<PAGE>
-------------------------------
STATE STREET RESEARCH
HIGH INCOME FUND
-------------------------------
SEMIANNUAL REPORT
September 30, 1997
WHAT'S INSIDE
INVESTMENT UPDATE
About the Fund,
economy and markets
FUND INFORMATION
Facts and figures
PLUS, COMPLETE PORTFOLIO HOLDINGS
AND FINANCIAL STATEMENTS
[Graphic Omitted]
For Excellence
in
Shareholder Service
STATE STREET RESEARCH FUNDS
<PAGE>
STATE STREET RESEARCH HIGH INCOME FUND
- --------------------------------------------------------------------------------
INVESTMENT UPDATE
- --------------------------------------------------------------------------------
INVESTMENT ENVIRONMENT
THE ECONOMY
* The economy slowed to a moderate pace in the second and third quarter of 1997,
reducing fears that had been raised by a stronger-than-expected first quarter.
Employment is high, personal income has increased, and Americans are the most
confident they have been in close to 30 years. The consensus of outside
experts is for 1997 growth in real GNP to average around 3% for the year.
* The Federal Reserve Board has kept short term interest rates at 5.50%,
unchanged throughout the past six months.
* Inflation remained low, although it actually picked up after declining through
the middle of the year. The Consumer Price Index, a common measure of
inflation, was up 2.2% (an annualized figure) versus one year ago. Wholesale
prices have declined during the period.
THE MARKETS
* High yield bonds led other U.S. fixed income sectors throughout the six month
period. The strongest performance came from the lowest-rated high yield bonds,
not surprising in the context of a robust economy.
* Yields fell to historically low levels, the result of heavy demand. For the
six months ended September 30, 1997, the First Boston High Yield Index, a
measure of high yield bond performance, was up 9.23%(1) compared to the Lehman
Brothers Aggregate Bond Index, a measure of a mix of government and corporate
bonds, which rose 7.12%(1).
* The U.S. stock market lost some ground early in the period then turned around
to resume its climb past the 8,000 mark. The S&P 500 rose 26.24%(1) for the
six months ended September 30, 1997.
THE FUND
OVER THE PAST SIX MONTHS
* Class A shares of State Street Research High Income Fund provided a total
return of 13.24%(2) for the six months ended September 30, 1997 (without sales
charge), significantly outpacing the average high current yield fund, which
gained 10.99% during the same period, according to Lipper Analytical Services.
* The Fund's largest investments were in the strong-performing communications
sector, which helped performance.
* The Fund also benefited from its focus on "B" rated bonds and zero coupon
bonds, both of which did well.
CURRENT STRATEGY
* We will continue to overweight "B" rated bonds for their higher yields and
lower vulnerability to changing interest rates. And, we will maintain our
large position in the communications sector.
* Our outlook is for continued slow growth and relatively stable interest rates
for the period ahead. In that context, we believe the environment for high
yield bonds remains positive.
September 30, 1997
(1) The Standard & Poor's 500 Composite Index (S&P 500) is a market-value
weighted index composed of 500 widely held common stocks. The Lehman
Brothers Aggregate Bond Index is a market value weighted index of fixed-rate
debt issues, including U.S. treasury, agency and corporate bond issues, and
mortgaged/backed securities. The First Boston High Yield Index is a commonly
used measure of high yield bond performance. The indices are unmanaged and
do not take transaction charges into consideration. Direct investment in the
indices is not possible; results are for illustrative purposes only.
(2) +12.89% for Class B shares; +13.45% for Class C shares; +12.87% for Class D
shares.
(3) All returns represent past performance, which is no guarantee of future
results. The investment return and principal value of an investment made in
the Fund will fluctuate and shares, when redeemed, may be worth more or less
than their original cost. All returns assume reinvestment of capital gain
distributions and income dividends. In January 1994, the Fund changed its
investment objective to include capital appreciation as a secondary part of
its objective, and to allow greater use of lower rated securities.
Performance for a class includes periods prior to the adoption of class
designations in 1993, which resulted in new or increased 12b-1 fees of up to
1% per class thereafter and which will reduce subsequent performance. "C"
shares, offered without a sales charge, are available only to certain
employee benefit plans and large institutions.
(4) Performance reflects up to maximum 4.5% "A" share front-end
(5) Cumulative total returns are not annual- ized, nor do they reflect sales
charges, which, if reflected, would reduce performance.
PLEASE NOTE THAT THE DISCUSSION THROUGHOUT THIS SHAREHOLDER REPORT IS DATED AS
INDICATED AND, BECAUSE OF POSSIBLE CHANGES IN VIEWPOINT, DATA AND TRANSACTIONS,
SHOULD NOT BE RELIED UPON AS BEING CURRENT THEREAFTER.
- --------------------------------------------------------------------------------
FUND INFORMATION (all data are for periods ended September 30, 1997)
- --------------------------------------------------------------------------------
SEC AVERAGE ANNUAL COMPOUND RATES OF RETURN
(at maximum applicable sales charge)(3)(4)
- ------------------------------------------------------------------------
10 YEARS 5 YEARS 1 YEAR
- ------------------------------------------------------------------------
Class A +10.67% +11.72% +10.70%
- ------------------------------------------------------------------------
Class B +10.79% +11.71% +10.14%
- ------------------------------------------------------------------------
Class C +11.26% +12.93% +16.29%
- ------------------------------------------------------------------------
Class D +10.80% +11.98% +14.12%
- ------------------------------------------------------------------------
CUMULATIVE TOTAL RETURNS
(do not reflect sales charge)(3)(5)
- ------------------------------------------------------------------------
10 YEARS 5 YEARS 1 YEAR
- ------------------------------------------------------------------------
Class A +188.70% +82.26% +15.92%
- ------------------------------------------------------------------------
Class B +178.73% +75.96% +15.14%
- ------------------------------------------------------------------------
Class C +190.98% +83.70% +16.29%
- ------------------------------------------------------------------------
Class D +178.98% +76.12% +15.12%
- ------------------------------------------------------------------------
ASSET ALLOCATION
(by percentage of net assets)
B 66%
CONVERTIBLE 12%
COMMON STOCKS 9%
PREFERRED STOCKS 4%
CCC 4%
BB 3%
CASH 2%
Quality ratings based on those provided by Standard & Poor's Corp. and/or
equivalent ratings by Moody's Investors Service, Inc.
* 9% of the above bonds were unrated and included among relevant rating
categories as determined by the Fund's manager.
TOP 5 INDUSTRIES
(by percentage of net assets)
COMMUNICATIONS 20.8%
CONSUMER GOODS 14.8%
MEDIA 12.3%
SHIPPING 5.0%
OIL 4.8%
Total: 57.7%
<PAGE>
STATE STREET RESEARCH HIGH INCOME FUND
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------
September 30, 1997 (Unaudited)
- ---------------------------------------------------------------------------------------------------------------
PRINCIPAL MATURITY VALUE
AMOUNT DATE (NOTE 1)
- ---------------------------------------------------------------------------------------------------------------
PRINCIPAL MATURITY VALUE
AMOUNT DATE (NOTE 1)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BONDS 73.2%
AEROSPACE/DEFENSE 1.9%
Argo-Tech Corp. Sr. Sub. Note, 8.625%+ ............ $4,250,000 10/01/2007 $ 4,260,625
--------------
Haynes International Inc. Sr. Note, 11.625% ....... 2,240,000 9/01/2004 2,587,200
L3 Communications Corp. Sr. Sub. Note, 10.375%+ ... 2,625,000 5/01/2007 2,835,000
Ladish Company, Inc. Sr. Sub. Note, 12.00%(+)@ .... 210,600 12/22/2000 221,555
Ladish Company, Inc. Sr. Sub. Note, 12.00%(+)# .... 1,029,250 12/22/2000 1,067,095
Tracor Inc. Sr. Sub. Deb., 8.50% .................. 3,000,000 3/01/2007 3,075,000
Wyman-Gordon Co. Sr. Note, 10.75% ................. 5,390,000 3/15/2003 5,753,825
--------------
19,800,300
--------------
AUTOMOTIVE PARTS 0.2%
Exide Corp. Sr. Note, 10.00% ...................... 2,250,000 4/15/2005 2,385,000
--------------
CABLE TELEVISION 1.6%
American Telecasting Inc. Sr. Note, 0.00% to
6/14/99, 14.50% from 6/15/99 to maturity ........ 17,785,372 6/15/2004 6,580,588
American Telecasting Inc. Sr. Note Series B, 0.00%
to 8/14/2000, 14.50% from
8/15/2000 to maturity ........................... 2,265,000 8/15/2005 770,100
Marcus Cable Co. L.P. Sr. Deb., 11.875% 6,500,000 10/01/2005 7,109,375
Marcus Cable Co. L.P. Sr. Note, 0.00% to 6/14/2000,
14.25% from 6/15/2000 to maturity ............... 2,750,000 12/15/2005 2,282,500
--------------
16,742,563
--------------
CAPITAL GOODS/EQUIPMENT 2.7%
Alvey Systems Inc. Sr. Sub. Note, 11.375% ......... 7,375,000 1/31/2003 7,743,750
Axiohm Inc. Sr. Sub. Note, 9.75%+ ................. 2,000,000 10/01/2007 2,022,500
Celestica International Inc. Series B Note, 10.50% 2,750,000 12/31/2006 2,980,312
International Knife & Saw Inc. Sr. Sub. Note,
11.375% ......................................... 3,000,000 11/15/2006 3,262,500
Tokheim Corp. Sr. Sub. Note Series B, 11.50% ...... 11,250,000 8/01/2006 12,684,375
--------------
28,693,437
--------------
CHEMICAL 0.2%
Pioneer Americas Acquisition Corp. Sr. Sec. Note,
9.25%+ .......................................... 1,750,000 6/15/2007 1,750,000
--------------
CONGLOMERATE 1.2%
Amphenol Corp. Sr. Sub. Note, 9.875% .............. 2,000,000 5/15/2007 2,080,000
Axia Inc. Sr. Sub. Note Series B, 11.00% 394,000 3/15/2001 399,910
ICF International Inc. Sr. Sub. Note, 13.00% ...... 9,500,000 12/31/2003 9,903,750
--------------
12,383,660
--------------
CONSUMER GOODS & SERVICES 13.2%
Anchor Advanced Products Inc. Sr. Note Series B,
11.75%+ ......................................... $3,000,000 4/01/2004 $ 3,210,000
Coleman Holdings Corp. Sr. Sec. Note, 0.00%+ ...... 8,500,000 5/15/2001 5,121,250
Drypers Corp. Series B Sr. Note, 10.25%+ 9,250,000 6/15/2007 9,296,250
Empire Gas Corp. Sr. Sec. Note, 7.00% to 7/14/99,
12.875% from 7/15/99 to maturity ................ 14,000,000 7/15/2004 13,230,000
French Fragrances Inc. Sr. Note Series B, 10.375% . 11,000,000 5/15/2007 11,550,000
Intertek Finance PLC Series B Sr. Sub. Note, 10.25%
................................................. 15,400,000 11/01/2006 16,247,000
La Petite Holdings Corp. Sr. Sec. Note, 9.625% .... 10,750,000 8/01/2001 11,018,750
Muzak L.P. Sr. Note, 10.00% ....................... 3,000,000 10/01/2003 3,150,000
NBTY Inc. Sr. Sub. Note, 8.625%+ .................. 1,400,000 9/15/2007 1,393,000
Norcal Waste Systems Inc. Sr. Note Series B, 13.25%
to 11/14/97, 13.50%
from 11/15/97 to maturity ....................... 7,940,000 11/15/2005 8,972,200
North Atlantic Trading Inc. Sr. Note, 11.00%+ ..... 12,000,000 6/15/2004 12,600,000
Pagemart Nationwide Inc. Sr. Exch. Note, 0.00% to
1/31/2000, 15.00%
from 2/1/2000 to maturity ....................... 25,275,000 2/01/2005 20,472,750
Real Time Data Inc. Sub. Note, 0.00% to 8/14/2001,
13.50% from 8/15/2001 to maturity+ .............. 25,250,000 8/15/2006 15,023,750
Spinnaker Industries Inc. Sr. Sec. Note, 10.75% ... 6,250,000 10/15/2006 6,468,750
--------------
137,753,700
--------------
ENTERTAINMENT/LEISURE 0.8%
Hollywood Entertainment Corp. Sr. Sub. Note,
10.625%+ ........................................ 1,000,000 8/15/2004 1,022,500
Premier Parks Inc. Sr. Note Series A, 12.00% ...... 6,400,000 8/15/2003 7,120,000
Speedway Motorsports Inc. Sr. Sub. Note, 8.50%+ ... 500,000 8/15/2007 503,750
--------------
8,646,250
--------------
FINANCIAL SERVICE 0.5%
Rose Hills Acquisition Corp. Sr. Sub. Note, 9.50%+ 4,750,000 11/15/2004 4,987,500
--------------
FOOD & BEVERAGE 2.2%
Archibald Candy Corp. Sr. Sec. Notes, 10.25%+ ..... 17,000,000 7/01/2004 17,892,500
Silgan Holdings Inc. Sub. Deb., 13.25% ............ 1,123,000 7/15/2006 1,280,220
Viacap SA De CV Sr. Note, 11.375%+ ................ 4,000,000 5/15/2007 4,440,000
--------------
23,612,720
--------------
GROCERY 0.6%
Pathmark Stores Inc. Sub. Note, 11.625% 3,250,000 6/15/2002 3,282,500
Safeway Inc. Lease Certificate, 13.50% ............ 90,123 1/15/2009 130,003
Star Market Inc. Sr. Sub. Note, 13.00% ............ 2,500,000 11/01/2004 2,850,000
Victory Markets Inc. Sub. Deb., 12.50%[ ] ......... 925,000 3/15/2000 46,250
--------------
6,308,753
--------------
HOSPITAL/HEALTH CARE 2.0%
Dade International Inc. Sr. Sub. Note, 11.125% .... $4,000,000 5/01/2006 $ 4,505,000
Owens & Minor Inc. Sr. Sub. Note, 10.875% ......... 875,000 6/01/2006 964,688
Quest Diagnostics Inc. Sr. Sub. Note, 10.75% ...... 7,750,000 12/15/2006 8,447,500
Unilab Corp. Sr. Note, 11.00% ..................... 7,400,000 4/01/2006 7,400,000
--------------
21,317,188
--------------
HOTEL & RESTAURANT 0.4%
Krystal Co. Sr. Note, 10.25%+ ..................... 4,250,000 10/01/2007 4,335,000
--------------
MEDIA 11.5%
Affiliated Newspapers Investments, Inc. Sr. Deb.,
0.00% to 6/30/99, 13.25% from 7/1/99 to maturity 3,000,000 7/01/2006 2,730,000
Affinity Group Inc. Sr. Sub. Deb., 11.50% ......... 5,250,000 10/15/2003 5,630,625
Allbritton Communications Co. Sr. Sub. Deb., 9.75% 5,825,000 11/30/2007 5,825,000
Benedek Broadcasting Corp. Sr. Note, 11.875% ...... 6,250,000 3/01/2005 7,031,250
Benedek Communications Corp. Sr. Sub. Note, 0.00%
to 5/14/2001, 13.25% from 5/15/2001 to maturity . 16,500,000 5/15/2006 11,632,500
Busse Broadcasting Corp. Sr. Sec. Note, 11.625% ... 4,000,000 10/15/2000 4,290,000
CapStar Broadcasting Partners Sr. Note, 0.00% to
1/31/2002, 12.75% from 2/1/2002 to maturity ..... 15,750,000 2/01/2009 10,788,750
Intermedia Capital Partners LP Sr. Note, 11.25% ... 6,250,000 8/01/2006 6,859,375
ITT Publimedia BV Sr. Sub. Note, 9.375%+ .......... 1,500,000 9/15/2007 1,563,750
Lamar Advertising Co. Sr. Sub. Note, 9.625% ....... 3,250,000 12/01/2006 3,428,750
Outdoor Systems Inc. Sr. Sub. Note, 9.375% ........ 16,000,000 10/15/2006 16,800,000
Spanish Broadcasting Systems Inc. Sr. Note, 7.50%
to 6/14/97, 12.50% from 6/15/97 to maturity ..... 13,250,000 6/15/2002 15,105,000
Sun Media Corp. Sr. Sub. Note, 9.50% .............. 4,150,000 2/15/2007 4,295,250
Sun Media Corp. Sr. Sub. Note, 9.50% .............. 5,100,000 5/15/2007 5,291,250
Telemundo Group Inc. Sr. Note, 7.00% to 2/14/99,
10.50% from 2/15/99 to maturity ................. 4,250,000 2/15/2006 4,186,250
TV Azteca SA de CV Series B Sr. Note, 10.50% ...... 5,250,000 2/15/2007 5,591,250
Universal Outdoor Inc. Sr. Sub. Note, 9.75% ....... 8,750,000 10/15/2006 9,362,500
--------------
120,411,500
--------------
METALS/MINING/STEEL 3.8%
Crown Resources Corp. Cv. Sub. Deb., 5.75% ........ 220,000 8/27/2001 195,800
Envirosource Inc. Note, 9.75% ..................... 19,000,000 6/15/2003 18,810,000
Envirosource Inc. Sr. Note Series B, 9.75%+ ....... 3,250,000 6/15/2003 3,270,312
GS Technologies Operating Inc. Sr. Note, 12.00% ... 5,250,000 9/01/2004 5,788,125
Sheffield Steel Corp. First Mortgage Note, 12.00% . 11,124,000 11/01/2001 11,457,720
--------------
39,521,957
--------------
OIL & GAS 4.2%
Moran Energy Inc. Cv. Deb., 8.75% ................. $2,420,000 1/15/2008 2,395,800
Transamerican Energy Corp. Sr. Note, 0.00% to
6/14/2000, 13.00% from 6/15/2000 to maturity+ ... 30,000,000 6/15/2002 23,850,000
Transamerican Energy Corp. Sr. Note, 11.50%+ ...... 17,500,000 6/15/2002 17,368,750
--------------
43,614,550
--------------
PAPER PRODUCTS 0.3%
Crown Packaging Enterprise Ltd. Sr. Sec. Note,
0.00% to 7/31/2003, 14.00% from 8/1/2003 to
maturity ........................................ 9,000,000 8/01/2006 450,000
Mail-Well Envelope Corp. Sr. Sub. Note, 10.50% .... 2,250,000 2/15/2004 2,424,375
--------------
2,874,375
--------------
PLASTICS 2.8%
Packaging Resources Inc. Sr. Sec. Note, 11.625% ... 12,250,000 5/01/2003 12,923,750
Plastic Containers Inc. Sr. Sec. Note Series B,
10.00% .......................................... 1,250,000 12/15/2006 1,331,250
Plastic Specialties & Technologies, Inc. Sr. Note,
11.25% .......................................... 7,250,000 12/01/2003 7,721,250
Tekni-Plex Inc. Sr. Sub. Note, 11.25%+ ............ 6,250,000 4/01/2007 6,890,625
--------------
28,866,875
--------------
RETAIL TRADE 0.3%
Phar-Mor, Inc. Note, 11.72% ....................... 3,064,000 9/11/2002 3,255,500
--------------
SHIPPING/TRANSPORTATION 5.0%
CHC Helicopter Corp. Sr. Sub. Note, 11.50% ........ 12,914,000 7/15/2002 13,785,695
Econophone Inc. Sr. Note, 13.50%+ ................. 13,000,000 7/15/2007 14,105,000
Golden Ocean Group Ltd. Sr. Note, 10.00%+ ......... 5,500,000 8/31/2001 4,235,000
Johnstown America Industries Inc. Sr. Sub. Note,
11.75% .......................................... 3,500,000 8/15/2005 3,762,500
Johnstown America Industries Inc. Sr. Sub. Note
Series B, 11.75%+ ............................... 2,375,000 8/15/2005 2,553,125
Stena AB Sr. Note, 8.75% .......................... 5,250,000 6/15/2007 5,295,937
TFM SA de CV Sr. Note, 10.25%+ .................... 8,150,000 6/15/2007 8,679,750
--------------
52,417,007
--------------
TECHNOLOGY/COMMUNICATIONS 17.8%
Advanced Radio Telecom Corp. Sr. Note, 14.00% ..... 3,500,000 2/15/2007 2,888,594
Celcaribe SA Sr. Sec. Note, 0.00% to
3/14/98, 13.50% from 3/15/98 to maturity ........ 5,810,000 3/15/2004 5,664,750
Clearnet Communications Inc. Sr. Note, 0.00% to
12/14/2000, 14.75% from 12/15/2000 to maturity .. 16,750,000 12/15/2005 12,981,250
ICG Holdings Inc. Sr. Note, 0.00% to
9/14/2000, 13.50% from 9/15/2000 to maturity .... 19,850,000 9/15/2005 15,780,750
Ionica PLC Sr. Note, 13.50% ....................... 5,500,000 8/15/2006 6,132,500
Mobile Telecommunication Technology, Inc. Sr. Sub.
