<PAGE>
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STATE STREET RESEARCH
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HIGH INCOME FUND
---------------------
SEMIANNUAL REPORT
September 30, 1999
--------------------
WHAT'S INSIDE
--------------------
INVESTMENT UPDATE
About the Fund,
economy and markets
FUND INFORMATION
Facts and figures
PLUS, COMPLETE PORTFOLIO HOLDINGS
AND FINANCIAL STATEMENTS
----------------------
DALBAR
HONORS COMMITMENT TO:
INVESTORS
1998
----------------------
For Excellence
[Logo] STATE STREET RESEARCH in
Shareholder Service
<PAGE>
STATE STREET RESEARCH HIGH INCOME FUND
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INVESTMENT UPDATE
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INVESTMENT ENVIRONMENT
THE ECONOMY
o The economy continued to show strong real growth in the six months ended
September 30, 1999. Housing began to show signs of peaking in response to
higher mortgage rates, but overall consumer and capital spending remained
strong.
o Inflation remained steady at about 2% despite the steep increase in energy
prices and the weaker U.S. dollar. The continued improvement in productivity
helped to keep prices low.
o The Federal Reserve Board raised the interest rate in an attempt to slow the
growth in the U.S. economy and thereby provided some slack as the Asian and
European economies began to recover. The Fed is clearly concerned over both
inflation and the "wealth effect" of the stock market.
THE MARKETS
o The U.S. stock market, as measured by the S&P 500, ended virtually unchanged,
closing up 0.37% for the six months ended September 30, 1999(1). The most
notable development during this period was the broadening which occurred with
small-cap stocks, significantly outperforming large cap for the first time in
several years.
o The bond market, as measured by the Lehman Brothers Aggregate Bond Index,
declined 0.21% for the six month period.(2) Interest rates moved up in
response to concerns over inflation and companies trying to complete their
financing before the year end.
THE FUND
OVER THE PAST SIX MONTHS
o For the six months ended September 30, 1999 State Street Research High Income
Fund Class A shares returned -1.07 % (does not reflect sales charge).(3) That
loss was slightly more than the Lipper High Income Average, which was -0.90%,
and the First Boston High Yield Index,(4) which was -0.47%.
o BB-rated bonds fared better than lower- quality B-rated bonds.
o Our small position in equities helped performance.
CURRENT STRATEGY
o We continue to stay away from short-term, high liquidity bonds that are
smaller sized and easily traded. We are trying to protect the fund against
interest rate increases from the Federal Reserve.
o We felt the U.S. economy was spending more than saving, and therefore looked
to cut duration on bonds to protect against interest rate increases from the
Federal Reserve.
September 30, 1999
(1) The S&P 500 (officially the "Standard & Poor's 500 Composite Stock Price
Index") is an unmanaged index of 500 U.S. Stocks. The index does not take
transaction charges into consideration. It is not possible to invest
directly into the index.
(2) The Lehman Brothers Aggregate Bond Index is a market-value weighted index of
fixed-rate debt issues, including U.S. treasury, agency, and corporate bond
issues, and mortgage-backed securities. The index does not take transaction
charges into consideration. It is not possible to invest directly in the
index.
(3) -1.63% for Class B(1) shares; -1.45% for Class B shares; -1.44% for Class C
shares; -0.96% for Class S shares.
(4) The First Boston High Yield Index mirrors the public high-yield debt market
representing a total of 250 different sectors within this market. The index
is unmanaged and does not take transaction charges into account. It is not
possible to invest directly in the index.
(5) Keep in mind that past performance is no guarantee of future results. The
Fund's share price, yield and return will fluctuate, and you may have a gain
or loss when you sell your shares. All returns assume reinvestment of
capital gain distributions and income dividends at net asset value. The
Fund's returns include performance before the creation of share classes. If
this performance reflected the share classes' current 12b-1 fees, the Fund's
returns may have been lower. Class S shares, offered without a sales charge,
are available through certain employee benefit plans and special programs.
(6) Performance reflects a maximum 4.50% Class A share front-end sales charge,
or 5% Class B(1) and Class B share or 1% Class C share contingent deferred
sales charge, where applicable.
PLEASE NOTE THAT THE DISCUSSION THROUGHOUT THIS SHAREHOLDER REPORT IS DATED AS
INDICATED AND, BECAUSE OF POSSIBLE CHANGES IN VIEWPOINT, DATA AND TRANSACTIONS,
SHOULD NOT BE RELIED UPON AS BEING CURRENT THEREAFTER.
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FUND INFORMATION (all data are for periods ended September 30, 1999)
- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
(at maximum applicable sales charge)(5)(6)
10 YEARS 5 YEARS 1 YEAR
- ------------------------------------------------------------------------
Class A 8.67% 7.11% -1.41%
- ------------------------------------------------------------------------
Class B(1) 8.61% 6.99% -2.27%
- ------------------------------------------------------------------------
Class B 8.63% 7.03% -2.09%
- ------------------------------------------------------------------------
Class C 8.64% 7.29% 1.58%
- ------------------------------------------------------------------------
Class S 9.29% 8.34% 3.34%
- ------------------------------------------------------------------------
ASSET ALLOCATION*
(by percentage of net assets)
B 52%
BB 19%
CCC, CC, C 9%
Convertibles 9%
Common Stock/Warrants 6%
Cash 3%
Preferred Stocks 1%
BBB 1%
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 not rated by either Moody's or S&P and have been
assigned a comparable rating by the Fund's manager.
5 LARGEST INDUSTRY BOND POSITIONS
(by percentage of net assets)
FIXED COMMUNICATIONS 13.9%
GENERAL INDUSTRIAL 8.0%
MOBILE COMMUNICATIONS 6.9%
HEALTH CARE 5.9%
ENERGY 4.7%
Total: 39.4%
<PAGE>
STATE STREET RESEARCH HIGH INCOME FUND
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INVESTMENT PORTFOLIO
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September 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
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PRINCIPAL MATURITY VALUE
AMOUNT DATE (NOTE 1)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BONDS 81.1%
AUTOMOTIVE 2.0%
J.H. Heafner Inc. Sr. Note Series D, 10.00% ........ $ 5,255,000 5/15/2008 $ 4,939,700
Johnstown America Industries Inc. Sr. Sub. Note,
11.75% ........................................... 6,250,000 8/15/2005 6,406,250
Lear Corp. Sr. Note, 8.11%+ ........................ 8,500,000 5/15/2009 8,252,650
--------------
19,598,600
--------------
CABLE 3.4%
American Telecasting Inc. Sr. Note, 0.00% to
6/14/99, 14.50% from 6/15/99 to maturity ......... 14,585,356 6/15/2004 15,095,843
American Telecasting Inc. Sr. Note Series B, 0.00%
to 8/14/2000, 14.50% from 8/15/2000 to maturity .. 2,874,155 8/15/2005 2,773,560
Bresnan Communications Group Sr. Note, 9.25%+ ...... 250,000 2/01/2009 164,375
Charter Communications Holdings LLC Sr. Note,
8.625%+ .......................................... 11,195,000 4/01/2009 10,411,350
Insight Midwest LP Sr. Note, 9.75% ................. 1,750,000 10/01/2009 1,765,313
Intermedia Capital Partners LP Sr. Note, 11.25% .... 3,375,000 8/01/2006 3,712,500
--------------
33,922,941
--------------
CASINO 2.1%
Ameristar Casinos Inc. Sr. Sub. Note, 10.50% ....... 2,205,000 8/01/2004 2,238,075
Harrah's Operating Inc. Sr. Sub. Note, 7.875% ...... 6,950,000 12/15/2005 6,637,250
Hollywood Casino Corp. Note, 13.00%+ ............... 2,400,000 8/01/2006 2,484,000
International Game Technology Sr. Note, 8.375% ..... 2,250,000 5/15/2009 2,143,125
Mohegan Tribal Gaming Authority Sr. Note, 8.125% ... 5,610,000 1/01/2006 5,441,700
Mohegan Tribal Gaming Authority Sr. Sub. Note, 8.75% 1,360,000 1/01/2009 1,332,800
--------------
20,276,950
--------------
CHEMICAL 1.5%
American Pacific Corp. Sr. Note, 9.25% ............. 8,750,000 3/01/2005 8,837,500
GNI Group Inc. Sr. Note, 10.875% ................... 7,000,000 7/15/2005 3,150,000
Lyondell Chemical Co. Sr. Sec. Note Series A, 9.625% 3,005,000 5/01/2007 2,989,975
Lyondell Chemical Co. Sr. Sec. Note Series B, 9.875% 315,000 5/01/2007 312,638
--------------
15,290,113
--------------
CONSUMER GOODS & SERVICES 1.2%
Empire Gas Corp. Sr. Sec. Note, 0.00% to 7/14/99,
12.875% from 7/15/99 to maturity ................. 17,625,000 7/15/2004 11,808,750
--------------
ENERGY 4.7%
Canadian Forest Oil Ltd. Sr. Sub. Note, 8.75% ...... 3,045,000 9/15/2007 2,938,425
Frontier Corp. Sr. Note, 9.125% .................... 10,050,000 2/15/2006 9,798,750
Moran Energy Inc. Cv. Deb., 8.75% .................. 2,420,000 1/15/2008 2,299,000
Newpark Resources Inc. Sr. Sub. Note Series B,
8.625% ........................................... 5,470,000 12/15/2007 5,087,100
Ocean Energy Inc. Series B Sr. Note, 7.625% ........ 1,750,000 7/01/2005 1,680,000
Ocean Energy Inc. Sr. Sub. Note, 10.375% ........... 8,790,000 10/15/2005 8,965,800
Pogo Producing Co. Sr. Sub. Note, 8.75% ............ 2,585,000 5/15/2007 2,468,675
Pogo Producing Co. Sub. Note, 5.50% ................ 850,000 6/15/2006 692,750
Pool Energy Services Co. Sr. Sub. Note, 8.625% ..... 8,280,000 4/01/2008 8,528,400
Vintage Petroleum Inc. Sr. Sub. Note, 9.75% ........ 4,005,000 6/30/2009 4,075,087
--------------
46,533,987
--------------
FIXED COMMUNICATIONS 13.9%
Advanced Radio Telecom Corp. Sr. Note, 14.00% ...... 4,438,000 2/15/2007 3,772,300
BTI Telecom Corp. Sr. Note, 10.50% ................. 5,485,000 9/15/2007 4,607,400
Call-Net Enterprises Inc. Sr. Note, 8.00% .......... 5,250,000 8/15/2008 4,200,000
Call-Net Enterprises Inc. Sr. Note, 9.375% ......... 6,400,000 5/15/2009 5,632,000
E. Spire Communications Inc. Sr. Note, 0.00% to
3/31/2001, 12.75% from 4/1/2001 to maturity ...... 775,000 4/01/2006 430,125
Econophone Inc. Sr. Note, 0.00% to
2/14/2003, 11.00% from 2/15/2003 to maturity ..... 13,700,000 2/15/2008 8,117,250
Econophone Inc. Sr. Note, 13.50% ................... 15,250,000 7/15/2007 15,593,125
Facilicom International Inc. Sr. Note, 10.50% ...... 6,865,000 1/15/2008 5,835,250
Globenet Communications Group Sr. Note, 13.00%+ .... 3,425,000 7/15/2007 3,270,875
Hyperion Telecommunication Inc. Sr. Sub. Note,
12.00%+ .......................................... 7,655,000 11/01/2007 7,693,275
ICG Holdings Inc. Sr. Note, 0.00% to 9/14/2000,
13.50% from 9/15/2000 to maturity ................ 7,600,000 9/15/2005 6,612,000
Logix Communications Sr. Note, 12.25% .............. 1,500,000 6/15/2008 1,095,000
Orion Network Systems Inc. Sr. Note, 11.25% ........ 1,500,000 1/15/2007 1,065,000
Primus Telecommunications Group Sr. Note, 11.75% ... 6,550,000 8/01/2004 6,451,750
RSL Communications Ltd. Sr. Note, 12.25% ........... 15,824,000 11/15/2006 15,744,880
Startec Global Communications Corp. Sr. Note, 12.00% 9,650,000 5/15/2008 8,009,500
Viatel Inc. Sr. Note, 0.00% to 4/14/2003, 12.50%
from 4/15/2003 to maturity ....................... 10,350,000 4/15/2008 5,796,000
Viatel Inc. Sr. Note, 11.25% ....................... 8,350,000 4/15/2008 7,849,000
Williams Communications Group Sr. Note, 10.875% .... 10,500,000 10/01/2009 10,421,145
Winstar Communications Inc. Sr. Exch. Note, 14.50% . 6,375,000 10/15/2005 8,351,250
Winstar Equipment Corp. Sr. Sec. Exch. Note, 12.50% 6,930,000 3/15/2004 6,999,300
--------------
137,546,425
--------------
FOOD & BEVERAGE 1.7%
Archibald Candy Corp. Sr. Sec. Note, 10.25% ........ 10,350,000 7/01/2004 10,194,750
Aurora Foods Inc. Sr. Sub. Note Series B, 9.875% ... 2,000,000 2/15/2007 2,025,000
Aurora Foods Inc. Sr. Sub. Note Series E, 8.75% .... 1,250,000 7/01/2008 1,184,375
Tom's Foods Inc. Sr. Sec. Note, 10.50% ............. 3,750,000 11/01/2004 3,243,750
--------------
16,647,875
--------------
GENERAL INDUSTRIAL 8.0%
Ametek Inc. Sr. Note, 7.20% ........................ 7,450,000 7/15/2008 6,849,232
Argo-Tech Corp. Sr. Sub. Note, 8.625% .............. 3,000,000 10/01/2007 2,580,000
Buckeye Technologies Inc. Sr. Sub. Note, 8.00% ..... 7,700,000 10/15/2010 7,141,750
Cluett American Corp. Sr. Sub. Note Series B,
10.125% .......................................... 6,700,000 5/15/2008 4,455,500
Envirosource Inc. Sr. Note Series B, 9.75% ......... 3,250,000 6/15/2003 1,950,000
Gentek Inc. Sr. Sub Note, 11.00%+ .................. 4,350,000 8/01/2009 4,447,875
Henry Co. Sr. Note Series B, 10.00% ................ 4,700,000 4/15/2008 3,125,500
International Knife & Saw Inc. Sr. Sub. Note,
11.375% .......................................... 4,090,000 11/15/2006 3,087,950
International Utility Structures Sr. Sub. Note,
10.75% ........................................... 2,000,000 2/01/2008 1,860,000
J.B. Poindexter Inc. Sr. Note, 12.50% .............. 15,850,000 5/15/2004 14,978,250
Phase Metrics Inc. Sr. Note, 10.75% ................ 12,000,000 2/01/2005 3,600,000
Simonds Industries Inc. Sr. Sub. Note, 10.25% ...... 10,225,000 7/01/2008 7,668,750
Transdigm Inc. Sr. Sub. Note, 10.375% .............. 3,750,000 12/01/2008 3,637,500
Westpoint Stevens Inc. Sr. Note, 7.875% ............ 210,000 6/15/2005 196,350
Westpoint Stevens Inc. Sr. Note, 7.875% ............ 15,450,000 6/15/2008 13,827,750
--------------
79,406,407
--------------
HEALTH CARE 5.9%
Columbia/HCA Healthcare Corp. Note, 6.91% .......... 2,195,000 6/15/2005 1,961,671
Columbia/HCA Healthcare Corp. Note, 7.00% .......... 17,020,000 7/01/2007 14,892,500
Dade International Inc. Sr. Sub. Note, 11.125% ..... 4,000,000 5/01/2006 4,150,000
Fisher Scientific International Inc. Sr. Sub. Note,
9.00% ............................................ 4,210,000 2/01/2008 3,894,250
Quest Diagnostics Inc. Sr. Sub. Note, 10.75% ....... 8,500,000 12/15/2006 8,627,500
Triad Hospitals Holdings Inc. Sr. Sub. Note, 11.00%+ 10,290,000 5/15/2009 10,238,550
Unilab Corp. Sr. Note, 11.00% ...................... 11,150,000 4/01/2006 12,181,375
Unilab Corp. Sr. Sub. Note, 12.75% ................. 2,075,000 10/01/2009 2,064,625
--------------
58,010,471
------------
HOTELS & LODGING 0.5%
Extended Stay America Inc. Sr. Sub. Note, 9.15% .... 5,510,000 3/15/2008 5,262,050
--------------
LEISURE 1.1%
Premier Parks Inc. Sr. Note, 9.75% ................. 3,635,000 6/15/2007 3,453,250
SFX Entertainment Inc. Sr. Note Series B, 9.125% ... 6,000,000 2/01/2008 5,670,000
SFX Entertainment Inc. Sr. Sub. Note, 9.125% ....... 1,800,000 12/01/2008 1,674,000
--------------
10,797,250
--------------
MANUFACTURING 2.5%
Drypers Corp. Series B Sr. Note, 10.25% ............ 10,250,000 6/15/2007 8,097,500
North Atlantic Trading Inc. Sr. Note, 11.00% ....... 12,500,000 6/15/2004 12,000,000
Prime Succession Inc. Sr. Sub. Note, 10.75% ........ 3,000,000 8/15/2004 1,800,000
Scotts Co. Sr. Sub. Note, 8.625%+ .................. 2,600,000 1/15/2009 2,483,000
--------------
24,380,500
--------------
MEDIA 3.6%
Advanstar Communications Inc. Sr. Sub. Note, 9.25% . 8,310,000 5/01/2008 7,832,175
American Lawer Media Holdings Inc. Sr. Note Series
B, 0.00% to 12/14/2002, 12.25% from 12/15/2002 to
maturity ......................................... 1,150,000 12/15/2008 730,250
Outdoor Systems Inc. Sr. Sub. Note, 9.375% ......... 900,000 10/15/2006 942,750
Primedia Inc. Sr. Note, 7.625% ..................... 4,850,000 4/01/2008 4,389,250
R. H. Donnelley Inc. Sr. Sub. Note, 9.125% ......... 3,000,000 6/01/2008 2,940,000
Spanish Broadcasting Systems Inc. Sr. Note, 12.50% . 13,250,000 6/15/2002 15,237,500
Transwestern Publishing Co. LP Sr. Sub. Note Series
D, 9.625% ........................................ 3,325,000 11/15/2007 3,233,563
--------------
35,305,488
--------------
METALS 3.7%
Alaska Steel Corp. Sr. Note, 9.125%+ ............... 5,085,000 12/15/2006 5,097,712
Crown Resources Corp. Cv. Sub. Deb., 5.75% ......... 1,110,000 8/27/2001 721,500
Envirosource Inc. Note, 9.75% ...................... 19,000,000 6/15/2003 11,780,000
Great Central Mines Ltd. Sr. Note, 8.875% .......... 11,000,000 4/01/2008 9,900,000
Kaiser Aluminum & Chemical Corp. Sr. Sub. Note,
12.75% ........................................... 8,610,000 2/01/2003 8,696,100
--------------
36,195,312
--------------
MOBILE COMMUNICATIONS 6.9%
AirGate PCS Inc. Sr. Sub. Note, 0.00% to 9/30/2004,
13.50% from 10/1/2004 to maturity ................ 7,340,000 10/01/2009 3,981,950
Celcaribe SA Sr. Sec. Note, 13.50% ................. 5,810,000 3/15/2004 4,008,900
Cellnet Data Systems Inc. Sr. Note Series B, 0.00%
to 9/30/2002, 14.00% from 10/1/2002 to maturity .. 13,500,000 10/01/2007 5,298,750
Microcell Telecommunications, Inc. Sr. Note Series
B, 0.00% to 10/14/2002,11.125% from 10/15/2002
to maturity ...................................... 18,950,000 10/15/2007 8,125,298
Nextel Partners Inc. Sr. Note, 0.00% to 1/31/2004,
14.00% from 2/1/2004 to maturity+ ................ 10,900,000 2/01/2009 6,349,250
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 21,736,500
Pagemart Wireless Inc. Sr. Sub. Note, 0.00% to
1/31/2003, 11.25% from 2/1/2003 to maturity ...... 12,900,000 2/01/2008 3,870,000
Paging Network Do Brasil SA Sr. Note, 13.50% ....... 750,000 6/06/2005 345,000
Telecorp PCS Inc. Sr. Sub. Note, 0.00% to 4/14/2004,
11.625% from 4/15/2004 to maturity+ .............. 11,175,000 4/15/2009 6,453,562
Triton PCS Inc. Sr. Sub. Note, 0.00% to 4/30/2003,
11.00% from 5/1/2003 to maturity ................. 12,355,000 5/01/2008 8,277,850
--------------
68,447,060
--------------
PAPER & PACKAGING 4.3%
Ball Corp. Sr. Note, 7.75% ......................... 4,530,000 8/01/2006 4,394,100
Ball Corp. Sr. Sub. Note, 8.25% .................... 14,900,000 8/01/2008 14,453,000
Buckeye Cellulose Corp. Sr. Sub. Note, 9.25% ....... 1,810,000 9/15/2008 1,810,000
Crown Packaging Enterprise Ltd. Sr. Sec. Note, 0.00%
to 7/31/2003, from 8/1/2003 to maturity .......... 9,000,000 8/01/2006 90,000
Owens-Illinois Inc. Sr. Deb., 7.50% ................ 10,810,000 5/15/2010 10,227,125
Packaging Resources Inc. Sr. Sec. Note, 11.625% .... 10,450,000 5/01/2003 10,606,750
Silgan Holdings Inc. Sub. Deb., 13.25% ............. 1,123,000 7/15/2006 1,224,070
--------------
42,805,045
--------------
RESTAURANTS 0.7%
NE Restaurant Inc. Sr. Note, 10.75% ................ 7,850,000 7/15/2008 7,104,250
--------------
RETAIL 2.0%
J. Crew Group Inc. Sr. Deb., 0.00% to 10/14/2002,
13.125% from 10/15/2002 to maturity .............. 15,120,000 10/15/2008 8,013,600
J. Crew Operating Corp. Sr. Sub. Note, 10.375% ..... 10,675,000 10/15/2007 10,034,500
Loehmanns Inc. Sr. Note, 11.875% > [ ] ............. 7,442,000 5/15/2003 1,265,140
--------------
19,313,240
--------------
SERVICES 2.2%
Allied Waste North America Inc. Sr. Note, 7.625%+ .. 5,990,000 1/01/2006 5,398,488
Rose Hills Co. Sr. Sub. Note, 9.50% ................ 8,750,000 11/15/2004 7,175,000
Safety Kleen Corp. Sr. Note, 9.25%+ ................ 4,865,000 5/15/2009 4,694,725
USA Waste Services Inc. Sr. Note, 7.00% ............ 4,620,000 10/01/2004 4,322,703
--------------
21,590,916
--------------
SUPERMARKETS/DRUG 2.7%
Fred Meyer Inc. Note, 9.20% ........................ 13,754,000 7/02/2018 14,326,166
Pathmark Stores Inc. Sub. Deb., 12.625% ............ 8,360,000 6/15/2002 8,464,500
