<PAGE>
-------------------------
STATE STREET RESEARCH
-------------------------
HIGH INCOME FUND
-------------------------
SEMIANNUAL REPORT
September 30, 2000
----------------------
WHAT'S INSIDE
----------------------
INVESTMENT UPDATE
About the fund,
economy and markets
FUND INFORMATION
Facts and figures
PLUS, COMPLETE PORTFOLIO HOLDINGS
AND FINANCIAL STATEMENTS
-------------------
[DALBAR LOGO]
-------------------
For Excellence
[Logo] STATE STREET RESEARCH in
Shareholder Service
<PAGE>
STATE STREET RESEARCH HIGH INCOME FUND
--------------------------------------------------------------------------------
INVESTMENT UPDATE
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INVESTMENT ENVIRONMENT
THE ECONOMY
o The Federal Reserve Board appears to have steered the U.S. economy to a soft
landing. Growth slowed from 5.6% in the second quarter to 2.7% in the third
quarter.
o In May, the Federal Reserve Board raised short-term interest rates to 6.5%.
However, slower growth and modest inflation suggest that the Fed could soon
back off of its bias toward further increases.
o Corporate profit growth has slowed, but new home sales and consumer spending
remained strong. The savings rate slid to a record low 0.1% toward the end of
the period, and consumer debt rose.
THE MARKETS
o The stock market bounced back from a Spring technology correction and rallied
in August as investors rotated into old-economy value stocks. However, the
late summer rally was followed by a steep sell-off in September.
o The 10-year Treasury bond replaced the 30-year bond as the bellwether of the
U.S. bond market. The yield on the 10-year Treasury bond moved up and down
during the six-month period, but closed just about where it started -- at
5.8%. Municipal and corporate bonds rose, but high-yield bonds lagged.
THE FUND
OVER THE PAST SIX MONTHS
o For the six months ended September 30, 2000, Class A shares of State Street
Research High Income Fund returned -11.04% (does not reflect sales charge).(1)
The fund underperformed the Lipper High Current Yield Funds Average, which
returned -1.15%.
o Disappointing performance relative to the fund's peer group was primarily the
result of weak credit selection.
o The fund also lost ground as the result of weak performance among
telecommunications issues.
o Poor liquidity hurt performance in the lower- rated end of the high-yield
universe, where the fund was still heavily exposed.
CURRENT STRATEGY
o We continue to upgrade the quality of the portfolio by adding to investments
in BB bonds, energy bonds, and, in general, more liquid securities.
o We are selling less liquid securities.
o We continue to keep the fund's duration -- a measure of sensitivity to
interest rate risk -- short.
September 30, 2000
(1) -11.43% for Class B(1) shares; -11.41% for Class B shares; -11.21% for Class
C shares; -10.79% for Class S shares.
(2) Keep in mind that past performance is no guarantee of future results. The
fund's share price, yield and return will fluctuate, and you may have a gain
or loss when you sell your shares. All returns assume reinvestment of
capital gains distributions and income dividends at net asset value. 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.
(3) Performance reflects a maximum 4.50% Class A share front-end sales charge,
or 5% Class B(1) or Class B share or 1% Class C share contingent deferred
sales charge, where applicable.
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, 2000)
--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
(at maximum applicable sales charge)(2)(3)
10 YEARS 5 YEARS 1 YEAR
------------------------------------------------------------------------
Class A 9.09% 2.73% -15.53%
------------------------------------------------------------------------
Class B(1) 8.94% 2.63% -16.27%
------------------------------------------------------------------------
Class B 8.96% 2.68% -16.24%
------------------------------------------------------------------------
Class C 8.97% 2.93% -13.02%
------------------------------------------------------------------------
Class S 9.76% 3.97% -11.20%
------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
(does not reflect sales charge)(3)
10 YEARS 5 YEARS 1 YEAR
------------------------------------------------------------------------
Class A 9.60% 3.68% -11.55%
------------------------------------------------------------------------
Class B(1) 8.94% 2.89% -12.28%
------------------------------------------------------------------------
Class B 8.97% 2.93% -12.25%
------------------------------------------------------------------------
Class C 8.98% 2.93% -12.23%
------------------------------------------------------------------------
Class S 9.77% 3.97% -11.20%
------------------------------------------------------------------------
ASSET ALLOCATION*
(by percentage of net assets)
B 51%
BB 21%
BBB 4%
Cash 3%
Common Stock/Warrants 9%
Preferred Stocks 5%
CCC, CC, C 7%
Quality ratings based on those provided by Standard & Poor's Corp. and/or
equivalent ratings by Moody's Investors Service, Inc.
*4% 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 14.7%
ENERGY 8.8%
PAPER & PACKAGING 6.8%
MOBILE COMMUNICATIONS 6.6%
GENERAL INDUSTRIAL 6.1%
Total: 43.0%
<PAGE>
<TABLE>
STATE STREET RESEARCH HIGH INCOME FUND
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INVESTMENT PORTFOLIO
-----------------------------------------------------------------------------------------------------------------
September 30, 2000 (Unaudited)
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
PRINCIPAL MATURITY VALUE
AMOUNT DATE (NOTE 1)
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BONDS 83.2%
AUTOMOTIVE 0.8%
Lear Corp. Sr. Note Series B, 7.96% .................... $ 5,000,000 5/15/2005 $ 4,790,600
-------------
CABLE 1.1%
Charter Communications Holding LLC Sr. Note, 8.625% .... 2,475,000 4/01/2009 2,215,125
Echostar Broadband Corp. Sr. Note, 10.375%+ ............ 3,800,000 10/01/2007 3,800,000
Insight Midwest LP Sr. Note, 9.75% ..................... 140,000 10/01/2009 139,300
-------------
6,154,425
-------------
CASINO 5.2%
Hollywood Casino Shreveport Mortgage Note, 13.00% ...... 2,400,000 8/01/2006 2,586,000
International Game Technology Sr. Note, 8.375% ......... 6,465,000 5/15/2009 6,335,700
Mandalay Resort Group Sr. Sub. Note, 10.25%+ ........... 3,420,000 8/01/2007 3,522,600
MGM Grand Inc. Sr. Sub. Note, 9.75% .................... 5,175,000 6/01/2007 5,343,188
MGM Mirage Inc. Sr. Note, 8.50% ........................ 3,040,000 9/15/2010 3,041,763
Mohegan Tribal Gaming Authority Sr. Note, 8.125% ....... 7,370,000 1/01/2006 7,185,750
Park Place Entertainment Corp. Sr. Sub. Note, 9.375% ... 2,300,000 2/15/2007 2,343,125
-------------
30,358,126
-------------
CHEMICAL 1.4%
Acetex Sr. Note, 9.75% ................................. 2,300,000 10/01/2003 2,196,500
Agriculture Minerals & Chemicals Sr. Note, 10.75% ...... 310,000 9/30/2003 198,400