Note, 13.50% .................................... 4,500,000 12/15/2002 5,107,500
Nextel Communications Inc. Sr. Note, 0.00% to
2/14/99, 9.75% from 2/15/99 to maturity ......... $22,825,000 8/15/2004 $ 19,743,625
Orion Network Systems Inc. Sr. Note, 11.25% ....... 14,500,000 1/15/2007 15,696,250
Paging Network Brasil SA Sr. Note, 13.50%+ ........ 750,000 6/06/2005 738,750
Pricellular Wireless Corp. Sr. Note, 10.75% ....... 4,250,000 11/01/2004 4,590,000
Primus Telecommunications Inc. Sr. Note, 11.75% ... 6,500,000 8/01/2004 6,955,000
Protection One Alarm Inc. Sr. Sub. Note, 0.00% to
6/29/98, 13.625% from 6/30/98 to maturity ....... 6,000,000 6/30/2005 6,600,000
Qwest Communications International Inc. Series B
Sr. Note, 10.875% ............................... 2,000,000 4/01/2007 2,240,000
RSL Communications Ltd. Sr. Note, 12.25% .......... 13,500,000 11/15/2006 14,445,000
Trump Atlantic City Associates First Mortgage Note,
11.25% .......................................... 7,375,000 5/01/2006 7,153,750
U.S.A. Mobile Communications Inc. Sr. Note, 14.00% 19,000,000 11/01/2004 21,280,000
Viasystems Inc. Sr. Sub. Note, 9.75%+ ............. 1,000,000 6/01/2007 1,040,000
Viatel Inc. Sr. Note, 15.00% to 1/14/2000, 15.00%
from 1/15/2000 to maturity ...................... 5,440,000 1/15/2005 3,862,400
Winstar Communications Inc. Sr. Sub. Cv. Note,
0.00% to 10/14/2000, 14.00% from 10/15/2000 to
maturity+ ....................................... 6,525,000 10/15/2005 4,730,625
Winstar Equipment Corp. Sr. Sec. Note, 12.50%+ .... 16,500,000 3/15/2004 17,531,250
Wireless One Inc. Sr. Note, 0.00% to
7/31/2001, 13.50% from 8/1/2001 to maturity ..... 27,250,000 8/01/2006 6,131,250
Wireless One Inc. Sr. Note, 13.00% ................ 10,950,000 10/15/2003 5,256,000
--------------
186,549,244
--------------
Total Bonds (Cost $750,359,297) ....................................................... 766,227,079
--------------
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PREFERRED STOCKS 16.1%
BANK 0.3%
Riverbank America Pfd.* ............................................... 110,000 $ 2,667,500
--------------
BUSINESS SERVICE 1.6%
La Petite Academy Inc. Cl. A Exch. Pfd. ............................... 361,000 16,606,000
--------------
CABLE TELEVISION 0.6%
Cablevision Systems Corp. Series B Pfd.# .............................. 59,523 6,517,768
--------------
CHEMICAL 0.0%
KTI Inc. Cv. Exch. Pfd. + ............................................. 10,000 335,000
--------------
CONTAINER 0.8%
WBK STRYPES Trust Exch. Pfd. .......................................... 270,000 8,503,125
--------------
ELECTRIC 0.0%
Consolidated Hydro Inc. Cv. Pfd.* ..................................... 2,000 200,000
--------------
ELECTRONIC COMPONENTS 1.1%
Nextel Communications Inc. Series D Exch. Pfd.+# ...................... 9,750 11,261,250
--------------
ELECTRONIC EQUIPMENT 0.7%
IXC Communications Inc. Exch. Pfd.+ ................................... 6,250 7,250,000
--------------
FOREST PRODUCT 0.2%
Equitable Bag Inc. Series A Pfd.* ..................................... 134,760 2,560,440
--------------
GAMING & LODGING 0.5%
Station Casinos Inc. Cv. Pfd. ......................................... 133,600 5,736,450
--------------
HOTEL & RESTAURANT 0.5%
Ameriking Inc. Sr. Exch. Pfd.* ........................................ 191,000 5,395,750
--------------
MEDIA 2.0%
American Radio Systems Corp. Series B Exch. Pfd.# ..................... 13,159 1,579,129
Granite Broadcasting Corp. Cv. Exch. Pfd. ............................. 114,700 6,882,000
Granite Broadcasting Corp. Exch. Pfd.# ................................ 11,404 12,059,730
--------------
20,520,859
--------------
OIL 0.6%
Clark USA Inc. Sr. Exch. Pfd.# ........................................ 6,050 6,186,125
--------------
PERSONAL CARE 0.1%
Renaissance Cosmetics Inc. Series C Sr. Pfd. .......................... 1,149 804,080
--------------
PRINTING & PUBLISHING 3.8%
Hollinger International, Inc. Cv. Pfd. ................................ 2,252,000 27,727,750
K-III Communications Corp. Series D Exch. Pfd.* ....................... 80,000 8,520,000
K-III Communications Corp. Series E Exch. Pfd.+ ....................... 30,500 3,080,500
--------------
39,328,250
--------------
RECREATION 0.8%
Adelphia Communications Corp. Series A Exch. Pfd.*+ 72,500 8,083,750
--------------
RETAIL TRADE 1.1%
Supermarkets General Holdings Corp. Exch. Pfd.# ....................... 568,540 11,939,340
--------------
TELEPHONE 0.7%
ICG Holdings Inc. Exch. Pfd.* ......................................... 6,171 7,312,635
--------------
TOBACCO 0.7%
DECS Trust Exch. Pfd.* ................................................ 106,000 2,603,625
North Atlantic Trading Inc. Sr. Exch. Pfd.+# .......................... 160,000 4,280,000
--------------
6,883,625
--------------
Total Preferred Stocks (Cost $157,901,110) ............................ 168,091,947
--------------
COMMON STOCKS & OTHER 8.5%
Advanced Radio Telecom Corp. Wts.* .................................... 52,500 $ 682,500
American Communications Services, Inc. Wts.*+ ......................... 9,500 855,000
American Telecasting Inc. Wts.* ....................................... 41,130 41,130
Ameriking Inc. Com.*+ ................................................. 4,775 238,750
Anacomp Inc. Com.* .................................................... 873,507 13,539,358
Anacomp Inc. Wts.* .................................................... 25,848 164,781
Axia Holding Corp. Com.*(+) ........................................... 2,250 225,000
Bar Technologies Inc. Wts.*+ .......................................... 4,250 255,000
Belle Casinos Inc. Wts.*+ ............................................. 1,400 14
Boomtown Inc. Wts.*+ .................................................. 7,250 7
Celcaribe SA Trust Certificates*+ ..................................... 944,706 5,195,883
Central Rents Inc. Com.*+ ............................................. 5,250 315,000
Chatwins Group Inc. Wts.*+ ............................................ 7,000 7,000
CHC Helicopter Corp. Wts.*(+) ......................................... 46,000 161,000
Clearnet Communications Inc. Wts.* .................................... 78,705 787,050
County Seat Holdings Inc. Wts.*(+) .................................... 2,000 20
Crown Packaging Enterprises Ltd. Com.*+ ............................... 1,170,000 11,700
Crown Packaging Holdings Ltd. Wts.*+ .................................. 20,750 2,594
Dr Pepper Bottling Holdings Inc. Cl. A Com.* .......................... 50,000 975,000
Empire Gas Corp. Wts.*(+) ............................................. 2,760 12,420
Equitable Bag Inc. Com.* .............................................. 1,347,600 539,040
Fitzgeralds South Inc. Wts.*(+) ....................................... 3,750 37,500
Food 4 Less Holdings Inc. Wts.*@ ...................................... 24,223 6,303,551
Golden Ocean Group Ltd. Com.*+ ........................................ 5,500 5,500
Goldriver Hotel & Casino Corp. Cl. B Com.*(+) ......................... 52,500 6,563
Goldriver Hotel & Casino Corp. Liquidation Trust Units*(+) ............ 5,250,000 66,675
Heartland Wireless Communications, Inc. Wts.*(+) ...................... 37,500 375
ICF Kaiser International Inc. Wts.* ................................... 49,200 24,600
Indspec Chemical Corp. Wts.*(+)@ ...................................... 506 1,098,875
Insight Capital Corp. Wts.*(+) ........................................ 25,000 62,500
Intelcom Group, Inc. Wts.*(+) ......................................... 21,450 332,475
Intermedia Communications Inc. Wts.*+ ................................. 1,500 112,500
Ionica PLC Wts.*+ ..................................................... 9,500 2,375,000
Jewel Recovery L.P. Units*(+) ......................................... 82,595 826
Ladish Company, Inc. Com.*@ ........................................... 520,000 1,690,000
LTX Corp. Com.* ....................................................... 145,000 1,060,312
Lyondell Petrochemical Co. Com. ....................................... 892,350 23,368,426
Mail-Well Holdings, Inc. Com.*(+) ..................................... 21,308 577,966
Motels of America Inc. Com.*+ ......................................... 5,500 55,000
Nextel Communications Inc. Cl. A Com.* ................................ 41,443 1,196,667
Nextel Communications Inc. Wts.* ...................................... 1,250 39
NS Group Inc. Wts.*+ .................................................. 13,250 4,240,000
Orion Network Systems Inc. Wts.* ...................................... 14,500 181,250
Pagemart Inc. Wts.*+ .................................................. 21,850 202,113
Pagemart Nationwide Inc. Com.*+ ....................................... 18,375 199,828
Pegasus Communications Corp. Cl. A Com.*+ ............................. 8,461 181,912
Plastic Specialties & Technologies, Inc. Com.* ........................ 45,300 135,900
Powertel Inc. Wts.* ................................................... 8,480 67,840
Protection One Inc. Wts.*+ ............................................ 10,400 135,200
Renaissance Cosmetics Inc. Wts.*+ ..................................... 2,000 100,000
Renaissance Cosmetics Inc. Wts.*+ ..................................... 1,000 10
RSL Communications Ltd. Wts.+ ......................................... 13,500 945,000
Sabreliner Corp. Wts.*+ ............................................... 1,750 17,500
SDW Holdings Corp. Wts.* .............................................. 108,000 569,160
Seven-Up/RC Bottling Company of Southern California Com.* ............. 472,500 5,670,000
Sheffield Steel Corp. Wts.* ........................................... 38,750 155,000
Tom Brown, Inc. Com.* ................................................. 283,304 7,011,774
Town & Country Corp. Cl. A Com.*+@ .................................... 188,526 35,349
Universal Outdoor Holdings Inc. Com.* ................................. 155,200 5,820,000
Vestar/LPA Investment Corp. Com.*+ .................................... 14,250 213,750
Viatel Inc. Com.* ..................................................... 108,300 500,887
Waxman Industries Inc. Wts.*+ ......................................... 236,000 708,000
Wireless One Inc. Wts.*+ .............................................. 16,500 165
Wireless One Inc. Wts.* ............................................... 27,250 6,813
--------------
Total Common Stocks & Other (Cost $55,272,903) ....................... 89,481,048
--------------
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
PRINCIPAL MATURITY
AMOUNT DATE
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHORT-TERM OBLIGATIONS 2.8%
American Express Credit Corp., 5.58% ............. $ 4,324,000 10/01/1997 4,324,000
Associates Corp. of North America, 5.75% ......... 16,552,000 10/02/1997 16,552,000
Ford Motor Credit Co., 5.56% ..................... 1,480,000 10/01/1997 1,480,000
General Electric Capital Corp., 5.62% ............ 6,652,000 10/06/1997 6,652,000
--------------
Total Short-Term Obligations (Cost $29,008,000) ....................................... 29,008,000
--------------
REPURCHASE AGREEMENTS 0.3%
State Street Bank and Trust Company, dated 9/30/
97, repurchase proceeds $3,240,383,
collateralized by $3,325,000 U.S. Treasury Bill,
4.25%, due 11/13/97, Market Value $3,305,452 ... 3,240,000 10/01/1997 3,240,000
--------------
Total Repurchase Agreements (Cost $3,240,000) ......................................... 3,240,000
--------------
Total Investments (Cost $995,781,310) - 100.9% ........................................ 1,056,048,074
Cash and Other Assets, Less Liabilities - (0.9%) ...................................... (9,878,199)
--------------
Net Assets - 100.0% ................................................................... $1,046,169,875
==============
Federal Income Tax Information (Note 1):
At September 30, 1997, the net unrealized appreciation of investments based on cost for
Federal income tax purposes of $995,857,064 was as follows:
Aggregate gross unrealized appreciation for all investments in which there is an excess
of value over tax cost .............................................................. $ 105,008,388
Aggregate gross unrealized depreciation for all investments in which there is an excess
of tax cost over value .............................................................. (44,817,378)
--------------
$ 60,191,010
==============
* Nonincome-producing securities.
# Payments of income may be made in cash or in the form of additional securities.
[ ] Security is in default.
@ Security valued under consistently applied procedures established by the Trustees.
(+) Security restricted as to public resale. At September 30, 1997, there were no outstanding unrestricted
securities of the sam e class as those held. The total cost and market value of restricted securities owned
at September 30, 1997 were $2,115,463 and $3,870, 845 (0.37% of net assets), respectively.
+ Security restricted in accordance with Rule 144A under the Securities Act of 1933, which allows for the
resale of such secur ities among certain qualified institutional buyers. The total cost and market value of
Rule 144A securities owned at September 30, 1997 were $226,103,297 and $247,948,837 (23.70% of net assets),
respectively.
ASSET COMPOSITION TABLE
September 30, 1997 (Unaudited)
Percentage of
Ratings++ Net Assets*
--------- -----------
BB 2.6%
B 66.1
CCC and below 4.5
Equities 24.6
Other 2.2
-----
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.