Stater Brothers Holdings Inc. Sr. Note, 10.75%+ .... 4,125,000 8/15/2006 4,228,125
--------------
27,018,791
--------------
TECHNOLOGY 3.4%
Elgar Holdings Inc. Sr. Sub. Note, 9.875% .......... 4,250,000 2/01/2008 2,911,250
Intersil Corp. Sr. Sub. Note, 13.25%+ .............. 4,400,000 8/15/2009 4,532,000
Intertek Finance PLC Series B Sr. Sub. Note, 10.25% 13,050,000 11/01/2006 12,267,000
Networks Associates Inc. Cv. Sub. Deb., 0.00% ...... 20,320,000 2/13/2018 6,518,453
PSI Net Inc. Sr. Note, 11.00%+ ..................... 1,400,000 8/01/2009 1,379,000
SCG Holding Semiconductor Corp. Sr. Note, 12.00%+ .. 5,510,000 8/01/2009 5,620,200
--------------
33,227,903
--------------
TRANSPORTATION 2.8%
Cenargo International PLC Note, 9.75% .............. 7,035,000 6/15/2008 5,979,750
First Wave Marine Inc. Sr. Note, 11.00% ............ 3,250,000 2/01/2008 2,453,750
Golden Ocean Group Ltd. Sr. Note, 10.00% [ ] ....... 13,000,000 8/31/2001 1,170,000
International Shipholding Corp. Sr. Note Series B,
7.75% ............................................ 8,050,000 10/15/2007 7,446,250
Pegasus Shipping Hellas Ltd. Pfd. Note Series A,
11.875% .......................................... 3,500,000 11/15/2004 1,032,500
Sea Containers Ltd. Sr. Note Series B, 7.875% ...... 5,900,000 2/15/2008 5,221,500
Stena AB Sr. Note, 8.75% ........................... 1,700,000 6/15/2007 1,538,500
Westinghouse Air Brake Co. Sr. Note Series B2,
9.375% ........................................... 2,650,000 6/15/2005 2,643,375
--------------
27,485,625
--------------
UTILITY 0.3%
Calpine Corp. Sr. Note, 7.625% ..................... 1,450,000 4/15/2006 1,376,558
Calpine Corp. Sr. Note, 7.75% ...................... 1,945,000 4/15/2009 1,822,270
--------------
3,198,828
--------------
Total Bonds (Cost $899,781,667) .......................................................... 801,174,777
--------------
<CAPTION>
SHARES
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<S> <C> <C>
PREFERRED STOCKS 10.4%
CONSUMER GOODS & SERVICES 0.4%
North Atlantic Trading Inc. Sr. Pfd.> ............................... 207,996 3,483,934
------------
ELECTRONIC COMPONENTS 0.6%
Nextel Communications Inc. Series D Exch. Pfd.> ..................... 5,326 5,539,040
------------
ENERGY 0.7%
Clark U.S.A. Inc. Sr. Exch. Pfd.> ................................... 10,907 6,816,909
------------
FINANCIAL 0.2%
RB Asset Inc. Pfd. Series A * ....................................... 110,000 2,048,200
------------
FIXED COMMUNICATIONS 1.0%
ICG Holdings Inc. Exch. Pfd.> ....................................... 10,803 10,154,820
------------
GENERAL INDUSTRIAL 0.7%
Cluett American Corp. Sr. Exch. Pfd.> ............................... 132,516 6,625,800
------------
MANUFACTURING 0.1%
DECS Trust Exch. Pfd.* .............................................. 231,500 1,258,781
------------
MEDIA 1.5%
Granite Broadcasting Corp. Exch. Pfd.> .............................. 15,531 15,220,380
------------
PAPER & PACKAGING 0.1%
Equitable Bag Inc. Series A Pfd.* ................................... 134,760 673,800
------------
PRINTING & PUBLISHING 1.2%
Primedia Inc. Series D Exch. Pfd. ................................... 65,500 6,238,875
Primedia Inc. Series F Exch. Pfd. ................................... 64,500 5,821,125
------------
12,060,000
------------
RESTAURANTS 0.5%
Ameriking Inc. Sr. Exch. Pfd.> ...................................... 271,196 4,474,734
------------
SERVICES 1.8%
Real Time Data Inc. Series C Pfd.*+@ ................................ 44,832 9,945,083
Real Time Date Inc. Series B Pfd.*+@ ................................ 31,155 7,733,917
------------
17,679,000
------------
SUPERMARKETS/DRUG 1.3%
Supermarkets General Holdings Corp. Exch. Pfd.> ..................... 344,540 12,920,250
------------
UTILITY 0.3%
International Utility Structures Inc. Exch. Pfd.+ > ................. 3,318 3,085,740
------------
Total Preferred Stocks (Cost $129,533,957) .......................... 102,041,388
------------
COMMON STOCKS & OTHER 5.9%
Advanced Radio Telecom Corp. Wts.*+ ................................. 52,500 785,400
Ameriking Inc. Com.*+ ............................................... 4,775 47,750
Anacomp Inc. Com.* .................................................. 873,507 14,385,573
Anacomp Inc. Wts.* .................................................. 25,940 222,111
Bar Technologies Inc. Wts.*+ ........................................ 4,250 85,000
Celcaribe SA Trust Certificates *+ .................................. 944,706 1,889,412
Cellnet Data Systems Inc. Wts.*+ .................................... 1,500 3,000
Central Rents Inc. Com.*+ ........................................... 5,250 115,500
Chatwins Group Inc. Wts.*+ .......................................... 7,000 7,000
CHC Helicopter Corp Cl. A Com.* ..................................... 46,000 138,000
CHI Energy Inc. Cl. C Wts.* ......................................... 3,279 33
Clearnet Communications Inc. Wts.* .................................. 78,705 472,230
Concentric Network Corp. Com.*+ ..................................... 19,022 386,384
Dr Pepper Bottling Holdings Inc. Cl. A Com.* ........................ 50,000 1,500,000
E. Spire Communications Inc. Wts.*+ ................................. 9,500 380,000
Econophone Inc. Wts.*+ .............................................. 14,750 442,500
Empire Gas Corp. Wts.*(+) ........................................... 2,760 690
Equitable Bag Inc. Com.* ............................................ 1,347,600 202,140
Granite Broadcasting Corp. Com.* .................................... 573,500 6,380,188
Hollinger International, Inc. Cl. A Com.* ........................... 1,918,000 22,776,250
Insight Communications L.P. Unit *(+) ............................... 105,500 1,266,000
Intelcom Group, Inc. Wts.*+ ......................................... 21,450 198,413
Intermedia Communications Inc. Wts.*+ ............................... 1,500 135,375
International Utility Structures Wts.* .............................. 2,750 2,750
Ionica PLC Wts.*+ ................................................... 9,500 95
Ladish Inc. Com.* ................................................... 86,667 563,336
Ladish Inc. Wts.* ................................................... 150,946 800,013
Loral Orion Network Systems Inc. Wts.*+ ............................. 14,500 87,000
Motels of America Inc. Com.*+ ....................................... 5,500 1,375
NS Group Inc. Wts.* ................................................. 13,250 1,457,500
Nucentrix Broadband Networks Wts.*+ ................................. 37,500 375
Pagemart Inc. Wts.*+ ................................................ 21,850 65,550
Pagemart Nationwide Inc. Com.*+ ..................................... 18,375 110,250
Powertel Inc. Wts.*+ ................................................ 8,480 296,800
Primus Telecommunications Group Wts.*+ .............................. 6,500 131,625
Protection One Inc. Wts.*+ .......................................... 10,400 20,800
RSL Communications Ltd. Wts.*+ ...................................... 13,500 972,000
Sabreliner Corp. Wts.*+ ............................................. 1,750 17,500
Startec Global Communications Corp. Wts.*+ .......................... 8,545 8,545
Town & Country Corp. Cl. A Com.* .................................... 195,632 12,227
Viatel Inc. Com.* ................................................... 69,999 2,069,345
Waxman Industries Inc. Wts.*+ ....................................... 236,000 11,800
Wireless One Inc. Wts.* ............................................. 16,500 165
Wireless One Inc. Wts.* ............................................. 27,250 27,250
------------
Total Common Stocks & Other (Cost $46,328,576) ...................... 58,475,250
SHORT-TERM INVESTMENTS 2.8%
Navigator Securities Lending Prime
Portfolio ......................................................... 27,722,763 27,722,763
--------------
Total Short-Term Investments (Cost $27,722,763) .......................................... 27,722,763
--------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
PRINCIPAL MATURITY
AMOUNT DATE
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMERCIAL PAPER 2.7%
American Express Credit Corp., 5.44% ............... $ 9,767,000 10/01/1999 9,767,000
Chevron USA Inc., 5.29% ............................ 3,813,000 10/04/1999 3,813,000
Exxon Corp., 5.29% ................................. 6,427,000 10/04/1999 6,427,000
Ford Motor Credit Co., 5.30% ....................... 5,419,000 10/07/1999 5,419,000
Ford Motor Credit Co., 5.35% ....................... 1,514,000 10/04/1999 1,514,000
--------------
Total Commercial Paper (Cost $26,940,000) ................................................ 26,940,000
--------------
Total Investments (Cost $1,130,306,963) - 102.9% ......................................... 1,016,354,178
Cash and Other Assets, Less Liabilities - (2.9%) ......................................... (28,169,561)
--------------
Net Assets - 100.0% ...................................................................... $ 988,184,617
==============
Federal Income Tax Information (Note 1):
At September 30, 1999, the net unrealized depreciation of investments based on cost for
Federal income tax purposes of $1,130,360,274 was as follows:
Aggregate gross unrealized appreciation for all investments in which there is an excess of
value over tax cost .................................................................... $ 32,503,577
Aggregate gross unrealized depreciation for all investments in which there is an excess
of tax cost over value ................................................................. (146,509,673)
--------------
$ (114,006,096)
==============
- ------------------------------------------------------------------------------------------------------------------
* 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, 1999, there were no outstanding unrestricted
securities of the same class as those held. The total cost and market value of restricted securities owned at
September 30, 1999 were $140,400 and $1,266,690 (0.13% of net assets), respectively.
+ Security restricted in accordance with Rule 144A under the Securities Act of 1933, which allows for the resale
of such securities among certain qualified institutional buyers. The total cost and market value of Rule 144A
securities owned at September 30, 1999 were $122,833,402 and $120,163,201 (12.16% of net assets),
respectively.
Forward currency exchange contracts outstanding at September 30, 1999, are as follows:
<CAPTION>
CONTRACT UNREALIZED DELIVERY
TOTAL VALUE PRICE DEPRECIATION DATE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sell Canadian dollars, Buy U.S. dollars 12,125,000 CAD 0.66765 CAD $(161,001) 10/22/99
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
STATE STREET RESEARCH HIGH INCOME FUND
- -------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- -------------------------------------------------------------------------------
September 30, 1999 (Unaudited)
ASSETS
Investments, at value (Cost $1,130,306,963) (Note 1) ....... $1,016,354,178
Cash ....................................................... 1,222
Interest and dividends receivable .......................... 23,300,093
Receivable for securities sold ............................. 2,928,483
Receivable for fund shares sold ............................ 423,366
Other assets ............................................... 41,661
--------------
1,043,049,003
LIABILITIES
Payable for collateral received on securities loaned ....... 27,722,763
Payable for securities purchased ........................... 20,822,054
Dividends payable .......................................... 3,140,576
Payable for fund shares redeemed ........................... 2,161,509
Accrued distribution and service fees (Note 4) ............. 417,668
Payable for open forward contracts ......................... 161,001
Accrued management fee (Note 2) ............................ 122,607
Accrued transfer agent and shareholder services
(Note 2) ................................................. 90,319
Accrued trustees' fees (Note 2) ............................ 11,749
Other accrued expenses ..................................... 214,140
--------------
54,864,386
--------------
NET ASSETS ................................................. $ 988,184,617
==============
Net Assets consist of:
Undistributed net investment income ...................... $ 1,845,763
Unrealized depreciation of investments ................... (113,952,785)
Unrealized depreciation of forward contracts ............. (161,001)
Accumulated net realized loss ............................ (50,998,764)
Paid-in capital .......................................... 1,151,451,404
--------------
$ 988,184,617
==============
Net Asset Value and redemption price per share of
Class A shares ($586,235,219 / 109,893,342
shares) .................................................. $ 5.33
======
Maximum Offering Price per share of Class A shares
($5.33 / .955) ........................................... $ 5.58
======
Net Asset Value and offering price per share of Class B(1)
shares ($30,778,280 / 5,812,718 shares)* ................. $ 5.29
======
Net Asset Value and offering price per share of Class B
shares ($288,741,531 / 54,445,815 shares)* ............... $ 5.30
======
Net Asset Value and offering price per share of Class C
shares ($35,655,094 / 6,715,185 shares)* ................. $ 5.31
======
Net Asset Value, offering price and redemption price per
share of Class S shares ($46,774,493 / 8,833,710 shares) . $ 5.29
======
- -------------------------------------------------------------------------------
* Redemption price per share for Class B(1), Class B and Class C is equal to
net asset value less any applicable contingent deferred sales charge.
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATE STREET RESEARCH HIGH INCOME FUND
- -------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- -------------------------------------------------------------------------------
For the six months ended September 30, 1999 (Unaudited)
INVESTMENT INCOME
Interest (Note 1) .......................................... $ 49,008,804
Dividends .................................................. 5,706,029
--------------
54,714,833
EXPENSES
Management fee (Note 2) .................................... 3,016,167
Transfer agent and shareholder services (Note 2) ........... 856,962
Service fee - Class A (Note 4) ............................. 783,694
Distribution and service fees - Class B(1) (Note 4) ........ 115,044
Distribution and service fees - Class B (Note 4) ........... 1,586,186
Distribution and service fees - Class C (Note 4) ........... 197,086
Custodian fee .............................................. 130,829
Registration fees .......................................... 115,322
Reports to shareholders .................................... 48,655
Legal fees ................................................. 35,183
Audit fee .................................................. 23,473
Trustees' fees (Note 2) .................................... 11,749
Miscellaneous .............................................. 13,465
--------------
6,933,815
Fees paid indirectly (Note 2) .............................. (33,768)
--------------
6,900,047
--------------
Net investment income ...................................... 47,814,786
--------------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS,
FOREIGN CURRENCY AND FORWARD CONTRACTS
Net realized loss on investments (Notes 1 and 3) ........... (35,035,219)
Net realized loss on forward contracts and foreign
currency ................................................. (186,521)
--------------
Total net realized loss .................................. (35,221,740)
--------------
Net unrealized depreciation of investments ................. (23,100,579)
Net unrealized depreciation of forward contracts ........... (105,086)
--------------
Total net unrealized depreciation ........................ (23,205,665)
--------------
Net loss on investments, foreign currency and forward
contracts ................................................ (58,427,405)
--------------
Net decrease in net assets resulting from operations ....... $ (10,612,619)
==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATE STREET RESEARCH HIGH INCOME FUND
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED SEPTEMBER 30, 1999
MARCH 31, 1999 (UNAUDITED)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income .................................... $ 101,271,406 $ 47,814,786
Net realized gain (loss) on investments, foreign
currency and forward contracts ......................... 4,078,740 (35,221,740)
Net unrealized depreciation of investments and forward
contracts .............................................. (144,035,477) (23,205,665)
-------------- --------------
Net decrease resulting from
operations ............................................. (38,685,331) (10,612,619)
-------------- --------------
Dividends from net investment income:
Class A ................................................ (65,376,715) (29,654,247)
Class B(1) ............................................. (126,881) (1,005,506)
Class B ................................................ (31,354,348) (13,906,572)
Class C ................................................ (3,495,607) (1,728,142)
Class S ................................................ (1,801,692) (2,348,770)
-------------- --------------
(102,155,243) (48,643,237)
-------------- --------------
Distribution from net realized gains:
Class A ................................................ (9,878,189) --
Class B ................................................ (4,999,368) --
Class C ................................................ (539,370) --
Class S ................................................ (185,070) --
-------------- --------------
(15,601,997) --
-------------- --------------
Distribution in excess of net realized gains:
Class A ................................................ (9,170,762) --
Class B ................................................ (4,927,708) --
Class C ................................................ (571,701) --
Class S ................................................ (386,636) --
-------------- --------------
(15,056,807) --
-------------- --------------
Net increase (decrease) from fund share transactions
(Note 5) ............................................... 150,648,021 (38,655,497)
-------------- --------------
Total decrease in net assets ............................. (20,851,357) (97,911,353)
NET ASSETS
Beginning of period ...................................... 1,106,947,327 1,086,095,970
-------------- --------------
End of period (including undistributed net investment
income of $2,674,214 and $1,845,763, respectively) ..... $1,086,095,970 $ 988,184,617
============== ==============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
STATE STREET RESEARCH HIGH INCOME FUND
- --------------------------------------------------------------------------------
NOTES TO UNAUDITED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
September 30, 1999
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 consists presently of two separate funds: State
Street Research High Income Fund and State Street Research Strategic Growth &
Income.