GNI Group Inc. Sr. Note, 10.875%[ ] .................... 7,000,000 7/15/2005 560,000
Lyondell Chemical Co. Sr. Sec. Note Series A, 9.625% ... 735,000 5/01/2007 720,300
PCI Chemicals Inc. Sr. Note Series B, 9.25% ............ 3,560,000 10/15/2007 1,762,200
Pioneer Americas Acquisition Corp. Sr. Sec. Note
Series B, 9.25% ...................................... 5,530,000 6/15/2007 2,488,500
Terra Industries Sr. Note, 10.50% ...................... 550,000 6/15/2005 339,625
-------------
8,265,525
-------------
ENERGY 8.8%
Cheasapeake Energy Corp. Sr. Note Series B, 9.625% ..... 9,120,000 5/01/2005 9,177,000
Frontier Corp. Sr. Note, 9.125% ........................ 10,050,000 2/15/2006 9,095,250
Gulfmark Offshore Inc. Sr. Note, 8.75% ................. 3,880,000 6/01/2008 3,647,200
Moran Energy Inc. Cv. Deb., 8.75% ...................... 2,420,000 1/15/2008 2,214,300
Newpark Resources Inc. Sr. Sub. Note Series B, 8.625% .. 10,120,000 12/15/2007 9,512,800
Ocean Energy Inc. Series B Sr. Note, 7.625% ............ 1,750,000 7/01/2005 1,693,125
Ocean Energy Inc. Sr. Sub. Note, 8.625% ................ 2,425,000 8/01/2005 2,428,031
Plains Resources Inc. Sr. Sub. Note, 10.25%+ ........... 3,165,000 3/15/2006 3,252,038
Pogo Producing Co. Sr. Sub. Note, 8.75% ................ 3,010,000 5/15/2007 2,934,750
Pogo Producing Co. Sub. Note, 5.50% .................... 850,000 6/15/2006 730,405
Pool Energy Services Co. Sr. Sub. Note, 8.625% ......... 5,020,000 4/01/2008 5,076,475
RBF Finance Co. Sr. Sec. Note, 11.375% ................. 1,230,000 3/15/2009 1,426,800
-------------
51,188,174
-------------
FIXED COMMUNICATIONS 14.7%
Advanced Radio Telecom Corp. Sr. Note, 14.00% .......... 4,048,000 2/15/2007 2,712,160
BTI Telecom Corp. Sr. Note, 10.50% ..................... 5,250,000 9/15/2007 3,045,000
Call-Net Enterprises Inc. Sr. Note, 8.00% .............. 5,250,000 8/15/2008 2,100,000
Call-Net Enterprises Inc. Sr. Note, 9.375% ............. 8,405,000 5/15/2009 3,866,300
Econophone Inc. Sr. Note, 13.50% ....................... 15,250,000 7/15/2007 9,531,250
Hyperion Telecommunication Inc. Sr. Sub. Note, 12.00% .. 5,500,000 11/01/2007 3,575,000
Intermedia Communications Inc. Sr. Note, 8.60% ......... 340,000 6/01/2008 324,700
North Point Communications, 12.875% .................... 9,900,000 2/15/2010 9,702,000
Primus Telecommunications Group Sr. Note, 11.75% ....... 7,440,000 8/01/2004 4,650,000
Primus Telecommunications Inc. Sr. Note, 12.75% ........ 2,240,000 10/15/2009 1,254,400
PSINet Inc. Sr. Note, 10.50% ........................... 2,835,000 12/01/2006 1,871,100
Rhythms Netconnections Inc. Note, 12.75% ............... 5,060,000 4/15/2009 3,137,200
Rhythms Netconnections Inc. Sr. Note Series B, 14.00% .. 2,200,000 2/15/2010 1,408,000
RSL Communications Ltd. Sr. Note, 12.25% ............... 13,409,000 11/15/2006 4,022,700
Startec Global Communications Corp. Sr. Note, 12.00% ... 10,300,000 5/15/2008 8,240,000
Viatel Inc. Sr. Note, 0.00% to 4/14/2003, 12.50% from
4/15/2003 to maturity ................................ 11,685,000 4/15/2008 4,206,600
Viatel Inc. Sr. Note, 11.25% ........................... 4,785,000 4/15/2008 2,440,350
Viatel Inc. Sr. Note, 11.50% ........................... 5,173,000 3/15/2009 2,819,285
Williams Communications Group Inc. Sr. Note, 11.70%+ ... 1,045,000 8/01/2008 995,362
Williams Communications Group Inc. Sr Note, 10.70% ..... 895,000 10/01/2007 827,875
Williams Communications Group Inc. Sr. Note, 10.875% ... 5,010,000 10/01/2009 4,571,625
Winstar Communicaions Inc., 12.50%+ .................... 5,560,000 4/15/2008 4,058,800
Winstar Communications Inc. Sr. Note, 12.75%+ .......... 815,000 4/15/2010 586,800
World Access Inc. Sr. Note, 13.25% ..................... 7,315,000 1/15/2008 5,705,700
-------------
85,652,207
-------------
FOOD & BEVERAGE 1.3%
Archibald Candy Corp. Sr. Sec. Note, 10.25% ............ 7,950,000 7/01/2004 4,650,750
Luiginos Inc. Sr. Sub. Note, 10.00% .................... 725,000 2/01/2006 572,750
Tom's Foods Inc. Sr. Sec. Note, 10.50% ................. 3,750,000 11/01/2004 2,493,750
-------------
7,717,250
-------------
GENERAL INDUSTRIAL 6.1%
Ametek Inc. Sr. Note, 7.20% ............................ 6,300,000 7/15/2008 5,780,502
Argo-Tech Corp. Sr. Sub. Note, 8.625% .................. 750,000 10/01/2007 622,500
Cluett American Corp. Sr. Sub. Note Series B, 10.125% .. 6,200,000 5/15/2008 4,991,000
Gentek Inc. Sr. Sub. Note, 11.00% ...................... 1,575,000 8/01/2009 1,618,313
Henry Co. Sr. Note Series B, 10.00% .................... 5,050,000 4/15/2008 2,550,250
International Knife & Saw Inc. Sr. Sub. Note, 11.375% .. 9,325,000 11/15/2006 4,953,906
International Utility Structures Inc. Sr. Sub. Note,
10.75% ............................................... 2,000,000 2/01/2008 1,450,000
J.B. Poindexter Inc. Sr. Note, 12.50% .................. 10,820,000 5/15/2004 10,116,700
Simonds Industries Inc. Sr. Sub. Note, 10.25% .......... 4,180,000 7/01/2008 3,364,900
Transdigm Inc. Sr. Sub. Note, 10.375% .................. 330,000 12/01/2008 302,280
Westpoint Stevens Inc. Sr. Note, 7.875% ................ 100,000 6/15/2005 87,125
-------------
35,837,476
-------------
HEALTH CARE 5.6%
Beckman Instruments Inc. Sr. Note, 7.10% ............... 980,000 3/04/2003 950,620
Bio-Rad Laboratories Inc. Sr. Sub Note, 11.625% ........ 680,000 2/15/2007 710,600
Columbia/HCA Healthcare Corp. Note, 8.75% .............. 1,930,000 9/01/2010 1,951,713
Columbia/HCA Healthcare Corp. Note, 6.91% .............. 695,000 6/15/2005 653,300
Fresenius Medical Care Capital Trust, 9.00% ............ 200,000 12/01/2006 198,500
Healthsouth Corp. Sr. Note, 6.875% ..................... 1,550,000 6/15/2005 1,325,575
Healthsouth Corp. Sr. Note, 7.00% ...................... 1,600,000 6/15/2008 1,277,168
Iasis Healthcare Corp. Sr. Sub. Note, 13.00% ........... 7,155,000 10/15/2009 7,011,900
Magellan Health Services Inc. Sr. Sub. Note, 9.00% ..... 625,000 2/15/2008 412,500
Quest Diagnostics Inc. Sr. Sub. Note, 10.75% ........... 8,500,000 12/15/2006 9,010,000
Tenet Healthcare Corp. Sr. Note, 9.25%+ ................ 8,575,000 9/01/2010 8,918,000
Triad Hospitals Sr. Sub. Note, 11.00% .................. 180,000 5/15/2009 184,500
-------------
32,604,376
-------------
HOTELS & LODGING 0.6%
Extended Stay America Inc. Sr. Sub. Note, 9.15% ........ 3,810,000 3/15/2008 3,619,500
-------------
MANUFACTURING 2.4%
Drypers Corp. Series B Sr. Note, 10.25%[ ] ............. 13,875,000 6/15/2007 1,855,781
North Atlantic Trading Inc. Sr. Note, 11.00% ........... 12,500,000 6/15/2004 10,687,500
Prime Succession Inc. Sr. Sub. Note, 10.75%[ ] ......... 3,000,000 8/15/2004 660,000
Scotts Co. Sr. Sub. Note, 8.625%+ ...................... 635,000 1/15/2009 622,300
-------------
13,825,581
-------------
MEDIA 2.7%
Crown Castle International Corp., 10.75% ............... 840,000 8/01/2011 856,800
Hollinger International Publishing Inc. Sr. Sub.