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
STATE STREET RESEARCH HIGH INCOME FUND
- ---------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- ---------------------------------------------------------------------------------------
September 30, 1997 (Unaudited)
<S> <C>
ASSETS
Investments, at value (Cost $995,781,310) (Note 1) .................... $1,056,048,074
Cash .................................................................. 750
Interest and dividends receivable ..................................... 19,271,067
Receivable for securities sold ........................................ 17,398,341
Receivable for fund shares sold ....................................... 760,954
Other assets .......................................................... 20,942
--------------
1,093,500,128
LIABILITIES
Payable for securities purchased ...................................... 39,883,600
Dividends payable ..................................................... 2,940,727
Payable for fund shares redeemed ...................................... 3,001,980
Accrued transfer agent and shareholder services
(Note 2) ............................................................ 424,635
Accrued management fee (Note 2) ....................................... 550,406
Accrued distribution and service fees (Note 4) ........................ 412,589
Accrued trustees' fees (Note 2) ....................................... 15,595
Other accrued expenses ................................................ 100,721
--------------
47,330,253
--------------
NET ASSETS $1,046,169,875
==============
Net Assets consist of:
Undistributed net investment income ................................. $ 7,919,867
Unrealized appreciation of investments .............................. 60,266,764
Accumulated net realized loss ....................................... (16,610,580)
Shares of beneficial interest ....................................... 994,593,824
--------------
$1,046,169,875
==============
Net Asset Value and redemption price per share of Class A shares
($704,011,782 / 107,957,676 shares of beneficial interest) .......... $6.52
=====
Maximum Offering Price per share of Class A shares ($6.52 / .955) ..... $6.83
=====
Net Asset Value and offering price per share of Class B shares
($302,444,682 / 46,592,533 shares of beneficial interest)* .......... $6.49
=====
Net Asset Value, offering price and redemption price per share of Class
C shares ($7,040,253 / 1,085,371 shares of beneficial interest) ..... $6.49
=====
Net Asset Value and offering price per share of Class D shares
($32,673,158 / 5,028,075 shares of beneficial interest)* ............ $6.50
=====
- ---------------------------------------------------------------------------------------
*Redemption price per share for Class B and Class D is equal to net asset
value less any applicable contingent deferred sales charge.
</TABLE>
<PAGE>
STATE STREET RESEARCH HIGH INCOME FUND
<TABLE>
- ---------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- ---------------------------------------------------------------------------------------
For the six months ended September 30, 1997 (Unaudited)
<S> <C>
INVESTMENT INCOME
Interest, net of foreign taxes of $56,308 ............................... $ 44,948,092
Dividends ............................................................... 4,615,452
------------
49,563,544
EXPENSES
Management fee (Note 2) ................................................. 3,222,949
Transfer agent and shareholder services (Note 2) ........................ 644,157
Custodian fee ........................................................... 119,067
Reports to shareholders ................................................. 88,702
Service fee-Class A (Note 4) ............................................ 843,598
Distribution and service fees-Class B (Note 4) .......................... 1,395,304
Distribution and service fees-Class D (Note 4) .......................... 151,541
Registration fees ....................................................... 36,472
Audit fee ............................................................... 22,959
Trustees' fees (Note 2) ................................................. 18,175
Legal fees .............................................................. 4,969
Miscellaneous ........................................................... 22,360
------------
6,570,253
------------
Net investment income ................................................... 42,993,291
------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments (Notes 1 and 3) ........................ 9,583,710
Net unrealized appreciation of investments .............................. 71,043,693
------------
Net gain on investments ................................................. 80,627,403
------------
Net increase in net assets resulting from operations .................... $123,620,694
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
STATE STREET RESEARCH HIGH INCOME FUND
- -------------------------------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30, 1997 YEAR ENDED
(UNAUDITED) MARCH 31, 1997
- -------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS
<S> <C> <C>
Operations:
Net investment income ..................................... $ 42,993,291 $ 86,554,756
Net realized gain on investments .......................... 9,583,710 5,358,925
Net unrealized appreciation
(depreciation) of investments ........................... 71,043,693 (6,463,064)
-------------- ------------
Net increase resulting from operations .................... 123,620,694 85,450,617
-------------- ------------
Dividends from net investment income:
Class A ................................................. (29,219,389) (58,427,483)
Class B ................................................. (11,074,180) (18,222,317)
Class C ................................................. (292,957) (463,672)
Class D ................................................. (1,200,597) (1,682,938)
-------------- ------------
(41,787,123) (78,796,410)
-------------- ------------
Net increase from fund share
transactions (Note 5) ................................... 12,104,126 94,267,308
-------------- ------------
Total increase in net assets .............................. 93,937,697 100,921,515
NET ASSETS
Beginning of period ....................................... 952,232,178 851,310,663
-------------- ------------
End of period (including undistributed net investment
income of $7,919,867 and $6,713,699, respectively) ...... $1,046,169,875 $952,232,178
============== ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATE STREET RESEARCH HIGH INCOME FUND
- --------------------------------------------------------------------------------
NOTES TO UNAUDITED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
September 30, 1997
NOTE 1
State Street Research High Income Fund (the "Fund"), is a series of State
Street Research Income Trust (the "Trust"), which was organized as a
Massachusetts business trust on December 23, 1985 and is registered under the
Investment Company Act of 1940, as amended, as an open-end management
investment company. The Trust commenced operations in August, 1986. The Trust
consists of two separate funds: State Street Research High Income Fund and
State Street Research Managed Assets.
The investment objective of the Fund is to seek, primarily, high current
income and, secondarily, capital appreciation, from investments in fixed
income securities. In selecting investments for the Fund, the investment
manager seeks to identify those fixed income securities which it believes will
not involve undue risk. Certain of the Fund's investments, however, may be
considered predominantly speculative.
The Fund offers four classes of shares. Class A shares are subject to an initial
sales charge of up to 4.50% and an annual service fee of 0.25% of average daily
net assets. Class B shares are subject to a contingent deferred sales charge on
certain redemptions made within five years of purchase and pay annual
distribution and service fees of 1.00%. Class B shares automatically convert
into Class A shares (which pay lower ongoing expenses) at the end of eight years
after the issuance of the Class B shares. Class C shares are only offered to
certain employee benefit plans and large institutions. No sales charge is
imposed at the time of purchase or redemption of Class C shares. Class C shares
do not pay any distribution or service fees. Class D shares are subject to a
contingent deferred sales charge of 1.00% on any shares redeemed within one year
of their purchase. Class D shares also pay annual distribution and service fees
of 1.00%. The Fund's expenses are borne pro-rata by each class, except that each
class bears expenses, and has exclusive voting rights with respect to provisions
of the Plan of Distribution, related specifically to that class. The Trustees
declared separate dividends on each class of shares.
The following significant accounting policies are consistently followed by the
Fund in preparing its financial statements, and such policies are in conformity
with generally accepted accounting principles for investment companies.
A. INVESTMENT VALUATION
Fixed income securities are valued by a pricing service, which utilizes market
transactions, quotations from dealers, and various relationships among
securities in determining value. If not valued by a pricing service, such
securities are valued at prices obtained from independent brokers. Values for
listed equity securities reflect final sales on national securities exchanges
quoted prior to the close of the New York Stock Exchange. Over-the-counter
securities quoted on the National Association of Securities Dealers Automated
Quotation ("NASDAQ") system are valued at closing prices supplied through such
system. If not quoted on the NASDAQ system, such securities are valued at
prices obtained from independent brokers. In the absence of recorded sales,
valuations are at the mean of the closing bid and asked quotations. Short-term
securities 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 rates. 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, 1997, the Fund
had a capital loss carryforward of $20,803,392 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, 1996 through March
31, 1997, the Fund incurred net capital losses of $5,068,197 and has deferred
and treated such losses as arising in the fiscal year ended March 31, 1998.
F. ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period.
Actual results could differ from those estimates.
NOTE 2
The Trust and State Street Research & Management Company (the "Adviser"), an
indirect wholly owned subsidiary of Metropolitan Life Insurance Company
("Metropolitan"), have entered into an agreement under which the Adviser earns
monthly fees at an annual rate of 0.65% of the Fund's average daily net
assets. In consideration of these fees, the Adviser furnishes the Fund with
management, investment advisory, statistical and research facilities and
services. The Adviser also pays all salaries, rent and certain other expenses
of management. During the six months ended September 30, 1997, the fees
pursuant to such agreement amounted to $3,222,949.
State Street Research Shareholder Services, a division of State Street
Research Investment Services, Inc., the Trust's principal underwriter (the
"Distributor"), an indirect wholly owned subsidiary of Metropolitan, provides
certain shareholder services to the Fund such as responding to inquiries and
instructions from investors with respect to the purchase and redemption of
shares of the Fund. During the six months ended September 30, 1997, the amount
of such expenses was $147,583.
The fees of the Trustees not currently affiliated with the Adviser amounted to
$18,175 during the six months ended September 30, 1997.
NOTE 3
For the six months ended September 30, 1997, purchases and sales of
securities, exclusive of short-term investments, aggregated $577,991,593 and
$537,918,496, respectively.
NOTE 4
The Trust has adopted a Plan of Distribution pursuant to Rule
12b-1 (the "Plan") under the Investment Company Act of 1940. Under the Plan,
the Fund pays annual service fees to the Distributor at a rate of 0.25% of
average daily net assets for Class A, Class B and Class D shares. In addition,
the Fund pays annual distribution fees of 0.75% of average daily net assets
for Class B and Class D shares. The Distributor uses such payments for
personal service and/or the maintenance or servicing of shareholder accounts,
to reimburse securities dealers for distribution and marketing services, to
furnish ongoing assistance to investors and to defray a portion of its
distribution and marketing expenses. For the six months ended September 30,
1997, fees pursuant to such plan amounted to $843,598, $1,395,304 and $151,541
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 $112,515 and $634,448, respectively, on sales of Class A shares of
the Fund during the six months ended September 30, 1997, and that MetLife
Securities, Inc. earned commissions aggregating $675,758 on sales of Class B
shares, and that the Distributor collected contingent deferred sales charges
aggregating $312,339 and $4,444 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 September 30, 1997, the
Distributor owned 7,018 Class A shares and Metropolitan owned 16,155 Class D
shares of the Fund.
Share transactions were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30, 1997 YEAR ENDED
(UNAUDITED) MARCH 31, 1997
----------------------------------- ---------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold .................. 6,082,304 $ 37,640,114 15,602,119 $ 94,973,592
Issued upon reinvestment of
dividends from net investment
income ....................... 3,029,657 18,936,361 6,212,698 37,840,814
Shares repurchased ........... (10,738,986) (66,627,265) (20,888,291) (127,047,788)
----------- ------------ ----------- ------------
Net increase (decrease) ...... (1,627,025) $(10,050,790) 926,526 $ 5,766,618
=========== ============ =========== ============
CLASS B SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------
Shares sold .................. 6,304,960 $ 38,768,150 15,907,481 $ 96,551,028
Issued upon reinvestment of
dividends from net
investment income .......... 1,001,440 6,295,763 1,668,549 10,129,956
Shares repurchased ........... (4,022,933) (24,832,499) (5,605,180) (33,954,283)
----------- ------------ ----------- ------------
Net increase ................. 3,283,467 $ 20,231,414 11,970,850 $ 72,726,701
=========== ============ =========== ============
CLASS C SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
Shares sold .................. 154,477 $ 952,709 733,872 $ 4,470,033
Issued upon reinvestment of
dividends from net investment
income ....................... 38,785 241,377 58,765 357,467
Shares repurchased ........... (154,175) (947,763) (394,609) (2,403,760)
----------- ------------ ----------- ------------
Net increase ................. 39,087 $ 246,323 398,028 $ 2,423,740
=========== ============ =========== ============
CLASS D SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
Shares sold .................. 757,935 $ 4,666,326 2,630,966 $ 16,046,241
Issued upon reinvestment of
dividends from net investment
income ....................... 131,735 819,767 163,926 998,823
Shares repurchased ........... (618,893) (3,808,914) (609,727) (3,694,815)
----------- ------------ ----------- ------------
Net increase ................. 270,777 $ 1,677,179 2,185,165 $ 13,350,249
=========== ============ =========== ============
</TABLE>
<PAGE>
<TABLE>
STATE STREET RESEARCH HIGH INCOME FUND
- -----------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------------------------------------------------------------
For a share outstanding throughout each period:
<CAPTION>
CLASS A
---------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED MARCH 31
SEPTEMBER 30, 1997 --------------------------------------------------------------------------------
(UNAUDITED)* 1997* 1996* 1995* 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $6.01 $5.95 $5.80 $6.43 $6.32 $5.95
----- ----- ----- ----- ----- -----
Net investment income 0.28 0.59 0.52 0.61 0.66 0.67
Net realized and
unrealized gain
(loss) on investments 0.50 (0.01) 0.20 (0.58) 0.22 0.37
----- ----- ----- ----- ----- -----
Total from investment
operations 0.78 0.58 0.72 0.03 0.88 1.04
----- ----- ----- ----- ----- -----
Dividends from net
investment income (0.27) (0.52) (0.56) (0.60) (0.62) (0.67)
Distributions from net
realized gains -- -- (0.01) (0.06) (0.15) --
----- ----- ----- ----- ----- -----
Total distributions (0.27) (0.52) (0.57) (0.66) (0.77) (0.67)
----- ----- ----- ----- ----- -----
Net asset value, end of
period $6.52 $6.01 $5.95 $5.80 $6.43 $6.32
===== ===== ===== ===== ===== =====
Total return 13.24%++ 10.30%+ 12.85%+ 1.80%+ 14.58%+ 18.70%+
Net assets at end of
period (000s) $704,012 $658,413 $646,473 $618,462 $650,755 $496,352
Ratio of operating
expenses to average net
assets 1.09%(+) 1.10% 1.17% 1.23% 1.16% 1.15%
Ratio of net investment
income to average net
assets 8.90%(+) 9.70% 8.88% 10.19% 10.41% 11.25%
Portfolio turnover rate 48.85% 81.75% 56.47% 31.55% 24.36% 79.39%
Average commission rate@
$0.0060 $0.0152 -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
CLASS B
-----------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED MARCH 31
SEPTEMBER 30, 1997 --------------------------------------------------------------------
(UNAUDITED)* 1997* 1996* 1995* 1994**
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $5.98 $5.93 $5.79 $6.42 $6.34
----- ----- ----- ----- -----
Net investment income 0.25 0.55 0.46 0.57 0.51
Net realized and unrealized gain
(loss) on investments 0.51 (0.02) 0.21 (0.58) 0.15
----- ----- ----- ----- -----
Total from investment operations 0.76 0.53 0.67 (0.01) 0.66
----- ----- ----- ----- -----
Dividends from net investment income (0.25) (0.48) (0.52) (0.56) (0.48)
Distributions from net realized gains -- -- (0.01) (0.06) (0.10)
----- ----- ----- ----- -----
Total distributions (0.25) (0.48) (0.53) (0.62) (0.58)
----- ----- ----- ----- -----
Net asset value, end of period $6.49 $5.98 $5.93 $5.79 $6.42
===== ===== ===== ===== =====
Total return 12.89%++ 9.35%+ 12.06%+ 0.89%+ 10.76%++
Net assets at end of period (000s) $302,445 $259,077 $185,735 $117,767 $67,337
Ratio of operating expenses to
average net assets 1.84%(+) 1.85% 1.92% 1.98% 1.93%(+)
Ratio of net investment income to
average net assets 8.15%(+) 9.01% 7.95% 9.65% 10.32%(+)
Portfolio turnover rate 48.85% 81.75% 56.47% 31.55% 24.36%
Average commission rate@
$0.0060 $0.0152 -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
* 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.
@ Average commission rate per share paid for security trades beginning with the fiscal year ended March 31, 1997.
</TABLE>
<PAGE>
<TABLE>
STATE STREET RESEARCH HIGH INCOME FUND
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS C
-----------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED MARCH 31
SEPTEMBER 30, 1997 --------------------------------------------------------------------
(UNAUDITED)* 1997* 1996* 1995* 1994**
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $5.98 $5.92 $5.78 $6.42 $6.34
----- ----- ----- ----- -----
Net investment income 0.28 0.61 0.53 0.64 0.57
Net realized and unrealized gain
(loss) on investments 0.51 (0.01) 0.20 (0.60) 0.14
----- ----- ----- ----- -----
Total from investment operations 0.79 0.60 0.73 0.04 0.71
----- ----- ----- ----- -----
Dividends from net investment income (0.28) (0.54) (0.58) (0.62) (0.53)
Distributions from net realized gains -- -- (0.01) (0.06) (0.10)
----- ----- ----- ----- -----
Total distributions (0.28) (0.54) (0.59) (0.68) (0.63)
----- ----- ----- ----- -----
Net asset value, end of period $6.49 $5.98 $5.92 $5.78 $6.42
===== ===== ===== ===== =====
Total return 13.45%++ 10.63%+ 13.19%+ 1.73%+ 11.67%++
Net assets at end of period (000s) $7,040 $6,255 $3,840 $2,579 $851
Ratio of operating expenses to
average net assets 0.84%(+) 0.85% 0.92% 0.98% 0.93%(+)
Ratio of net investment income to
average net assets 9.15%(+) 10.04% 8.97% 10.85% 11.32%(+)
Portfolio turnover rate 48.85% 81.75% 56.47% 31.55% 24.36%
Average commission rate@
$0.0060 $0.0152 -- -- --
</TABLE>
<TABLE>
<CAPTION>
CLASS D
-----------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED MARCH 31
SEPTEMBER 30, 1997 --------------------------------------------------------------------
(UNAUDITED)* 1997* 1996* 1995* 1994**
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $5.99 $5.93 $5.79 $6.42 $6.34
----- ----- ----- ----- -----
Net investment income 0.25 0.54 0.46 0.58 0.51
Net realized and unrealized gain
(loss) on investments 0.51 (0.00) 0.21 (0.59) 0.15
----- ----- ----- ----- -----
Total from investment operations 0.76 0.54 0.67 (0.01) 0.66
----- ----- ----- ----- -----
Dividends from net investment income (0.25) (0.48) (0.52) (0.56) (0.48)
Distributions from net realized gains -- -- (0.01) (0.06) (0.10)
----- ----- ----- ----- -----
Total distributions (0.25) (0.48) (0.53) (0.62) (0.58)
----- ----- ----- ----- -----
Net asset value, end of period $6.50 $5.99 $5.93 $5.79 $6.42
===== ===== ===== ===== =====
Total return 12.87%++ 9.52%+ 12.05%+ 0.88%+ 10.74%++
Net assets at end of period (000s) $32,673 $28,488 $15,262 $6,766 $2,661
Ratio of operating expenses to
average net assets 1.84%(+) 1.85% 1.92% 1.98% 1.93%(+)
Ratio of net investment income to
average net assets 8.15%(+) 9.09% 7.91% 9.81% 10.32%(+)
Portfolio turnover rate 48.85% 81.75% 56.47% 31.55% 24.36%
Average commission rate@ $0.0060 $0.0152 -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
* 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.