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 five classes of shares. Class A shares are subject to an
initial sales charge of up to 4.50% and an annual service fee of 0.25% of
average daily net assets. On January 1, 1999, the Fund began offering Class B
(1) shares and continued offering Class B shares but only to current
shareholders through reinvestment of dividends and distributions or through
exchanges from existing Class B accounts of State Street Research funds. Class
B(1) and Class B pay annual distribution and service fees of 1.00% and both
classes automatically convert into Class A shares (which pay lower ongoing
expenses) at the end of eight years. Class B(1) shares are subject to a
contingent deferred sales charge on certain redemptions made within six years
of purchase. Class B shares are subject to a contingent deferred sales charge
on certain redemptions made within five years of purchase. Class C shares are
subject to a contingent deferred sales charge of 1.00% on any shares redeemed
within one year of their purchase. Class C shares also pay annual distribution
and service fees of 1.00%. Class S shares are only offered through certain
retirement accounts, advisory accounts of State Street Research & Management
Company (the "Adviser"), an indirect wholly owned subsidiary of Metropolitan
Life Insurance Company ("Metropolitan"), and special programs. No sales charge
is imposed at the time of purchase or redemption of Class S shares. Class S
shares do not pay any distribution or service fees. The Fund's expenses are
borne pro-rata by each class, except that each class bears expenses, and has
exclusive voting rights with respect to provisions of the Plan of
Distribution, related specifically to that class. The Trustees declare
separate dividends on each class of shares.
The following significant accounting policies are consistently followed by the
Fund in preparing its financial statements, and such policies are in
conformity with generally accepted accounting principles for investment
companies.
A. INVESTMENT VALUATION
Fixed income securities are valued by a pricing service, which utilizes market
transactions, quotations from dealers, and various relationships among
securities in determining value. If not valued by a pricing service, such
securities are valued at prices obtained from independent brokers. Values for
listed equity securities reflect final sales on national securities exchanges
quoted prior to the close of the New York Stock Exchange. Over-the-counter
securities quoted on the National Association of Securities Dealers Automated
Quotation ("NASDAQ") system are valued at closing prices supplied through such
system. If not quoted on the NASDAQ system, such securities are valued at prices
obtained from independent brokers. In the absence of recorded sales, valuations
are at the mean of the closing bid and asked quotations. Short-term securities
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 in 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 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.
E. 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.
F. FEDERAL INCOME TAXES
No provision for Federal income taxes is necessary because the Fund has
elected to qualify under Subchapter M of the Internal Revenue Code and its
policy is to distribute all of its taxable income, including net realized
capital gains, within the prescribed time periods.
In order to meet certain excise tax distribution requirements under Section
4982 of the Internal Revenue Code, the Fund is required to measure and
distribute annually, if necessary, net capital gains realized during a twelve-
month period ending October 31. In this connection, the Fund is permitted to
defer into its next fiscal year any net capital losses incurred between each
November 1 and the end of its fiscal year. From November 1, 1998 through March
31, 1999, the Fund incurred net capital losses of approximately $15,818,000
and intends to defer and treat such losses as arising in the fiscal year ended
March 31, 2000.
G. ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period.
Actual results could differ from those estimates.
H. SECURITIES LENDING
The Fund may seek additional income by lending portfolio securities to
qualified institutions. The Fund will receive cash or securities as collateral
in an amount equal to at least 100% of the current market value of any loaned
securities plus accrued interest. By reinvesting any cash collateral it
receives in these transactions, the Fund could realize additional gains and
losses. If the borrower fails to return the securities and the value of the
collateral has declined during the term of the loan, the Fund will bear the
loss. At September 30, 1999, the value of the securities loaned and the value
of collateral were $26,991,384 and $27,722,763, respectively. During the six
months ended September 30, 1999, income from securities lending amounted to
$55,525 and is included in interest income.
NOTE 2
The Trust and the Adviser have entered into an agreement under which the
Adviser earns monthly fees at an annual rate of 0.60% of the first $500
million of net assets, annually, 0.55% of the next $500 million, and 0.50% of
any amount over $1 billion. 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, 1999, the fees pursuant to such agreement amounted to $3,016,167.
State Street Research Service Center, a division of State Street Research
Investment Services, Inc., the Trust's principal underwriter (the
"Distributor"), an indirect wholly owned subsidiary of Metropolitan, provides
certain shareholder services to the Fund such as responding to inquiries and
instructions from investors with respect to the purchase and redemption of
shares of the Fund. In addition, Metropolitan receives a fee for maintenance
of the accounts of certain shareholders who are participants in sponsored
arrangements, employee benefit plans and similar programs or plans, through or
under which shares of the Fund may be purchased. During the six months ended
September 30, 1999, the amount of such expenses was $387,611.
The Fund has entered into an arrangement with its transfer agent whereby
credits realized as a result of uninvested cash balances were used to reduce a
portion of the Fund's expense. During the six months ended September 30, 1999
the Fund's transfer agent fees were reduced by $33,768 under this agreement.
The fees of the Trustees not currently affiliated with the Adviser amounted to
$11,749 during the six months ended September 30, 1999.
NOTE 3
For the six months ended September 30, 1999, purchases and sales of
securities, exclusive of short-term investments, aggregated $323,299,601 and
$362,518,451, respectively.
NOTE 4
The Trust has adopted plans of distribution pursuant to Rule
12b-1 under the Investment Company Act of 1940. Under the plans, the Fund pays
annual service fees to the Distributor at a rate of 0.25% of average daily net
assets for Class A, Class B(1), Class B and Class C shares. In addition, the
Fund pays annual distribution fees of 0.75% of average daily net assets for
Class B(1), Class B and Class C shares. The Distributor uses such payments for
personal service and/or the maintenance or servicing of shareholder accounts,
to 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,
1999, fees pursuant to such plans amounted to $783,694, $115,044, $1,586,186
and $197,086 for Class A, Class B(1), Class B and Class C shares,
respectively.
The Fund has been informed that the Distributor and MetLife Securities, Inc.,
a wholly owned subsidiary of Metropolitan, earned initial sales charges
aggregating $112,677 and $600,673, respectively, on sales of Class A shares of
the Fund during the six months ended September 30, 1999, and that MetLife
Securities, Inc. earned commissions aggregating $220,341 and $90,090 on sales
of Class B(1) and Class B shares, and that the Distributor collected
contingent deferred sales charges aggregating $41,197, $382,608 and $3,483 on
redemptions of Class B(1), Class B and Class C shares, respectively, during
the same period.
<PAGE>
NOTE 5
The Trustees have the authority to issue an unlimited number of shares of
beneficial interest, $.001 par value per share.
Share transactions were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED SEPTEMBER 30, 1999
MARCH 31, 1999 (UNAUDITED)
--------------------------------- ---------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ................ 20,276,045 $ 121,986,092 7,373,435 $ 40,973,620
Issued upon reinvestment of:
Dividends from net
investment income .......... 7,224,259 42,925,293 3,508,003 19,423,702
Distribution from net
realized gains ............. 2,640,762 15,798,355 -- --
Shares redeemed ............ (24,073,358) (143,844,378) (15,678,028) (87,385,490)
----------- ------------- ------------ --------------
Net increase (decrease) .... 6,067,708 $ 36,865,362 (4,796,590) $ (26,988,168)
=========== ============= ============ ==============
<CAPTION>
CLASS B(1) SHARES* AMOUNT* SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ................ 2,306,218 $ 12,887,088 3,926,571 $ 21,772,878
Issued upon reinvestment of
dividends from net
investment income .......... 8,749 49,080 99,876 545,101
Shares redeemed ............ (47,435) (268,123) (481,261) (2,658,597)
----------- ------------- ------------ --------------
Net increase ............... 2,267,532 $ 12,668,045 3,545,186 $ 19,659,382
=========== ============= ============ ==============
<CAPTION>
CLASS B SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ................ 16,017,044 $ 97,744,288 1,068,759 $ 5,938,712
Issued upon reinvestment of:
Dividends from net
investment income .......... 2,785,476 16,611,341 1,410,507 7,767,385
Distribution from net
realized gains ............. 1,285,486 7,629,070 -- --
Shares redeemed ............ (12,746,528) (75,119,927) (7,893,686) (43,704,386)
----------- ------------- ------------ --------------
Net increase (decrease) .... 7,341,478 $ 46,864,772 (5,414,420) $ (29,998,289)
=========== ============= ============ ==============
<CAPTION>
CLASS C SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ................ 4,100,226 $ 24,694,993 1,702,073 $ 9,427,814
Issued upon reinvestment of:
Dividends from net
investment income .......... 339,756 2,008,561 167,622 924,157
Distribution from net
realized gains ............. 144,432 856,430 -- --
Shares redeemed ............ (2,663,155) (15,519,090) (2,323,997) (12,832,916)
----------- ------------- ------------ --------------
Net increase (decrease) .... 1,921,259 $ 12,040,894 (454,302) $ (2,480,945)
=========== ============= ============ ==============
<CAPTION>
CLASS S SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ................ 7,536,611 $ 42,912,636 175,148 $ 982,878
Issued upon reinvestment of:
Dividends from net
investment income .......... 296,656 1,693,323 418,098 2,297,740
Distribution from net
realized gains ............. 96,895 555,557 -- --
Shares redeemed ............ (504,050) (2,952,568) (380,106) (2,128,095)
----------- ------------- ------------ --------------
Net increase ............... 7,426,112 $ 42,208,948 213,140 $ 1,152,523
=========== ============= ============ ==============
- -------------------------------------------------------------------------------------------------------
* January 1, 1999 (commencement of share class) to March 31, 1999.
</TABLE>
<PAGE>
STATE STREET RESEARCH HIGH INCOME FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For a share outstanding throughout each period:
CLASS A
-------------------------------------------------------------------------------------------------------------
YEARS ENDED MARCH 31 SIX MONTHS ENDED
--------------------------------------------------------------------------------- SEPTEMBER 30, 1999
1995(a) 1996(a) 1997(a) 1998(a) 1999(a) (UNAUDITED)(a)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD ($) 6.43 5.80 5.95 6.01 6.62 5.65
---- ---- ---- ---- ---- ----
Net investment
income ($) 0.61 0.52 0.59 0.58 0.58 0.26
Net realized and
unrealized gain (loss)
on investments,
foreign currency
and forward
contracts ($) (0.58) 0.20 (0.01) 0.63 (0.80) (0.32)
---- ---- ---- ---- ---- ----
TOTAL FROM INVESTMENT
OPERATIONS ($) 0.03 0.72 0.58 1.21 (0.22) (0.06)
---- ---- ---- ---- ---- ----
Dividends from
net investment
income ($) (0.60) (0.56) (0.52) (0.60) (0.58) (0.26)
Distributions
from net
realized gains ($) (0.06) (0.01) -- -- (0.09) --
Distribution in
excess of net
realized gains ($) -- -- -- -- (0.08) --
---- ---- ---- ---- ---- ----
TOTAL DISTRIBUTIONS ($) (0.66) (0.57) (0.52) (0.60) (0.75) (0.26)
---- ---- ---- ---- ---- ----
NET ASSET VALUE,
END OF PERIOD ($) 5.80 5.95 6.01 6.62 5.65 5.33
==== ==== ==== ==== ==== ====
Total return(b) (%) 1.80 12.85 10.30 20.98 (3.19) (1.07)(c)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end
of period ($
thousands) 618,462 646,473 658,413 718,705 648,217 586,235
Ratio of operating
expenses to
average net
assets (%) 1.23 1.17 1.10 1.10 1.06 1.06(d)
Ratio of operating
expenses to
average net
assets after
expense
reductions (%) 1.23 1.17 1.10 1.10 1.05 1.05(d)
Ratio of net
investment income
to average net
assets (%) 10.19 8.88 9.70 9.10 9.63 9.33(d)
Portfolio turnover
rate (%) 31.55 56.47 81.75 70.53 53.46 31.92
</TABLE>
<TABLE>
<CAPTION>
CLASS B(1)
----------------------------------
SIX MONTHS ENDED
YEAR ENDED SEPTEMBER 30, 1999
MARCH 31, 1999(a)(e) (UNAUDITED)(a)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ($) 5.62 5.62
---- ----
Net investment income ($) 0.12 0.23
Net realized and unrealized gain (loss) on investments, foreign
currency and forward contracts ($) 0.01 (0.32)
---- ----
TOTAL FROM INVESTMENT OPERATIONS ($) 0.13 (0.09)
---- ----
Dividends from net investment income ($) (0.13) (0.24)
---- ----
TOTAL DISTRIBUTIONS ($) (0.13) (0.24)
---- ----
NET ASSET VALUE, END OF PERIOD ($) 5.62 5.29
==== ====
Total return(b) (%) 2.25(c) (1.63)(c)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period ($ thousands) 12,732 30,778
Ratio of operating expenses to average net assets (%) 1.74(d) 1.81(d)
Ratio of operating expenses to average net assets after
expense reductions (%) 1.73(d) 1.80(d)
Ratio of net investment income to average net assets (%) 8.81(d) 8.47(d)
Portfolio turnover rate (%) 53.46 31.92
- -----------------------------------------------------------------------------------------------------------------------------------
(a) Per-share figures have been calculated using the average shares method.
(b) Does not reflect any front-end or contingent deferred sales charges.
(c) Not annualized.
(d) Annualized.
(e) January 1, 1999 (commencement of share class) to March 31, 1999.
</TABLE>
<PAGE>
STATE STREET RESEARCH HIGH INCOME FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS B
-------------------------------------------------------------------------------------------------------------
YEARS ENDED MARCH 31 SIX MONTHS ENDED
--------------------------------------------------------------------------------- SEPTEMBER 30, 1999
1995(a) 1996(a) 1997(a) 1998(a) 1999(a) (UNAUDITED)(a)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF
PERIOD ($) 6.42 5.79 5.93 5.98 6.58 5.62
---- ---- ---- ---- ---- ----
Net investment
income ($) 0.57 0.46 0.55 0.53 0.53 0.24
Net realized and
unrealized gain
(loss) on
investments,
foreign
currency and
forward
contracts ($) (0.58) 0.21 (0.02) 0.62 (0.79) (0.32)
---- ---- ---- ---- ---- ----
TOTAL FROM
INVESTMENT
OPERATIONS ($) (0.01) 0.67 0.53 1.15 (0.26) (0.08)
---- ---- ---- ---- ---- ----
Dividends from
net investment
income ($) (0.56) (0.52) (0.48) (0.55) (0.53) (0.24)
Distributions
from net
realized gains ($) (0.06) (0.01) -- -- (0.09) --
Distribution in
excess of net
realized gains ($) -- -- -- -- (0.08) --
---- ---- ---- ---- ---- ----
TOTAL DISTRIBUTIONS ($) (0.62) (0.53) (0.48) (0.55) (0.70) (0.24)
---- ---- ---- ---- ---- ----
NET ASSET VALUE,
END OF PERIOD ($) 5.79 5.93 5.98 6.58 5.62 5.30
==== ==== ==== ==== ==== ====
Total return(b) (%) 0.89 12.06 9.35 20.02 (3.77) (1.45)(c)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of
period ($ thousands) 117,767 185,735 259,077 345,797 336,420 288,742
Ratio of operating
expenses to
average net
assets (%) 1.98 1.92 1.85 1.85 1.81 1.81(d)
Ratio of operating
expenses to
average net
assets after
expense
reductions (%) 1.98 1.92 1.85 1.85 1.80 1.80(d)
Ratio of net
investment income
to average net
assets (%) 9.65 7.95 9.01 8.36 8.90 8.58(d)
Portfolio turnover
rate (%) 31.55 56.47 81.75 70.53 53.46 31.92
<CAPTION>
CLASS C
-------------------------------------------------------------------------------------------------------------
YEARS ENDED MARCH 31 SIX MONTHS ENDED
--------------------------------------------------------------------------------- SEPTEMBER 30, 1999
1995(a) 1996(a) 1997(a) 1998(a) 1999(a) (UNAUDITED)(a)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF
PERIOD ($) 6.42 5.79 5.93 5.99 6.59 5.63
---- ---- ---- ---- ---- ----
Net investment
income ($) 0.58 0.46 0.54 0.53 0.53 0.24
Net realized and
unrealized gain
(loss) on
investments,
foreign
currency and
forward
contracts ($) (0.59) 0.21 -- 0.62 (0.79) (0.31)
---- ---- ---- ---- ---- ----
TOTAL FROM
INVESTMENT
OPERATIONS ($) (0.01) 0.67 0.54 1.15 (0.26) (0.07)
---- ---- ---- ---- ---- ----
Dividends from
net investment
income ($) (0.56) (0.52) (0.48) (0.55) (0.53) (0.25)
Distributions
from net
realized gains ($) (0.06) (0.01) -- -- (0.09) --
Distribution in
excess of net
realized gains ($) -- -- -- -- (0.08) --
---- ---- ---- ---- ---- ----
TOTAL DISTRIBUTIONS ($) (0.62) (0.53) (0.48) (0.55) (0.70) (0.25)
---- ---- ---- ---- ---- ----
NET ASSET VALUE,
END OF PERIOD ($) 5.79 5.93 5.99 6.59 5.63 5.31
==== ==== ==== ==== ==== ====
Total return(b) (%) 0.88 12.05 9.52 19.99 (3.76) (1.44)(c)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end
of period ($
thousands) 6,766 15,262 28,488 34,586 40,342 35,655
Ratio of operating
expenses to
average net
assets (%) 1.98 1.92 1.85 1.85 1.81 1.81(d)
Ratio of operating
expenses to
average net
assets after
expense
reductions (%) 1.98 1.92 1.85 1.85 1.80 1.80(d)
Ratio of net
investment income
to average net
assets (%) 9.81 7.91 9.09 8.35 8.91 8.59(d)
Portfolio turnover
rate (%) 31.55 56.47 81.75 70.53 53.46 31.92
- --------------------------------------------------------------------------------------------------------------------------------
(a) Per-share figures have been calculated using the average shares method.
(b) Does not reflect any front-end or contingent deferred sales charges.
(c) Not annualized.
(d) Annualized.
</TABLE>
<PAGE>
STATE STREET RESEARCH HIGH INCOME FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS S
-------------------------------------------------------------------------------------------------------------
YEARS ENDED MARCH 31 SIX MONTHS ENDED
--------------------------------------------------------------------------------- SEPTEMBER 30, 1999
1995(a) 1996(a) 1997(a) 1998(a) 1999(a) (UNAUDITED)(a)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF
PERIOD ($) 6.42 5.78 5.92 5.98 6.58 5.61
---- ---- ---- ---- ---- ----
Net investment
income ($) 0.64 0.53 0.61 0.59 0.58 0.27
Net realized and
unrealized gain
(loss) on
investments,
foreign
currency and
forward
contracts ($) (0.60) 0.20 (0.01) 0.63 (0.77) (0.32)
---- ---- ---- ---- ---- ----
TOTAL FROM
INVESTMENT
OPERATIONS ($) 0.04 0.73 0.60 1.22 (0.21) (0.05)
---- ---- ---- ---- ---- ----
Dividends from
net investment
income ($) (0.62) (0.58) (0.54) (0.62) (0.59) (0.27)
Distributions
from net
realized gains ($) (0.06) (0.01) -- -- (0.09) --
Distribution in
excess of net
realized gains ($) -- -- -- -- (0.08) --
---- ---- ---- ---- ---- ----
TOTAL DISTRIBUTIONS ($) (0.68) (0.59) (0.54) (0.62) (0.76) (0.27)
---- ---- ---- ---- ---- ----
NET ASSET VALUE,
END OF PERIOD ($) 5.78 5.92 5.98 6.58 5.61 5.29
==== ==== ==== ==== ==== ====
Total return(b) (%) 1.73 13.19 10.63 21.22 (2.97) (0.96)(c)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end
of period ($
thousands) 2,579 3,840 6,255 7,860 48,384 46,774
Ratio of operating
expenses to
average net
assets (%) 0.98 0.92 0.85 0.85 0.81 0.81(d)
Ratio of operating
expenses to
average net
assets after
expense
reductions (%) 0.98 0.92 0.85 0.85 0.80 0.80(d)
Ratio of net
investment income
to average net
assets (%) 10.85 8.97 10.04 9.36 10.00 9.61(d)
Portfolio turnover
rate (%) 31.55 56.47 81.75 70.53 53.46 31.92
- ---------------------------------------------------------------------------------------------------------------------------------
(a) Per-share figures have been calculated using the average shares method.
