918 19,280 28,918
[Description of Line Chart for Class B Shares]
Class B Shares
- --------------------------------------------
Average Annual Total Return
- --------------------------------------------
1 Year 5 Year Life of Fund
+16.48% +12.00% +11.07%
- --------------------------------------------
Managed LB Gov't/ S&P
Assets Corp Index 500
12/88 $10,000 $10,000 $10,000
3/89 10,426 10,111 10,708
3/90 11,550 11,293 12,767
3/91 12,019 12,703 14,603
3/92 13,616 14,149 16,212
3/93 15,868 16,172 18,678
3/94 17,495 16,621 18,951
3/95 17,638 17,381 21,896
3/96 21,425 19,280 28,918
[Description of Line Chart for Class C Shares]
Class C Shares
- --------------------------------------------
Average Annual Total Return
- --------------------------------------------
1 Year 5 Year Life of Fund
+22.70% +12.91% +11.51%
- --------------------------------------------
Managed LB Gov't/ S&P
Assets Corp Index 500
12/88 $10,000 $10,000 $10,000
3/89 10,426 10,111 10,708
3/90 11,550 11,293 12,767
3/91 12,019 12,703 14,603
3/92 13,616 14,149 16,212
3/93 15,868 16,172 18,678
3/94 17,661 16,621 18,951
3/95 17,974 17,381 21,896
3/96 22,053 19,280 28,918
[Description of Line Chart for Class D Shares]
Class D Shares
- --------------------------------------------
Average Annual Total Return
- --------------------------------------------
1 Year 5 Year Life of Fund
+20.54% +12.28% +11.08%
- --------------------------------------------
Managed LB Gov't/ S&P
Assets Corp Index 500
12/88 $10,000 $10,000 $10,000
3/89 10,426 10,111 10,708
3/90 11,550 11,293 12,767
3/91 12,019 12,703 14,603
3/92 13,616 14,149 16,212
3/93 15,868 16,172 18,678
3/94 17,504 16,621 18,951
3/95 17,647 17,381 21,896
3/96 21,449 19,280 28,918
LEGEND
-------------------------------------------------------
+++++ Managed Assets ===== LB Gov't/Corp Index
- ----- S&P 500
-------------------------------------------------------
20
<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
Exchange Place
Boston, MA 02109
Independent Accountants
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110
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
21
<PAGE>
[Back Cover]
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: 3146-960522(0697)SSR-LD
Cover Illustration by Dorothy Cullinan MA-273D-596