@ Average commission rate per share paid for security trades beginning with the fiscal year ended March 31, 1997.
</TABLE>
<PAGE>
<TABLE>
STATE STREET RESEARCH HIGH INCOME FUND
- -----------------------------------------------------------------------------------------------------------------------------------
FUND INFORMATION, OFFICERS AND TRUSTEES OF STATE STREET RESEARCH INCOME TRUST
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FUND INFORMATION OFFICERS TRUSTEES
STATE STREET RESEARCH RALPH F. VERNI RALPH F. VERNI
HIGH INCOME FUND Chairman of the Board, Chairman of the Board,
One Financial Center President and President, Chief Executive
Boston, MA 02111 Chief Executive Officer Officer and Director,
State Street Research &
INVESTMENT ADVISER PETER C. BENNETT Management Company
State Street Research & Vice President
Management Company
One Financial Center BARTLETT R. GEER STEVE A. GARBAN
Boston, MA 02111 Vice President Retired; formerly Senior Vice
President for Finance and
DISTRIBUTOR JOHN H. KALLIS Operations and Treasurer, The
State Street Research Vice President Pennsylvania State University
Investment Services, Inc.
One Financial Center THOMAS A. SHIVELY
Boston, MA 02111 Vice President MALCOLM T. HOPKINS
Former Vice Chairman of the
SHAREHOLDER SERVICES GERARD P. MAUS Board and Chief Financial
State Street Research Treasurer Officer, St. Regis Corp.
Shareholder Services
P.O. Box 8408 JOSEPH W. CANAVAN
Boston, MA 02266-8408 Assistant Treasurer EDWARD M. LAMONT
1-800-562-0032 Formerly in banking (Morgan
DOUGLAS A. ROMICH Guaranty Trust Company of
CUSTODIAN Assistant Treasurer New York); presently engaged
State Street Bank and in private investments and
Trust Company FRANCIS J. MCNAMARA, III civic affairs
225 Franklin Street Secretary and General Counsel
Boston, MA 02110
DARMAN A. WING ROBERT A. LAWRENCE
LEGAL COUNSEL Assistant Secretary and Associate, Saltonstall & Co.
Goodwin, Procter & Hoar LLP Assistant General Counsel
Exchange Place
Boston, MA 02109 AMY L. SIMMONS DEAN O. MORTON
Assistant Secretary 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
</TABLE>
<PAGE>
STATE STREET RESEARCH HIGH INCOME FUND --------------
One Financial Center Bulk Rate
Boston, MA 02111 U.S. Postage
PAID
Randolph, MA
Permit No. 600
--------------
QUESTIONS? COMMENTS?
CALL us at 1-800-562-0032
WRITE us at:
State Street Research
Service Center
P.O. Box 8408
Boston, MA 02266-8408
E-MAIL us at:
[email protected]
[Graphic Omitted] STATE STREET RESEARCH
This report is prepared for the general information of current shareholders.
When used in the general solicitation of investors, this report must be
accompanied or preceded by a current State Street Research High Income Fund
prospectus. When used after December 31, 1997, this report must be accompanied
by a current Quarterly Performance Update.
Portfolio changes should not be considered recommendations for action by
individual investors.
The Dalbar awards recognize quality shareholder service and should not be
considered a rating of fund performance. The survey included mutual fund
complexes that volunteered or were otherwise selected to participate and was not
industry-wide.
CONTROL NUMBER: 4405-971118(1298)SSR-LD HI-523E-1197 IBSRN
<PAGE>
-------------------------------
STATE STREET RESEARCH
MANAGED ASSETS
-------------------------------
SEMIANNUAL REPORT
September 30, 1997
WHAT'S INSIDE
INVESTMENT UPDATE
About the Fund,
economy and markets
FUND INFORMATION
Facts and figures
PLUS, COMPLETE PORTFOLIO HOLDINGS
AND FINANCIAL STATEMENTS
[Graphic Omitted]
For Excellence
in
Shareholder Service
STATE STREET RESEARCH FUNDS
<PAGE>
STATE STREET RESEARCH MANAGED ASSETS
- --------------------------------------------------------------------------------
INVESTMENT UPDATE
- --------------------------------------------------------------------------------
INVESTMENT ENVIRONMENT
THE ECONOMY
* The economy slowed to a moderate pace in the second and third quarter of 1997,
reducing fears that had been raised by a stronger-than-expected first quarter.
Employment is high, personal income has increased, and Americans are the most
confident they have been in close to 30 years. The consensus of outside
experts is for 1997 growth in real GNP to average around 3% for the year.
* The Federal Reserve Board has kept short term interest rates at 5.50%,
unchanged throughout the past six months.
* Inflation remained low, although it actually picked up some after declining
through the middle of the year. The Consumer Price Index, a common measure of
inflation, was up 2.2% (an annualized figure) versus a year ago. Wholesale
prices have declined during the period.
THE MARKETS
* The U.S. stock market lost some ground early in the period then turned around
to resume its climb past the 8,000 mark. The S&P 500 rose 26.24%(1) for the
six months ended September 30, 1997.
* Slower economic growth and benign inflation were good news for all segments of
the bond market, although investors remained skittish throughout the first
half of the period. The yield on the 30-year Treasury fell from 7.17% in April
to end the quarter at 6.40%. High yield bonds led the fixed- income markets
throughout the period. The First Boston High Yield Index, a measure of high
yield bond performance, was up 9.23%(1) for the six months ended September 30,
1997.
THE FUND
OVER THE PAST SIX MONTHS
* Class A shares of State Street Research Managed Assets returned 20.83% for the
six months ended September 30, 1997 (without sales charge)(2). That was higher
than the average flexible portfolio fund, which gained 18.00% during the same
period, according to Lipper Analytical Services.
* Early in the period, we made a strategic decision to reduce the Fund's equity
holdings from 70% equities to 65% equities and 35% bonds. Although the
decision reduced the Fund's exposure to the continued strong performance of
the stock market, we believe it was a prudent move in light of the rising
valuations of common stocks, in general, and large-cap stocks, in particular.
* Taking profits on large-cap stocks and adding to our investment in small and
mid-cap stocks was well timed: Small and mid- caps outperformed large caps
toward the end of the period.
* We added to the Fund's overall fixed income positions and cut back on its
exposure to lower quality, high yield securities. We invested the proceeds in
higher quality corporate bonds.
CURRENT STRATEGY
* We will continue to rebalance the Fund's exposure to common stocks from time
to time.
* The Fund as a whole remains aggressively positioned relative to its peers. We
will continue to keep an eye on valuations and take advantage of opportunities
to move assets into undervalued segments of the stock and bond markets.
* Our outlook is for continued slow economic growth and relatively stable
interest rates for the period ahead. We believe our current asset allocation
within the bond portion of the portfolio is a good match for the current
environment.
September 30, 1997
(1) The Standard & Poor's 500 Composite Index (S&P 500) is a market-value
weighted index composed of 500 widely traded common stocks. The First Boston
High Yield Index is a commonly used measure of high yield bond performance.
The indices are unmanaged and do not take transaction charges into
consideration. Direct investment in the indices is not possible; results are
for illustrative purposes only.
(2) +20.27% for Class B shares; +20.97% for Class C shares; +20.35% for Class D
shares.
(3) All returns represent past performance, which is no guarantee of future
results. The investment return and principal value of an investment made in
the Fund will fluctuate and shares, when redeemed, may be worth more or less
than their original cost. All returns assume reinvestment of capital gain
distributions and income dividends. Performance for a class includes periods
prior to the adoption of class designations in 1993, which resulted in new
or increased 12b-1 fees of up to 1% per class thereafter and which will
reduce subsequent performance. "C" shares, offered without a sales charge,
are available only to certain employee benefit plans and large instititions.
(4) Performance reflects up to maximum 4.5% "A" share front-end sales charge, or
5% "B" share or 1% "D" share contingent deferred sales charges, where
applicable.
(5) Cumulative total returns are not annualized, nor do they reflect sales
charges, which, if reflected, would reduce performance.
PLEASE NOTE THAT THE DISCUSSION THROUGHOUT THIS SHAREHOLDER REPORT IS DATED AS
INDICATED AND, BECAUSE OF POSSIBLE CHANGES IN VIEWPOINT, DATA AND
TRANSACTIONS, SHOULD NOT BE RELIED UPON AS BEING CURRENT THEREAFTER.
- -------------------------------------------------------------------------
FUND INFORMATION (all data are for periods ended September 30, 1997)
- -------------------------------------------------------------------------
SEC AVERAGE ANNUAL COMPOUND RATES OF RETURN
(at maximum applicable sales charge)(3)(4)
- -------------------------------------------------------------------------
LIFE OF FUND
5 YEARS 1 YEAR
(since 12/29/88)
- -------------------------------------------------------------------------
Class A +12.67% +14.92% +20.20%
- -------------------------------------------------------------------------
Class B +12.83% +14.98% +19.87%
- -------------------------------------------------------------------------
Class C +13.39% +16.22% +26.17%
- -------------------------------------------------------------------------
Class D +12.84% +15.23% +23.95%
- -------------------------------------------------------------------------
CUMULATIVE TOTAL RETURNS
(do not reflect sales charge)(3)(5)
- --------------------------------------------------------------------------------
LIFE OF FUND
5 YEARS 1 YEAR
(since 12/29/88)
- -------------------------------------------------------------------------
Class A +197.71% +109.86% +25.86%
- -------------------------------------------------------------------------
Class B +187.97% +103.00% +24.87%
- -------------------------------------------------------------------------
Class C +200.84% +112.06% +26.17%
- -------------------------------------------------------------------------
Class D +188.17% +103.13% +24.95%
- -------------------------------------------------------------------------
ASSET ALLOCATION
(by percentage of net assets)
[Graphic Omitted]
Equities ............................ 65%
Bonds ............................... 29%
Net Cash ............................ 6%
TOP 5 EQUITY INDUSTRIES
(by percentage of net assets)
OIL ................................. 10.1%
INSURANCE ........................... 3.9%
HOSPITAL SUPPLY ..................... 3.9%
RETAIL TRADE ........................ 3.5%
ELECTRONIC COMPONENTS ............... 3.0%
Total: 24.4%
<PAGE>
<TABLE>
STATE STREET RESEARCH MANAGED ASSETS
- -----------------------------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
September 30, 1997 (Unaudited)
- -----------------------------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------
VALUE
SHARES (NOTE 1)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
EQUITY SECURITIES 57.7%
BASIC INDUSTRIES 9.2%
CHEMICAL 2.7%
Agrium Inc. .................................................. 353,000 $ 4,236,000
Cabot Corp. .................................................. 135,000 3,636,563
Cambrex Corp. ................................................ 25,650 1,195,931
Ciba Specialty Chemicals AG* ................................. 2,700 260,829
E.I. Du Pont De Nemours & Co. ................................ 49,000 3,016,563
H.B. Fuller Co. .............................................. 8,800 476,850
JLM Industries Inc.* ......................................... 26,400 326,700
OM Group Inc. ................................................ 14,700 587,081
Thiokol Corp. ................................................ 50,700 4,360,200
------------
18,096,717
------------
DIVERSIFIED 0.0%
Axia Holdings Corp.*(+) ...................................... 750 75,000
Plastic Specialties & Technology, Inc.* ...................... 7,500 22,500
------------
97,500
------------
ELECTRICAL EQUIPMENT 1.4%
Asia Pacific Wire & Cable Corp. Ltd.* ........................ 200,400 2,267,025
Essex International Inc.* .................................... 10,300 396,550
General Electric Co. ......................................... 53,800 3,661,762
Matsushita Electric Works .................................... 305,000 3,184,719
Protection One Inc. Wts.*+ ................................... 800 10,400
------------
9,520,456
------------
FOREST PRODUCT 1.4%
Abitibi-Consolidated Inc. .................................... 152,200 2,558,862
Aracruz Celulose SA ADR ...................................... 47,000 966,438
Crown Packaging Holdings Ltd. Wts.*+ ......................... 3,750 469
Equitable Bag Inc.* .......................................... 47,600 19,040
Equitable Bag Inc. Pfd.* ..................................... 4,760 90,440
MacMillan Bloedel Ltd. ....................................... 124,500 1,829,503
Mail-Well Holdings, Inc.*(+) ................................. 21,308 577,966
SDW Holdings Corp. Wts.* ..................................... 18,000 94,860
Stone Container Corp. ........................................ 186,100 2,896,181
------------
9,033,759
------------
MACHINERY 1.6%
Chatwins Group Inc. Wts.*+ ................................... 500 500
Hanover Compressor Co.* ...................................... 15,800 387,100
ITEQ Inc.* ................................................... 81,300 1,133,119
Sundstrand Corp. ............................................. 62,800 3,618,850
Tyco International Ltd. ...................................... 40,600 3,331,738
US Filter Corp.* ............................................. 56,500 2,433,031
------------
10,904,338
------------
METAL & MINING 2.0%
Alumax Inc.* ................................................. 96,300 3,936,262
Aluminum Co. of America ...................................... 38,400 3,148,800
Bar Technologies Inc. Wts.*+ ................................. 250 15,000
General Cable Corp.* ......................................... 28,600 1,015,300
Kennametal Inc. .............................................. 85,900 4,166,150
NS Group Inc. Wts.*+ ......................................... 650 208,000
Sheffield Steel Corp. Wts.* .................................. 1,250 5,000
Wyman-Gordon Co.* ............................................ 34,500 905,625
------------
13,400,137
------------
TRUCKERS 0.1%
CNF Transportation Inc. ...................................... 7,900 344,144
------------
Total Basic Industries ....................................... 61,397,051
------------
CONSUMER CYCLICAL 8.7%
AIRLINE 0.3%
Aeroporti Di Roma SPA ........................................ 13,700 133,020
CHC Helicopter Corp. Wts.*(+) ................................ 2,000 7,000
China Southern Airlines Co. Ltd.* ............................ 3,230,100 1,920,194
------------
2,060,214
------------
AUTOMOTIVE 1.6%
Excelsior-Henderson Motorcycle Manufacturing Co.* ............ 20,400 131,325
Exide Corp. .................................................. 165,000 3,743,437
Lear Corp.* .................................................. 101,300 4,989,025
Renault SA ................................................... 58,200 1,725,600
------------
10,589,387
------------
BUILDING 0.6%
Lafarge Corp. ................................................ 116,600 3,760,350
Waxman Industries Inc. Wts.*+ ................................ 29,500 88,500
------------
3,848,850
------------
HOTEL & RESTAURANT 1.4%
Apple South Inc. ............................................. 25,000 481,250
CKE Restaurants Inc.* ........................................ 10,300 432,600
Fine Host Corp.* ............................................. 17,900 693,625
Harrah's Entertainment Inc.* ................................. 201,000 4,509,938
Mirage Resorts Inc.* ......................................... 114,800 3,458,350
Motels of America Inc.*+ ..................................... 500 5,000
------------
9,580,763
------------
PHOTOGRAPHY 0.2%
Imation Corp.* ............................................... 49,000 1,307,687
------------
RECREATION 1.0%
American Radio Systems Corp. Cl. A ........................... 12,600 600,075
American Radio Systems Corp. Series B Exch. Pfd. [] 2,632 315,801
American Telecasting Inc. Wts.* .............................. 1,250 1,250
Chancellor Media Corp. ....................................... 13,100 689,388
Cox Communications Inc.* ..................................... 86,600 2,386,913
Fitzgeralds South Inc. Wts.*(+) .............................. 1,250 12,500
Goldriver Hotel & Casino Corp. Cl. B*(+) ..................... 20,000 2,500
Goldriver Hotel & Casino Corp. Liquidation Trust Units(+) 500,000 6,350
Granite Broadcasting Corp. Exch. Pfd. [] ..................... 255 269,662
Heartland Wireless Communications, Inc. Wts.*(+) ............. 1,500 15
International Game Technology Inc. ........................... 74,500 1,694,875
Panavision Inc.* ............................................. 12,600 263,025
SHRP Equity Inc.* ............................................ 37 148
TCA Cable TV Inc.* ........................................... 10,100 393,900
Wireless One Inc. Wts.*+ ..................................... 750 8
Wireless One Inc. Wts.* ...................................... 1,250 313
------------
6,636,723
------------
RETAIL TRADE 3.5%
Carson Pirie Scott & Co.* .................................... 14,300 563,956
Central Rents Inc.*+ ......................................... 250 15,000
CVS Corp. .................................................... 57,900 3,293,063
Dominick's Supermarkets Inc.* ................................ 23,500 709,406