(b) Does not reflect any front-end or contingent deferred sales charges.
(c) Not annualized.
(d) Annualized.
</TABLE>
- --------------------------------------------------------------------------------
REPORT ON SPECIAL MEETING OF SHAREHOLDERS
- --------------------------------------------------------------------------------
A Special Meeting of Shareholders of the State Street Research High Income
Fund ("Fund"), along with shareholders of other series of
State Street Research Income Trust ("Trust"), was convened on April 6, 1999
("Meeting"). The results of the Meeting are set forth below.
VOTES (MILLIONS
OF SHARES)
(COMBINED FOR ALL
SERIES OF THE
TRUST)
-----------------
ACTION ON PROPOSAL FOR WITHHELD
- --------------------------------------------------------------------------------
The following persons were elected as Trustees:
Bruce R. Bond ............................................. 149.4 3.0
Steve A. Garban ........................................... 149.4 3.0
Malcolm T. Hopkins ........................................ 149.2 3.1
Susan M. Phillips ......................................... 149.4 3.0
<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 BRUCE R. BOND
One Financial Center BARTLETT R. GEER Former Chairman of the Board,
Boston, MA 02111 Vice President Chief Executive Officer
and President,
DISTRIBUTOR JOHN H. KALLIS PictureTel Corporation
State Street Research Vice President
Investment Services, Inc. STEVE A. GARBAN
One Financial Center THOMAS A. SHIVELY Former Senior Vice President
Boston, MA 02111 Vice President for Finance and Operations and
Treasurer, The Pennsylvania
SHAREHOLDER SERVICES JAMES M. WEISS State University
State Street Research Vice President
Service Center MALCOLM T. HOPKINS
P.O. Box 8408 GERARD P. MAUS Former Vice Chairman of the
Boston, MA 02266-8408 Treasurer Board and Chief Financial
1-800-562-0032 Officer, St. Regis Corp.
JOSEPH W. CANAVAN
CUSTODIAN Assistant Treasurer DEAN O. MORTON
State Street Bank and Former Executive Vice President,
Trust Company DOUGLAS A. ROMICH Chief Operating Officer and
225 Franklin Street Assistant Treasurer Director, Hewlett-Packard Company
Boston, MA 02110
FRANCIS J. MCNAMARA, III SUSAN M. PHILLIPS
LEGAL COUNSEL Secretary and General Counsel Dean, School of Business and
Goodwin, Procter & Hoar LLP Public Management, George
Exchange Place DARMAN A. WING Washington University; former
Boston, MA 02109 Assistant Secretary and Member of the Board of Governors
Assistant General Counsel of the Federal Reserve System and
Chairman and Commissioner of
AMY L. SIMMONS the Commodity Futures Trading
Assistant Secretary Commission
TOBY ROSENBLATT
President,
Founders Investments Ltd.
President,
The Glen Ellen Company
MICHAEL S. SCOTT MORTON
Jay W. Forrester Professor of
Management, Sloan School of
Management, Massachusetts
Institute of Technology
</TABLE>
<PAGE>
---------------
Bulk Rate
STATE STREET RESEARCH HIGH INCOME FUND U.S. Postage
One Financial Center PAID
Boston, MA 02111 Canton, MA
Permit #313
---------------
STATE STREET RESEARCH
[Logo]
LASTING VALUE
- -------------
LEADING IDEAS
QUESTIONS? COMMENTS?
CALL us at 1-800-562-0032 or
[hearing impaired 1-800-676-7876]
[Chinese and Spanish-speaking 1-888-638-3193]
WRITE us at:
State Street Research
Service Center
P.O. Box 8408
Boston, MA 02266-8408
E-MAIL us at:
[email protected]
INTERNET site:
www.ssrfunds.com
[LOGO] STATE STREET RESEARCH
This report is prepared for the general information of current shareholders.
This publication must be preceded or accompanied by a current State Street
Research High Income Fund prospectus.
When used after December 31, 1999, 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: (exp1100) SSR-LD HI-413G-1199
<PAGE>
- -------------------------------------------------------------------------------
STATE STREET RESEARCH
- -------------------------------------------------------------------------------
STRATEGIC GROWTH & INCOME FUND
------------------------------
SEMIANNUAL REPORT
September 30, 1999
--------------------
WHAT'S INSIDE
--------------------
INVESTMENT UPDATE
About the Fund,
economy and markets
FUND INFORMATION
Facts and figures
PLUS, COMPLETE PORTFOLIO HOLDINGS
AND FINANCIAL STATEMENTS
----------------------
DALBAR
HONORS COMMITMENT TO:
INVESTORS
1998
----------------------
For Excellence
[Logo] STATE STREET RESEARCH in
Shareholder Service
<PAGE>
STATE STREET RESEARCH STRATEGIC GROWTH & INCOME FUND
- -------------------------------------------------------------------------------
INVESTMENT UPDATE
- -------------------------------------------------------------------------------
INVESTMENT ENVIRONMENT
THE ECONOMY
o The economy continued to show strong real growth in the six months ended
September 30, 1999. Housing began to show signs of peaking in response to
higher mortgage rates, but overall consumer and capital spending remained
strong.
o Inflation remained steady at about 2% despite the steep increase in energy
prices and the weaker U.S. dollar. The continued improvement in productivity
helped to keep prices low.
o The Federal Reserve Board raised the interest rate in an attempt to slow the
growth in the U.S. economy and thereby provide some slack as the Asian and
European economies began to recover. The Federal Reserve was very careful,
however, not to tighten too much with Y2K only three months away.
THE MARKETS
o The U.S. stock market, as measured by the S&P 500(1), ended up virtually
unchanged for the six months ended September 30, 1999. The most notable
development during this period was the broadening which occurred with small
cap stocks significantly outperforming large cap for this first time in
several years.
o The bond market, as measured by the Lehman Brothers Aggregate Bond Index(5),
was also unchanged for the period with prices declining on balance. Interest
rates moved up in response to concerns over inflation and companies trying to
complete their financing before the year end.
THE FUND
OVER THE PAST SIX MONTHS
o For the six months ended September 30, 1999, Class A shares returned 1.00%
(does not reflect sales charge).(2)
o The equity portion of this portfolio significantly outperformed the S&P 500
which returned 0.37%, reflecting the benefits of a broader market. The bond
portfolio did not fare as well, however, with interest rates moving up and a
modest flight to quality.
o The strongest sectors of the portfolio were international equity and inflation
responsive, up more than 10% and 25% respectively for the period. The
strengths in the inflation- responsive sector reflected the sharp recovery in
energy prices from the very depressed levels early in the period.
o Stocks continued to be underweighted during the period. This position reflects
our concern over the somewhat high valuations on stocks, the upward pressure
on interest rates, and the attractive real returns available on bonds.
CURRENT STRATEGY
o The manager is in the process of reducing the allocation to stocks and
increasing the allocation to bonds as part of a longer-term strategy to reduce
risk in the portfolio. The fund's normal stock allocation is moving from 70%
to 60% which is more consistent with the firm's longer term outlook and its
view that bonds are becoming increasingly attractive.
September 30, 1999
(1) The S&P 500 (officially the "Standard and Poor's 500 Index") is an unmanaged
index of 500 U.S. stocks. The index does not take transaction charges into
consideration. It is not possible to invest directly in the index.
(2) 0.61% for Class B(1) shares; 0.62% for Class B shares; 0.61% for Class C
shares; 1.13% for Class S shares.
(3) Keep in mind that past performance is no guarantee of future results. The
Fund's share price, yield and return will fluctuate, and you may have a gain
or loss when you sell your shares. All returns assume reinvestment of
capital gain distributions and income dividends at net asset value. The
Fund's returns include performance from before the creation of share
classes. If this performance reflected the share classes' current 12b-1
fees, the fund's returns may have been lower. Class S shares, offered
without a sales charge, are available only through certain employee benefit
plans and special programs.
(4) Performance reflects up to maximum 5.75% Class A share front-end sales
charge, or 5% Class B(1) or Class B share or 1% Class C share contingent
deferred sales charges, where applicable.
(5) The Lehman Brothers Aggregate Bond Index is a market-value weighted index of
fixed-rate debt issues, including U.S. treasury, agency, and corporate bond
issues, and mortgage-backed securities. The index does not take transaction
charges into consideration. It is not possible to invest directly in the
index.
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, 1999)
- -------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN (at maximum applicable sales charge)(3)(4)
- --------------------------------------------------------------------------------
10 YEARS 5 YEARS 1 YEAR
- -------------------------------------------------------------------------
Class A 10.09% 11.45% 4.12%
- -------------------------------------------------------------------------
Class B(1) 10.23% 11.68% 4.73%
- -------------------------------------------------------------------------
Class B 10.22% 11.67% 4.68%
- -------------------------------------------------------------------------
Class C 10.22% 11.92% 8.68%
- -------------------------------------------------------------------------
Class S 10.92% 13.03% 10.74%
- -------------------------------------------------------------------------
ASSET ALLOCATION
(by percentage of net assets)
Equities 54%
Bonds 35%
Net Cash 6%
Inflation Responsive 5%
TOP FIVE EQUITY INDUSTRIES
(by percentage of net assets)
NON-U.S. EQUITIES 9.3%
COMPUTER TECHNOLOGY 4.4%
OIL & GAS PRODUCERS 3.2%
COMMERCIAL SERVICES 2.8%
UTILITIES: ELECTRICAL 2.4%
Total: 22.1%
<PAGE>
STATE STREET RESEARCH STRATEGIC GROWTH & INCOME FUND
- --------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
- --------------------------------------------------------------------------------
(September 30, 1999 (Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
VALUE
SHARES (NOTE 1)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
EQUITY SECURITIES 54.4%
AUTOMOBILES & TRANSPORTATION 0.0%
AIR TRANSPORT 0.0%
CHC Helicopter Corp. Cl. A* ......................................... 2,000 $ 6,000
Mesa Air Group, Inc.* ............................................... 35,300 216,213
------------
222,213
------------
Total Automobiles & Transportation .................................. 222,213
------------
CONSUMER DISCRETIONARY 10.9%
ADVERTISING AGENCIES 2.2%
Lamar Advertising Co. Cl. A* ........................................ 11,400 564,300
Omnicom Group ....................................................... 37,100 2,937,856
Valassis Communications Inc.* ....................................... 233,050 10,239,635
Young & Rubicam Inc.* ............................................... 31,100 1,368,400
------------
15,110,191
------------
CASINOS/GAMBLING, HOTEL/MOTEL 1.1%
GTech Holdings Corp.* ............................................... 71,900 1,541,356
Harrah's Entertainment Inc.* ........................................ 216,000 5,994,000
Motels of America Inc.*+ ............................................ 500 125
------------
7,535,481
------------
COMMERCIAL SERVICES 2.8%
A.C. Nielson Corp.* ................................................. 247,900 5,624,231
Abacus Direct Corp.* ................................................ 6,100 743,437
Allied Waste Industries Inc.* ....................................... 23,000 268,813
America Online Inc.* ................................................ 24,500 2,548,000
Cheap Tickets Inc.* ................................................. 13,700 443,537
Copart Inc.* ........................................................ 32,900 606,594
GoTo.com, Inc.* ..................................................... 15,900 828,787
Innotrac Corp.* ..................................................... 27,000 482,625
Maximus Inc.* ....................................................... 29,100 871,181
Netzero Inc.* ....................................................... 2,300 59,800
ProBusiness Services Inc.* .......................................... 21,400 575,125
Protection One Inc. Wts.*+ .......................................... 800 1,600
QRS Corp.* .......................................................... 2,700 173,138
Safety Kleen Corp.* ................................................. 147,700 1,781,631
StarMedia Network, Inc.* ............................................ 17,700 649,922
Steiner Leisure Ltd.* ............................................... 47,699 1,192,475
Usweb Corp.* ........................................................ 10,600 363,713
VerticalNet Inc.* ................................................... 10,200 377,400
Waste Connections Inc.* ............................................. 21,400 440,038
Yahoo!, Inc.* ....................................................... 1,501 269,430
Ziff-Davis Inc.* .................................................... 31,000 660,687
------------
18,962,164
------------
COMMUNICATIONS, MEDIA & ENTERTAINMENT 1.2%
Acme Communications Inc.* ........................................... 5,100 155,550
AMFM Inc.* .......................................................... 15,400 937,475
CBS Corp.* .......................................................... 94,000 4,347,500
Cinar Films Inc. Cl. B* ............................................. 40,200 1,216,050
Citadel Communications Corp.* ....................................... 17,400 593,775
Hearst Argyle Television Inc.* ...................................... 16,100 346,150
Insight Communications Inc.* ........................................ 4,800 137,400
Sinclair Broadcast Group Inc. ....................................... 38,800 351,625
TiVo Inc.* .......................................................... 1,400 41,913
------------
8,127,438
------------
CONSUMER PRODUCTS 0.1%
Yankee Candle Company, Inc.* ........................................ 16,800 324,450
------------
CONSUMER SERVICES 0.1%
Bright Horizons Family Solutions Corp.* ............................. 21,000 328,125
Central Rents Inc.*+ ................................................ 250 5,500
DeVry Inc.* ......................................................... 31,500 630,000
------------
963,625
------------
PRINTING & PUBLISHING 0.8%
General Media Inc. Wts.*(+) ......................................... 250 250
Hollinger International, Inc. Cl. A ................................. 463,300 5,501,687
Sullivan Holdings Inc.*(+)# ......................................... 149 17,873
------------
5,519,810
------------
RESTAURANTS 0.7%
McDonald's Corp. .................................................... 103,100 4,433,300
------------
RETAIL 1.9%
Aviation Sales Co.* ................................................. 7,800 148,200
Circuit City Stores Inc. ............................................ 68,400 2,885,625
CSK Auto Corp.* ..................................................... 17,800 388,263
David's Bridal Inc.* ................................................ 35,100 261,056
EMusic.com Inc.* .................................................... 43,900 653,012
eTOYS, Inc.* ........................................................ 9,000 599,062
Federated Department Stores Inc.* ................................... 46,800 2,044,575
Global Imaging Systems, Inc.* ....................................... 24,800 368,900
Home Depot Inc. ..................................................... 29,400 2,017,575
Jones Apparel Group Inc.* ........................................... 17,500 503,125
Linens 'n Things Inc.* .............................................. 7,300 246,375
Men's Wearhouse, Inc.* .............................................. 10,900 234,350
Sharper Image Corp.* ................................................ 31,100 342,100
Ticketmaster Online City Search, Inc. Cl. B* ........................ 10,000 241,875
Wal-Mart Stores, Inc. ............................................... 42,300 2,011,894
------------
12,945,987
------------
Total Consumer Discretionary ........................................ 73,922,446
------------
CONSUMER STAPLES 2.2%
BEVERAGES 0.6%
Anheuser-Busch Companies, Inc. ...................................... 54,700 3,832,419
------------
DRUG & GROCERY STORE CHAINS 0.6%
Duane Reade Inc.* ................................................... 23,300 701,912
Hannaford Brothers Co. .............................................. 50,985 3,591,256
------------
4,293,168
------------
FOODS 0.1%
Nabisco Group Holdings Corp. ........................................ 27,600 414,000
------------
HOUSEHOLD PRODUCTS 0.6%
Colgate-Palmolive Co. ............................................... 65,300 2,987,475
Dial Corp. .......................................................... 51,495 1,313,123
------------
4,300,598
------------
TOBACCO 0.3%
R.J. Reynolds Tobacco Holdings Inc. ................................. 27,700 747,900
UST Inc. ............................................................ 34,700 1,047,506
------------
1,795,406
------------
Total Consumer Staples .............................................. 14,635,591
------------
FINANCIAL SERVICES 5.8%
BANKS & SAVINGS & LOAN 2.2%
Chase Manhattan Corp. ............................................... 59,500 4,484,812
Commercial Federal Corp. ............................................ 12,600 247,275
Golden State Bancorp Inc.* .......................................... 13,000 233,188
Golden West Financial Corp. ......................................... 14,800 1,454,100
Hudson City Bancorp Inc.* ........................................... 83,900 1,153,625
Mercantile Bankshares Corp. ......................................... 47,500 1,469,531
Peoples Heritage Financial Group .................................... 203,500 3,383,187
Saint Paul Bancorp, Inc. ............................................ 8,800 201,300
Southtrust Corp. .................................................... 33,900 1,216,163
TCF Financial Corp. ................................................. 7,200 205,650
Telebanc Financial Corp.* ........................................... 24,400 561,200
------------
14,610,031
------------
FINANCIAL DATA PROCESSING SERVICES & SYSTEMS 0.4%
NextCard Inc.* ...................................................... 41,700 1,021,650
Nova Corp.* ......................................................... 26,400 660,000
Profit Recovery Group International Inc.* ........................... 22,350 997,369
------------
2,679,019
------------
INSURANCE 1.1%
Ace Ltd. ............................................................ 160,100 2,711,694
Mutual Risk Management Ltd. ......................................... 12,600 154,350
Saint Paul Companies, Inc. .......................................... 48,400 1,331,000
Terra Nova Holdings Ltd. Cl. A* ..................................... 17,900 571,681
XL Capital Ltd. Cl. A ............................................... 62,901 2,830,545
------------
7,599,270
------------
MISCELLANEOUS FINANCIAL 1.7%
AMBAC Inc. .......................................................... 103,100 4,884,363
Citigroup, Inc. ..................................................... 89,400 3,933,600
Digital Insight Corp.* .............................................. 900 13,500
Finet.com Corp.* .................................................... 37,000 112,156
Heller Financial Inc. Cl. A ......................................... 15,600 351,000
Metris Companies Inc.* .............................................. 17,200 506,325
Prism Financial Corp.* .............................................. 37,400 374,000
Radian Group Inc. ................................................... 8,300 356,381
RB Asset Inc. Series A Pfd.* ........................................ 20,000 372,400
Security First Tech Corp.* .......................................... 18,600 723,075
------------
11,626,800
------------
REAL ESTATE INVESTMENT TRUSTS 0.1%
First Industrial Realty Trust Inc. .................................. 11,300 279,675
IndyMac Mortgage Holdings Inc. ...................................... 26,800 402,000
------------
681,675
------------
RENTAL & LEASING SERVICES: COMMERCIAL 0.0%
United Rentals Inc.* ................................................ 10,500 228,375
------------
SECURITIES BROKERAGE & SERVICES 0.3%
Bear Stearns Company Inc. ........................................... 38,010 1,461,009
Knight/Trimark Group, Inc. Cl. A* ................................... 17,600 521,400
------------
1,982,409
------------
Total Financial Services ............................................ 39,407,579
------------
HEALTH CARE 2.3%
DRUGS & BIOTECHNOLOGY 1.8%
Amgen Inc.* ......................................................... 30,000 2,445,000
Axogen Ltd. ......................................................... 9,400 301,975
Biovail Corp.* ...................................................... 65,600 3,329,200
Bristol-Myers Squibb Co. ............................................ 30,500 2,058,750
Intelligent Polymers Ltd.* .......................................... 81,300 4,004,025
Spiros Development Corp.* ........................................... 12,500 87,500
------------
12,226,450
------------
HEALTH CARE FACILITIES 0.1%
Total Renal Care Holdings Inc.* ..................................... 75,833 564,008
------------
HEALTH CARE SERVICES 0.3%
Healtheon Corp.* .................................................... 8,100 299,700
Quorum Health Group Inc.* ........................................... 230,900 1,623,516
------------
1,923,216
------------
HOSPITAL SUPPLY 0.1%
Wesley Jessen VisionCare Inc.* ...................................... 30,200 941,862
------------
Total Health Care ................................................... 15,655,536
------------