Note, 9.25% .......................................... 4,155,000 3/15/2007 4,155,000
Hollinger International, Inc. Sr. Sub. Note, 9.25% ..... 4,419,000 2/01/2006 4,424,524
K-III Communications Corp. Sr. Note, 8.50% ............. 3,100,000 2/01/2006 2,945,000
LIN Televison Corp. Sr. Sub Note, 8.375% ............... 385,000 3/01/2008 368,638
R. H. Donnelley Inc. Sr. Sub. Note, 9.125% ............. 625,000 6/01/2008 609,375
Transwestern Publishing Co. LP Sr. Sub. Note Series
D, 9.625% ............................................ 2,625,000 11/15/2007 2,631,562
-------------
15,990,899
-------------
METALS 5.3%
Alaska Steel Corp. Sr. Note, 9.125% .................... 4,875,000 12/15/2006 4,704,375
Crown Resources Corp. Cv. Sub. Deb., 5.75% ............. 1,110,000 8/27/2001 588,300
Envirosource Inc. Note, 9.75% .......................... 19,000,000 6/15/2003 6,650,000
Envirosource Inc. Sr. Note Series B, 9.75% ............. 600,000 6/15/2003 192,000
Great Central Mines Ltd. Sr. Note, 8.875% .............. 7,650,000 4/01/2008 6,732,000
Kaiser Aluminum & Chemical Corp. Sr. Sub. Note, 12.75% . 10,570,000 2/01/2003 9,407,300
Sheffield Steel Corp. Note Series B, 11.50% ............ 4,030,000 12/01/2005 2,377,700
-------------
30,651,675
-------------
MOBILE COMMUNICATIONS 6.6%
AirGate PCS, Inc. Sr. Sub. Note, 0.00% to 9/30/2004,
13.50% from 10/1/2004 to maturity .................... 2,715,000 10/01/2009 1,629,000
Celcaribe SA Sr. Sec. Note, 14.50% ..................... 3,660,000 3/15/2004 2,799,900
Horizon PCS Inc. Sr. Note, 0.00% to 9/30/2005, 14.00%
from 10/1/2005 to maturity+ .......................... 4,975,000 10/01/2010 2,537,250
IPCS Inc. Sr. Sub. Note, 0.00% to 7/14/2005, 14.00%
from 7/15/2005 to maturity+ .......................... 1,815,000 7/15/2010 943,800
Nextel Partners Inc. Sr. Note, 11.00%+ ................. 3,690,000 3/15/2010 3,703,837
Pagemart Nationwide Inc. Sr. Note, 0.00% to 1/30/2000,
15.00% from 1/31/2000 to maturity .................... 22,940,000 1/31/2005 21,620,950
Paging Network Do Brasil SA Sr. Note, 13.50%[ ] ........ 750,000 6/06/2005 61,875
US Unwired Inc. Sr. Sub Note Series B, 0.00% to
10/31/2004, 13.375% from 11/1/2004 to maturity ....... 10,090,000 11/01/2009 5,398,150
-------------
38,694,762
-------------
PAPER & PACKAGING 6.8%
Ball Corp. Sr. Note, 7.75% ............................. 2,780,000 8/01/2006 2,613,200
Ball Corp. Sr. Sub. Note, 8.25% ........................ 13,065,000 8/01/2008 12,281,100
Buckeye Cellulose Corp. Sr. Sub. Note, 9.25% ........... 1,900,000 9/15/2008 1,928,500
Buckeye Technologies Inc. Sr. Sub. Note, 8.00% ......... 8,000,000 10/15/2010 7,580,000
Crown Packaging Enterprise Ltd. Sr. Sec. Note, 0.00%
to 7/31/2003, 14.00% from 8/1/2003 to maturity ....... 9,000,000 8/01/2006 90,000
Four M Corp. Sr. Sec. Note Series B, 12.00% ............ 4,670,000 6/01/2006 4,448,175
Owens-Illinois Inc. Sr. Deb., 7.50% .................... 2,830,000 5/15/2010 2,392,623
Packaging Resources Inc. Sr. Sec. Note, 11.625%[ ] ..... 5,000,000 5/01/2003 3,525,000
Tekni Plex Inc. Sr. Sub Note, 12.75%+ .................. 2,750,000 6/15/2010 2,750,000
Tembec Industries Inc. Guaranteed Sr. Note, 8.625% ..... 2,000,000 6/30/2009 1,950,000
-------------
39,558,598
-------------
RESTAURANTS 1.2%
Apple South Inc. Sr. Note, 9.75% ....................... 770,000 6/01/2006 581,350
NE Restaurant Company, Inc. Sr. Note, 10.75% ........... 7,890,000 7/15/2008 6,193,650
-------------
6,775,000
-------------
RETAIL 4.8%
Intertek Finance PLC Series B Sr. Sub. Note, 10.25% .... 8,850,000 11/01/2006 3,141,750
J. Crew Group Inc. Sr. Deb., 0.00% to 10/14/2002,
13.125% from 10/15/2002 to maturity .................. 20,900,000 10/15/2008 12,853,500
J. Crew Operating Corp. Sr. Sub. Note, 10.375% ......... 8,850,000 10/15/2007 7,953,937
J.H. Heafner Inc. Sr. Note Series D, 10.00% ............ 5,600,000 5/15/2008 1,960,000
Loehmanns Inc. Sr. Note, 11.875%[ ] .................... 7,442,000 5/15/2003 1,860,500
-------------
27,769,687
-------------
SERVICES 2.6%
Rose Hills Co. Sr. Sub. Note, 9.50% .................... 8,750,000 11/15/2004 5,862,500
Safety Kleen Corp. Sr. Note, 9.25%[ ] .................. 4,865,000 5/15/2009 152,031
Safety Kleen Services Inc. Sr. Sub. Note, 9.25%[ ] ..... 4,085,000 6/01/2008 127,656
Stericycle Inc. Sr. Sub. Note Series B, 12.375% ........ 1,400,000 11/15/2009 1,484,000
USA Waste Services Inc. Sr. Note, 7.00% ................ 7,320,000 10/01/2004 7,012,560
Waste Management Inc., 7.70% ........................... 350,000 10/01/2002 346,546
-------------
14,985,293
-------------
SUPERMARKETS/DRUG 0.5%
Stater Brothers Holdings Inc. Sr. Note, 10.75% ......... 3,275,000 8/15/2006 2,767,375
-------------
TECHNOLOGY 0.9%
Anacomp Inc. Sr. Sub. Note Series D, 10.875% ........... 450,000 4/01/2004 112,500
Elgar Holdings Inc. Sr. Sub. Note, 9.875% .............. 2,225,000 2/01/2008 1,212,625
Intersil Corp. Sr. Note, 13.25% ........................ 3,445,000 8/15/2009 3,996,200
-------------
5,321,325
-------------
TRANSPORTATION 2.4%
First Wave Marine Inc. Sr. Note, 11.00% ................ 3,250,000 2/01/2008 1,905,313
Golden Ocean Group Ltd. Sr. Note, 10.00%[ ] ............ 13,000,000 8/31/2001 2,340,000
International Shipholding Corp. Sr. Note Series B, 7.75% 7,030,000 10/15/2007 6,151,250
Pegasus Shipping Hellas Ltd. Pfd. Note Series A,
11.875%[ ] ........................................... 3,500,000 11/15/2004 1,242,500
Westinghouse Air Brake Co. Sr. Note Series B2, 9.375% .. 2,650,000 6/15/2005 2,570,500
-------------
14,209,563
-------------
UTILITY 1.4%
AES Drax Energy Ltd. Sr. Sec. Note, 11.50%+ ............ 700,000 8/30/2010 740,250
AES Corp. Sr. Note, 9.375% ............................. 3,050,000 9/15/2010 3,066,836
Empire Gas Corp. Sr. Sec. Note, 12.875%[ ] ............. 7,144,000 7/15/2004 4,286,400
-------------
8,093,486
-------------
Total Bonds (Cost $637,098,493) .......................................................... 484,830,903
-------------
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
VALUE
SHARES (NOTE 1)
-----------------------------------------------------------------------------------------------------------------
PREFERRED STOCKS 4.7%
ENERGY 0.4%
Premocor USA Inc. Sr. Pfd. .................................................. 11,536 $ 2,422,560
-------------
FINANCIAL 0.3%
RB Asset Inc. Pfd. Series A* ................................................ 110,000 2,048,200
-------------
FIXED COMMUNICATIONS 0.0%
ICG Holdings Inc. Exch. Pfd.> ............................................... 12,425 186,375
-------------
MANUFACTURING 0.7%
North Atlantic Trading Inc. Sr. Pfd.> ....................................... 227,508 3,924,513
-------------
MEDIA 2.0%
Granite Broadcasting Corp. Exch. Pfd.> ...................................... 17,575 11,599,500
-------------
PAPER & PACKAGING 0.0%
Equitable Bag Inc. Series A Pfd.*+ .......................................... 134,760 13,476
-------------
RESTAURANTS 0.2%
Ameriking Inc. Sr. Exch. Pfd.> .............................................. 308,206 1,386,927
-------------
SERVICES 0.3%
Real Time Data Inc. Series B Pfd.*(+)@ ...................................... 32,864 1,519,963
-------------
SUPERMARKETS/DRUG 0.0%
Supermarkets General Holdings Corp. Exch. Pfd.*> ............................ 344,540 43,068
-------------
TEXTILES 0.8%
Cluett American Corp. Sr. Exch. Pfd.* ....................................... 132,597 4,441,999
-------------
UTILITY 0.4%
International Utility Structures Inc. Exch. Pfd.+> .......................... 3,762 2,370,060
-------------
Total Preferred Stocks (Cost $100,373,203) .................................. 27,534,081
-------------
COMMON STOCKS & OTHER 9.5%
Abbey Healthcare Group Inc. Com ............................................. 1,675,000 1,664,532
Advanced Radio Telecom Corp. Wts.* .......................................... 70,823 601,991
AirGate PCS, Inc. Com.* ..................................................... 22,811 1,023,644
Ameriking Inc. Com.*+ ....................................................... 4,775 47,750
Anacomp Inc. Wts.*+ ......................................................... 25,940 7,296
Cellnet Data Systems Inc. Wts.*+ ............................................ 1,500 377
Central Rents Inc. Com.*+ ................................................... 5,250 115,500
CHC Helicopter Corp Cl. A Com.* ............................................. 46,000 324,875
CHI Energy Inc. Cl. C Wts.*+ ................................................ 3,279 820
Clearnet Communications Inc. Wts.*+ ......................................... 78,705 1,967,625
Dimon Inc. Com .............................................................. 225,000 731,250
E. Spire Communications Inc. Wts.*+ ......................................... 9,500 47,500
Empire Gas Corp. Wts.*+ ..................................................... 2,760 690
Equitable Bag Inc. Com.*+ ................................................... 1,347,600 13,476
FreedomPay Inc. Com.*(+)@ ................................................... 3,145,340 1,942,248
Granite Broadcasting Corp. Com.* ............................................ 515,000 2,365,781
Hollinger International, Inc. Cl. A Com ..................................... 1,729,900 28,975,825
Insight Communications Inc. Cl. A Com.* ..................................... 42,518 674,973
Intelcom Group, Inc. Wts.+* ................................................. 21,450 10,725
Intermedia Communications Inc. Wts.* ........................................ 6,570 193,815
International Utility Structures Inc. Wts.* ................................. 2,750 2,750
Ionica PLC Wts.*+ ........................................................... 9,500 95
Ladish Inc. Com.* ........................................................... 86,667 1,137,504
Ladish Inc. Wts.*+ .......................................................... 150,946 1,800,029
Loral Space & Communications Ltd. Com.* ..................................... 8,781 53,785
Motels of America Inc. Com.*+ ............................................... 5,500 1,375
NEXTLINK Communications Inc. Cl. A* ......................................... 24,478 861,302
NS Group Wts. Inc.* ......................................................... 155,012 3,078,533
Nucentrix Broadband Networks, Inc. Wts.*+ ................................... 37,500 375
Pagemart Inc. Wts.*+ ........................................................ 21,850 87,400
Pathmark Stores Inc. Com.* .................................................. 121,364 1,494,294
Phase Metrics Inc. Cl. A Com.*(+) ........................................... 867,272 1,199,958