Food 4 Less Holdings Inc. Wts.*# ............................. 584 151,974
Global DirectMail Corp.* ..................................... 23,600 528,050
Hannaford Brothers Co. ....................................... 86,000 3,058,375
InaCom Corp.* ................................................ 8,200 304,938
K-III Communications Corp. Series E Exch. Pfd.+ .............. 1,000 101,000
Kroger Co.* .................................................. 203,700 6,149,194
Sothebys Holdings Inc. Cl. A ................................. 17,600 357,500
Staples Inc.* ................................................ 174,500 4,820,562
Supermarkets General Holdings Corp. Exch. Pfd. [] ............ 18,200 382,200
Talbots Inc. ................................................. 11,700 334,181
Wal-Mart Stores, Inc. ........................................ 71,000 2,600,375
------------
23,369,774
------------
TEXTILE & APPAREL 0.1%
Acme Boot Co.*+ .............................................. 250 250
Samsonite Corp.* ............................................. 6,500 285,188
------------
285,438
------------
Total Consumer Cyclical ..................................... 57,678,836
------------
CONSUMER STAPLE 11.2%
BUSINESS SERVICE 1.6%
Avis Rent A Car, Inc.* ....................................... 8,800 210,100
Carriage Services, Inc. Cl. A* ............................... 19,200 336,000
HBO & Co. .................................................... 56,600 2,136,650
ICF Kaiser International Inc. Wts.* .......................... 2,400 1,200
La Petite Academy Inc. Cl. A Exch. Pfd. ...................... 22,000 1,012,000
Maximus Inc.* ................................................ 17,900 517,981
Microage Inc.* ............................................... 9,400 272,600
Norrell Corp. ................................................ 13,600 467,500
Pagemart Inc. Wts.*+ ......................................... 2,300 21,275
Pameco Corp.* ................................................ 47,000 834,250
Philip Services Corp.* ....................................... 27,358 499,274
Shared Medical Systems Corp. ................................. 6,200 327,825
Staff Leasing Inc.* .......................................... 18,800 462,950
Universal Outdoor Holdings Inc.* ............................. 16,000 600,000
USA Waste Services Inc.* ..................................... 38,500 1,535,188
Vestar/LPA Investment Corp.*+ ................................ 1,375 20,625
Vestcom International Inc.* .................................. 29,600 592,000
Waterlink Inc.* .............................................. 50,900 954,375
------------
10,801,793
------------
CONTAINER 0.2%
Ball Corp. ................................................... 19,700 685,806
Golden Ocean Group Ltd.+ ..................................... 500 500
WBK STRYPES Trust ............................................ 13,000 407,550
------------
1,093,856
------------
DRUG 2.0%
Ascent Pediatrics Inc.* ...................................... 29,900 276,575
Axogen Ltd.* ................................................. 26,100 977,119
BioVail Corp.* ............................................... 52,400 1,522,875
Eli Lilly & Co. .............................................. 26,900 3,239,769
Novartis AG* ................................................. 2,700 4,139,851
Pathogenesis Corp.* .......................................... 8,600 305,300
Schering-Plough Corp. ........................................ 55,200 2,842,800
Warner Chilcott Laboratories PLC ADR* ........................ 15,400 273,350
------------
13,577,639
------------
FOOD & BEVERAGE 0.7%
Dr Pepper Bottling Holdings Inc. Cl. A* ...................... 56,000 1,092,000
Seven-Up/RC Bottling Co. of Southern California* ............. 26,250 315,000
Whitman Corp. ................................................ 131,900 3,594,275
------------
5,001,275
------------
HOSPITAL SUPPLY 3.9%
Baxter International Inc. .................................... 28,500 1,489,125
Boston Scientific Corp.* ..................................... 24,100 1,330,019
Centennial Healthcare Corp.* ................................. 26,400 607,200
Genesis Health Ventures Inc.* ................................ 14,800 576,275
Guidant Corp. ................................................ 54,000 3,024,000
Healthdyne Technologies Inc.* ................................ 70,300 1,309,337
National Surgery Cemters Inc.* ............................... 27,900 606,825
Pacificare Health Systems, Inc. Cl. A* ....................... 52,400 3,458,400
Roche Holdings AG* ........................................... 475 4,213,078
Rural/Metro Corp.* ........................................... 9,400 286,700
Tenet Healthcare Corp. ....................................... 108,800 3,168,800
Terumo Corp.* ................................................ 190,000 3,526,974
Total Renal Care Holdings Inc.* .............................. 34,700 1,735,000
Xomed Surgical Products Inc.* ................................ 29,600 588,300
------------
25,920,033
------------
PERSONAL CARE 0.6%
Procter & Gamble Co. ......................................... 28,800 1,989,000
Wesley Jessen VisionCare Inc.* ............................... 65,100 1,839,075
------------
3,828,075
------------
PRINTING & PUBLISHING 1.7%
A.H. Belo Corp. Cl. A ........................................ 12,852 623,322
General Media Inc. Wts.*(+) .................................. 250 250
Hollinger International, Inc. Cl. A* ......................... 340,000 4,547,500
K-III Communications Corp. Series D Exch. Pfd.* .............. 2,500 266,250
Prosieben Media AG ........................................... 12,000 596,961
Sullivan Holdings Inc.* ...................................... 149 53,467
Valassis Communications Inc. ................................. 161,900 5,160,563
------------
11,248,313
------------
TOBACCO 0.5%
Dimon Inc. ................................................... 89,900 2,247,500
Philip Morris Companies, Inc. ................................ 26,400 1,097,250
------------
3,344,750
------------
Total Consumer Staple ....................................... 74,815,734
------------
ENERGY 6.6%
OIL 5.5%
British Petroleum Co. PLC* ................................... 109,800 1,655,441
Energy Africa Ltd.* .......................................... 974,400 5,645,060
ENI SPA ADR .................................................. 48,800 3,065,250
Gulf Indonesia Resources Ltd.*++ ............................. 15,200 338,200
Maxx Petroleum Ltd.*++ ....................................... 125,000 271,336
Oryx Energy Co.* ............................................. 186,200 4,736,462
PTT Exploration & Production Public Co. Ltd.* ................ 13,400 179,405
Royal Dutch Petroleum Co. .................................... 39,200 2,175,600
Santa Fe Energy Resources Inc. ............................... 69,700 871,250
Seagull Energy Corp.*++ ...................................... 366,188 9,337,794
Tosco Corp. .................................................. 117,000 4,073,062
Total SA Cl. B* .............................................. 12,909 1,477,453
Total SA Cl. B ADR ........................................... 49,000 2,808,313
------------
36,634,626
------------
OIL SERVICE 1.1%
Daniel Industries Inc. ....................................... 20,500 398,469
Dreco Energy Services Ltd. ................................... 12,365 925,057
Mapco Inc. ................................................... 67,000 2,206,812
Schlumberger Ltd. ............................................ 43,000 3,620,062
------------
7,150,400
------------
Total Energy ................................................ 43,785,026
------------
FINANCE 7.1%
BANK 2.1%
BankAmerica Corp. ............................................ 41,600 3,049,800
Citicorp ..................................................... 8,300 1,111,681
Commercial Federal Corp. ..................................... 4,900 230,913
Fleet Financial Group Inc. ................................... 65,900 4,320,569
Golden State Bancorp Inc. .................................... 24,500 731,937
Mellon Bank Corp. ............................................ 78,700 4,308,825
Riverbank America Pfd.* ...................................... 20,000 485,000
------------
14,238,725
------------
FINANCIAL SERVICE 1.1%
CB Commercial Real Estate Services Group, Inc.* .............. 13,300 425,600
CMAC Investment Corp. ........................................ 11,200 600,600
CRIIMI MAE Inc.* ............................................. 13,500 214,313
Federal Home Loan Mortgage Corp. ............................. 96,800 3,412,200
First Industrial Realty Trust Inc. ........................... 11,300 384,200
Homeside Inc.* ............................................... 45,300 1,172,137
INMC Mortgage Holdings Inc. .................................. 24,200 605,000
Liberty Property Trust ....................................... 11,700 315,169
------------
7,129,219
------------
INSURANCE 3.9%
Ace Ltd. ..................................................... 89,000 8,366,000
AMBAC Inc. ................................................... 54,400 2,213,400
Capital Re Corp. ............................................. 5,500 335,500
General Re Corp. ............................................. 18,400 3,652,400
HCC Insurance Holdings Inc. .................................. 17,100 454,219
Mid Ocean Ltd. ............................................... 71,700 4,543,987
Mutual Risk Management Ltd. .................................. 14,600 741,863
Penncorp Financial Group Inc.* ............................... 20,000 620,000
Travelers Group Inc. ......................................... 31,100 2,122,575
Travelers Property Casualty Corp. Cl. A ...................... 76,700 3,106,350
------------
26,156,294
------------
Total Finance ............................................... 47,524,238
------------
SCIENCE & TECHNOLOGY 12.0%
AEROSPACE 0.5%
Boeing Co. ................................................... 51,292 2,792,208
First Aviation Services Inc.* ................................ 36,800 308,200
Ladish Company, Inc.*# ....................................... 52,000 169,000
------------
3,269,408
------------
COMPUTER SOFTWARE & SERVICE 2.6%
Advantage Learning Systems Inc. .............................. 2,700 68,175
Anacomp Inc. Wts.* ........................................... 4,941 31,499
Aspen Technology Inc.* ....................................... 7,500 263,438
Boston Technology Inc.* ...................................... 19,100 647,012
Box Hill Systems Corp.* ...................................... 10,700 187,250
Cisco Systems Inc.* .......................................... 22,000 1,607,375
Complete Business Solutions Inc.* ............................ 18,300 521,550
Diamond Multimedia Systems Inc.* ............................. 31,500 385,875
Mapics Inc.* ................................................. 41,900 544,700
Mastech Corp.* ............................................... 22,000 748,000
Microsoft Corp.* ............................................. 11,600 1,534,825
Network Solutions Inc. Cl. A* ................................ 2,700 58,725
SAP AG Pfd.* ................................................. 14,900 3,980,192
Sema Group PLC* .............................................. 72,300 1,509,760
Transition Systems Inc.* ..................................... 34,100 699,050
TT Tieto Oy Cl. B* ........................................... 8,000 899,649
Veritas Software Co.* ........................................ 6,000 263,625
Wang Laboratories Inc.* ...................................... 22,700 478,119
Western Digital Corp.* ....................................... 55,000 2,203,437
WM Data AB Cl. B* ............................................ 40,500 677,891
Xylan Corp.* ................................................. 16,500 365,063
------------
17,675,210
------------
ELECTRONIC COMPONENTS 3.0%
AMP Inc. ..................................................... 41,900 2,244,269
Hitachi Ltd.* ................................................ 220,000 1,914,312
Intel Corp.* ................................................. 23,800 2,197,037
Lernout & Hauspie Speech Products NV ADR* .................... 89,900 3,933,125
Microtouch Systems Inc.* ..................................... 15,800 440,425
Remec Inc.* .................................................. 35,350 1,290,275
Rohm Co. ..................................................... 15,000 1,765,145
Sandisk Corp.* ............................................... 11,200 403,200
Texas Instruments Inc. ....................................... 38,100 5,148,262
Vitesse Semiconductor Corp.* ................................. 12,800 634,400
World Access Inc.* ........................................... 9,400 305,500
------------
20,275,950
------------
ELECTRONIC EQUIPMENT 3.0%
Aeroflex Inc.* ............................................... 63,000 637,875
Brooks Automation Inc.* ...................................... 5,600 214,900
Chicago Miniature Lamp, Inc.* ................................ 52,300 1,738,975
Integrated Process Equipment Corp. ........................... 7,900 291,313
KLA-Tencor Corp.* ............................................ 36,200 2,445,762
L.M. Ericsson Telephone Co. ADR Cl. B* ....................... 72,680 3,484,097
L.M. Ericsson Telephone Co. Cl. B* ........................... 96,800 4,650,227
MAS Technology Ltd. ADR* ..................................... 22,600 514,150
Motorola Inc. ................................................ 27,300 1,962,187
Scientific Atlanta Inc. ...................................... 28,500 644,813
Silicon Valley Group Inc.* ................................... 9,300 330,731
Spectrian Corp.* ............................................. 26,300 1,686,488
Teradyne Inc.* ............................................... 23,500 1,264,594
------------
19,866,112
------------
OFFICE EQUIPMENT 2.9%
Compaq Computer Corp.* ....................................... 58,000 4,335,500
Hewlett-Packard Co. .......................................... 47,000 3,269,438
International Business Machines Corp. ........................ 20,700 2,192,906
Quantum Corp.* ............................................... 130,500 4,999,781
Unisys Corp. ................................................. 284,200 4,351,813
------------
19,149,438
------------
Total Science & Technology .................................. 80,236,118
------------
UTILITY 2.9%
ELECTRIC 1.7%
Edison International Inc. .................................... 103,800 2,620,950
Elecricidade De Portugal SA .................................. 100,000 1,717,239
OGE Energy Corp. ............................................. 60,000 2,831,250
Veba AG* ..................................................... 37,000 2,162,059
Western Resources Inc. ....................................... 67,200 2,305,800
------------
11,637,298
------------
NATURAL GAS 0.1%
Calpine Corp.* ............................................... 25,100 516,119
------------
TELEPHONE 1.1%
Allen Telecom Inc. ........................................... 33,400 951,900
Bell Canada International Inc* ............................... 6,600 124,575
Celcaribe SA*+ ............................................... 297,558 1,636,569
Clearnet Communications Inc. Wts.* ........................... 2,640 26,400
Intelcom Group, Inc. Wts.*(+) ................................ 1,650 25,575
Nextel Communications Inc. Cl. A ............................. 1,549 44,727
NEXTLINK Communications Inc. Cl. A* .......................... 11,400 273,600
Nortel Inversora SA ADR ...................................... 66,000 1,831,500
Powertel Inc. Wts. ........................................... 960 7,680
RSL Communications Ltd. Wts.+ ................................ 750 52,500
WorldCom Inc.* ............................................... 62,700 2,218,013
------------
7,193,039
------------
Total Utility ............................................... 19,346,456
------------
Total Equity Securities (Cost $294,466,421) ................. 384,783,459
------------
EQUITY SECURITIES -- INFLATION RESPONSIVE
INVESTMENTS 7.2%
BASIC INDUSTRIES 1.1%
METAL & MINING 1.0%
Aber Resources Ltd.* ......................................... 13,600 180,200
Ashanti Goldfields Ltd. GDR .................................. 50,000 550,000
Battle Mountain Gold Co. ..................................... 100,000 718,750
Crown Resources Corp.* ....................................... 125,000 789,062
Delta Gold NL* ............................................... 168,000 201,233
Kinross Gold Corp.* .......................................... 60,000 333,750
Menzies Gold NL* ............................................. 400,000 55,172
Newcrest Mining Ltd.* ........................................ 150,000 270,053
Normandy Mining Ltd.* ........................................ 510,869 649,015
Pan African Resources Corp.* ................................. 215,600 26,520
Southernera Resources Ltd.* .................................. 100,000 1,331,356
Sutton Resources Ltd.* ....................................... 56,000 539,000
TVX Gold Inc.* ............................................... 60,000 375,000
Vaal Reefs Exploration & Mining Ltd. ADR ..................... 43,100 231,663
Viceroy Resource Corp.* ...................................... 100,000 253,247
------------
6,504,021
------------
RAILROAD 0.1%
OMI Corp. .................................................... 89,200 1,115,000
------------
Total Basic Industries ...................................... 7,619,021
------------
CONSUMER STAPLE 0.2%
BUSINESS SERVICE 0.2%
Commodore Applied Technologies, Inc.* ........................ 150,000 825,000