INTEGRATED OILS 0.7%
INTEGRATED DOMESTIC 0.3%
Unocal Corp. ........................................................ 61,300 2,271,931
------------
INTEGRATED INTERNATIONAL 0.4%
BP Amoco PLC ADR .................................................... 22,600 2,504,363
------------
Total Integrated Oils ............................................... 4,776,294
------------
MATERIALS & PROCESSING 3.8%
BUILDING & CONSTRUCTION 0.1%
SLI Inc.* ........................................................... 14,522 309,500
Waxman Industries Inc. Wts.*+ ....................................... 29,500 1,478
------------
310,978
------------
CHEMICALS 1.0%
Cabot Corp. ......................................................... 180,400 4,284,500
Cambrex Corp. ....................................................... 15,700 415,069
Dow Chemical Co. .................................................... 19,900 2,261,137
------------
6,960,706
------------
CONTAINERS & PACKAGING 0.8%
American Material Can Group Inc. .................................... 235,900 3,730,169
Equitable Bag Inc.* ................................................. 47,600 7,140
Smurfit Stone Container Corp.* ...................................... 66,200 1,431,575
------------
5,168,884
------------
DIVERSIFIED MANUFACTURING 1.0%
Ball Corp. .......................................................... 157,700 6,948,656
------------
FERTILIZERS 0.3%
Agrium Inc. ......................................................... 191,500 1,903,031
------------
FOREST PRODUCTS 0.1%
Champion International Corp. ........................................ 17,200 883,650
------------
MISCELLANEOUS MATERIALS & PROCESSING 0.0%
Ladish Inc. Wts.* ................................................... 15,095 80,004
------------
PAPER & FOREST PRODUCTS 0.2%
Bowater Inc. ........................................................ 26,700 1,401,750
------------
STEEL 0.3%
Armco, Inc.* ........................................................ 114,700 802,900
Bar Technologies Inc. Wts.*+ ........................................ 250 5,000
Harsco Corp. ........................................................ 46,900 1,295,612
------------
2,103,512
------------
TEXTILE & PRODUCTS 0.0%
Cluett American Corp. Sr. Exch. Pfd.> ............................... 2,982 149,100
------------
Total Materials & Processing ........................................ 25,910,271
------------
OTHER 2.3%
MULTI-SECTOR 2.3%
AlliedSignal Inc. ................................................... 56,200 3,368,487
Gencorp Inc.* ....................................................... 113,300 2,074,806
General Electric Co. ................................................ 34,300 4,066,694
Johnson Controls Inc. ............................................... 11,500 762,594
Ogden Corp. ......................................................... 184,900 1,849,000
Tyco International Ltd. ............................................. 29,900 3,087,175
------------
Total Other ......................................................... 15,208,756
------------
OTHER ENERGY 2.9%
GAS PIPELINES 0.9%
Columbia Energy Group ............................................... 7,900 437,462
Williams Companies Inc. ............................................. 143,689 5,379,357
------------
5,816,819
------------
OFFSHORE DRILLING 0.2%
Transocean Offshore Inc. ............................................ 37,400 1,145,375
------------
OIL & GAS PRODUCERS 1.0%
Abacan Resource Corp.*++ ............................................ 539,500 94,413
Maxx Petroleum Ltd.*++ .............................................. 123,850 488,904
Ocean Energy Inc.*++ ................................................ 509,088 5,186,334
Union Pacific Resources Group Inc. .................................. 60,600 973,387
------------
6,743,038
------------
OIL WELL EQUIPMENT & SERVICES 0.8%
Baker Hughes Inc. ................................................... 41,900 1,215,100
Calpine Corp.* ...................................................... 10,000 850,625
Halliburton Co.++ ................................................... 72,500 2,972,500
Valero Refining & Marketing Corp. ................................... 37,600 723,800
------------
5,762,025
------------
Total Other Energy .................................................. 19,467,257
------------
PRODUCER DURABLES 2.2%
AEROSPACE 0.1%
Heico Corp. Cl. A ................................................... 20,000 385,000
Ladish Inc.* ........................................................ 8,666 56,329
------------
441,329
------------
ELECTRICAL EQUIPMENT & COMPONENTS 0.9%
Mark IV Industries Inc. ............................................. 294,500 5,816,375
------------
ELECTRONICS: INDUSTRIAL 0.0%
Mettler Toledo International Inc.* .................................. 13,500 399,938
------------
MACHINERY 0.5%
Chatwins Group Inc.*+ ............................................... 500 500
Helix Technology Corp.* ............................................. 8,600 285,950
Howmet International Inc.* .......................................... 227,400 3,183,600
------------
3,470,050
------------
OFFICE FURNITURE & BUSINESS EQUIPMENT 0.0%
Anacomp Inc. Wts.* .................................................. 4,941 42,307
------------
PRODUCTION TECHNOLOGY EQUIPMENT 0.6%
Cymer Inc.* ......................................................... 13,500 468,282
Dupont Photomasks Inc.* ............................................. 6,500 299,406
Teradyne Inc.* ...................................................... 98,000 3,454,500
------------
4,222,188
------------
TELECOMMUNICATIONS EQUIPMENT 0.1%
American Tower Corp. Cl. A* ......................................... 15,300 299,306
L-3 Communications Holding Corp.* ................................... 7,800 294,450
------------
593,756
------------
Total Producer Durables ............................................. 14,985,943
------------
TECHNOLOGY 8.4%
COMMUNICATIONS TECHNOLOGY 1.5%
Alteon Websystems, Inc.* ............................................ 1,700 159,800
Ask Jeeves Inc.* .................................................... 6,400 220,800
Covad Communications Group Inc.* .................................... 11,650 507,867
Digital Microwave Corp.* ............................................ 30,820 483,489
Extreme Networks Inc.* .............................................. 4,700 297,569
Foundry Networks, Inc.* ............................................. 3,400 428,400
Go2Net, Inc.* ....................................................... 4,700 304,325
Intervu Inc.* ....................................................... 9,300 345,263
Lernout & Hauspie Speech Products NV ADR* ........................... 58,100 2,026,237
Liberate Technologies, Inc.* ........................................ 12,700 534,987
Mapquest.com Inc.* .................................................. 14,500 172,188
Metromedia Fiber Network Inc. Cl. A* ................................ 6,622 162,239
Mpath Interactive, Inc.* ............................................ 21,800 250,700
NCR Corp.* .......................................................... 37,600 1,243,150
NetSolve, Inc.* ..................................................... 2,100 37,275
Network Solutions Inc. Cl. A* ....................................... 11,200 1,029,000
NorthPoint Communications Group Inc.* ............................... 10,300 190,550
Packeteer Inc.* ..................................................... 12,600 429,188
Remec Inc.* ......................................................... 55,350 761,062
Tibco Software Inc.* ................................................ 12,100 364,134
Worldgate Communications Inc.* ...................................... 5,200 118,950
------------
10,067,173
------------
COMPUTER SOFTWARE 1.0%
Answerthink Consulting Group, Inc.* ................................. 17,100 164,587
Interactive Pictures Corp.* ......................................... 1,700 36,550
Kana Communications, Inc.* .......................................... 2,200 109,725
Microsoft Corp.* .................................................... 67,600 6,122,025
Transaction Systems Architects Inc. Cl. A* .......................... 8,500 228,969
------------
6,661,856
------------
COMPUTER TECHNOLOGY 4.4%
Cisco Systems Inc.* ................................................. 104,900 7,192,206
Electronic Data Systems Corp. ....................................... 58,000 3,070,375
EMC Corp.* .......................................................... 57,200 4,086,225
International Business Machines Corp. ............................... 35,000 4,248,125
Radiant Systems Inc.* ............................................... 38,400 621,600
Silicon Graphics Inc.* .............................................. 251,600 2,751,875
Sun Microsystems Inc.* .............................................. 56,200 5,226,600
Unisys Corp.* ....................................................... 19,700 888,963
Verio Inc.* ......................................................... 37,600 1,165,600
Zebra Technologies Corp. Cl. A* ..................................... 11,700 531,984
------------
29,783,553
------------
ELECTRONICS 0.9%
Aeroflex Inc.* ...................................................... 71,500 871,406
Nokia Corp. ADR ..................................................... 26,300 2,362,069
Solectron Corp.* .................................................... 41,400 2,973,038
------------
6,206,513
------------
ELECTRONICS: SEMI-CONDUCTORS/COMPONENTS 0.6%
Analog Devices Inc.* ................................................ 20,200 1,035,250
Benchmark Electronics Inc.* ......................................... 14,100 497,906
Cypress Semiconductor Corp.* ........................................ 103,800 2,231,700
------------
3,764,856
------------
Total Technology .................................................... 56,483,951
------------
UTILITIES 4.1%
CABLE TELEVISION & RADIO 0.0%
Wireless One Inc. Wts.* ............................................. 2,000 1,257
------------
ELECTRICAL 2.4%
CMP Group Inc. ...................................................... 28,900 762,238
DQE, Inc. ........................................................... 50,400 1,971,900
Energy East Corp. ................................................... 37,300 885,875
Illinova Corp. ...................................................... 169,500 4,756,594
OGE Energy Corp. .................................................... 143,500 3,192,875
Pinnacle West Capital Corp. ......................................... 134,100 4,877,887
------------
16,447,369
------------
GAS DISTRIBUTION 0.3%
National Fuel Gas Co. ............................................... 13,200 622,875
Nicor Inc. .......................................................... 20,100 747,469
Questar Corp. ....................................................... 24,600 445,875
------------
1,816,219
------------
TELECOMMUNICATIONS 1.4%
AirGate PCS, Inc.* .................................................. 4,200 104,475
Celcaribe SA*+ ...................................................... 297,558 595,116
Intelcom Group, Inc. Wts.*+ ......................................... 1,650 15,262
MCI WorldCom Inc.* .................................................. 80,800 5,807,500
Nextel Communications Inc.* ......................................... 1,549 105,042
Nucentrix Broadband Networks Wts.*+ ................................. 1,500 15
Pagemart Inc. Wts.*+ ................................................ 2,300 6,900
Powertel Inc. Wts.*+ ................................................ 960 33,600
RCN Corp.* .......................................................... 15,600 639,600
RSL Communications Ltd. Cl. A* ...................................... 53,300 972,725
RSL Communications Ltd. Wts.*+ ...................................... 750 54,000
Startec Global Communications Corp. Wts.*+ .......................... 500 500
Time Warner Telecom Inc.* ........................................... 12,900 269,287
Viatel Inc.* ........................................................ 4,462 131,908
Winstar Communications Inc.* ........................................ 12,090 472,266
------------
9,208,196
------------
Total Utilities ..................................................... 27,473,041
------------
NON-U.S. EQUITIES 8.8%
Banco Di Roma ....................................................... 489,500 742,214
British Petroleum Co. PLC* .......................................... 109,800 2,006,477
Cable & Wireless PLC ................................................ 111,900 1,144,012
Clariant AG ......................................................... 4,000 1,810,316
Clearnet Communications Inc. Wts.* .................................. 2,640 15,840
East Japan Railway Inc. ............................................. 200 1,269,906
Econophone Inc. Wts.*+ .............................................. 750 22,500
Eircom PLC .......................................................... 35,200 152,815
Equitable Bag Inc. Pfd.* ............................................ 4,760 23,800
Granite Broadcasting Corp. Exch. Pfd.> .............................. 345 338,100
Gulfstream Resources Ltd.++ ......................................... 156,800 245,450
Hikari Tsushin Inc .................................................. 6,100 3,713,242
IXOS Software AG .................................................... 12,200 1,934,229
Kirin Brewery Co .................................................... 192,700 2,300,922
Kokuyo Co ........................................................... 97,000 1,692,367
L.M. Ericsson Telephone Co. Cl. B* .................................. 92,800 2,876,993
Nokia Ab Oy ......................................................... 25,600 2,290,856
OKI Electric Industries Co. Ltd.* ................................... 350,000 2,140,647
Orange PLC .......................................................... 40,000 788,907
Pharmacia & Upjohn .................................................. 36,800 1,828,097
Post Energy Corp.*++ ................................................ 142,100 706,003
PTT Exploration & Production Public Co. Ltd.* ....................... 127,200 888,272
QP Corp. ............................................................ 206,000 1,593,519
Reckson Associates Realty Corp. ..................................... 12,000 249,750
Repsol SA* .......................................................... 22,000 430,493
Sema Group PLC* ..................................................... 224,100 2,737,503
Shaw Communications Inc. Cl. B ...................................... 80,200 2,210,512
Snow Brand Milk Co. ................................................. 268,000 1,350,290
Societe Generale .................................................... 6,800 1,400,076
Softbank Corp. ...................................................... 13,300 5,044,484
Takara Shuzo Co. .................................................... 363,000 5,388,228
Telecom Italia SPA* ................................................. 285,500 2,478,895
Tieto Corp. ......................................................... 50,100 1,583,274
WM Data AB Cl. B* ................................................... 50,000 2,166,484
Wolters Kluwer ...................................................... 61,200 2,096,858
York Benimaru Co .................................................... 44,500 1,741,994
------------
Total Non-U.S. Equities ............................................. 59,404,325
------------
Total Equity Securities (Cost $302,351,728) ......................... 367,553,203
------------
EQUITY SECURITIES -- INFLATION RESPONSIVE INVESTMENTS 4.8%
AUTOMOBILES & TRANSPORTATION 0.0%
MISCELLANEOUS TRANSPORTATION 0.0%
Marine Transport Corp.* ............................................. 7,639 22,917
OMI Corp.* .......................................................... 106,400 272,650
------------
295,567
------------
Total Automobiles & Transportation .................................. 295,567
------------
INTEGRATED OILS 0.2%
INTEGRATED DOMESTIC 0.2%
Callon Petroleum Co.* ............................................... 59,500 907,375
KCS Energy Inc. ..................................................... 160,000 160,000
------------
1,067,375
------------
Total Integrated Oils ............................................... 1,067,375
------------
MATERIALS & PROCESSING 0.2%
GOLD & PRECIOUS METALS 0.2%
Anglogold Ltd. ADR* ................................................. 8,620 270,991
Ashanti Goldfields Co. Ltd. GDR ..................................... 100,000 787,500
Golden Star Resources Ltd.* ......................................... 4,312 3,234
------------
1,061,725
------------
Total Materials & Processing ........................................ 1,061,725
------------
OTHER 0.0%
MULTI-SECTOR 0.0%
Viceroy Resource Corp.* ............................................. 67,000 69,768
------------
Total Other ......................................................... 69,768
------------
OTHER ENERGY 3.2%
OFFSHORE DRILLING 0.3%
Atwood Oceanics Inc.*@ .............................................. 22,400 684,600
Marine Drilling Companies, Inc.* .................................... 30,000 474,375
Santa Fe International Corp. ........................................ 50,000 1,078,125
TMBR/Sharp Drilling, Inc.* .......................................... 20,500 158,875
------------
2,395,975
------------
OIL & GAS PRODUCERS 2.2%
Basin Exploration Inc.* ............................................. 100,000 2,400,000
Cabot Oil & Gas Corp. Cl. A ......................................... 57,100 984,975
Canadian 88 Energy Corp.* ........................................... 110,800 235,450
Esenjay Exploration Inc.* ........................................... 12,100 28,738
FX Energy Inc.* ..................................................... 25,000 178,125
Louis Dreyfus Natural Gas Corp.*@ ................................... 41,600 891,800
Mallon Resources Corp.* ............................................. 12,400 106,950
Nuevo Energy Co.*+ .................................................. 75,600 1,304,100
Patina Oil & Gas Corp. .............................................. 15,500 137,563
Petroquest Energy Inc.* ............................................. 43,100 72,731
Plains Resources Inc.*@ ............................................. 133,400 2,384,525
Ranger Oil Ltd.* .................................................... 278,200 1,199,737
St. Mary Land & Exploration Co.*@ ................................... 18,800 491,150
Talisman Energy Inc.*@ .............................................. 39,830 1,192,411
Titan Exploration Inc.* ............................................. 163,000 804,812
Tom Brown, Inc.* .................................................... 75,600 1,115,100
Ulster Petroleum Ltd.* .............................................. 121,500 1,310,675
------------
14,838,842
------------
OIL WELL EQUIPMENT & SERVICES 0.7%
3DX Technologies Inc.* .............................................. 50,000 34,375
BJ Services Co.* .................................................... 7,900 251,319
Cooper Cameron Corp.* ............................................... 25,000 943,750
Crystal Gas Storage Inc. ............................................ 10,000 417,500
Global Industries Inc.* ............................................. 25,500 207,188
NewPark Resources Inc.* ............................................. 119,600 926,900
Noble Drilling Corp.* ............................................... 52,300 1,144,062
Precision Drilling Corp.* ........................................... 28,400 658,525
------------
4,583,619
------------
Total Other Energy .................................................. 21,818,436
------------
UTILITIES 0.7%
GAS DISTRIBUTION 0.7%
K N Energy Inc. ..................................................... 28,000 628,250
Southwestern Energy Co. ............................................. 67,300 609,906
Western Gas Resources Inc. .......................................... 176,400 3,296,475
------------
4,534,631
------------
Total Utilities ..................................................... 4,534,631
------------
NON-U.S. EQUITIES 0.5%
Badger Daylighting Inc.* ............................................ 40,000 149,731
Baytex Energy Ltd. Cl. A ............................................ 100,000 666,984
Delta Gold NL* ...................................................... 168,000 305,738
Elk Point Resources Inc. Cl. A* ..................................... 15,600 58,926
Magin Energy Inc. ................................................... 18,600 47,472
Menzies Gold NL* .................................................... 400,000 23,499
Newcrest Mining Ltd.* ............................................... 150,000 488,583
Normandy Mining Ltd.* ............................................... 511,325 453,924
Oil Search Ltd.* .................................................... 468,100 604,994
Probe Exploration Inc.* ............................................. 350,000 110,767
Richland Petroleum Corp.* ........................................... 44,600 122,936
Seven Seas Petroleum Inc.* .......................................... 104,700 327,187
Southernera Resources Ltd.* ......................................... 97,500 178,503
Tri-Link Resources Ltd. Cl. A* ...................................... 20,700 151,450
Virginia Gold Mines Inc.* ........................................... 50,000 20,418
Zimbabwe Platinum Mines Ltd. ........................................ 33,600 12,282
------------
Total Non-U.S. Equities ............................................. 3,723,394
------------
Total Equity Securities -- Inflation Responsive
Investments (Cost $32,533,047) .................................... 32,570,896
------------
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