Powertel Inc. Com.* ......................................................... 9,078 690,483
Primus Telecommunications Group Wts.*+ ...................................... 6,500 44,525
Protection One Inc. Wts.*+ .................................................. 10,400 2,600
Reunion Industries Inc. Com.* ............................................... 225,000 428,906
RSL Communications Ltd. Cl. A Com.* ......................................... 53,660 107,321
Sabreliner Corp. Wts.*+ ..................................................... 1,750 17,500
Startec Global Communications Corp. Wts.*+ .................................. 8,545 2,991
Town & Country Corp. Cl. A Com.* ............................................ 195,632 12,227
Viatel Inc. Com.* ........................................................... 115,000 1,178,750
Waxman Industries Inc. Wts.*+ ............................................... 236,000 2,360
Wireless One Inc. Wts.*+ .................................................... 16,500 165
World Access Inc. Com.* ..................................................... 22,984 124,257
-------------
Total Common Stocks & Other (Cost $65,316,199) .............................. 55,462,738
-------------
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
PRINCIPAL MATURITY
AMOUNT DATE
-----------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENT 6.6%
State Street Navigator Securities Lending Prime
Portfolio ................................... 38,159,787 38,159,787
-------------
Total Short-Term Investments (Cost $38,159,787) ............................. 38,159,787
-------------
COMMERCIAL PAPER 0.1%
Pacific Gas & Electric Co. 6.72% ................ $ 418,000 10/02/2000 417,922
-------------
Total Commercial Paper (Cost $417,922) ...................................... 417,922
-------------
Total Investments (Cost $841,365,604) - 104.1% .............................. 606,405,431
Cash and Other Assets, Less Liabilities - (4.1%) ............................ (23,937,336)
-------------
Net Assets - 100.0% ......................................................... $ 582,468,095
=============
Federal Income Tax Information (Note 1):
At September 30, 2000, the net unrealized depreciation of investments based
on cost for Federal income tax purposes of $841,525,197 was as follows:
Aggregate gross unrealized appreciation for all investments in which there
is an excess of value over tax cost ....................................... $ 25,901,235
Aggregate gross unrealized depreciation for all investments in which there
is an excess of tax cost over value ....................................... (261,021,001)
-------------
$(235,119,766)
=============
-----------------------------------------------------------------------------------------------------------------
* 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, 2000, 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, 2000 were $31,761,302 and $4,662,169 (0.80% 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, 2000 were $56,804,076 and $42,985,747 (7.38% of net assets),
respectively.
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
STATE STREET RESEARCH HIGH INCOME FUND
------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
------------------------------------------------------------------------------------------
September 30, 2000 (Unaudited)
<S> <C>
ASSETS
Investments, at value (Cost $841,365,604) (Note 1) .................... $ 606,405,431
Interest and dividends receivable ..................................... 18,133,674
Receivable for securities sold ........................................ 2,787,840
Receivable for fund shares sold ....................................... 555,779
-------------
627,882,724
LIABILITIES
Payable for collateral received on securities loaned .................. 38,159,787
Payable for securities purchased ...................................... 2,182,251
Dividends payable ..................................................... 2,201,398
Payable for fund shares redeemed ...................................... 1,345,619
Accrued transfer agent and shareholder services (Note 2) .............. 538,515
Accrued management fee (Note 2) ....................................... 280,026
Accrued distribution and service fees (Note 2) ........................ 275,430
Accrued trustees' fees (Note 2) ....................................... 15,921
Other accrued expenses ................................................ 415,682
-------------
45,414,629
-------------
NET ASSETS ............................................................ $ 582,468,095
=============
Net Assets consist of:
Unrealized depreciation of investments .............................. $(234,960,173)
Accumulated net realized loss ....................................... (90,544,859)
Paid-in capital ..................................................... 907,973,127
-------------
$ 582,468,095
=============
Net Asset Value and redemption price per share of
Class A shares ($365,789,713 / 85,846,117 shares) ................... $4.26
=====
Maximum Offering Price per share of Class A shares ($4.26 / .955) ..... $4.46
=====
Net Asset Value and offering price per share of Class B(1) shares
($32,541,513 / 7,702,152 shares)* ................................... $4.22
=====
Net Asset Value and offering price per share of Class B shares
($161,403,318 / 38,127,330 shares)* ................................. $4.23
=====
Net Asset Value and offering price per share of Class C shares
($17,930,050 / 4,232,609 shares)* ................................... $4.24
=====
Net Asset Value, offering price and redemption price per share of
Class S shares ($4,803,501 / 1,134,317 shares) ...................... $4.23
=====
------------------------------------------------------------------------------------------
* 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.
</TABLE>
<PAGE>
<TABLE>
STATE STREET RESEARCH HIGH INCOME FUND
------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
------------------------------------------------------------------------------------------
For the six months ended September 30, 2000 (Unaudited)
<S> <C>
INVESTMENT INCOME
Interest, net of foreign taxes of $26,853 (Note 1) .................... $ 29,541,655
Dividends ............................................................. 3,336,833
------------
32,878,488
EXPENSES
Management fee (Note 2) ............................................... 2,087,484
Transfer agent and shareholder services (Note 2) ...................... 1,013,914
Custodian fee ......................................................... 129,015
Reports to shareholders ............................................... 52,155
Distribution and service fees - Class A (Note 4) ...................... 626,357
Distribution and service fees - Class B(1) (Note 4) ................... 171,481
Distribution and service fees - Class B (Note 4) ...................... 970,322
Distribution and service fees - Class C (Note 4) ...................... 109,061
Registration fees ..................................................... 62,952
Audit fee ............................................................. 24,156
Trustees' fees (Note 2) ............................................... 15,921
Legal fees ............................................................ 15,555
Miscellaneous ......................................................... 15,006
------------
5,293,379
Fees paid indirectly (Note 2) ......................................... (31,570)
------------
5,261,809
------------
Net investment income ................................................. 27,616,679
------------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS,
FOREIGN CURRENCY AND FORWARD CONTRACTS
Net realized loss on investments (Notes 1 and 3) ...................... (36,743,496)
------------
Change in unrealized depreciation of investments ...................... (74,681,544)
------------
Net loss on investments ............................................... (111,425,040)
------------
Net decrease in net assets resulting from operations .................. $(83,808,361)
============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
STATE STREET RESEARCH HIGH INCOME FUND
-----------------------------------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
-----------------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED SEPTEMBER 30, 2000
MARCH 31, 2000 (UNAUDITED)
-----------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income ................................ $ 91,874,929 $ 27,616,679
Net realized loss on investments, foreign currency and
forward contracts .................................. (38,721,659) (36,743,496)
Net unrealized depreciation of investments and forward
contracts .......................................... (69,370,508) (74,681,544)
-------------- -------------
Net decrease resulting from
operations ......................................... (16,217,238) (83,808,361)
-------------- -------------
Dividends from net investment income:
Class A ............................................ (56,225,697) (22,537,500)
Class B(1) ......................................... (2,555,427) (1,692,867)
Class B ............................................ (25,669,267) (9,543,752)
Class C ............................................ (3,137,992) (1,075,642)
Class S ............................................ (4,670,012) (1,728,968)
-------------- -------------
(92,258,395) (36,578,729)
-------------- -------------
Distributions from capital gains:
Class A ............................................ (57,728) --
Class B(1) ......................................... (3,737) --
Class B ............................................ (27,783) --
Class C ............................................ (3,350) --
Class S ............................................ (4,912) --
-------------- -------------
(97,510) --
-------------- -------------
Net decrease from fund share transactions (Note 5) ... (137,766,259) (136,901,383)
-------------- -------------
Total decrease in net assets ......................... (246,339,402) (257,288,473)
NET ASSETS
Beginning of period .................................. 1,086,095,970 839,756,568
-------------- -------------
End of period (including undistributed net investment
income of $1,501,659 and $0, respectively) ......... $ 839,756,568 $ 582,468,095
============== =============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
--------------------------------------------------------------------------------
NOTES TO UNAUDITED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
September 30, 2000
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 Fund.