Commodore Applied Technologies, Inc. Wts.* ................... 150,000 178,125
------------
1,003,125
------------
Total Consumer Staple ....................................... 1,003,125
------------
ENERGY 5.1%
OIL 4.6%
Baytex Energy Ltd. Cl. A ..................................... 1,500 23,606
3DX Technologies Inc.* ....................................... 50,000 453,125
Abacan Resource Corp.*@ ...................................... 304,100 950,312
Arakis Energy Corp.*@ ........................................ 453,100 1,415,937
Barrington Petroleum Ltd.* ................................... 126,300 543,747
Basin Exploration Inc.* ...................................... 65,000 1,088,750
Benton Oil & Gas Co. ......................................... 9,400 175,663
Brigham Exploration Co.* ..................................... 24,000 333,000
Cabot Oil & Gas Corp. Cl. A .................................. 20,200 465,863
Clayton Williams Energy Inc.* ................................ 13,598 220,968
Crystal Oil Co.* ............................................. 10,000 388,125
Forcenergy Inc. .............................................. 8,900 345,431
Forest Oil Corp. ............................................. 12,300 224,475
Gulf Canada Resources Ltd. ................................... 155,771 1,421,410
Gulfstream Resource Canada Ltd. .............................. 42,800 402,590
Hurricane Hydrocarbons Ltd. Cl. A ............................ 18,100 161,742
KCS Energy Inc.@ ............................................. 221,500 6,534,250
Meridian Resource Corp. ...................................... 12,200 160,888
Nuevo Energy Co.*@ ........................................... 56,700 2,714,512
Ocean Energy Inc.* ........................................... 27,300 1,883,700
Oil Search Ltd.* ............................................. 598,100 1,380,727
Optima Petroleum Corp.* ...................................... 43,100 94,281
Patina Oil & Gas Corp. ....................................... 12,400 122,450
Plains Resources Inc.* ....................................... 109,800 1,976,400
Ranger Oil Ltd.* ............................................. 136,000 1,275,000
Seven Seas Petroleum Inc.* ................................... 32,500 398,125
Southwestern Energy Co.* ..................................... 58,600 750,813
St. Mary Land & Exploration Co. .............................. 5,000 226,875
Stone Energy Corp. ........................................... 9,200 309,350
Summit Resources Ltd. ........................................ 50,000 249,629
Tarragon Oil & Gas Ltd.* ..................................... 116,357 1,313,389
Titan Exploration Inc.* ...................................... 29,800 357,600
Tom Brown, Inc.* ............................................. 35,600 881,100
Ulster Petroleum Ltd.* ....................................... 89,000 949,857
Union Pacific Resources Group Inc. ........................... 25,600 670,400
------------
30,864,090
------------
OIL SERVICE 0.5%
Atwood Oceanics Inc.* ........................................ 9,000 1,013,625
Dailey Petroleum Services Corp. Cl. A* ....................... 34,200 389,025
Noble Drilling Corp.* ........................................ 42,800 1,380,300
TMBR/Sharp Drilling, Inc.* ................................... 20,500 553,500
------------
3,336,450
------------
Total Energy ................................................ 34,200,540
------------
SCIENCE & TECHNOLOGY 0.1%
ELECTRONIC EQUIPMENT 0.1%
Commodore Separation Technologies, Inc.* ..................... 150,000 412,500
Commodore Separation Technologies, Inc. Wts.* ................ 150,000 168,750
------------
581,250
------------
Total Science & Technology .................................. 581,250
------------
UTILITY 0.7%
NATURAL GAS 0.7%
Questar Corp. ................................................ 6,100 247,431
TransTexas Gas Corp.*@ ....................................... 254,700 4,075,200
Valero Refining & Marketing Corp. ............................ 7,800 255,938
------------
4,578,569
------------
Total Utility ............................................... 4,578,569
------------
Total Equity Securities -- Inflation Responsive
Investments (Cost $35,135,740) ............................. 47,982,505
------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
PRINCIPAL MATURITY VALUE
AMOUNT DATE (NOTE 1)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FIXED INCOME SECURITIES 29.2%
U.S. TREASURY 6.8%
U.S. Treasury Bond, 12.00% .......................... $ 800,000 8/15/2013 $ 1,152,000
U.S. Treasury Bond, 8.75% ........................... 3,800,000 5/15/2017 4,757,714
U.S. Treasury Bond, 8.125% .......................... 3,950,000 8/15/2021 4,727,044
U.S. Treasury Bond, 6.25% ........................... 2,500,000 8/15/2023 2,426,950
U.S. Treasury Note, 6.875% .......................... 5,475,000 8/31/1999 5,578,532
U.S. Treasury Note, 7.125% .......................... 400,000 9/30/1999 409,748
U.S. Treasury Note, 6.875% .......................... 250,000 3/31/2000 255,780
U.S. Treasury Note, 6.00% ........................... 3,125,000 8/15/2000 3,135,250
U.S. Treasury Note, 6.375% .......................... 2,700,000 3/31/2001 2,734,182
U.S. Treasury Note, 6.625% .......................... 4,325,000 7/31/2001 4,419,588
U.S. Treasury Note, 6.25% ........................... 4,725,000 2/28/2002 4,768,564
U.S. Treasury Note, 7.875% .......................... 3,375,000 11/15/2004 3,710,914
U.S. Treasury Note, 6.50% ........................... 6,325,000 8/15/2005 6,459,406
U.S. Treasury Note, 3.375% .......................... 683,768 1/15/2007 670,517
------------
45,206,189
------------
U.S. AGENCY MORTGAGE 5.5%
Federal Home Loan Mortgage Corp., 7.50% ............. 87,070 4/01/2002 88,177
Federal Home Loan Mortgage Corp., 8.50% ............. 343 7/01/2009 358
Federal Home Loan Mortgage Corp. TBA, 7.00% ......... 2,900,000 11/17/2012 2,919,938
Federal Home Loan Mortgage Corp. Series 29-H PAC,
6.50% ............................................. 425,000 3/25/2023 419,156
Federal Home Loan Mortgage Corp., 7.00% ............. 1,495,578 6/01/2024 1,497,911
Federal Home Loan Mortgage Corp., 7.50% ............. 1,168,028 8/01/2024 1,192,113
Federal Home Loan Mortgage Corp., 7.00% ............. 769,358 12/01/2024 770,558
Federal National Mortgage Association, 9.50% ........ 1,443,080 10/01/2003 1,508,928
Federal National Mortgage Association TBA, 7.00% .... 1,325,000 10/22/2004 1,330,380
Federal National Mortgage Association, 8.00% ........ 231,366 4/01/2008 240,281
Federal National Mortgage Association, 8.00% ........ 296,718 6/01/2008 308,150
Federal National Mortgage Association, 8.50% ........ 268,047 2/01/2009 281,197
Federal National Mortgage Association, 7.50% ........ 1,802,266 6/01/2010 1,851,252
Federal National Mortgage Association, 7.50% ........ 2,752,699 6/01/2012 2,815,488
Federal National Mortgage Association, 6.00% ........ 1,000,000 5/25/2022 972,810
Federal National Mortgage Association, 7.50% ........ 935,263 10/01/2025 952,509
Federal National Mortgage Association, 7.50% ........ 1,602,103 10/01/2025 1,628,634
Federal National Mortgage Association TBA, 7.50% .... 6,375,000 11/13/2027 6,470,625
Government National Mortgage Association, 6.50% ..... 598,664 2/15/2009 599,131
Government National Mortgage Association, 6.50% ..... 219,818 6/15/2009 219,990
Government National Mortgage Association, 6.50% ..... 1,313,461 7/15/2009 1,314,485
Government National Mortgage Association TBA, 7.50% . 975,000 10/16/2012 1,001,203
Government National Mortgage Association, 9.00% ..... 388,969 6/15/2016 421,907
Government National Mortgage Association, 8.00% ..... 701,794 9/15/2017 736,006
Government National Mortgage Association, 8.00% ..... 705,203 8/15/2022 732,530
Government National Mortgage Association, 8.00% ..... 537,245 12/15/2022 558,734
Government National Mortgage Association, 8.00% ..... 549,591 12/15/2022 570,888
Government National Mortgage Association, 7.00% ..... 1,156,673 1/15/2025 1,160,640
Government National Mortgage Association, 8.00% ..... 713,061 5/15/2025 737,569
Government National Mortgage Association, 8.00% ..... 905,078 7/15/2025 935,624
Government National Mortgage Association, 6.50% ..... 927,951 11/15/2025 907,648
Government National Mortgage Association, 7.50% ..... 1,305,008 11/15/2025 1,328,251
Government National Mortgage Association, 8.00% ..... 211,826 9/15/2026 218,975
------------
36,692,046
------------
TRUST CERTIFICATES 0.2%
Cooperative Trust Certificates, 10.11% .............. 900,000 12/15/2017 952,218
Cooperative Utility Trust Certificates, 10.70% ...... 350,000 9/15/2017 367,500
Cooperative Utility Trust Certificates, 10.125% ..... 225,000 3/15/2019 241,308
------------
1,561,026
------------
FINANCE/MORTGAGE 5.0%
Advanta Credit Card Master Trust Series 95F-A1,
6.05% ............................................. 475,000 8/01/2003 471,879
Arcadia Automobile Trust Series 97-C A5, 6.55% ...... 675,000 6/15/2005 680,801
Associates Corp. of North America Sr. Note, 6.70% ... 1,400,000 5/29/2001 1,421,630
Bank of New York Institutional Capital Trust, 7.78%+ 2,650,000 12/01/2026 2,644,541
BankAmerica Institutional Capital Series B, 7.70%+ .. 2,600,000 12/31/2026 2,576,652
Capital One Bank Sr. Note, 7.08% .................... 1,850,000 10/30/2001 1,881,783
Chase Mortgage Finance Corp. Series
93L-2A5, 6.25% .................................... 675,000 10/25/2024 664,242
Cigna Corp. Deb., 7.875% ............................ 1,400,000 5/15/2027 1,469,594
CIT Group Holdings Inc. Sr. Note, 6.80% 1,400,000 4/17/2000 1,422,876
Commercial Credit Group Inc. Note,
6.45% ............................................. 1,450,000 7/01/2002 1,468,125
Commercial Credit Group Inc. Sr. Note, 5.55% ........ 1,400,000 2/15/2001 1,368,416
Countrywide Funding Corp. Medium Term Note, 7.26% ... 1,400,000 5/10/2004 1,444,422
Countrywide Mortgage Inc. Series 1993-E A-1, 6.50% .. 193,645 1/25/2024 193,766
Countrywide Mortgage Inc. Series 1994-2 A-7, 6.50% .. 498,736 4/25/2008 497,798
DLJ Mortgage Acceptance Corp. Series 97-CF2 A1A,
6.55%+ ............................................ 700,000 10/15/2030 701,641
First Deposit, 5.75% ................................ 1,400,000 6/15/2001 1,400,434
First USA Credit Card Master Trust,
6.42% ............................................. 1,350,000 3/17/2005 1,357,383
Ford Credit Auto Loan Master Trust Series 95-1,
6.50% ............................................. 1,100,000 8/15/2002 1,107,216
GE Global Insurance Holding Corp. Note, 7.00% ....... 725,000 2/15/2026 718,156
MBNA Corp. Sr. Note, 6.875% ......................... 675,000 11/15/2002 682,999
Prime Credit Card Master Trust 1995-1A, 6.75% ....... 1,800,000 11/15/2005 1,819,116
Prudential Home Mortgage Securities Co. Series 93-29
A-6 PAC, 6.75% .................................... 933,304 8/25/2008 936,216
Prudential Home Mortgage Securities Co. Series
93-47A-11, 6.10% .................................. 1,300,000 12/25/2023 1,226,056
Residential Funding Corp. Series 1993-S25 A-1, 6.50% 143,044 7/25/2008 142,775
Sears Credit Account Master Trust Series 1995-2A,
8.10% ............................................. 2,650,000 6/15/2004 2,745,214
Sears Credit Account Master Trust Series 1997-1A,
6.20% ............................................. 700,000 7/16/2007 697,375
Zurich Capital Trust, 8.37%+ ........................ 1,425,000 6/01/2037 1,510,871
------------
33,251,977
------------
FOREIGN GOVERNMENT 4.9%
Australian Dollar
Commonwealth of Australia, 9.00% .................... 10,425,000 9/15/2004 8,879,116
Canadian Dollar
Government of Canada, 0.00% ......................... 3,825,000 2/05/1998 2,735,963
New Zealand Dollar
Government of New Zealand, 10.00% ................... 6,700,000 3/15/2002 4,825,937
Government of New Zealand, 8.00% .................... 4,225,000 11/15/2006 2,955,198
Pound Sterling
United Kingdom Treasury, 8.50% ...................... 7,200,000 12/07/2005 13,093,898
------------
32,490,112
------------
FOREIGN 0.8%
Hydro-Quebec Deb. Series HS, 9.40% .................. $ 475,000 2/01/2021 589,869
Petroliam Nasional BHD Note, 7.125%+ ................ 675,000 10/18/2006 671,949
Province of Quebec Deb., 7.125% ..................... 700,000 2/09/2024 688,345
Usinor Sacilor Note ADR, 7.25% ...................... 3,500,000 8/01/2006 3,564,890
------------
5,515,053
------------
CORPORATE 6.0%
Acme Boot Inc. Sr. Note Series B,
11.50% ............................................ 250,000 12/15/2000 105,000
Allbritton Communications Co. Sr. Sub. Deb., 9.75% .. 500,000 11/30/2007 500,000
Alvey Systems Inc. Sr. Sub. Note,
11.375% ........................................... 250,000 1/31/2003 262,500
American Telecasting Inc. Sr. Note, 0.00% to 6/14/99,
12.50%from 6/15/99 to maturity .................... 499,947 6/15/2004 184,980
Anchor Advanced Products, Inc. Series B Sr. Note,
11.75%+ ........................................... 500,000 4/01/2004 535,000
Archibald Candy Corp. Sr. Sec. Notes, 10.25%+ ....... 500,000 7/01/2004 526,250
Argo-Tech Corp. Sr. Sub. Note, 8.625%+ .............. 250,000 10/01/2007 250,625
Axia Inc. Sr. Sub. Note, 11.00% ..................... 132,000 3/15/2001 133,980
Axiohm Inc. Sr. Sub. Note, 9.75%+ ................... 250,000 10/01/2007 252,813
Belden & Blake Corp. Sr. Sub. Note, 9.875%+ ......... 250,000 6/15/2007 251,250
Benedek Broadcasting Corp. Sr. Note, 11.875% ........ 250,000 3/01/2005 281,250
Benedek Communications Co. Sr. Sub. Note, 0.00% to
5/14/2001, 13.25% from 5/15/2001 to maturity ...... 1,000,000 5/15/2006 705,000
Busse Broadcasting Corp. Sr. Sec. Note, 11.625% ..... 500,000 10/15/2000 536,250
Capstar Broadcasting Partners Sr. Note, 0.00% to
1/31/2002, 12.75% from 2/1/2002 to maturity ....... 750,000 2/01/2009 513,750
Celcaribe SA Sr. Sec. Note, 0.00% to 3/14/98, 13.50%
from 3/15/98 to maturity .......................... 1,830,000 3/15/2004 1,784,250
Celestica International Inc. Series B Sr. Sub. Note,
10.50% ............................................ 250,000 12/31/2006 270,938
CHC Helicopter Corp. Sr. Sub. Note, 11.50% .......... 600,000 7/15/2002 640,500
Clearnet Communications Inc. Sr. Note, 0.00% to
12/14/2000, 14.75% from 12/15/2000 to maturity .... 600,000 12/15/2005 465,000
Columbia/HCA Healthcare Corp. Deb., 7.50% ........... 700,000 12/15/2023 684,474
Columbia/HCA Healthcare Corp. Note, 6.91% ........... 1,400,000 6/15/2005 1,362,452
Columbia/HCA Healthcare Corp. Note, 7.69% ........... 650,000 6/15/2025 633,613
Drypers Corp. Series B Sr. Note, 10.25%+ 500,000 6/15/2007 502,500
Econophone Inc. Sr. Note, 13.50%+ ................... 500,000 7/15/2007 542,500
Edison Mission Energy Funding Corp. Series A Note,
6.77%+ ............................................ 2,327,410 9/15/2003 2,344,470
Empire Gas Corp. Sr. Sec. Note, 7.00% to 7/14/99,
12.875% from 7/15/99 to maturity .................. 750,000 7/15/1999 708,750
Envirosource Inc. Note, 9.75% ....................... 1,000,000 6/15/2003 990,000
Exide Corp. Sr. Note, 10.00% ........................ 250,000 4/15/2005 265,000
Fort James Corp. Sr. Note, 6.625% ................... 1,350,000 9/15/2004 1,337,053
French Fragrances Inc. Sr. Note, 10.375% 500,000 5/15/2007 525,000
Golden Ocean Group Ltd. Sr. Note, 10.00%+ ........... 500,000 8/31/2001 385,000
ICF International Inc. Sr. Sub. Note, 13.00% ........ 375,000 12/31/2003 390,937
ICG Holdings Inc. Sr. Note, 0.00% to
9/14/2000, 13.50% from 9/15/2000 to maturity ...... 500,000 9/15/2005 397,500
International Knife & Saw Inc. Sr. Sub. Note,
11.375% ........................................... 250,000 11/15/2006 271,875
Intertek Finance PLC Series B Sr. Sub. Note, 10.25% . 625,000 11/01/2006 659,375
Johnstown America Industries, Inc. Series B Sr. Sub
Note, 11.75%+ ..................................... 125,000 8/15/2005 134,375
Johnstown America Industries, Inc. Sr. Sub. Note,
11.75% ............................................ 250,000 8/15/2005 268,750
Krystal Co. Sr. Note, 10.25%+ ....................... 250,000 10/01/2007 255,000
L3 Communications Corp. Sr. Sub. Note, 10.375%+ ..... 250,000 5/01/2007 270,000
Ladish Company, Inc. Sr. Sub. Note, 12.00%(+)# ...... 20,517 12/22/2000 21,584
Lamar Advertising Co. Sr. Sub. Note, 9.625% ......... 250,000 12/01/2006 263,750
Mail-Well Envelope Corp. Sr. Sub. Note, 10.50% ...... 250,000 2/15/2004 269,375
Muzak L.P. Sr. Note, 10.00% ......................... 250,000 10/01/2003 262,500
National Energy Group Inc. Series C Sr. Note,
10.75%+ ........................................... 250,000 11/01/2006 259,375
NBTY Inc. Sr. Sub. Note, 8.625%+ .................... 125,000 9/15/2007 124,375
Nextel Communications Inc. Sr. Note, 0.00% to
2/14/99, 9.75% from 2/15/99 to maturity ........... 250,000 8/15/2004 216,250
Norcal Waste Systems Inc. Series B Sr. Note, 13.25%
to 11/14/97, 13.50% from 11/15/97 to maturity ..... 500,000 11/15/2005 565,000
North Atlantic Trading Inc. Sr. Note, 11.00%+ ....... 750,000 6/15/2004 787,500
Outdoor Systems Inc. Sr. Sub. Note, 9.375% .......... 750,000 10/15/2006 787,500
Owens & Minor Inc. Sr. Sub. Note, 10.875% ........... 125,000 6/01/2006 137,813
Packaging Resources Inc. Sr. Sec. Note, 11.625% ..... 750,000 5/01/2003 791,250
Pagemart Nationwide Inc. Sr. Disc. Note, 0.00% to
1/31/2000, 15.00% from 2/1/2000 to maturity ....... 550,000 2/01/2005 445,500
Pathmark Stores Inc. Sub. Note, 11.625% 250,000 6/15/2002 252,500
Pricellular Wireless Corp. Sr. Note, 10.75% ......... 125,000 11/01/2004 135,000
Protection One Alarm Inc. Sr. Note, 0.00% to 6/29/98,
13.375% from 6/30/98 to maturity .................. 500,000 6/30/2005 550,000
Quest Diagnostics Inc. Sr. Sub. Note, 10.75% ........ 500,000 12/15/2006 545,000
Qwest Communications International Inc. Series B Sr.