PRINCIPAL MATURITY VALUE
AMOUNT DATE (NOTE 1)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FIXED INCOME SECURITIES 34.5%
U.S. TREASURY 2.2%
U.S. Treasury Bond, 12.00% ......................... $ 800,000 8/15/2013 $ 1,104,376
U.S. Treasury Bond, 8.125% ......................... 1,950,000 8/15/2021 2,327,812
U.S. Treasury Bond, 6.625% ......................... 3,200,000 2/15/2027 3,304,992
U.S. Treasury Bond, 6.125% ......................... 1,500,000 11/15/2027 1,456,635
U.S. Treasury Bond TIPS, 3.875% .................... 1,191,368 4/15/2029 1,150,790
U.S. Treasury Note, 5.875% ......................... 2,225,000 9/30/2002 2,232,988
U.S. Treasury STRIPS, 0.00% ........................ 3,775,000 5/15/2003 3,056,429
U.S. Treasury STRIPS, 0.00% ........................ 1,025,000 5/15/2018 306,998
------------
14,941,020
------------
U.S. AGENCY MORTGAGE 10.0%
Federal Home Loan Mortgage Corp., 7.50% ............ 35,073 4/01/2002 35,224
Federal Home Loan Mortgage Corp., 8.50% ............ 191 7/01/2009 196
Federal Home Loan Mortgage Corp., 6.50% ............ 2,715,420 7/01/2029 2,605,093
Federal National Mortgage Association, 9.50% ....... 565,114 10/01/2003 584,418
Federal National Mortgage Association, 8.00% ....... 142,619 4/01/2008 147,008
Federal National Mortgage Association, 8.00% ....... 183,418 6/01/2008 187,955
Federal National Mortgage Association, 8.50% ....... 162,867 2/01/2009 169,459
Federal National Mortgage Association, 6.375% ...... 1,450,000 6/15/2009 1,420,551
Federal National Mortgage Association, 5.50% ....... 1,466,679 12/01/2013 1,382,345
Federal National Mortgage Association, 7.50% ....... 166 10/01/2025 167
Federal National Mortgage Association, 6.50% ....... 608,339 9/01/2028 583,245
Federal National Mortgage Association, 6.50% ....... 4,706,243 11/01/2028 4,512,111
Federal National Mortgage Association, 6.50% ....... 4,944,722 12/01/2028 4,740,752
Federal National Mortgage Association, 6.00% ....... 2,060,380 2/01/2029 1,921,305
Federal National Mortgage Association, 6.00% ....... 3,707,435 3/01/2029 3,457,183
Federal National Mortgage Association, 6.50% ....... 1,102,702 3/01/2029 1,057,215
Federal National Mortgage Association, 7.50% ....... 2,882,262 7/01/2029 2,890,361
Federal National Mortgage Association TBA, 6.50% ... 1,175,000 10/14/2029 1,126,719
Federal National Mortgage Association TBA, 7.00% ... 14,775,000 10/14/2029 14,518,802
Federal National Mortgage Association TBA, 7.50% ... 5,925,000 10/14/2029 5,941,649
Government National Mortgage Association, 6.50% .... 391,526 2/15/2009 386,507
Government National Mortgage Association, 6.50% .... 142,632 6/15/2009 140,803
Government National Mortgage Association, 6.50% .... 857,509 7/15/2009 846,516
Government National Mortgage Association, 7.50% .... 76,275 11/15/2010 77,586
Government National Mortgage Association, 7.50% .... 515,196 12/15/2010 524,047
Government National Mortgage Association, 7.00% .... 824,725 1/15/2025 813,641
Government National Mortgage Association, 7.00% .... 3,434,515 5/15/2028 3,369,019
Government National Mortgage Association, 6.50% .... 1,774,956 11/15/2028 1,696,734
Government National Mortgage Association, 6.50% .... 4,533,014 11/15/2028 4,338,955
Government National Mortgage Association, 7.00% .... 3,546,545 11/15/2028 3,481,147
Government National Mortgage Association, 7.00% .... 134,013 11/15/2028 131,542
Government National Mortgage Association TBA, 7.00% 4,725,000 10/21/2029 4,637,162
------------
67,725,417
------------
FOREIGN 0.2%
Province of Quebec Deb., 5.75% ..................... 375,000 2/15/2009 343,223
Quebec Province Canada, 7.50% ...................... 800,000 9/15/2029 800,888
------------
1,144,111
------------
FINANCE/MORTGAGE 7.1%
A T & T Capital Corp. Note, 7.50% .................. 925,000 11/15/2000 931,614
A T & T Capital Corp. Note, 6.75% .................. 1,125,000 2/04/2002 1,119,723
American Express Credit Trust Series 99-1-A, 5.60% . 1,625,000 11/15/2006 1,561,008
Arcadia Automobile Trust Series 97-C A5, 6.55% ..... 675,000 6/15/2005 678,807
Capital One Bank Note, 6.62% ....................... 1,900,000 8/04/2003 1,850,809
Capital One Bank Note, 6.65% ....................... 1,175,000 3/15/2004 1,143,768
Capital One Bank Sr. Note, 6.48% ................... 825,000 1/28/2002 816,173
Chase Credit Card Owner Trust Note 99-3-A, 6.66% ... 2,300,000 1/15/2007 2,299,310
Chase Manhattan Auto Owner Trust Note 98-B-A, 5.80% 1,700,000 2/17/2003 1,685,652
CIT Group Holdings Inc. Sr. Note, 6.80% ............ 1,400,000 4/17/2000 1,405,852
Citibank Credit Card Master Trust, 5.30% ........... 1,525,000 1/09/2006 1,448,262
Citibank Credit Cord Master Trust, 5.875% .......... 750,000 3/10/2011 689,528
Commercial Credit Group Inc. Note, 6.45% ........... 1,450,000 7/01/2002 1,446,578
Commercial Credit Group Inc. Sr. Note, 5.55% ....... 1,400,000 2/15/2001 1,386,322
Countrywide Funding Corp. Note, 6.58% .............. 1,100,000 9/21/2001 1,098,669
Credit Suisse First Boston 97-C2 Cl. A2, 6.52% ..... 975,000 7/17/2007 947,885
DLJ Commercial Mortgage Corp. 98-C2, 6.24% ......... 500,000 11/12/2031 470,000
ERAC USA Finance Co. Note, 6.625%+ ................ 725,000 2/15/2005 698,690
Finova Capital Corp. Sr. Note, 6.125% .............. 1,950,000 3/15/2004 1,870,069
Ford Motor Credit Co. Note, 6.45% .................. 1,625,000 7/16/2002 1,632,491
GE Global Insurance Holding Corp. Note, 7.00% ...... 2,825,000 2/15/2026 2,614,170
General Motors Acceptance Corp. Note, 6.38% ........ $ 1,625,000 10/07/2002 $ 1,625,000
GMAC Commercial Mortgage Security Inc. 97-C2 Cl
A, 6.55% ......................................... 1,350,000 4/15/2029 1,303,172
GMAC Commercial Mortgage Security Inc. 98-C1 Cl
A1, 6.41% ........................................ 985,045 11/15/2007 961,343
GMAC Commercial Mortgage Security Inc. 99-C1 Cl
A2, 6.175% ....................................... 1,250,000 5/15/2033 1,165,625
Household Finance Corp. Note, 6.00% ................ 800,000 5/01/2004 769,544
Household Finance Corp. Sr. Note, 6.125% ........... 900,000 7/15/2012 883,224
Intertek Finance PLC Series B Sr. Sub. Note, 10.25% 600,000 11/01/2006 564,000
LB Commercial Conduit Mortgage Trust 97-LL1-A1,
6.79% ............................................ 1,313,765 6/12/2004 1,310,070
LB Commercial Conduit Mortgage Trust 98C1-A1, 6.33% 1,388,791 11/18/2004 1,364,487
LB Commercial Conduit Mortgage Trust 98C4-A1, 6.21% 450,000 10/15/2008 419,625
MBNA Corp. Sr. Note, 6.875% ........................ 675,000 11/15/2002 673,751
MBNA Corp. Sr. Note, 7.125% ........................ 1,300,000 9/15/2004 1,297,829
MBNA Master Credit Card Trust Series 99-G-A, 6.35% . 1,600,000 12/15/2006 1,582,496
MBNA Master Credit Card Trust Series 99-J-A, 7.00% . 3,000,000 2/15/2012 3,006,562
Morgan Stanley Capital Inc. 98-A1, 6.19% ........... 303,216 1/15/2007 295,162
Prime Credit Card Master Trust Series 1995-1A, 6.75% 1,800,000 11/15/2005 1,803,366
Woodside Finance Ltd. Note, 6.60%+ ................. 875,000 4/15/2008 788,541
------------
47,609,177
------------
FOREIGN GOVERNMENT 4.8%
Republic of Peru, 4.50% ............................ 2,775,000 3/07/2003 1,721,299
Greek Drachma
Republic of Greece, 8.80% .......................... 3,586,200,000 6/19/2007 12,914,756
New Zealand Dollar
Government of New Zealand, 10.00% .................. 16,725,000 3/15/2002 9,408,965
Government of New Zealand, 8.00% ................... 15,325,000 11/15/2006 8,432,534
------------
32,477,554
------------
CORPORATE 10.2%
Acme Boot Inc. Sr. Note Series B, 11.50%(+) ........ $ 250,000 12/15/2000 105,000
Advanced Radio Telecom Corp. Sr. Note, 14.00% ...... 250,000 2/15/2007 212,500
Advanstar Communications Inc. Sr. Sub. Note, 9.25% . 550,000 5/01/2008 518,375
Airgate PCS Inc. Sr. Sub. Note, 0.00% to 9/30/2004,
13.50% from 10/1/2004 to maturity ................ 500,000 10/01/2009 271,250
Alaska Steel Sr. Note, 9.125%+ ..................... 500,000 12/15/2006 501,250
Albertsons Inc. Sr. Deb., 7.45% .................... 1,600,000 8/01/2029 1,528,880
Allbritton Communications Co. Sr. Sub. Deb., 9.75% . 750,000 11/30/2007 746,250
Allied Waste North America Inc. Sr. Note, 7.625%+ .. 500,000 1/01/2006 450,625
American Pacific Corp. Sr. Note, 9.25% ............ 500,000 3/01/2005 505,000
American Telecasting Inc. Sr. Note, 14.50% ......... 413,677 6/15/2004 428,156
Ameristar Casinos Inc. Sr. Sub. Note, 10.50% ....... 75,000 8/01/2004 76,125
Ametek Inc. Sr. Note, 7.20% ........................ 400,000 7/15/2008 367,744
Archibald Candy Corp. Sr. Sec. Note, 10.25% ........ 450,000 7/01/2004 443,250
Atlantic Richfield Co. Note, 5.90% ................. 1,350,000 4/15/2009 1,252,975
Aurora Foods Inc. Sr. Sub. Note, 8.75% ............. 350,000 7/01/2008 331,625
Ball Corp. Sr. Sub. Note, 8.25% .................... 750,000 8/01/2008 727,500
British Sky Broadcasting Group Note, 6.875% ........ 975,000 2/23/2009 882,970
BTI Telecom Corp. Sr. Note, 10.50% ................. 250,000 9/15/2007 210,000
Buckeye Cellulose Corp. Sr. Sub. Note, 9.25% ....... 250,000 9/15/2008 250,000
Buckeye Technologies Inc. Sr. Sub. Note, 8.00% ..... 500,000 10/15/2010 463,750
California Infrastructure Development Series
1997-A7, 6.42% ................................... 1,475,000 9/25/2008 1,442,965
Call-Net Enterprises Inc. Sr. Note, 9.375% ......... 250,000 5/15/2009 220,000
Calpine Corp. Sr. Note, 7.625% ..................... 300,000 4/15/2006 284,805
Canadian First Oil Ltd. Sr. Sub. Note, 8.75% ....... 150,000 9/15/2007 144,750
Celcaribe SA Sr. Sec. Note, 13.50% ................. 1,830,000 3/15/2004 1,262,700
Cellnet Data Systems Inc. Sr. Note Series B,
0.00% to 9/30/2002, 14.00% from 10/1/2002 to
maturity ......................................... 750,000 10/01/2007 294,375
Cenargo International PLC Note, 9.75% ............. 500,000 6/15/2008 425,000
Century Communications Corp. Sr. Note, 8.375% ...... 500,000 12/15/2007 466,250
Charter Communications Holdings Sr. Note, 8.625%+ .. 500,000 4/01/2009 465,000
Coca-Cola Enterprises Inc. Deb., 6.95% ............ 875,000 11/15/2026 803,976
Columbia/HCA Healthcare Corp. Note, 8.12% .......... 1,625,000 8/04/2003 1,592,435
Columbia/HCA Healthcare Corp. Note, 7.69% .......... 650,000 6/15/2025 516,750
Columbia/Hca Healthcare Corp. Note, 7.75% .......... 750,000 7/15/2036 582,068
Drypers Corp. Series B Sr. Note, 10.25% ............ 500,000 6/15/2007 395,000
E. Spire Communications Sr. Note, 0.00% to 3/31/
2001, 12.75% from 4/1/2001 to maturity ........... 50,000 4/01/2006 27,750
Econophone Inc. Sr. Note, 13.50% ................... 250,000 7/15/2007 255,625
Edison Mission Energy Funding Corp. Series A
Note, 6.77%+ ..................................... 1,687,470 9/15/2003 1,650,261
Elgar Holdings Inc. Sr. Sub. Note, 9.875% .......... 400,000 2/01/2008 274,000
Empire Gas Corp. Sr. Sec. Note, 12.875% ............ 750,000 7/15/2004 502,500
Envirosource Inc. Note, 9.75% ...................... 1,000,000 6/15/2003 620,000
Extended Stay America Inc. Sr. Sub. Note, 9.15% .... 350,000 3/15/2008 334,250
Facilicom International Inc. Sr. Note, 10.50% ...... 500,000 1/15/2008 425,000
Falcon Holding Group LP Series B Sr. Deb., 8.375%+ . 500,000 4/15/2010 491,250
First Wave Marine Inc. Sr. Note, 11.00% ............ 250,000 2/01/2008 188,750
Fisher Scientific International Inc. Sr. Sub.
Note, 9.00% ...................................... 375,000 2/01/2008 346,875
Fort James Corp. Note, 6.23% ....................... 825,000 3/15/2001 817,426
Fred Meyer Inc. Note, 9.20% ........................ 700,000 7/02/2018 729,120
Frontier Corp. Sr. Note, 9.125% .................... 500,000 2/15/2006 487,500
Gentek Inc. Sr. Sub. Note, 11.00%+ ................. 350,000 8/01/2009 357,875
Globenet Communications Group Sr. Note, 13.00%+ .... 175,000 7/15/2007 167,125
GNI Group Inc. Sr. Note, 10.875% ................... 650,000 7/15/2005 292,500
Golden Ocean Group Ltd. Sr. Note, 10.00%[ ] ........ 750,000 8/31/2001 67,500
Great Central Mines Ltd. Sr. Note, 8.875% .......... 1,000,000 4/01/2008 900,000
Gulf Canada Resources Ltd., 8.375% ................. 250,000 11/15/2005 245,598
Harrahs Operating Inc. Sr. Sub. Note, 7.875% ....... 750,000 12/15/2005 716,250
Healthsouth Corp. Sr. Note, 6.875% ................. 900,000 6/15/2005 805,014
Henry Co. Sr. Note Series B, 10.00% ................ 200,000 4/15/2008 133,000
Hollywood Casino Corp. Note, 13.00%+ ............... 125,000 8/01/2006 129,375
Horseshoe Gaming LLC Sr. Sub. Note, 8.625%+ ........ 100,000 5/15/2009 94,750
Huntsman ICI Chemicals Inc. Sr. Sub. Note,
10.125%+ ......................................... 250,000 7/01/2009 243,750
Hyperion Telecommunication Inc. Sr. Sub. Note,
12.00%+ .......................................... 350,000 11/01/2007 351,750
ICG Holdings Inc. Sr. Note, 0.00% to 9/14/2000,
13.50% from 9/15/2000 to maturity ................ 250,000 9/15/2005 217,500
Insight Midwest LP Sr. Note, 9.75% ................. 175,000 10/01/2009 176,531
International Game Technology Sr. Note, 8.375% ..... 100,000 5/15/2009 95,250
International Knife & Saw Inc. Sr. Sub. Note,
11.375% .......................................... 150,000 11/15/2006 113,250
International Shipholding Corp. Sr. Note, 9.00% .... 250,000 7/01/2003 250,000
International Shipholding Corp. Sr. Note Series
B, 7.75% ......................................... 500,000 10/15/2007 462,500
Intersil Corp. Sr. Sub. Note, 13.25%+ .............. 375,000 8/15/2009 386,250
Isle Capri Casinos Inc. Sr. Sub. Note, 8.75%+ ...... 100,000 4/15/2009 92,250
J. Crew Group Inc. Sr. Note, 0.00% to 10/14/2002,
13.125% from 10/15/2002 to maturity .............. 300,000 10/15/2008 159,000
J. Crew Operating Corp. Sr. Sub. Note, 10.375% ..... 750,000 10/15/2007 705,000
J.B. Poindexter Inc. Sr. Note, 12.50% ............. 750,000 5/15/2004 708,750
J.H. Heafner Inc. Sr. Note Series D, 10.00% ........ 500,000 5/15/2008 470,000
Johnstown America Industries, Inc. Sr. Sub. Note,
11.75% ........................................... 250,000 8/15/2005 256,250
Kaiser Aluminum & Chemical Corp. Sub. Note, 12.75% . 355,000 2/01/2003 358,550
Lear Corp. Note, 8.11%+ ............................ 350,000 5/15/2009 339,815
Loehmanns Inc. Sr. Note, 11.875%[ ] ................ 350,000 5/15/2003 59,500
Lucent Technologies Inc. Deb., 6.45% ............... 2,750,000 3/15/2029 2,473,487
Lyondell Chemical Co. Sr. Note, 9.625% ............. 250,000 5/01/2007 248,750
Metromedia Fiber Network Inc. Sr. Note, 10.00% ..... 500,000 11/15/2008 487,500
Mohegan Tribal Gaming Authority Sr. Note, 8.125% ... 350,000 1/01/2006 339,500
NE Restaurant Inc. Sr. Note, 10.75% ................ 250,000 7/15/2008 226,250
Networks Associates Inc. Cv. Sub. Deb., 0.00% ...... 875,000 2/13/2018 280,691
New York State Power Authority Revenue Series D,
6.17% ............................................ 2,000,000 2/15/2001 1,995,960
Newpark Resources Inc. Sr. Sub. Note Series B,
8.625% ........................................... 500,000 12/15/2007 465,000
News America Holdings Inc. Deb., 7.375% ............ 1,675,000 10/17/2008 1,640,579
News America Inc. Sr. Deb., 7.125% ................. 925,000 4/08/2028 804,066
Nextel Partners Inc. Sr. Note, 0.00% to 1/31/2004,
14.00% from 2/1/2004 to maturity+ ................ 500,000 2/01/2009 291,250
North Atlantic Trading Inc. Sr. Note, 11.00% ....... 750,000 6/15/2004 720,000
Ocean Energy Inc. Series B Sr. Note, 7.625% ........ 200,000 7/01/2005 192,000
Ocean Energy Inc. Sr. Sub. Note, 10.375% ........... 350,000 10/15/2005 357,000
Orange PLC Note, 9.00%+ ............................ 250,000 6/01/2009 253,125
Owens-Illinois Inc. Sr. Deb., 7.50% ................ 250,000 5/15/2010 236,520
Packaging Corp. of America Note, 9.625%+ ........... 250,000 4/01/2009 252,500
Packaging Resources Inc. Sr. Sec. Note, 11.625% .... 650,000 5/01/2003 659,750
Pagemart Nationwide Inc. Sr. Note, 0.00% to 1/31/2000,
15.00% from 2/1/2000 to maturity ................. 250,000 2/01/2005 215,000
Pagemart Wireless Inc. Sr. Sub. Note, 0.00% to
1/31/2003, 11.25% from 2/1/2003 to maturity ...... 750,000 2/01/2008 225,000
Pathmark Stores Inc. Sub. Deb., 12.625% ............ 250,000 6/15/2002 253,125
Peco Energy Transport Trust, 6.05% ................. 1,750,000 3/01/2009 1,653,190
Peco Energy Transport Trust Series 99A Cl. A7, 6.13% 1,950,000 3/01/2009 1,836,042
Pepsi Bottling Holdings Inc. Note, 5.625%+ ......... 1,950,000 2/17/2009 1,754,064
Phase Metrics Inc. Sr. Note, 10.75% ................ 750,000 2/01/2005 225,000
Pool Energy Services Co. Sr. Sub. Note, 8.625% ..... 500,000 4/01/2008 515,000
Premier Parks Inc. Sr. Note, 9.75% ................. 250,000 6/15/2007 237,500
Price Communications Wireless Inc. Sr. Sec. Note
Series B, 9.125% ................................. 625,000 12/15/2006 637,500
Prime Succession Inc. Sr. Sub. Note, 10.75% ........ 150,000 8/15/2004 90,000
Primedia Inc. Sr. Note, 7.625% ..................... 750,000 4/01/2008 678,750
Primus Telecommunications Group Sr. Note, 11.75% ... 250,000 8/01/2004 246,250
PSI Net Inc. Sr. Note, 11.00%+ ..................... 250,000 8/01/2009 246,250
Quest Diagnostics Inc. Sr. Sub. Note, 10.75% ....... 500,000 12/15/2006 507,500
R H Donnelley Inc. Sr. Sub. Note, 9.125% ........... 250,000 6/01/2008 245,000
Rose Hills Co. Sr. Sub. Note, 9.50% ................ 500,000 11/15/2004 410,000
RSL Communications Ltd. Sr. Note, 12.25% ........... 900,000 11/15/2006 895,500
S.C.G. Holdings Corp. Sr. Note, 12.00%+ ............ 95,000 8/01/2009 96,900
Safety Kleen Corp. Sr. Note, 9.25%+ ................ 200,000 5/15/2009 193,000
Safeway Inc. Note, 7.00% ........................... 1,775,000 9/15/2002 1,772,071
Scotts Co. Sr. Sub. Note, 8.625%+ .................. 250,000 1/15/2009 238,750
Sea Containers Ltd. Sr. Note Series B, 7.875% ...... 300,000 2/15/2008 265,500
SFX Entertainment Inc. Sr. Note Series B, 9.125% ... 300,000 2/01/2008 283,500
Simonds Industries Inc. Sr. Sub. Note, 10.25% ...... 425,000 7/01/2008 318,750
Spanish Broadcasting Systems Inc. Sr. Note, 12.50% . 1,000,000 6/15/2002 1,150,000
Startec Global Communications Corp. Sr. Note, 12.00% 500,000 5/15/2008 415,000
Stater Brothers Holdings Inc. Sr. Note, 10.75%+ .... 350,000 8/15/2006 358,750
Stena AB Sr. Note, 8.75% ........................... 50,000 6/15/2007 45,250
Telecorp PCS Inc. Sr. Sub. Note, 0.00% to
4/14/2004, 11.625% from 4/15/2004 to maturity+ ... 540,000 4/15/2009 311,850
Transdigm Inc. Sr. Sub. Note, 10.375% ............. 200,000 12/01/2008 194,000
Transwestern Publishing Company LP Sr. Sub. Note
Series D, 9.625% ................................. 425,000 11/15/2007 413,313
Triad Hospitals Holdings Inc. Sr. Sub. Note,
11.00%+ .......................................... 500,000 5/15/2009 497,500
Triton PCS Inc. Sr. Sub. Note, 0.00% to 4/30/
2003, 11.00% from 5/1/2003 to maturity ........... 450,000 5/01/2008 301,500
Unilab Corp. Sr. Note, 11.00% ...................... 500,000 4/01/2006 546,250
Unilab Corp. Sr. Sub. Note, 12.75% ................. 350,000 10/01/2009 348,250
USA Waste Services Inc. Sr. Note, 7.00% ............ 200,000 10/01/2004 187,130
Viatel Inc. Sr. Note, 11.25% ....................... 500,000 4/15/2008 470,000
Vintage Petroleum Inc. Sr. Sub. Note, 9.75% ........ 400,000 6/30/2009 407,000
Westinghouse Air Brake Co. Sr. Note, 9.375% ........ 150,000 6/15/2005 149,625
Westpoint Stevens Inc. Sr. Note, 7.875% ............ 900,000 6/15/2008 805,500
Williams Communications Group Sr. Note, 10.875% .... 375,000 10/01/2009 372,184
Winstar Equipment Corp. Sr. Sec. Exch. Note, 12.50% 500,000 3/15/2004 505,000
------------
69,115,661
------------
Total Fixed Income Securities (Cost $244,288,914) ........................................ 233,012,940
------------
SHORT-TERM OBLIGATIONS 8.4%
American Express Credit Corp., 5.30% ............... 2,538,000 10/01/1999 2,538,000
American Express Credit Corp., 5.35% ............... 10,000,000 10/05/1999 10,000,000
American Express Credit Corp., 5.32% ............... 15,000,000 10/08/1999 15,000,000
American Express Credit Corp., 5.28% ............... 1,583,000 10/14/1999 1,583,000
Chevron U.S.A. Inc., 5.35% ......................... 5,000,000 10/01/1999 5,000,000
Exxon Corp., 5.35% ................................. 1,822,000 10/08/1999 1,822,000
Ford Motor Credit Co., 5.36% ....................... 15,897,000 10/04/1999 15,897,000
Ford Motor Credit Co., 5.32% ....................... 5,000,000 10/08/1999 5,000,000
------------
Total Short-Term Obligations (Cost $56,840,000) .......................................... 56,840,000
------------
- -----------------------------------------------------------------------------------------------------------------
SHARES
- -----------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS 10.8%
State Street Navigator Securities Lending Prime Portfolio ........... 72,636,274 $ 72,636,274
------------
Total Short-Term Investments (Cost $72,636,274) .......................................... 72,636,274
------------
Total Investments (Cost $708,649,963) - 112.9% ........................................... 762,613,313
Cash and Other Assets, Less Liabilities - (12.9%) ........................................ (87,333,408)
------------
Net Assets - 100.0% ...................................................................... $675,279,905
============
Federal Income Tax Information (Note 1):
At September 30, 1999, the net unrealized appreciation of investments based on cost for
Federal income tax purposes of $710,035,407 was as follows:
Aggregate gross unrealized appreciation for all investments in which there is an excess of
value over tax cost .................................................................... $ 95,445,568
Aggregate gross unrealized depreciation for all investments in which there is an excess of
tax cost over value .................................................................... (42,867,662)
------------
$ 52,577,906
============
ADR and GDR stand for American Depositary Receipt and Global Depositary Receipt, respectively, representing
ownership of for eign securities.