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%. From April 1, 2000 to April 30, 2000, Class A
shares paid a service fee equal to 0.25% of average daily net assets. Beginning
May 1, 2000, Class A shares pay an annual service and distribution fee equal to
0.30% of average daily net assets. Class B(1) shares are offered only to current
shareholders through reinvestment of dividends and distributions or through
exchanges from existing Class B accounts of State Street Research funds. Class
B(1) and Class B pay annual service and distribution fees of 1.00% and both
classes automatically convert into Class A shares (which pay lower ongoing
expenses) at the end of eight years. Class B (1) shares are subject to a
contingent deferred sales charge on certain redemptions made within six years of
purchase. Class B shares are subject to a contingent deferred sales charge on
certain redemptions made within five years of purchase. Class C shares are
subject to a contingent deferred sales charge of 1.00% on any shares redeemed
within one year of their purchase. Class C shares also pay annual service and
distribution fees of 1.00%. Class S shares are only offered through certain
retirement accounts, advisory accounts of State Street Research & Management
Company (the "Adviser"), an indirect wholly owned subsidiary of MetLife Inc.,
and special programs. No sales charge is imposed at the time of purchase or
redemption of Class S shares. Class S shares do not pay any service or
distribution fees. The Fund's expenses are borne pro-rata by each class, except
that each class bears expenses, and has exclusive voting rights with respect to
provisions of the plans of distribution, related specifically to that class. The
Trustees declare separate dividends on each class of shares.
The following significant accounting policies are consistently followed by the
Fund in preparing its financial statements, and such policies are in conformity
with generally accepted accounting principles for investment companies.
A. INVESTMENT VALUATION
Fixed income securities are valued by a pricing service, which utilizes market
transactions, quotations from dealers, and various 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 gains distributions are determined in accordance
with Federal income tax regulations which may differ from generally accepted
accounting principles. The difference is primarily caused by 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. At March 31, 2000, the Fund had a capital
loss carryforward of $44,657,700 available, to the extent provided in
regulations, to offset future capital gains, if any, which expires on March 31,
2008.
In order to meet certain excise tax distribution requirements under Section 4982
of the Internal Revenue Code, the Fund is required to measure and distribute
annually, if necessary, net capital gains realized during a twelve-month period
ending October 31. In this connection, the Fund is permitted to defer into its
next fiscal year any net capital losses incurred between each November 1 and the
end of its fiscal year. From November 1, 1999 through March 31, 2000, the Fund
incurred net capital losses of approximately $8,882,000 and intends to defer and
treat such losses as arising in the fiscal year ended March 31, 2001.
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, 2000, the value of the securities loaned and the value
of collateral were $36,846,866 and $38,159,787, respectively. During the six
months ended September 30, 2000 income from securities lending amounted to
$57,718 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, 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, 2000, the
fees pursuant to such agreement amounted to $2,087,484.
State Street Research Service Center, a division of State Street Research
Investment Services, Inc., the Trust's principal underwriter (the
"Distributor"), an indirect wholly owned subsidiary of MetLife, provides
certain shareholder services to the Fund such as responding to inquiries and
instructions from investors with respect to the purchase and redemption of
shares of the Fund. In addition, MetLife 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, 2000, the amount of such expenses was $359,503.
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, 2000,
the Fund's transfer agent fees were reduced by $31,570 under this agreement.
The fees of the Trustees not currently affiliated with the Adviser amounted to
$15,921 during the six months ended September 30, 2000.
NOTE 3
For the six months ended September 30, 2000, purchases and sales of
securities, exclusive of short-term investments, aggregated $168,429,122 and
$295,566,716, 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,
beginning May 1, 2000, the Fund pays annual distribution fees of 0.05% of
average daily net assets for Class A shares. The Fund pays annual distribution
fees of 0.75% of average daily net assets for Class B(1), Class B and Class C
shares. The Distributor uses such payments for personal service and/or the
maintenance or servicing of shareholder accounts, to 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, 2000, fees pursuant to such
plans amounted to $626,357, $171,481, $970,322 and $109,061 for Class A, Class
B(1), Class B and Class C shares, respectively.
The Fund has been informed that the Distributor and MetLife Securities, Inc.,
a wholly owned subsidiary of MetLife, earned initial sales charges aggregating
$53,191 and $179,128, respectively, on sales of Class A shares of the Fund
during the six months ended September 30, 2000, and that MetLife Securities,
Inc. earned commissions aggregating $125,370, $1,523 and $60 on sales of Class
B(1), Class B and Class C shares, and that the Distributor collected
contingent deferred sales charges aggregating $85,949, $240,266 and $2,720 on
redemptions of Class B(1), Class B and Class C shares, respectively, during
the same period.
NOTE 5
The Trustees have the authority to issue an unlimited number of shares of
beneficial interest, $.001 par value per share.
Share transactions were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED SEPTEMBER 30, 2000
MARCH 31, 2000 (UNAUDITED)
---------------------------------- ---------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ............................. 15,101,807 $ 81,649,256 6,801,184 $ 32,105,464
Issued upon reinvestment of:
Dividends from net investment income .. 6,810,041 36,691,333 3,142,916 14,482,142
Distribution from capital gains ....... 9,153 48,145 -- --
Shares redeemed ......................... (37,383,845) (201,178,010) (23,325,071) (108,866,566)
----------- ------------- ----------- -------------
Net decrease ............................ (15,462,844) $ (82,789,276) (13,380,971) $ (62,278,960)
=========== ============= =========== =============
CLASS B(1) SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------------------------------------------------------------
Shares sold ............................. 6,202,418 $ 33,670,868 1,601,268 $ 7,409,039
Issued upon reinvestment of:
Dividends from net investment income .. 267,246 1,412,718 202,775 927,676
Distribution from capital gains ....... 553 2,890 -- --
Shares redeemed ......................... (1,544,929) (8,172,377) (1,294,711) (6,025,951)
----------- ------------- ----------- -------------
Net increase ............................ 4,925,288 $ 26,914,099 509,332 $ 2,310,764
=========== ============= =========== =============
CLASS B SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------------------------------------------------------------
Shares sold ............................. 2,383,374 $ 12,804,208 473,276 $ 2,177,203
Issued upon reinvestment of:
Dividends from net investment income .. 2,649,415 14,210,138 1,110,974 5,091,987
Distribution from capital gains ....... 4,050 21,182 -- --
Shares redeemed ......................... (18,909,837) (101,229,683) (9,444,157) (43,659,851)
----------- ------------- ----------- -------------
Net decrease ............................ (13,872,998) $ (74,194,155) (7,859,907) $ (36,390,661)
=========== ============= =========== =============
CLASS C SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------------------------------------------------------------
Shares sold ............................. 3,200,506 $ 17,277,504 369,775 $ 1,707,131