Note, 10.875% ..................................... 500,000 4/01/2007 560,000
Railcar Leasing LLC Sr. Sec. Note, 6.75%+ ........... 845,902 7/15/2006 869,164
RSL Communications Ltd. Sr. Note, 12.25% ............ 750,000 11/15/2006 802,500
Sam Houston Race Park Ltd. Sr. Sec. Note, 11.00% .. 140,244 9/01/2001 56,098
Sheffield Steel Corp. First Mortgage Note, 12.00% ... 500,000 11/01/2001 515,000
Spanish Broadcasting Systems Inc. Sr. Note, 7.50% ... 1,000,000 6/15/2002 1,140,000
Stena AB Sr. Note, 8.75% ............................ 250,000 6/15/2007 252,188
Sun Media Corp. Sr. Sub. Note, 9.50% ................ 250,000 2/15/2007 258,750
Sun Media Corp. Sr. Sub. Note, 9.50% ................ 250,000 5/15/2007 259,375
Tekni-Plex Inc. Sr. Sub. Note, 11.25%+ .............. 500,000 4/01/2007 551,250
Telemundo Group Inc. Sr. Note, 7.00% to 2/14/99,
10.50% from 2/15/99 to maturity ................... 250,000 2/15/2006 246,250
TFM SA de CV Sr. Note, 10.25%+ ...................... 500,000 6/15/2007 532,500
Tokheim Corp. Sr. Sub. Note, 11.50% ................. 750,000 8/01/2006 845,625
Tracor Inc. Sr. Sub. Deb., 8.50% .................... 500,000 3/01/2007 512,500
Transamerican Energy Corp. Sr. Note, 0.00% to
6/14/99, 13.00% from 6/15/99 to maturity+ ......... 1,000,000 6/15/2002 795,000
Transamerican Energy Corp. Sr. Note, 11.50%+ ........ 1,000,000 6/15/2002 992,500
Trump Atlantic City Associates First Mortgage Note,
11.25% ............................................ 250,000 5/01/2006 242,500
TV Azteca SA de CV Series B Sr. Note, 10.50% ........ 500,000 2/15/2007 532,500
U.S.A. Mobile Communications Inc. Sr. Note, 14.00% .. 750,000 11/01/2004 840,000
Unilab Corp. Sr. Note, 11.00% ....................... 500,000 4/01/2006 500,000
Universal Outdoor Inc. Sr. Sub. Note, 9.75% ......... 250,000 10/15/2006 267,500
Viatel Inc. Sr. Note, 15.00% ........................ 250,000 1/15/2005 177,500
Winstar Communications Inc. Sr. Sub. Cv. Note, 0.00%
to 10/14/2000, 14.00% from 10/15/2000 to maturity+ 300,000 10/15/2005 217,500
Wireless One Inc. Sr. Note, 13.00% .................. 400,000 10/15/2003 192,000
Wireless One Inc. Sr. Note, 0.00% to
7/31/2001, 13.50% from 8/1/2001 to maturity ....... 1,250,000 8/01/2006 281,250
Wyman-Gordon Co. Sr. Note, 10.75% ................... 250,000 3/15/2003 266,875
------------
40,248,557
------------
Total Fixed Income Securities (Cost $191,756,691) ............................................ 194,964,960
------------
CASH EQUIVALENTS 7.2%
American Express Credit Corp., 5.54% ................ 645,000 10/01/1997 645,000
American Express Credit Corp., 5.58% ................ 10,134,000 10/06/1997 10,134,000
Associates Corp. of North America,
5.75% ............................................. 585,000 10/02/1997 585,000
Ford Motor Credit Co., 5.53% ........................ 15,311,000 10/10/1997 15,311,000
General Electric Capital Corp., 5.45% ............... 6,712,000 10/01/1997 6,712,000
General Electric Capital Corp., 5.53% ............... 3,676,000 10/01/1997 3,676,000
General Electric Capital Corp., 5.58% ............... 6,574,000 10/10/1997 6,574,000
General Electric Capital Corp., 5.51% ............... 4,000,000 10/16/1997 4,000,000
------------
Total Cash Equivalents (Cost $47,637,000) .................................................... 47,637,000
------------
Total Investments (Cost $568,995,852) - 101.3% ................................................ 675,367,924
Cash and Other Assets, Less Liabilities - (1.3%) .............................................. (8,488,659)
------------
Net Assets - 100.0% ........................................................................... $666,879,265
============
Federal Income Tax Information:
At September 30, 1997, the net unrealized appreciation of investments based on cost for Federal
income tax purposes of $569,482,380 was as follows:
Aggregate gross unrealized appreciation for all investments
in which there is an excess of value over tax cost .......................................... $115,402,820
Aggregate gross unrealized depreciation for all investments in
which there is an excess of tax cost over value ............................................. (9,517,276)
------------
$105,885,544
============
- ------------------------------------------------------------------------------------------
ADR and GDR stand for American Depositary Receipt and Global Depositary Receipt, respectively, representing
ownership of foreign securities.
* Nonincome-producing securities.
[] Payments of income may be made in cash or in the form of additional securities.
# Security valued under consistently applies procedures established by the Trustees.
(+) Security restricted as to public resale. The total cost and market value of restricted securities owned at
September 30, 199 7 were $207,020 and $728,740 (0.11% of net assets), respectively.
+ Security restricted in accordance with Rule 144A under the Securities Act of 1933, which allows for the
resale of such secur ities among certain qualified institutional buyers. The total cost and market value of
Rule 144A securities owned at September 30, 1997 were $19,892,582 and $21,660,197 (3.25% of net assets),
respectively.
++ 6,100 shares of Gulf Indonesia Resources Ltd., 49,700 shares of Maxx Petroleum Ltd. and 158,780 shares of
Seagull Energy Cor p. are considered by the Adviser to be part of Inflation Responsive Investments.
@ 94,500 shares of Abacan Resource Corp., 118,200 shares of Arakis Energy Corp., 61,500 shares of KCS Energy,
Inc., 11,700 sha res of Nuevo Energy Co., and 70,000 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 prinicipal
value has not been finalized and may vary by n o more than 1%.
</TABLE>
Forward currency exchange contracts outstanding at September 30, 1997, are as
follows:
UNREALIZED
CONTRACT APPRECIATION DELIVERY
TOTAL VALUE PRICE (DEPRECIATION) DATE
- --------------------------------------------------------------------------------
Sell Australian dollars,
buy U.S. dollars 2,300,000 AUD 0.74146 AUD $ 34,698 10/24/97
Sell Australian dollars,
buy U.S. dollars 1,141,000 AUD 0.74092 AUD 16,597 10/24/97
Sell Australian dollars,
buy U.S. dollars 548,000 AUD 0.74580 AUD 10,645 10/24/97
Sell Australian dollars,
buy U.S. dollars 962,000 AUD 0.73565 AUD 8,588 10/24/97
Sell Australian dollars,
buy U.S. dollars 3,754,000 AUD 0.74214 AUD 57,875 11/14/97
Sell Australian dollars,
buy U.S. dollars 2,700,000 AUD 0.73289 AUD 15,232 12/10/97
Sell British pounds, buy
U.S. dollars 4,346,000 GBP 1.67100 GBP 261,398 10/24/97
Sell British pounds, buy
U.S. dollars 1,985,000 GBP 1.62000 GBP 18,156 10/24/97
Sell British pounds, buy
U.S. dollars 1,292,000 GBP 1.67220 GBP 79,260 10/24/97
Sell British pounds, buy
U.S. dollars 1,990,000 GBP 1.62570 GBP 34,340 12/01/97
Buy British pounds, sell
U.S. dollars 720,000 GBP 1.66430 GBP (40,217) 12/01/97
Buy British pounds, sell
U.S. dollars 1,270,000 GBP 1.61130 GBP (3,628) 12/01/97
Sell New Zealand
dollars, buy U.S.
dollars 7,207,000 NZD 0.63610 NZD (26,216) 10/24/97
Sell New Zealand
dollars, buy U.S.
dollars 720,000 NZD 0.63434 NZD (3,886) 10/24/97
Sell New Zealand
dollars, buy U.S.
dollars 3,860,000 NZD 0.63230 NZD (28,709) 10/24/97
Sell South African rand,
buy U.S. dollars 20,600,000 ZAR 0.20362 ZAR (65,279) 2/27/98
--------
$368,854
========
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
STATE STREET RESEARCH MANAGED ASSETS
- -------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- -------------------------------------------------------------------------------------------
September 30, 1997 (Unaudited)
<S> <C>
ASSETS
Investments, at value (Cost $568,995,852) (Note 1) ..................... $675,367,924
Cash ................................................................... 89,419
Receivable for securities sold ......................................... 25,355,197
Interest and dividends receivable ...................................... 3,049,658
Receivable for open forward contracts .................................. 536,789
Receivable for fund shares sold ........................................ 479,317
Receivable from Distributor (Note 3) ................................... 16,882
Other assets ........................................................... 98,513
------------
704,993,699
LIABILITIES
Payable for securities purchased ....................................... 36,384,373
Accrued management fee (Note 2) ........................................ 400,538
Accrued distribution and service fees (Note 5) ......................... 333,339
Accrued transfer agent and shareholder services
(Note 2) ............................................................. 297,190
Payable for fund shares purchased ...................................... 236,936
Payable for open forward contracts ..................................... 167,935
Dividends payable ...................................................... 104,906
Accrued trustees' fees (Note 2) ........................................ 15,550
Other accrued expenses ................................................. 173,667
------------
38,114,434
------------
NET ASSETS $666,879,265
============
Net Assets consist of:
Undistributed net investment income .................................. $ 517,543
Unrealized appreciation of investments ............................... 106,372,072
Unrealized appreciation of forward contracts and foreign currency .... 359,702
Accumulated net realized gain ........................................ 41,178,474
Shares of beneficial interest ........................................ 518,451,474
------------
$666,879,265
============
Net Asset Value and redemption price per share of Class A shares
($300,378,406 / 25,289,781 shares of beneficial interest) ............ $11.88
======
Maximum Offering Price per share of Class A shares ($11.88 / .955) ..... $12.44
======
Net Asset Value and offering price per share of Class B shares
($319,952,496 / 27,035,871 shares of beneficial interest)* ........... $11.83
======
Net Asset Value, offering price and redemption price per share of Class
C shares ($25,153,146 /
2,117,794 shares of beneficial interest) ............................. $11.88
======
Net Asset Value and offering price per share of Class D shares
($21,395,217 / 1,805,478 shares of
beneficial interest)* ................................................ $11.85
======
- -------------------------------------------------------------------------------------------
*Redemption price per share for Class B and Class D is equal to net asset
value less any applicable contingent deferred sales charge.
</TABLE>
<PAGE>
STATE STREET RESEARCH MANAGED ASSETS
<TABLE>
- -------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- -------------------------------------------------------------------------------------------
For the six months ended September 30, 1997 (Unaudited)
<S> <C>
INVESTMENT INCOME
Interest ................................................................ $ 7,833,551
Dividends, net of foreign taxes of $80,386 .............................. 1,985,853
------------
9,819,404
EXPENSES
Management fee (Note 2) ................................................. 2,245,760
Transfer agent and shareholder services (Note 2) ........................ 523,232
Custodian fee ........................................................... 193,283
Service fee-Class A (Note 5) ............................................ 339,365
Distribution and service fees-Class B (Note 5) .......................... 1,425,804
Distribution and service fees-Class D (Note 5) .......................... 97,069
Reports to shareholders ................................................. 74,862
Registration fees ....................................................... 39,247
Trustees' fees (Note 2) ................................................. 18,300
Audit fee ............................................................... 17,935
Legal fees .............................................................. 3,280
Miscellaneous ........................................................... 10,415
------------
4,988,552
Expenses borne by the Distributor (Note 3) .............................. (113,307)
------------
4,875,245
------------
Net investment income ................................................... 4,944,159
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
FOREIGN CURRENCY AND FORWARD CONTRACTS
Net realized gain on investments (Notes 1 and 4) ........................ 41,906,201
Net realized loss on forward contracts and foreign
currency (Note 1) ..................................................... (97,197)
------------
Total net realized gain ............................................. 41,809,004
------------
Net unrealized appreciation of investments .............................. 64,517,271
Net unrealized appreciation of forward contracts
and foreign currency .................................................. 412,121
------------
Total net unrealized appreciation ................................... 64,929,392
------------
Net gain on investments, foreign currency and
forward contracts ..................................................... 106,738,396
------------
Net increase in net assets resulting from operations $111,682,555
============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
STATE STREET RESEARCH MANAGED ASSETS
- ------------------------------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30,
1997 YEAR ENDED
(UNAUDITED) MARCH 31, 1997
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income ..................................... $ 4,944,159 $ 8,179,555
Net realized gain on investments, foreign currency and
forward contracts ....................................... 41,809,004 53,801,738
Net unrealized appreciation (depreciation)
of investments, foreign currency and forward contracts .. 64,929,392 (8,244,104)
-------------- --------------
Net increase resulting from operations 111,682,555 53,737,189
-------------- --------------
Dividends from net investment income:
Class A ................................................. (2,504,736) (6,086,782)
Class B ................................................. (1,584,432) (4,234,267)
Class C ................................................. (236,224) (634,525)
Class D ................................................. (107,648) (289,417)
-------------- --------------
(4,433,040) (11,244,991)
-------------- --------------
Distributions from net realized gains:
Class A ................................................. (11,919,618) (18,380,936)
Class B ................................................. (12,453,207) (18,075,176)
Class C ................................................. (1,001,948) (1,771,455)
Class D ................................................. (860,306) (1,236,399)
-------------- --------------
(26,235,079) (39,463,966)
-------------- --------------
Net increase from fund share
transactions (Note 6) ................................... 51,250,859 97,991,295
-------------- --------------
Total increase in net assets .............................. 132,265,295 101,019,527
NET ASSETS
Beginning of period ....................................... 534,613,970 433,594,443
-------------- --------------
End of period (including undistributed net investment
income of $517,543 and $6,424, respectively) ............ $ 666,879,265 $ 534,613,970
============== ==============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
STATE STREET RESEARCH MANAGED ASSETS
- --------------------------------------------------------------------------------
NOTES TO UNAUDITED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
September 30, 1997
NOTE 1
State Street Research Managed Assets (the "Fund"), is a series of State Street
Research Income Trust (the "Trust"), which was organized as a Massachusetts
business trust in December, 1985 and is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The Fund commenced operations in December 1988. The Trust consists presently
of two separate funds: State Street Research Managed Assets and State Street
Research High Income Fund.
The investment objective of the Fund is to seek a high total return while
attempting to limit investment risk and preserve capital. To achieve its
investment objective, the Fund intends to allocate assets among selected
investments in the following sectors: Fixed Income Securities, Equity
Securities, Inflation Responsive Investments and Cash & Cash Equivalents.
Total return may include current income as well as capital appreciation. The
Fund's investment manager believes that the timely re-allocation of assets can
enhance performance and reduce portfolio volatility.
The Fund offers four classes of shares. Class A shares are subject to an
initial sales charge of up to 4.50% and an annual service fee of 0.25% of
average daily net assets. Class B shares are subject to a contingent deferred
sales charge on certain redemptions made within five years of purchase and pay
annual distribution and service fees of 1.00%. Class B shares automatically
convert into Class A shares (which pay lower ongoing expenses) at the end of
eight years after the issuance of the Class B shares. Class C shares are only
offered to certain employee benefit plans and large institutions. No sales
charge is imposed at the time of purchase or redemption of Class C shares.
Class C shares do not pay any distribution or service fees. Class D shares are
subject to a contingent deferred sales charge of 1.00% on any shares redeemed
within one year of their purchase. Class D shares also pay annual distribution
and service fees of 1.00%. The Fund's expenses are borne pro-rata by each
class, except that each class bears expenses, and has exclusive voting rights
with respect to provisions of the Plan of Distribution, related specifically
to that class. The Trustees declare separate dividends on each class of
shares.
The following significant accounting policies are consistently followed by the
Fund in preparing its financial statements, and such policies are in
conformity with generally accepted accounting principles for investment
companies.
A. INVESTMENT VALUATION
Values for listed equity securities reflect final sales on national securities
exchanges quoted prior to the close of the New York Stock Exchange. Over-the-
counter securities quoted on the National Association of Securities Dealers
Automated Quotation ("NASDAQ") system are valued at closing prices supplied
through such system. If not quoted on the NASDAQ system, such securities are
valued at prices obtained from independent brokers. In the absence of recorded
sales, valuations are at the mean of the closing bid and asked quotations.
Fixed income securities are valued by a pricing service, which utilizes market
transactions, quotations from dealers, and various relationships among
securities in determining value. Short-term securities maturing within sixty
days are valued at amortized cost. Other securities, if any, are valued at
their fair value as determined in good faith under consistently applied
procedures established by and under the supervision of the Trustees.
B. FORWARD CONTRACTS AND FOREIGN CURRENCIES
The fund enters into forward foreign currency exchange contracts in order to
hedge its exposure to changes in foreign currency exchange rates on its
foreign portfolio holdings and to hedge certain purchase and sale commitments
denominated in foreign currencies. A forward foreign currency exchange
contract is an obligation by the Fund to purchase or sell a specific currency
at a future date, which may be any fixed number of days from the origination
date of the contract. Forward foreign currency exchange contracts establish an
exchange rate at a future date. These contracts are transferable in the
interbank market conducted directly between currency traders (usually large
commercial banks) and their customers. Risks may arise from the potential
inability of a counterparty to meet the terms of a contract and from
unanticipated movements in the value of foreign currencies relative to the
U.S. dollar. The aggregate principal amount of forward currency exchange
contracts is recorded in the Fund's accounts. All commitments are marked-to-
market at the applicable transaction rates resulting in unrealized gains or
losses. The Fund records realized gains or losses at the time the forward
contracts are extinguished by entry into a closing contract or by delivery of
the currency. Neither spot transactions nor forward currency exchange
contracts eliminate fluctuations in the prices of the Fund's portfolio
securities or in foreign exchange rates, or prevent loss if the price of these
securities should decline.