* Nonincome-producing securities.
[ ] Security is in default.
> Payments of income may be made in cash or in the form of additional securities.
# Security valued under consistently applied procedures established by the Trustees.
(+) Security restricted as to public resale. The total cost and market value of restricted securities owned at
September 30, 1999 were $474,896 and $123,123 (0.02% of net assets), respectively.
+ Security restricted in accordance with Rule 144A under the Securities Act of 1933, which allows for the resale
of such securities among certain qualified institutional buyers. The total cost and market value of Rule 144A
securities owned at September 30, 1999 were $13,860,612 and $13,748,692 (2.04% of net assets), respectively.
++ 268,200 shares of Abacan Resources Corp., 58,000 shares of Gulfstream Resources Ltd., 15,000 shares of
Halliburton Co., 35,325 shares of Maxx Petroleum Ltd., 232,080 shares of Ocean Energy Inc. and 50,000 shares
of Post Energy Corp., are considered by the Adviser to be part of Inflation Responsive Investments.
@ 7,400 shares of Atwood Oceanics, Inc., 11,600 shares of Louis Dreyfus Natural Gas Corp. 12,000 shares of
Plains Resources, Inc., 9,200 shares of St. Mary Land & Exploration Co. and 6,340 shares of Talisman Energy,
Inc. 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. Although the unit price has been established, the principal value has
not been finalized and may vary by no more than 1%.
Forward currency exchange contracts outstanding at September 30, 1999, are as follows:
<CAPTION>
UNREALIZED
CONTRACT APPRECIATION DELIVERY
TOTAL VALUE PRICE (DEPRECIATION) DATE
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sell Euro, buy U.S. dollars 1,636,000 EUR 1.04700 EUR $ (30,975) 10/22/99
Sell Euro, buy U.S. dollars 6,654,080 EUR 1.05205 EUR (110,284) 11/23/99
Sell Euro, buy U.S. dollars 1,636,800 EUR 1.04756 EUR (36,867) 12/09/99
Buy Euro, sell U.S. dollars 327,200 EUR 1.07290 EUR (2,280) 10/22/99
Sell Greek Drachma, buy U.S. dollars 172,300,000 GDR 0.00324 GDR 1,981 10/22/99
Sell Greek Drachma, buy U.S. dollars 612,700,000 GDR 0.00325 GDR 10,058 10/22/99
Sell New Zealand dollars, buy U.S. dollars 4,580,000 NZD 0.52490 NZD 33,962 10/22/99
Sell New Zealand dollars, buy U.S. dollars 11,602,000 NZD 0.52580 NZD 96,473 10/22/99
Sell New Zealand dollars, buy U.S. dollars 3,335,000 NZD 0.51815 NZD 1,128 11/23/99
Sell New Zealand dollars, buy U.S. dollars 15,970,000 NZD 0.51580 NZD (32,127) 11/23/99
Buy New Zealand dollars, sell U.S. dollars 1,373,000 NZD 0.51665 NZD 1,595 11/23/99
Sell Japanese yen, buy U.S. dollars 508,635,000 JPY 0.00885 JPY (334,474) 12/30/99
Sell Japanese yen, buy U.S. dollars 718,502,500 JPY 0.00884 JPY (479,223) 12/30/99
Sell Japanese yen, buy U.S. dollars 972,938,070 JPY 0.00899 JPY (628,055) 3/31/00
Buy Japanese yen, sell U.S. dollars 228,578,340 JPY 0.00940 JPY (8,250) 10/05/99
-----------
$(1,517,338)
===========
Futures contracts open at September 30, 1999, are as follows:
<CAPTION>
EXPIRATION UNREALIZED
TYPE NOTIONAL COST MONTH DEPRECIATION
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. Treasury Notes $2,000,000 December, 1999 $(1,390)
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
STATE STREET RESEARCH STRATEGIC GROWTH & INCOME FUND
- -------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
September 30, 1999 (Unaudited)
Investments, at value (Cost $708,649,963) (Note 1) ......... $ 762,613,313
Cash ....................................................... 634
Receivable for securities sold ............................. 17,666,456
Interest and dividends receivable .......................... 3,563,851
Receivable for fund shares sold ............................ 261,918
Receivable for open forward contracts ...................... 145,197
Other assets ............................................... 15,810
--------------
784,267,179
LIABILITIES
Payable for collateral received on securities loaned ....... 72,636,274
Payable for securities purchased ........................... 32,448,537
Payable for open forward contracts ......................... 1,662,535
Payable for fund shares redeemed ........................... 1,007,977
Accrued management fee (Note 2) ............................ 416,330
Accrued distribution and service fees (Note 4) ............. 373,061
Dividends payable .......................................... 110,630
Accrued transfer agent and shareholder services (Note 2) ... 67,634
Accrued trustees' fees (Note 2) ............................ 16,165
Payable for variation margin (Note 1) ...................... 1,390
Other accrued expenses ..................................... 246,741
--------------
108,987,274
--------------
NET ASSETS ................................................. $ 675,279,905
==============
Net Assets consist of:
Undistributed net investment income ...................... $ 1,685,012
Unrealized appreciation of investments ................... 53,963,350
Unrealized depreciation of futures contracts ............. (1,390)
Unrealized depreciation of forward contracts and
foreign currency ....................................... (1,521,281)
Accumulated net realized gain ............................ 6,688,287
Paid-in capital .......................................... 614,465,927
--------------
$ 675,279,905
==============
Net Asset Value and redemption price per share of Class A
shares ($288,848,675 / 27,854,288 shares) ................ $10.37
======
Maximum Offering Price per share of Class A shares
($10.37 / .9425) ......................................... $11.00
======
Net Asset Value and offering price per share of Class B(1)
shares ($24,315,879 / 2,355,996 shares)* ................. $10.32
======
Net Asset Value and offering price per share of Class B
shares ($330,865,701 / 32,033,386 shares)* ............... $10.33
======
Net Asset Value and offering price per share of Class C
shares ($18,021,225 / 1,741,176 shares)* ................. $10.35
======
Net Asset Value, offering price and redemption price per share
of Class S shares ($13,228,425 / 1,275,412 shares) ....... $10.37
======
- -------------------------------------------------------------------------------
*Redemption price per share for Class B(1), Class B and Class C is equal to
net asset value less any applicable contingent deferred sales charge.
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATE STREET RESEARCH STRATEGIC GROWTH & INCOME FUND
- -------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the six months ended September 30, 1999 (Unaudited)
Interest, net of foreign taxes of $36,297 (Note 1) ......... $ 9,396,559
Dividends, net of foreign taxes of $50,310 ................. 1,998,014
--------------
11,394,573
EXPENSES
Management fee (Note 2) .................................... 2,625,316
Transfer agent and shareholder services (Note 2) ........... 732,147
Custodian fee .............................................. 231,800
Service fee - Class A (Note 4) ............................. 383,249
Distribution and service fees - Class B(1) (Note 4) ........ 90,989
Distribution and service fees - Class B (Note 4) ........... 1,777,419
Distribution and service fees - Class C (Note 4) ........... 98,663
Registration fees .......................................... 74,298
Reports to shareholders .................................... 32,818
Trustees' fees (Note 2) .................................... 16,165
Audit fee .................................................. 15,921
Legal fees ................................................. 10,553
Miscellaneous .............................................. 15,250
--------------
6,104,588
Fees paid indirectly (Note 2) .............................. (32,782)
--------------
6,071,806
--------------
Net investment income ...................................... 5,322,767
--------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
FOREIGN CURRENCY, FORWARD CONTRACTS AND FUTURES CONTRACTS
Net realized gain on investments (Notes 1 and 3) ........... 7,145,122
Net realized loss on futures contracts (Note 1) ............ (30,268)
Net realized gain on forward contracts and foreign
currency (Note 1) ........................................ 1,913,585
--------------
Total net realized gain .................................. 9,028,439
--------------
Net unrealized depreciation of investments ................. (4,960,439)
Net unrealized depreciation of futures contracts ........... (1,390)
Net unrealized depreciation of forward contracts and
foreign currency ......................................... (2,633,486)
--------------
Total net unrealized depreciation ........................ (7,595,315)
--------------
Net gain on investments, foreign currency and
forward contracts ........................................ 1,433,124
--------------
Net increase in net assets resulting from operations ....... $ 6,755,891
==============
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATE STREET RESEARCH STRATEGIC GROWTH & INCOME FUND
- -------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED SEPTEMBER 30, 1999
MARCH 31, 1999 (UNAUDITED)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income .................................... $ 13,936,948 $ 5,322,767
Net realized gain on investments, foreign currency,
forward contracts and futures contracts ................ 26,894,384 9,028,439
Net unrealized depreciation of
investments, foreign currency, forward contracts and
futures contracts ...................................... (49,954,566) (7,595,315)
-------------- --------------
Net increase (decrease) resulting from operations ........ (9,123,234) 6,755,891
-------------- --------------
Dividends from net investment income:
Class A ................................................ (6,552,247) (2,825,880)
Class B(1) ............................................. (42,086) (138,443)
Class B ................................................ (4,962,495) (1,962,846)
Class C ................................................ (288,622) (105,952)
Class S ................................................ (427,400) (148,785)
-------------- --------------
(12,272,850) (5,181,906)
-------------- --------------
Distributions from net realized gains:
Class A ................................................ (25,005,097) (1,065,884)
Class B(1) ............................................. -- (51,829)
Class B ................................................ (29,297,803) (1,246,379)
Class C ................................................ (1,782,441) (68,666)
Class S ................................................ (1,606,730) (52,203)
-------------- --------------
(57,692,071) (2,484,961)
-------------- --------------
Distribution in excess of net realized
gains:
Class A ................................................ (433,237) --
Class B ................................................ (519,581) --
Class C ................................................ (30,773) --
Class S ................................................ (21,048) --
-------------- --------------
(1,004,639) --
-------------- --------------
Net increase (decrease) from fund share transactions
(Note 5) ............................................... 49,469,940 (43,036,524)
-------------- --------------
Total decrease in net assets ............................. (30,622,854) (43,947,500)
NET ASSETS
Beginning of period ...................................... 749,850,259 719,227,405
-------------- --------------
End of period (including undistributed net investment
income of $1,544,151 and $1,685,012, respectively) ..... $ 719,227,405 $ 675,279,905
============== ==============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
STATE STREET RESEARCH STRATEGIC GROWTH & INCOME FUND
- -------------------------------------------------------------------------------
NOTES TO UNAUDITED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
September 30, 1999
NOTE 1
State Street Research Strategic Growth & Income Fund formerly 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 Trust
consists presently of two separate funds: State Street Research Strategic
Growth & Income Fund 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 five classes of shares. Until December 31, 1998, Class A
shares were subject to an initial sales charge of up to 4.50% and effective
January 1, 1999 became subject to an initial sales charge of up to 5.75%.
Class A shares pay a service fee equal to 0.25% of average daily net assets.
On January 1, 1999, the Fund began offering class B(1) shares and continued
offering Class B shares but only to current shareholders through reinvestment
of dividends and distributions or through exchanges from existing Class B
accounts of State Street Research funds. Class B(1) and Class B pay annual
distribution and service fees of 1.00% and both classes automatically convert
into Class A shares (which pay lower ongoing expenses) at the end of eight
years. Class B(1) shares are subject to a contingent deferred sales charge on
certain redemptions made within six years of purchase. Class B shares are
subject to a contingent deferred sales charge on certain redemptions made
within five years of purchase. Class C shares are subject to a contingent
deferred sales charge of 1.00% on any shares redeemed within one year of their
purchase. Class C shares also pay annual distribution and service fees of
1.00%. Class S shares are only offered through certain retirement accounts,
advisory accounts of State Street Research & Management Company (the
"Adviser"), an indirect wholly owned subsidiary of Metropolitan Life Insurance
Company ("Metropolitan"), and special programs. No sales charge is imposed at
the time of purchase or redemption of Class S shares. Class S shares do not
pay any distribution or service fees. The Fund's expenses are borne pro-rata
by each class, except that each class bears expenses, and has exclusive voting
rights with respect to provisions of the 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 between both funds in the Trust.
E. DIVIDENDS
Dividends from net investment income are declared and paid or reinvested
quarterly. Net realized capital gains, if any, are distributed annually,
unless additional distributions are required for compliance with applicable
tax regulations.
Income dividends and capital gain distributions are determined in accordance
with Federal income tax regulations which may differ from generally accepted
accounting principles. The difference is primarily due to differing treatments
for foreign currency transactions, paydown gains and losses and wash sale
deferrals.
F. FEDERAL INCOME TAXES
No provision for Federal income taxes is necessary because the Fund has
elected to qualify under Subchapter M of the Internal Revenue Code and its
policy is to distribute all of its taxable income, including net realized
capital gains, within the prescribed time periods.
G. ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period.
Actual results could differ from those estimates.
H. SECURITIES LENDING
The Fund may seek additional income by lending portfolio securities to
qualified institutions. The Fund will receive cash or securities as collateral
in an amount equal to at least 100% of the current market value of any loaned
securities plus accrued interest. By reinvesting any cash collateral it
receives in these transactions, the Fund could realize additional gains and
losses. If the borrower fails to return the securities and the value of the
collateral has declined during the term of the loan, the Fund will bear the
loss. At September 30, 1999, the value of the securities loaned and the value
of collateral were $70,340,967 and $72,636,274, respectively. During the six
months ended September 30, 1999, income from securities lending amounted to
$234,068 and is included in interest income.
I. FUTURES
The Fund may enter into futures contracts as a hedge against unfavorable
market conditions and to enhance income. The Fund will not purchase any
futures contract if, after such purchase, more than one-third of net assets
would be represented by long futures contracts. The Fund will limit its risks
by entering into a futures position only if it appears to be a liquid
investment.
Upon entering into a futures contract, the Fund deposits with the selling
broker sufficient cash or U.S. Government securities to meet the minimum
"initial margin" requirements. Thereafter, the Fund receives from or pays to
the broker cash or U.S. Government securities equal to the daily fluctuation
in value of the contract ("variation margin"), which is recorded as unrealized
gain or loss. When the contract is closed, the Fund records a realized gain or
loss equal to the difference between the value of the contract at the time it
was opened and the value at the time it was closed.
NOTE 2
The Trust and the Adviser have entered into an agreement under which the
Adviser earns monthly fees at an annual rate of 0.75% of the first $500
million of net assets annually, 0.70% of the next $500 million, and 0.65% of
any amount over $1 billion. 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, 1999, the fees pursuant to such agreement amounted to $2,625,316.
State Street Research Service Center, a division of State Street Research
Investment Services, Inc., the Trust's principal underwriter (the
"Distributor"), an indirect wholly owned subsidiary of Metropolitan, provides
certain shareholder services to the Fund such as responding to inquiries and
instructions from investors with respect to the purchase and redemption of
shares of the Fund. 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, 1999, the
amount of such expenses was $288,173.
The Fund has entered into an agreement with its transfer agent whereby credits
realized as a result of uninvested cash balances were used to reduce a portion
of the Fund's expense. During the six months ended September 30, 1999 the
Fund's transfer agent fees were reduced by $32,782 under this agreement.
The fees of the Trustees not currently affiliated with the Adviser amounted to
$16,165 during the six months ended September 30, 1999.
NOTE 3
For the six months ended September 30, 1999, purchases and sales of
securities, exclusive of short-term obligations and forward foreign currency
exchange contracts, aggregated $376,246,428, and $437,519,331 (including
$165,121,912 and $166,035,473 of U.S. Government obligations), respectively.