Issued upon reinvestment of:
Dividends from net investment income .. 309,193 1,661,769 96,603 444,249
Distribution from capital gains ....... 457 2,395 -- --
Shares redeemed ......................... (5,474,306) (29,315,203) (1,439,106) (6,663,060)
----------- ------------- ----------- -------------
Net decrease ............................ (1,964,150) $ (10,373,535) (972,728) $ (4,511,680)
=========== ============= =========== =============
CLASS S SHARES AMOUNT SHARES AMOUNT
-------------------------------------------------------------------------------------------------------------------------
Shares sold ............................. 304,414 $ 1,658,715 349,117 $ 1,630,854
Issued upon reinvestment of:
Dividends from net investment income .. 855,646 4,566,991 345,669 1,604,011
Distribution from capital gains ....... 933 4,870 -- --
Shares redeemed ......................... (653,530) (3,553,968) (8,688,502) (39,265,711)
----------- ------------- ----------- -------------
Net increase (decrease) ................. 507,463 $ 2,676,608 (7,993,716) $ (36,030,846)
=========== ============= =========== =============
</TABLE>
<PAGE>
<TABLE>
STATE STREET RESEARCH HIGH INCOME FUND
------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
------------------------------------------------------------------------------------------------------------------------------------
For a share outstanding throughout each period:
<CAPTION>
CLASS A
------------------------------------------------------------------
YEARS ENDED MARCH 31 SIX MONTHS ENDED
--------------------------------------------- SEPTEMBER 30, 2000
1996(a) 1997(a) 1998(a) 1999(a) 2000(a) (UNAUDITED)(a)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ($) 5.80 5.95 6.01 6.62 5.65 5.05
------- ------- ------- ------- ------- -------
Net investment income ($) 0.52 0.59 0.58 0.58 0.52 0.19
Net realized and unrealized gain (loss) on investments, foreign
currency and forward contracts ($) 0.20 (0.01) 0.63 (0.80) (0.60) (0.73)
------- ------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS ($) 0.72 0.58 1.21 (0.22) (0.08) (0.54)
------- ------- ------- ------- ------- -------
Dividends from net investment income ($) (0.56) (0.52) (0.60) (0.58) (0.52) (0.25)
Distributions from capital gains ($) (0.01) -- -- (0.09) -- --
Distribution in excess of capital gains -- -- -- (0.08) -- --
------- ------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS ($) (0.57) (0.52) (0.60) (0.75) (0.52) (0.25)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD ($) 5.95 6.01 6.62 5.65 5.05 4.26
======= ======= ======= ======= ======= =======
Total return(b) (%) 12.85 10.30 20.98 (3.19) (1.65) (11.04)(c)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period ($ thousands) 646,473 658,413 718,705 648,217 501,042 365,790
Expense ratio (%) 1.17 1.10 1.10 1.06 1.12 1.24(d)
Expense ratio after expense reductions(%) 1.17 1.10 1.10 1.05 1.11 1.23(d)
Ratio of net investment income to average net assets (%) 8.88 9.70 9.10 9.63 9.50 7.96(d)
Portfolio turnover rate (%) 56.47 81.75 70.53 53.46 50.49 24.60
</TABLE>
<TABLE>
---------------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS B(1)
---------------------------------------------------
YEARS ENDED MARCH 31 SIX MONTHS ENDED
--------------------------- SEPTEMBER 30, 2000
1999(a)(e) 2000(a) (UNAUDITED)(a)
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ($) 5.62 5.62 5.01
------ ------ ------
Net investment income ($) 0.12 0.47 0.17
Net realized and unrealized gain (loss) on
investments, foreign currency and forward contracts ($) 0.01 (0.60) (0.73)
------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS ($) 0.13 (0.13) (0.56)
------ ------ ------
Dividends from net investment income ($) (0.13) (0.48) (0.23)
------ ------ ------
TOTAL DISTRIBUTIONS ($) (0.13) (0.48) (0.23)
------ ------ ------
NET ASSET VALUE, END OF PERIOD ($) 5.62 5.01 4.22
====== ====== ======
Total return(b) (%) 2.25(c) (2.57) (11.43)(c)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period ($ thousands) 12,732 36,038 32,542
Expense ratio (%) 1.74(d) 1.87 1.95(d)
Expense ratio after expense reductions (%) 1.73(d) 1.86 1.94(d)
Ratio of net investment income to average net assets (%) 8.81(d) 8.76 7.19(d)
Portfolio turnover rate (%) 53.46 50.49 24.60
-------------------------------------------------------------------------------------------------------------------------------
(a) Per-share figures have been calcuated 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>
------------------------------------------------------------------------------------------------------------------------------------
STATE STREET RESEARCH HIGH INCOME FUND
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS B
------------------------------------------------------------------
YEARS ENDED MARCH 31 SIX MONTHS ENDED
--------------------------------------------- SEPTEMBER 30, 2000
1996(a) 1997(a) 998(a) 1999(a) 2000(a) (UNAUDITED)(a)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ($) 5.79 5.93 5.98 6.58 5.62 5.02
------- ------- ------- ------- ------- -------
Net investment income ($) 0.46 0.55 0.53 0.53 0.47 0.17
Net realized and unrealized gain (loss) on investments, foreign
currency and forward contracts ($) 0.21 (0.02) 0.62 (0.79) (0.59) (0.73)
------- ------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS ($) 0.67 0.53 1.15 (0.26) (0.12) (0.56)
------- ------- ------- ------- ------- -------
Dividends from net investment income ($) (0.52) (0.48) (0.55) (0.53) (0.48) (0.23)
Distributions from capital gains ($) (0.01) -- -- (0.09) -- --
Distribution in excess of capital gains -- -- -- (0.08) -- --
------- ------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS ($) (0.53) (0.48) (0.55) (0.70) (0.48) (0.23)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD ($) 5.93 5.98 6.58 5.62 5.02 4.23
======= ======= ======= ======= ======= =======
Total return(b) (%) 12.06 9.35 20.02 (3.77) (2.38) (11.41)(c)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period ($ thousands) 185,735 259,077 345,797 336,420 230,786 161,403
Expense ratio (%) 1.92 1.85 1.85 1.81 1.87 1.95(d)
Expense ratio after expense reductions (%) 1.92 1.85 1.85 1.80 1.86 1.94(d)
Ratio of net investment income to average net assets (%) 7.95 9.01 8.36 8.90 8.76 7.26(d)
Portfolio turnover rate (%) 56.47 81.75 70.53 53.46 50.49 24.60
</TABLE>
<TABLE>
<CAPTION>
CLASS C
------------------------------------------------------------------
YEARS ENDED MARCH 31 SIX MONTHS ENDED
---------------------------------------------- SEPTEMBER 30, 2000
1996(a) 1997(a) 1998(a) 1999(a) 2000(a) (UNAUDITED)(a)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ($) 5.79 5.93 5.99 6.59 5.63 5.02
------- ------- ------- ------- ------- -------
Net investment income ($) 0.46 0.54 0.53 0.53 0.48 0.17
Net realized and unrealized gain (loss) on investments, foreign
currency and forward contracts ($) 0.21 (0.00) 0.62 (0.79) (0.61) (0.72)
------- ------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS ($) 0.67 0.54 1.15 (0.26) (0.13) (0.55)
------- ------- ------- ------- ------- -------
Dividends from net investment income ($) (0.52) (0.48) (0.55) (0.53) (0.48) (0.23)
Distributions from capital gains ($) (0.01) -- -- (0.09) -- --
Distribution in excess of capital gains -- -- -- (0.08) -- --
------- ------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS ($) (0.53) (0.48) (0.55) (0.70) (0.48) (0.23)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD ($) 5.93 5.99 6.59 5.63 5.02 4.24
======= ======= ======= ======= ======= =======
Total return(b) (%) 12.05 9.52 19.99 (3.76) (2.57) (11.21)(c)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period ($ thousands) 15,262 28,488 34,586 40,342 26,154 17,930
Expense ratio (%) 1.92 1.85 1.85 1.81 1.87 1.95(d)
Expense ratio after expense reductions (%) 1.92 1.85 1.85 1.80 1.86 1.94(d)
Ratio of net investment income to average net assets (%) 7.91 9.09 8.35 8.91 8.77 7.29(d)
Portfolio turnover rate (%) 56.47 81.75 70.53 53.46 50.49 24.60
-----------------------------------------------------------------------------------------------------------------------------------
(a) Per-share figures have been calcuated using the average shares method.
(b) Does not reflect any front-end or contingent deferred sales charges.
(c) Not annualized.
(d) Annualized.