Securities quoted in foreign currencies are translated into U.S. dollars at
the current exchange rate. Gains and losses that arise from changes in
exchange rates are not segregated from gains and losses that arise from
changes in market prices of investments.
C. SECURITY TRANSACTIONS
Security transactions are accounted for on the trade date (date the order to
buy or sell is executed). Realized gains or losses are reported on the basis
of identified cost of securities delivered.
D. NET INVESTMENT INCOME
Net investment income is determined daily and consists of interest and
dividends accrued and discount earned, less the estimated daily expenses of
the Fund. Interest income is accrued daily as earned. Dividend income is
accrued on the ex-dividend date. Discount on debt obligations is amortized
under the effective yield method. Certain fixed income securities held by the
Fund pay interest or dividends in the form of additional securities (payment-
in-kind securities). Interest income on payment-in-kind fixed income
securities is recorded using the effective-interest method. Dividend income on
payment-in-kind preferred securities is recorded at the market value of
securities received. The Fund is charged for expenses directly attributable to
it, while indirect expenses are allocated 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.
G. ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period.
Actual results could differ from those estimates.
NOTE 2
The Trust and State Street Research & Management Company (the "Adviser"), an
indirect wholly owned subsidiary of Metropolitan Life Insurance Company
("Metropolitan"), have entered into an agreement under which the Adviser earns
monthly fees at an annual rate of 0.75% of the Fund's average daily net
assets. In consideration of these fees, the Adviser furnishes the Fund with
management, investment advisory, statistical and research facilities and
services. The Adviser also pays all salaries, rent and certain other expenses
of management. During the six months ended September 30, 1997, the fees
pursuant to such agreement amounted to $2,245,760.
State Street Research Shareholder Services, a division of State Street
Research Investment Services, Inc., the Trust's principal underwriter (the
"Distributor"), an indirect wholly owned subsidiary of Metropolitan, provides
certain shareholder services to the Fund such as responding to inquiries and
instructions from investors with respect to the purchase and redemption of
shares of the Fund. In addition, Metropolitan receives a fee for maintenance
of the accounts of certain shareholders who are participants in sponsored
arrangements, such as employee benefit plans, through or under which shares of
the Fund may be purchased. During the six months ended September 30, 1997, the
amount of such expenses was $137,688.
The fees of the Trustees not currently affiliated with the Adviser amounted to
$18,300 during the six months ended September 30, 1997.
NOTE 3
The Distributor and its affiliates may from time to time and in varying
amounts voluntarily assume some portion of fees or expenses relating to the
Fund. During the six months ended September 30, 1997, the amount of such
expenses assumed by the Distributor and its affiliates was $113,307.
NOTE 4
For the six months ended September 30, 1997, purchases and sales of
securities, exclusive of short-term obligations and forward foreign currency
exchange contracts, aggregated $404,966,203 and $374,859,733 (including
$140,353,534 and $122,103,978 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 six
months ended September 30, 1997, fees pursuant to such plan amounted to
$339,365, $1,425,804 and $97,069 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 $91,954 and $603,889, respectively, on sales of Class A shares of
the Fund during the six months ended September 30, 1997, and that MetLife
Securities, Inc. earned commissions aggregating $1,183,851 on sales of Class B
shares, and the Distributor collected contingent deferred sales charges
aggregating $276,997 and $219 on redemptions of Class B and Class D shares,
respectively, during the same period.
NOTE 6
The Trustees have the authority to issue an unlimited number of shares of
beneficial interest, $.001 par value per share. At September 30, 1997, the
Distributor owned one Class A share of the Fund.
Share transactions were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30, 1997 YEAR ENDED
(UNAUDITED) MARCH 31, 1997
---------------------------------- ----------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ................... 2,598,519 $ 28,691,735 4,746,853 $ 50,499,204
Issued upon reinvestment of:
Dividends from net investment
income .................... 213,999 2,424,607 558,830 5,876,689
Distributions from net
realized gains ............ 1,110,940 11,598,210 1,699,169 17,870,060
Shares repurchased ............ (2,131,543) (23,414,422) (3,698,792) (39,318,613)
---------- ------------- ---------- -------------
Net increase .................. 1,791,915 $ 19,300,130 3,306,060 $ 34,927,340
========== ============= ========== =============
CLASS B SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
Shares sold ................... 3,467,465 $ 38,062,994 6,191,667 $ 65,679,543
Issued upon reinvestment of:
Dividends from net investment
income .................... 135,706 1,531,404 389,723 4,088,191
Distributions from net
realized gains ............ 1,169,718 12,165,063 1,680,278 17,607,323
Shares repurchased ............ (2,000,359) (21,914,791) (2,845,172) (30,131,674)
---------- ------------- ---------- -------------
Net increase .................. 2,772,530 $ 29,844,670 5,416,496 $ 57,243,383
========== ============= ========== =============
CLASS C SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
Shares sold ................... 335,050 $ 3,716,114 718,397 $ 7,645,927
Issued upon reinvestment of:
Dividends from net investment
income .................... 20,758 235,518 60,113 631,951
Distributions from net
realized gains ............ 95,812 1,001,236 168,533 1,771,442
Shares repurchased ............ (378,718) (4,141,618) (802,252) (8,601,591)
---------- ------------- ---------- -------------
Net increase .................. 72,902 $ 811,250 144,791 $ 1,447,729
========== ============= ========== =============
CLASS D SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
Shares sold ................... 197,664 $ 2,161,569 594,410 $ 6,307,999
Issued upon reinvestment of:
Dividends from net investment
income .................... 8,417 95,288 25,583 268,626
Distributions from net
realized gains ............ 75,840 789,492 110,940 1,163,717
Shares repurchased ............ (160,380) (1,751,540) (319,082) (3,367,499)
---------- ------------- ---------- -------------
Net increase .................. 121,541 $ 1,294,809 411,851 $ 4,372,843
========== ============= ========== =============
</TABLE>
<PAGE>
<TABLE>
STATE STREET RESEARCH MANAGED ASSETS
- -----------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------------------------------------------------------------
For a share outstanding throughout each period:
<CAPTION>
CLASS A
--------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED MARCH 31
SEPTEMBER 30, 1997 -------------------------------------------------------------------------------
(UNAUDITED)*** 1997*** 1996*** 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $10.40 $10.29 $ 8.76 $ 8.94 $ 8.94 $ 8.22
------ ------ ------ ------ ------ ------
Net investment income* 0.11 0.21 0.23 0.27 0.22 0.27
Net realized and unrealized
gain (loss) on
investments, foreign
currency and forward
contracts 1.98 1.05 1.72 (0.14) 0.72 1.01
------ ------ ------ ------ ------ ------
Total from investment
operations 2.09 1.26 1.95 0.13 0.94 1.28
------ ------ ------ ------ ------ ------
Dividends from net
investment income (0.10) (0.28) (0.26) (0.17) (0.22) (0.25)
Distributions from net
realized gains (0.51) (0.87) (0.16) (0.14) (0.72) (0.31)
------ ------ ------ ------ ------ ------
Total distributions (0.61) (1.15) (0.42) (0.31) (0.94) (0.56)
------ ------ ------ ------ ------ ------
Net asset value, end of
period $11.88 $10.40 $10.29 $ 8.76 $ 8.94 $ 8.94
====== ====== ====== ====== ====== ======
Total return 20.83%++ 12.49%+ 22.55%+ 1.52%+ 10.96%+ 16.54%+
Net assets at end of period
(000s) $300,378 $244,348 $207,713 $181,358 $166,011 $93,537
Ratio of operating expenses
to average net assets* 1.25%(+) 1.25% 1.25% 1.25% 1.25% 1.25%
Ratio of net investment
income to average net
assets* 2.02%(+) 2.02% 2.34% 3.11% 2.75% 3.26%
Portfolio turnover rate 66.74% 108.41% 109.20% 89.58% 105.17% 142.86%
Average commission rate@ $0.0208 $0.0266 -- -- -- --
*Reflects voluntary
assumption of fees or
expenses per share in each
period (Note 3) $ 0.00 $ 0.01 $ 0.02 $ 0.03 $ 0.02 $ 0.02
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CLASS B
----------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED MARCH 31
SEPTEMBER 30, 1997 -----------------------------------------------------------------
(UNAUDITED)*** 1997*** 1996*** 1995 1994**
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.37 $10.25 $ 8.74 $ 8.92 $ 8.78
------ ------ ------ ------ ------
Net investment income* 0.07 0.13 0.15 0.20 0.16
Net realized and unrealized gain
(loss) on investments, foreign
currency and forward contracts 1.96 1.06 1.71 (0.13) 0.39
------ ------ ------ ------ ------
Total from investment operations 2.03 1.19 1.86 0.07 0.55
------ ------ ------ ------ ------
Dividends from net investment income (0.06) (0.20) (0.19) (0.11) (0.18)
Distributions from net realized gains (0.51) (0.87) (0.16) (0.14) (0.23)
------ ------ ------ ------ ------
Total distributions (0.57) (1.07) (0.35) (0.25) (0.41)
------ ------ ------ ------ ------
Net asset value, end of period $11.83 $10.37 $10.25 $ 8.74 $ 8.92
====== ====== ====== ====== ======
Total return 20.27%++ 11.76%+ 21.48%+ 0.82%+ 6.26%++
Net assets at end of period (000s) $319,952 $251,518 $193,272 $152,251 $83,244
Ratio of operating expenses to
average net assets* 2.00%(+) 2.00% 2.00% 2.00% 2.00%(+)
Ratio of net investment income to
average net assets* 1.27%(+) 1.27% 1.59% 2.38% 2.03%(+)
Portfolio turnover rate 66.74% 108.41% 109.20% 89.58% 105.17%
Average commission rate@ $0.0208 $0.0266 -- -- --
*Reflects voluntary assumption of
fees or expenses per share in each
period (Note 3) $ 0.00 $ 0.01 $ 0.02 $ 0.03 $ 0.03
- ------------------------------------------------------------------------------------------------------------------------------------
(+) 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.
@ Average commission rate per share paid for security trades beginning with the fiscal year ended March 31, 1997.
</TABLE>
<PAGE>
<TABLE>
STATE STREET RESEARCH MANAGED ASSETS
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS C
----------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED MARCH 31
SEPTEMBER 30, 1997 -----------------------------------------------------------------
(UNAUDITED)*** 1997*** 1996*** 1995 1994**
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.40 $10.29 $ 8.77 $ 8.95 $ 8.78
------ ------ ------ ------ ------
Net investment income* 0.13 0.24 0.25 0.29 0.21
Net realized and unrealized gain
(loss) on investments, foreign
currency and forward contracts 1.97 1.05 1.71 (0.14) 0.43
------ ------ ------ ------ ------
Total from investment operations 2.10 1.29 1.96 0.15 0.64
------ ------ ------ ------ ------
Dividends from net investment income (0.11) (0.31) (0.28) (0.19) (0.24)
Distributions from net realized gains (0.51) (0.87) (0.16) (0.14) (0.23)
------ ------ ------ ------ ------
Total distributions (0.62) (1.18) (0.44) (0.33) (0.47)
------ ------ ------ ------ ------
Net asset value, end of period $11.88 $10.40 $10.29 $ 8.77 $ 8.95
====== ====== ====== ====== ======
Total return 20.97%++ 12.77%+ 22.70%+ 1.77%+ 7.27%++
Net assets at end of period (000s) $25,153 $21,263 $19,548 $25,803 $21,434
Ratio of operating expenses to
average net assets* 1.00%(+) 1.00% 1.00% 1.00% 1.00%(+)
Ratio of net investment income to
average net assets* 2.27%(+) 2.26% 2.59% 3.37% 3.03%(+)
Portfolio turnover rate 66.74% 108.41% 109.20% 89.58% 105.17%
Average commission rate@ $0.0208 $0.0266 -- -- --
*Reflects voluntary assumption of
fees or expenses per share in each
period (Note 3) $ 0.00 $ 0.01 $ 0.02 $ 0.03 $ 0.02
</TABLE>
<TABLE>
<CAPTION>
CLASS D
----------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED MARCH 31
SEPTEMBER 30, 1997 -----------------------------------------------------------------
(UNAUDITED)*** 1997*** 1996*** 1995 1994**
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $10.38 $10.27 $ 8.75 $ 8.93 $ 8.78
------ ------ ------ ------ ------
Net investment income* 0.07 0.13 0.15 0.20 0.16
Net realized and unrealized gain
(loss) on investments, foreign
currency and forward contracts 1.97 1.05 1.72 (0.13) 0.40
------ ------ ------ ------ ------
Total from investment operations 2.04 1.18 1.87 0.07 0.56
------ ------ ------ ------ ------
Dividends from net investment income (0.06) (0.20) (0.19) (0.11) (0.18)
Distributions from net realized gains (0.51) (0.87) (0.16) (0.14) (0.23)
------ ------ ------ ------ ------
Total distributions (0.57) (1.07) (0.35) (0.25) (0.41)
------ ------ ------ ------ ------
Net asset value, end of period $11.85 $10.38 $10.27 $ 8.75 $ 8.93
====== ====== ====== ====== ======
Total return 20.35%++ 11.64%+ 21.54%+ 0.82%+ 6.31%++
Net assets at end of period (000s) $21,395 $17,485 $13,061 $12,772 $7,117
Ratio of operating expenses to
average net assets* 2.00%(+) 2.00% 2.00% 2.00% 2.00%(+)
Ratio of net investment income to
average net assets* 1.28%(+) 1.26% 1.60% 2.39% 2.03%(+)
Portfolio turnover rate 66.74% 108.41% 109.20% 89.58% 105.17%
Average commission rate@ $0.0208 $0.0266 -- -- --
*Reflects voluntary assumption of
fees or expenses per share in each
period (Note 3) $ 0.00 $ 0.01 $ 0.02 $ 0.03 $ 0.03
- ------------------------------------------------------------------------------------------------------------------------------------
(+) 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.
@ Average commission rate per share paid for security trades beginning with the fiscal year ended March 31, 1997.
</TABLE>
<PAGE>
<TABLE>
STATE STREET RESEARCH MANAGED ASSETS
- -----------------------------------------------------------------------------------------------------------------------------------
FUND INFORMATION, OFFICERS AND TRUSTEES OF STATE STREET RESEARCH INCOME TRUST
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FUND INFORMATION OFFICERS TRUSTEES
STATE STREET RESEARCH RALPH F. VERNI RALPH F. VERNI
MANAGED ASSETS Chairman of the Board, Chairman of the Board,
One Financial Center President and President, Chief Executive
Boston, MA 02111 Chief Executive Officer Officer and Director,
State Street Research &
INVESTMENT ADVISER PETER C. BENNETT Management Company
State Street Research & Vice President
Management Company STEVE A. GARBAN
One Financial Center BARTLETT R. GEER Retired; formerly Senior Vice
Boston, MA 02111 Vice President President for Finance and
Operations and Treasurer, The
DISTRIBUTOR JOHN H. KALLIS Pennsylvania State University
State Street Research Vice President
Investment Services, Inc. MALCOLM T. HOPKINS
One Financial Center THOMAS A. SHIVELY Former Vice Chairman of the
Boston, MA 02111 Vice President Board and Chief Financial
Officer, St. Regis Corp.
SHAREHOLDER SERVICES GERARD P. MAUS
State Street Research Treasurer EDWARD M. LAMONT
Shareholder Services Formerly in banking (Morgan
P.O. Box 8408 JOSEPH W. CANAVAN Guaranty Trust Company of
Boston, MA 02266-8408 Assistant Treasurer New York); presently engaged
1-800-562-0032 in private investments and
DOUGLAS A. ROMICH civic affairs
CUSTODIAN Assistant Treasurer
State Street Bank and ROBERT A. LAWRENCE
Trust Company FRANCIS J. MCNAMARA, III Associate, Saltonstall & Co.
225 Franklin Street Secretary and General Counsel
Boston, MA 02110 DEAN O. MORTON
DARMAN A. WING Retired; formerly Executive
LEGAL COUNSEL Assistant Secretary and Vice President, Chief
Goodwin, Procter & Hoar LLP Assistant General Counsel Operating Officer and Director,
Exchange Place Hewlett-Packard Company
Boston, MA 02109 AMY L. SIMMONS
Assistant Secretary 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
</TABLE>
<PAGE>
STATE STREET RESEARCH MANAGED ASSETS --------------
One Financial Center Bulk Rate
Boston, MA 02111 U.S. Postage
PAID
Randolph, MA
Permit No. 600
--------------
QUESTIONS? COMMENTS?
CALL us at 1-800-562-0032
WRITE us at:
State Street Research
Service Center
P.O. Box 8408
Boston, MA 02266-8408
E-MAIL us at:
[email protected]
[Graphic Omitted] STATE STREET RESEARCH
This report is prepared for the general information of current shareholders.
When used in the general solicitation of investors, this report must be
accompanied or preceded by a current State Street Research Managed Assets
prospectus. When used after December 31, 1997, this report must be accompanied
by a current Quarterly Performance Update.
Portfolio changes should not be considered recommendations for action by
individual investors.
The Dalbar awards recognize quality shareholder service and should not be
considered a rating of fund performance. The survey included mutual fund
complexes that volunteered or were otherwise selected to participate and was not
industry-wide.
CONTROL NUMBER: 4404-971118(1298)SSR-LD MA-273D-1197 I