NOTE 4
The Trust has adopted plans of distribution pursuant to Rule 12b-1 under the
Investment Company Act of 1940. Under the plans, the Fund pays annual service
fees to the Distributor at a rate of 0.25% of average daily net assets for
Class A, Class B(1), Class B and Class C shares. In addition, the Fund pays
annual distribution fees of 0.75% of average daily net assets for Class B(1),
Class B and Class C shares. The Distributor uses such payments for personal
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, 1999, fees pursuant
to such plans amounted to $383,249, $90,989, $1,777,419 and $98,663 for Class
A, Class B(1), Class B and Class C shares, respectively.
The Fund has been informed that the Distributor and MetLife Securities, Inc.,
a wholly owned subsidiary of Metropolitan, earned initial sales charges
aggregating $40,831 and $271,631, respectively, on sales of Class A shares of
the Fund during the six months ended September 30, 1999, and that MetLife
Securities, Inc. earned commissions aggregating $317,891 and $72,783 on sales
of Class B(1) and Class B shares, and the Distributor collected contingent
deferred sales charges aggregating $24,778, $336,784 and $979 on redemptions
of Class B(1), Class B and Class C shares, respectively, during the same
period.
<PAGE>
NOTE 5
The Trustees have the authority to issue an unlimited number of shares of
beneficial interest, $.001 par value per share.
Share transactions were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED SEPTEMBER 30, 1999
MARCH 31, 1999 (UNAUDITED)
---------------------------------- ----------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold .................. 4,456,292 $ 47,419,479 1,079,063 $ 11,534,233
Issued upon reinvestment of:
Dividends from net
investment income ............ 613,434 6,336,535 257,993 2,729,516
Distributions from net
realized gains ............... 2,356,464 24,830,861 96,608 1,040,476
Shares redeemed .............. (6,144,406) (64,512,494) (3,357,988) (35,894,740)
------------ ------------- ------------ --------------
Net increase (decrease) ...... 1,281,784 $ 14,074,381 (1,924,324) $ (20,590,515)
============ ============= ============ =============
<CAPTION>
CLASS B(1) SHARES* AMOUNT* SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold .................. 1,015,988 $ 10,366,494 1,521,173 $ 16,177,679
Issued upon reinvestment of:
Dividends from net
investment income ............ 4,081 42,086 13,039 136,862
Distribution from net
realized gains ............... -- -- 4,823 51,654
Shares redeemed .............. (27,017) (277,270) (176,091) (1,879,313)
------------ ------------- ------------ --------------
Net increase ................. 993,052 $ 10,131,310 1,362,944 $ 14,486,882
============ ============= ============ =============
<CAPTION>
CLASS B SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold .................. 6,312,468 $ 67,591,232 225,047 $ 2,383,975
Issued upon reinvestment of:
Dividends from net
investment income ............ 466,974 4,800,489 180,439 1,901,952
Distributions from net
realized gains ............... 2,779,332 29,144,016 113,673 1,217,446
Shares redeemed .............. (6,409,575) (66,796,029) (3,572,003) (38,001,959)
------------ ------------- ------------ --------------
Net increase (decrease) ...... 3,149,199 $ 34,739,708 (3,052,844) $ (32,498,586)
============ ============= ============ =============
<CAPTION>
CLASS C SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold .................. 412,134 $ 4,373,703 95,591 $ 1,016,934
Issued upon reinvestment of:
Dividends from net
investment income ............ 23,639 244,153 7,373 77,913
Distributions from net
realized gains ............... 157,152 1,655,108 5,924 63,564
Shares repurchased ........... (673,754) (7,003,491) (344,428) (3,678,920)
------------ ------------- ------------ --------------
Net derease .................. (80,829) $ (730,527) (235,540) $ (2,520,509)
============ ============= ============ =============
<CAPTION>
CLASS S SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold .................. 485,399 $ 5,189,422 157,021 $ 1,675,198
Issued upon reinvestment of:
Dividends from net
investment income ............ 40,956 425,454 13,979 147,925
Distributions from net
realized gains ............... 152,390 1,624,883 4,836 52,085
Shares redeemed .............. (1,520,824) (15,984,691) (356,502) (3,789,004)
------------ ------------- ------------ --------------
Net decrease ................. (842,079) $ (8,744,932) (180,666) $ (1,913,796)
============ ============= ============ =============
- -------------------------------------------------------------------------------------------------------
* January 1, 1999 (commencement of share class) to March 31, 1999.
</TABLE>
<PAGE>
STATE STREET RESEARCH STRATEGIC GROWTH & INCOME FUND
- -------------------------------------------------------------------------------
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For a share outstanding throughout each period:
CLASS A
-------------------------------------------------------------------------------------------------------------
YEARS ENDED MARCH 31 SIX MONTHS ENDED
--------------------------------------------------------------------------------- SEPTEMBER 30, 1999
1995(a) 1996(a) 1997(a) 1998(a) 1999(a) (UNAUDITED)(a)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF
PERIOD ($) 8.94 8.76 10.29 10.40 11.60 10.40
---- ---- ---- ---- ---- ----
Net investment
income ($)* 0.27 0.23 0.21 0.22 0.25 0.10
Net realized and
unrealized gain
(loss) on
investments,
foreign
currency
forward
contracts and
futures
contracts ($) (0.14) 1.72 1.05 2.61 (0.35) 0.01
---- ---- ---- ---- ---- ----
TOTAL FROM
INVESTMENT
OPERATIONS ($) 0.13 1.95 1.26 2.83 (0.10) 0.11
---- ---- ---- ---- ---- ----
Dividends from
net investment
income ($) (0.17) (0.26) (0.28) (0.23) (0.22) (0.10)
Distributions
from net
realized gains ($) (0.14) (0.16) (0.87) (1.40) (0.87) (0.04)
Distribution in
excess of net
realized gains ($) -- -- -- -- (0.01) --
---- ---- ---- ---- ---- ----
TOTAL DISTRIBUTIONS ($) (0.31) (0.42) (1.15) (1.63) (1.10) (0.14)
---- ---- ---- ---- ---- ----
NET ASSET VALUE,
END OF PERIOD ($) 8.76 10.29 10.40 11.60 10.40 10.37
==== ===== ===== ===== ===== =====
Total return(b) (%) 1.52 22.55 12.49 29.62 (0.66) (1.00)(c)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end
of period ($
thousands) 181,358 207,713 244,348 330,421 309,752 288,849
Ratio of operating
expenses to
average net
assets (%)* 1.25 1.25 1.25 1.28 1.28 1.30(d)
Ratio of operating
expenses to
average net
assets after
expense
reductions (%)* 1.25 1.25 1.25 1.28 1.27 1.29(d)
Ratio of net
investment income
to average net
assets (%)* 3.11 2.34 2.02 1.96 2.32 1.90(d)
Portfolio turnover
rate (%) 89.58 109.20 108.41 133.30 136.37 54.52
*Reflects voluntary
reduction of
expenses per share
of these amounts ($) 0.03 0.02 0.01 0.00 -- --
<CAPTION>
CLASS B(1)
----------------------------------
SIX MONTHS ENDED
YEAR ENDED SEPTEMBER 30, 1999
MARCH 31, 1999(a)(e) (UNAUDITED)(a)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ($) 10.35 10.36
----- -----
Net investment income ($) 0.04 0.06
Net realized and unrealized gain on investments, foreign currency
forward contracts and futures contracts ($) 0.01 0.01
----- -----
TOTAL FROM INVESTMENT OPERATIONS ($) 0.05 0.07
----- -----
Dividends from net investment income ($) (0.04) (0.07)
Distribution from net realized gains ($) -- (0.04)
----- -----
TOTAL DISTRIBUTIONS ($) (0.04) (0.11)
----- -----
NET ASSET VALUE, END OF PERIOD ($) 10.36 10.32
===== =====
Total return(b) (%) 0.51(c) 10.61 (c)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period ($ thousands) 10,289 24,316
Ratio of operating expenses to average net assets (%) 2.08(d) 2.05(d)
Ratio of operating expenses to average net assets after
expense reductions (%) 2.07(d) 2.04(d)
Ratio of net investment income to average net assets (%) 1.89(d) 1.15(d)
Portfolio turnover rate (%) 136.37 54.52
- -----------------------------------------------------------------------------------------------------------------------------
(a) Per-share figures have been calculated using the average shares method.
(b) Does not reflect any front-end or contingent deferred sales charges.
(c) Not annualized.
(d) Annualized.
(e) January 1, 1999 (commencement of share class) to March 31, 1999.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CLASS B
-------------------------------------------------------------------------------------------------------------
YEARS ENDED MARCH 31 SIX MONTHS ENDED
--------------------------------------------------------------------------------- SEPTEMBER 30, 1999
1995(a) 1996(a) 1997(a) 1998(a) 1999(a) (UNAUDITED)(a)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF
PERIOD ($) 8.92 8.74 10.25 10.37 11.55 10.36
----- ----- ----- ----- ----- -----
Net investment
income ($)* 0.20 0.15 0.13 0.13 0.17 0.06
Net realized and
unrealized gain
(loss) on
investments,
foreign
currency
forward
contracts and
futures
contracts ($) (0.13) 1.71 1.06 2.59 (0.34) 0.01
----- ----- ----- ----- ----- -----
TOTAL FROM
INVESTMENT
OPERATIONS ($) 0.07 1.86 1.19 2.72 (0.17) 0.07
----- ----- ----- ----- ----- -----
Dividends from
net investment
income ($) (0.11) (0.19) (0.20) (0.14) (0.14) (0.06)
Distributions
from net
realized gains ($) (0.14) (0.16) (0.87) (1.40) (0.87) (0.04)
Distribution in
excess of net
realized gains ($) -- -- -- -- (0.01) --
----- ----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS ($) (0.25) (0.35) (1.07) (1.54) (1.02) (0.10)
----- ----- ----- ----- ----- -----
NET ASSET VALUE,
END OF PERIOD ($) 8.74 10.25 10.37 11.55 10.36 10.33
===== ===== ===== ===== ===== =====
Total return(b) (%) 0.82 21.48 11.76 28.53 (1.31) 0.62 (c)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end
of period ($
thousands) 152,251 193,272 251,518 368,975 363,517 330,866
Ratio of operating
expenses to
average net
assets (%)* 2.00 2.00 2.00 2.03 2.03 2.05(d)
Ratio of operating
expenses to
average net
assets after
expense
reductions (%)* 2.00 2.00 2.00 2.03 2.02 2.04(d)
Ratio of net
investment income
to average net
assets (%)* 2.38 1.59 1.27 1.21 1.57 1.14(d)
Portfolio turnover
rate (%) 89.58 109.20 108.41 133.30 136.37 54.52
*Reflects voluntary
reduction of
expenses per share
of these amounts ($) 0.03 0.02 0.01 0.00 -- --
<CAPTION>
CLASS C
-------------------------------------------------------------------------------------------------------------
YEARS ENDED MARCH 31 SIX MONTHS ENDED
--------------------------------------------------------------------------------- SEPTEMBER 30, 1999
1995(a) 1996(a) 1997(a) 1998(a) 1999(a) (UNAUDITED)(a)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF
PERIOD ($) 8.93 8.75 10.27 10.38 11.57 10.38
----- ----- ----- ----- ----- -----
Net investment
income ($)* 0.20 0.15 0.13 0.13 0.17 0.06
Net realized and
unrealized gain
(loss) on
investments,
foreign
currency
forward
contracts and
futures
contracts ($) (0.13) 1.72 1.05 2.60 (0.34) 0.01
----- ----- ----- ----- ----- -----
TOTAL FROM
INVESTMENT
OPERATIONS ($) 0.07 1.87 1.18 2.73 (0.17) 0.07
----- ----- ----- ----- ----- -----
Dividends from
net investment
income ($) (0.11) (0.19) (0.20) (0.14) (0.14) (0.06)
Distributions
from net (0.04)
realized gains ($) (0.14) (0.16) (0.87) (1.40) (0.87)
Distribution in
excess of net
realized gains ($) -- -- -- -- (0.01) --
----- ----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS ($) (0.25) (0.35) (1.07) (1.54) (1.02) (0.10)
----- ----- ----- ----- ----- -----
NET ASSET VALUE,
END OF PERIOD ($) 8.75 10.27 10.38 11.57 10.38 10.35
===== ===== ===== ===== ===== =====
Total return(b) (%) 0.82 21.54 11.64 28.59 (1.33) 0.61 (c)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end
of period ($
thousands) 12,772 13,061 17,485 23,807 20,519 18,021
Ratio of operating
expenses to
average net
assets (%)* 2.00 2.00 2.00 2.03 2.03 2.05(d)
Ratio of operating
expenses to
average net
assets after
expense
reductions (%)* 2.00 2.00 2.00 2.03 2.02 2.04(d)
Ratio of net
investment income
to average net
assets (%)* 2.39 1.60 1.26 1.21 1.56 1.15(d)
Portfolio turnover
rate (%) 89.58 109.20 108.41 133.30 136.37 54.52
*Reflects voluntary
reduction of
expenses per share
of these amounts ($) 0.03 0.02 0.01 0.00 -- --
- --------------------------------------------------------------------------------------------------------------------------------
(a) Per-share figures have been calculated using the average shares method.
(b) Does not reflect any front-end or contingent deferred sales charges.
(c) Not annualized.
(d) Annualized.
</TABLE>
<PAGE>
STATE STREET RESEARCH STRATEGIC GROWTH & INCOME FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (cont'd)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CLASS S
-------------------------------------------------------------------------------------------------------------
YEARS ENDED MARCH 31 SIX MONTHS ENDED
--------------------------------------------------------------------------------- SEPTEMBER 30, 1999
1995(a) 1996(a) 1997(a) 1998(a) 1999(a) (UNAUDITED)(a)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF
PERIOD ($) 8.95 8.77 10.29 10.40 11.60 10.40
----- ----- ----- ----- ----- -----
Net investment
income ($)* 0.29 0.25 0.24 0.25 0.27 0.11
Net realized and
unrealized gain
(loss) on
investments,
foreign
currency
forward
contracts and
futures
contracts ($) (0.14) 1.71 1.05 2.60 (0.34) 0.01
----- ----- ----- ----- ----- -----
TOTAL FROM
INVESTMENT
OPERATIONS ($) 0.15 1.96 1.29 2.85 (0.07) 0.12
----- ----- ----- ----- ----- -----
Dividends from
net investment
income ($) (0.19) (0.28) (0.31) (0.25) (0.25) (0.11)
Distributions
from net
realized gains ($) (0.14) (0.16) (0.87) (1.40) (0.87) (0.04)
Distribution in
excess of net
realized gains ($) -- -- -- -- (0.01) --
----- ----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS ($) (0.33) (0.44) (1.18) (1.65) (1.13) (0.15)
----- ----- ----- ----- ----- -----
NET ASSET VALUE,
END OF PERIOD ($) 8.77 10.29 10.40 11.60 10.40 10.37
===== ===== ===== ===== ===== =====
Total return(b) (%) 1.77 22.70 12.77 29.93 (0.41) 1.13 (c)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end
of period ($
thousands) 25,803 19,548 21,263 26,648 15,149 13,228
Ratio of operating
expenses to
average net
assets (%)* 1.00 1.00 1.00 1.03 1.03 1.05(d)
Ratio of operating
expenses to
average net
assets after
expense
reductions (%)* 1.00 1.00 1.00 1.03 1.02 1.04(d)
Ratio of net
investment income
to average net
assets (%)* 3.37 2.59 2.26 2.21 2.53 2.16(d)
Portfolio turnover
rate (%) 89.58 109.20 108.41 133.30 136.37 54.52
*Reflects voluntary
reduction of
expenses per share
of these amounts
($) 0.03 0.02 0.01 0.00 -- --
- ---------------------------------------------------------------------------------------------------------------------------------
(a) Per-share figures have been calculated using the average shares method.
(b) Does not reflect any front-end or contingent deferred sales charges.
(c) Not annualized.
(d) Annualized.
</TABLE>
<PAGE>
STATE STREET RESEARCH STRATEGIC GROWTH & INCOME FUND
- --------------------------------------------------------------------------------
REPORT ON SPECIAL MEETING OF SHAREHOLDERS
- --------------------------------------------------------------------------------
A Special Meeting of Shareholders of the State Street Research Strategic
Growth & Income Fund ("Fund"), along with shareholders of other series of
State Street Research Income Trust ("Trust"), was convened on April 6, 1999
("Meeting"). The results of the Meeting are set forth below.
VOTES (MILLIONS
OF SHARES)
(COMBINED FOR ALL
SERIES OF THE
TRUST)
-----------------
ACTION ON PROPOSAL FOR WITHHELD
- --------------------------------------------------------------------------------
The following persons were elected as Trustees:
Bruce R. Bond ............................................. 149.4 3.0
Steve A. Garban ........................................... 149.4 3.0
Malcolm T. Hopkins ........................................ 149.2 3.1
Susan M. Phillips ......................................... 149.4 3.0
<PAGE>
<TABLE>
STATE STREET RESEARCH STRATEGIC GROWTH & 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
STRATEGIC GROWTH & INCOME FUND Chairman of the Board, Chairman of the Board,
One Financial Center President and President, Chief Executive
Boston, MA 02111 Chief Executive Officer Officer and Director,
State Street Research &
INVESTMENT ADVISER PETER C. BENNETT Management Company
State Street Research & Vice President
Management Company BRUCE R. BOND
One Financial Center BARTLETT R. GEER Former Chairman of the Board,
Boston, MA 02111 Vice President Chief Executive Officer and
President, PictureTel Corporation
DISTRIBUTOR JOHN H. KALLIS
State Street Research Vice President STEVE A. GARBAN
Investment Services, Inc. Former Senior Vice President
One Financial Center THOMAS A. SHIVELY for Finance and Operations and
Boston, MA 02111 Vice President Treasurer, The Pennsylvania
State University
SHAREHOLDER SERVICES JAMES M. WEISS
State Street Research Vice President MALCOLM T. HOPKINS
Service Center Former Vice Chairman of the
P.O. Box 8408 GERARD P. MAUS Board and Chief Financial
Boston, MA 02266-8408 Treasurer Officer, St. Regis Corp.
1-800-562-0032
JOSEPH W. CANAVAN DEAN O. MORTON
CUSTODIAN Assistant Treasurer Former Executive Vice President,
State Street Bank and Chief Operating Officer and
Trust Company DOUGLAS A. ROMICH Director, Hewlett-Packard Company
225 Franklin Street Assistant Treasurer
Boston, MA 02110 SUSAN M. PHILLIPS
FRANCIS J. MCNAMARA, III Dean, School of Business and
LEGAL COUNSEL Secretary and General Counsel Public Management, George
Goodwin, Procter & Hoar LLP Washington University; former
Exchange Place DARMAN A. WING Member of the Board of Governors
Boston, MA 02109 Assistant Secretary and of the Federal Reserve System and
Assistant General Counsel Chairman and Commissioner of
the Commodity Futures Trading
AMY L. SIMMONS Commission
Assistant Secretary
TOBY ROSENBLATT
President,
Founders Investments Ltd.
President,
The Glen Ellen Company
MICHAEL S. SCOTT MORTON
Jay W. Forrester Professor of
Management, Sloan School of
Management, Massachusetts
Institute of Technology
</TABLE>
<PAGE>
---------------
Bulk Rate
STATE STREET RESEARCH STRATEGIC GROWTH & INCOME FUND U.S. Postage
One Financial Center PAID
Boston, MA 02111 Canton, MA
Permit #313
---------------
STATE STREET RESEARCH
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LASTING VALUE
- -------------
LEADING IDEAS
QUESTIONS? COMMENTS?
CALL us at 1-800-562-0032 or
[hearing impaired 1-800-676-7876]
[Chinese and Spanish-speaking 1-888-638-3193]
WRITE us at:
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Service Center
P.O. Box 8408
Boston, MA 02266-8408
E-MAIL us at:
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INTERNET site:
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[LOGO] STATE STREET RESEARCH
This report is prepared for the general information of current shareholders.
This publication must be preceded or accompanied by a current State Street
Research Strategic Growth & Income Fund prospectus. The Prospectus contains more
information, including sales charges and expenses. Please read the prospectus
carefully before investing.
When used after December 31, 1999, 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: (exp1100) SSR-LD SGI-414G-1199