</TABLE>
<PAGE>
<TABLE>
------------------------------------------------------------------------------------------------------------------------------------
STATE STREET RESEARCH HIGH INCOME FUND
------------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (cont'd)
------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS S
------------------------------------------------------------------
YEARS ENDED MARCH 31 SIX MONTHS ENDED
--------------------------------------------- SEPTEMBER 30, 2000
1996(a) 1997(a) 1998(a) 1999(a) 2000(a) (UNAUDITED)(a)
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ($) 5.78 5.92 5.98 6.58 5.61 5.01
------- ------- ------- ------- ------- -------
Net investment income ($) 0.53 0.61 0.59 0.58 0.53 0.21
Net realized and unrealized gain (loss) on investments, foreign
currency and forward contracts ($) 0.20 (0.01) 0.63 (0.79) (0.60) (0.74)
------- ------- ------- ------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS ($) 0.73 0.60 1.22 (0.21) (0.07) (0.53)
------- ------- ------- ------- ------- -------
Dividends from net investment income ($) (0.58) (0.54) (0.62) (0.59) (0.53) (0.25)
Distributions from capital gains ($) (0.01) -- -- (0.09) -- --
Distribution in excess of capital gains -- -- -- (0.08) -- --
------- ------- ------- ------- ------- -------
TOTAL DISTRIBUTIONS ($) (0.59) (0.54) (0.62) (0.76) (0.53) (0.25)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD ($) 5.92 5.98 6.58 5.61 5.01 4.23
======= ======= ======= ======= ======= =======
Total return(b) (%) 13.19 10.63 21.22 (2.97) (1.41) (10.79)(c)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period ($ thousands) 3,840 6,255 7,860 48,384 45,737 4,804
Expense ratio (%) 0.92 0.85 0.85 0.81 0.87 0.95(d)
Expense ratio after expense reductions (%) 0.92 0.85 0.85 0.80 0.86 0.94(d)
Ratio of net investment income to average net assets (%) 8.97 10.04 9.36 10.00 9.81 8.36(d)
Portfolio turnover rate (%) 56.47 81.75 70.53 53.46 50.49 24.60
-----------------------------------------------------------------------------------------------------------------------------------
(a) Per-share figures have been calcuated using the average shares method.
(b) Does not reflect any front-end or contingent deferred sales charges.
(c) Not annualized.
(d) Annualized.
</TABLE>
<PAGE>
<TABLE>
STATE STREET RESEARCH HIGH INCOME FUND
------------------------------------------------------------------------------------------------------------
FUND INFORMATION, OFFICERS AND TRUSTEES OF STATE STREET RESEARCH INCOME TRUST
------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FUND INFORMATION OFFICERS TRUSTEES
STATE STREET RESEARCH RICHARD S. DAVIS RICHARD S. DAVIS
HIGH INCOME FUND Chairman of the Board Chairman of the Board,
One Financial Center President and Chief Executive President, Chief Executive
Boston, MA 02111 Officer Officer and Director,
State Street Research
INVESTMENT ADVISER JOHN H. KALLIS & Management Company
State Street Research & Vice President
Management Company BRUCE R. BOND
One Financial Center THOMAS A. SHIVELY Former Chairman of the Board,
Boston, MA 02111 Vice President Chief Executive Officer
and President,
DISTRIBUTOR JAMES M. WEISS PictureTel Corporation
State Street Research Vice President
Investment Services, Inc. STEVE A. GARBAN
One Financial Center GERALD P. MAUS Former Senior Vice President
Boston, MA 02111 Treasurer for Finance and Operations and
Treasurer, The Pennsylvania
SHAREHOLDER SERVICES DOUGLAS A. ROMICH State University
State Street Research Assistant Treasurer
Service Center DEAN O. MORTON
P.O. Box 8408 FRANCIS J. MCNAMARA, III Former Executive Vice President,
Boston, MA 02266-8408 Secretary and General Counsel Chief Operating Officer and
1-87-SSR-FUNDS (1-877-773-8637) Director, Hewlett-Packard Company
DARMAN A. WING
CUSTODIAN Assistant Secretary and SUSAN M. PHILLIPS
State Street Bank and Assistant General Counsel Dean, School of Business and
Trust Company Public Management, George
225 Franklin Street SUSAN E. BREEN Washington University; former
Boston, MA 02110 Assistant Secretary Member of the Board of Governors
of the Federal Reserve System and
LEGAL COUNSEL AMY L. SIMMONS Chairman and Commissioner of
Goodwin, Procter & Hoar LLP Assistant Secretary the Commodity Futures Trading
Exchange Place Commission
Boston, MA 02109
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>
STATE STREET RESEARCH HIGH INCOME FUND ----------------
One Financial Center Bulk Rate
Boston, MA 02111 U.S. Postage
PAID
Canton, MA
Permit #313
----------------
QUESTIONS? COMMENTS?
E-MAIL us at:
[email protected]
INTERNET site:
www.statestreetresearch.com
CALL us toll-free at 1-87-SSR-FUNDS (1-877-773-8637) or
[hearing-impaired 1-800-676-7876]
[Chinese and Spanish-speaking 1-888-638-3193]
WRITE us at:
State Street Research
Service Center
P.O. Box 8408
Boston, MA 02266-8408
[Logo STATE STREET RESEARCH
(c)2000 State Street Research Investment Services, Inc.,
One Financial Center, Boston, MA 02111
This report is prepared for the general information of current shareholders.
This publication must be preceded or accompanied by a current State Street
Research High Income Fund prospectus.
When used after December 31, 2000, this report must be accompanied by a current
Quarterly Performance Update.
Portfolio changes should not be considered recommendations for action by
individual investors.
The Dalbar awards recognize quality shareholder service and should not be
considered a rating of fund performance. The survey included mutual fund
complexes that volunteered or were otherwise selected to participate and was not
industry-wide.
CONTROL NUMBER: (exp1101) SSR-LD HI-2658-1000
<PAGE>
------------------------------------
STATE STREET RESEARCH
------------------------------------
STRATEGIC GROWTH & INCOME FUND
--------------------------------
SEMIANNUAL REPORT
September 30, 2000
-------------------
WHAT'S INSIDE
-------------------
INVESTMENT UPDATE
About the fund,
economy and markets
FUND INFORMATION
Facts and figures
PLUS, COMPLETE PORTFOLIO HOLDINGS
AND FINANCIAL STATEMENTS
-------------------
[DALBAR LOGO]
-------------------
For Excellence
[Logo] STATE STREET RESEARCH in
Service
<PAGE>
STATE STREET RESEARCH STRATEGIC GROWTH & INCOME FUND
--------------------------------------------------------------------------------
INVESTMENT UPDATE
--------------------------------------------------------------------------------
INVESTMENT ENVIRONMENT
THE ECONOMY
o The Federal Reserve Board appears to have steered the U.S. economy to a soft
landing. Growth slowed from 5.6% in the second quarter to 2.7% in the third
quarter.
o In May, the Federal Reserve Board raised short-term interest rates to 6.5%.
However, slower growth and modest inflation suggest that the Fed could soon
back off of its bias toward further increases.
o Corporate profit growth has slowed, but new home sales and consumer spending
remained strong. The savings rate slid to a record low 0.1% toward the end of
the period, and consumer debt rose.
THE MARKETS
o The stock market bounced back from a Spring technology correction and rallied
in August as investors rotated into old-economy value stocks. However, the
late summer rally was followed by a steep sell-off in September.
o The 10-year Treasury bond replaced the 30-year bond as the bellwether of the
U.S. bond market. The yield on the 10-year Treasury bond moved up and down
during the six-month period, but closed just about where it started -- at
5.8%. Municipal and corporate bonds rose, but high-yield bonds lagged.
THE FUND
OVER THE PAST SIX MONTHS
o For the six months ended September 30, 2000, Class A shares of State Street
Research Strategic Growth & Income Fund returned 2.36% (does not reflect sales
charge).(1) The fund significantly outperformed the Lipper Flexible Portfolio
Funds Average, which returned -0.24%.
o Investments in value and energy stocks were the best performers on the stock
side of the portfolio.
o On the bond side, our investments in emerging market debt helped performance;
high yield and other international bonds hurt performance.
CURRENT STRATEGY
o We have underweighted stocks, and underweighted growth versus value stocks.
o We reduced our exposure to energy to take advantage of significant price
gains.
o We are monitoring the high-yield sector where low valuations are compelling.
September 30, 2000
(1) 2.03% for Class B(1) shares; 2.00% for Class B shares; 1.98% for Class C
shares; 2.47% for Class S shares.
(2) Keep in mind that past performance is no guarantee of future results. The
fund's share price, yield and return will fluctuate, and you may have a gain
or loss when you sell your shares. All returns assume reinvestment of
capital gains distributions and income dividends at net asset value. 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.
(3) Performance reflects up to a maximum 5.75% Class A share front-end sales
charge, or 5% Class B(1) or Class B share or 1% Class C share contingent
deferred sales charges, 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.
--------------------------------------------------------------------------------
FUND INFORMATION (all data are for periods ended September 30, 2000)
--------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
(at maximum applicable sales charge)(2)(3)
-----------------------------------------------------------------------
10 YEARS 5 YEARS 1 YEAR
-----------------------------------------------------------------------
Class A 12.20% 11.86% 11.64%
-----------------------------------------------------------------------
Class B(1) 12.25% 12.11% 12.57%
-----------------------------------------------------------------------
Class B 12.25% 12.10% 12.56%
-----------------------------------------------------------------------
Class C 12.24% 12.34% 16.51%
-----------------------------------------------------------------------
Class S 13.07% 13.46% 18.73%
-----------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURN
(does not reflect sales charge)(2)
-----------------------------------------------------------------------
10 YEARS 5 YEARS 1 YEAR
-----------------------------------------------------------------------
Class A 12.86% 13.19% 18.45%
-----------------------------------------------------------------------
Class B(1) 12.25% 12.36% 17.57%
-----------------------------------------------------------------------
Class B 12.25% 12.35% 17.56%
-----------------------------------------------------------------------
Class C 12.24% 12.34% 17.51%
-----------------------------------------------------------------------
Class S 13.07% 13.46% 18.73%
-----------------------------------------------------------------------
ASSET ALLOCATION
(by percentage of net assets)
Equities 53%
Bonds 39%
Net Cash 8%
TOP FIVE EQUITY INDUSTRIES
(by percentage of net assets)
DRUGS & BIOTECHNOLOGY 4.0%
MISCELLANEOUS FINANCIAL 3.5%
INSURANCE 3.3%
COMMUNICATIONS TECHNOLOGY 3.2%
OIL & GAS PRODUCERS 2.6%
Total: 16.6%
<PAGE>
STATE STREET RESEARCH STRATEGIC GROWTH & INCOME FUND
--------------------------------------------------------------------------------
INVESTMENT PORTFOLIO
--------------------------------------------------------------------------------
September 30, 2000 (Unaudited)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
VALUE
SHARES (NOTE 1)
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
EQUITY SECURITIES 52.9%
AUTOMOBILES & TRANSPORTATION 1.1%
AIR TRANSPORT 0.0%
CHC Helicopter Corp. Cl. A* .................................. 2,000 $ 14,125
------------
AUTOMOTIVE PARTS 0.6%
Delphi Automotive Systems Corp. .............................. 162,900 2,463,862
Eaton Corp. .................................................. 11,200 690,200
Gentex Corp.* ................................................ 21,600 540,000
TRW Inc. ..................................................... 19,300 784,063
------------
4,478,125
------------
MISCELLANEOUS TRANSPORTATION 0.2%
Canadian Pacific Ltd. ........................................ 42,600 1,105,062
------------
TRUCKERS 0.3%
CNF Transportation Inc. ...................................... 102,600 2,282,850
------------
Total Automobiles & Transportation ........................... 7,880,162
------------
CONSUMER DISCRETIONARY 6.6%
ADVERTISING AGENCIES 0.6%
Valassis Communications Inc.* ................................ 188,450 4,193,013
------------
CASINOS/GAMBLING, HOTEL/MOTEL 1.4%
Extended Stay America Inc.* .................................. 42,100 557,825
Harrah's Entertainment Inc.* ................................. 163,525 4,496,937
Hilton Hotels Corp. .......................................... 111,600 1,290,375
International Game Technology Inc.* .......................... 104,392 3,510,181
Motels of America Inc.*+ ..................................... 500 125
------------
9,855,443
------------
COMMERCIAL SERVICES 1.2%
A.C. Nielsen Corp.* .......................................... 171,790 4,090,749
Corporate Executive Board Co.* ............................... 7,800 313,950
E.W. Scripps Co. Cl. A ....................................... 8,000 432,000
Hotel Reservations Network Inc. Cl. A* ....................... 29,800 1,091,425
Protection One Inc. Wts.*+ ................................... 800 200
Republic Services Inc.* ...................................... 160,600 2,107,875
------------
8,036,199
------------
COMMUNICATIONS, MEDIA & ENTERTAINMENT 0.8%
Entravision Communications Corp.* ............................ 8,600 149,425
Granite Broadcasting Corp. Exch.
Pfd.*> ......................... 392 258,720
Hispanic Broadcasting Corp.* ................................. 9,200 256,450
TiVo Inc.* ................................................... 43,000 833,125
U.S.A. Networks Inc.* ........................................ 15,400 337,838
Walt Disney Co. .............................................. 60,650 2,319,862
World Wrestling Federation Entertainment Inc. Cl. A* ......... 65,900 1,000,856
------------
5,156,276
------------
CONSUMER PRODUCTS 0.1%
Oakley Inc.* ................................................. 51,600 906,225
------------
CONSUMER SERVICES 0.0%
Central Rents Inc.*+ ......................................... 250 5,500
Docent, Inc. ................................................. 2,000 22,000
------------
27,500
------------
PRINTING & PUBLISHING 1.0%
General Media Inc. Wts.*+ .................................... 250 250
Hollinger International, Inc. Cl. A .......................... 421,900 7,066,825
Sullivan Holdings Inc.*+# .................................... 149 98,894
------------
7,165,969
------------
RESTAURANTS 0.3%
Darden Restaurants Inc. ...................................... 110,600 2,301,863
------------
RETAIL 1.2%
Federated Department Stores Inc.* ............................ 105,800 2,764,025
Home Depot Inc. .............................................. 24,100 1,278,806
Staples Inc.* ................................................ 54,000 766,125
Ticketmaster Online City Search, Inc. Cl. B* ................. 41,300 699,519
TJX Companies, Inc. .......................................... 116,600 2,621,500
------------
8,129,975
------------
Total Consumer Discretionary ................................. 45,772,463
------------
CONSUMER STAPLES 1.1%
BEVERAGES 0.4%
Anheuser-Busch Companies, Inc. ............................... 61,400 2,597,988
------------
DRUG & GROCERY STORE CHAINS 0.4%
CVS Corp. .................................................... 42,000 1,945,125
Duane Reade Inc.* ............................................ 23,800 577,150
Pathmark Stores Inc.* ........................................ 2,667 32,837
------------
2,555,112
------------
TOBACCO 0.3%
UST Inc. ..................................................... 101,400 2,319,525
------------
Total Consumer Staples ....................................... 7,472,625
------------
FINANCIAL SERVICES 8.4%
BANKS & SAVINGS & LOAN 1.6%
Banknorth Group Inc.* ........................................ 208,372 3,724,649
Golden West Financial Corp. .................................. 45,900 2,461,387
Hudson City Bancorp Inc. ..................................... 65,200 1,108,400
Hudson United Bancorp ........................................ 30,300 837,038
Investors Financial Services Co. ............................. 8,100 511,313
Mercantile Bankshares Corp. .................................. 19,600 711,419
North Fork BanCorp., Inc. .................................... 34,700 750,388
Southtrust Corp. ............................................. 31,400 987,137
------------
11,091,731
------------
INSURANCE 3.3%
Ace Ltd. ..................................................... 298,500 11,716,125
Everest Reinsurance Group, Ltd. .............................. 9,900 490,050
Partnerre Ltd.* .............................................. 11,500 545,531
Saint Paul Companies, Inc. ................................... 96,500 4,758,656
XL Capital Ltd. Cl. A ........................................ 77,701 5,711,024
------------
23,221,386
------------
MISCELLANEOUS FINANCIAL 3.5%
AMBAC Financial Group, Inc. .................................. 80,500 5,896,510
Citigroup, Inc. .............................................. 119,200 6,444,250
Marsh & McLennan Companies, Inc. ............................. 29,500 3,913,125
MBNA Corp. ................................................... 87,620 3,373,370
Metris Companies Inc. ........................................ 15,900 628,050
Morgan Stanley Dean Witter & Co. ............................. 36,700 3,355,756
RB Asset Inc. Series A Pfd.* ................................. 20,000 372,400
------------
23,983,461
------------
Total Financial Services ..................................... 58,296,578
------------
HEALTH CARE 5.3%
DRUGS & BIOTECHNOLOGY 4.0%
Abbott Laboratories Inc. ..................................... 60,420 2,873,726
Amgen Inc.* .................................................. 60,000 4,189,687
Applied Molecular Evolution* ................................. 22,400 898,800
Barr Laboratories, Inc.* ..................................... 14,500 961,531
Biovail Corp.* ............................................... 7,200 586,350
Cephalon Inc.* ............................................... 4,700 227,950
Ciphergen Biosystems Inc.* ................................... 4,300 137,600
Deltagen Inc.* ............................................... 11,900 368,156
Dyax Corp.* .................................................. 23,600 1,032,500
Esperion Therapeutics Inc.* .................................. 22,300 384,675
Genzyme Corp.* ............................................... 14,200 968,263
Inhale Therapeutic Systems, Inc.* ............................ 5,500 310,063
Intermune Pharmaceuticals Inc.* .............................. 24,100 1,307,425
Lexicon Genetics Inc.* ....................................... 33,700 1,065,762
Pain Therapeutics Inc.* ...................................... 15,500 307,094
Pfizer Inc. .................................................. 110,000 4,943,125
Pharmacia Corp. .............................................. 87,020 5,237,516
Priority Healthcare Corp. Cl. B* ............................. 13,900 1,059,875
Versicor Inc.* ............................................... 33,200 498,000
XOMA Ltd.* ................................................... 20,500 295,969
------------
27,654,067
------------
HEALTH CARE FACILITIES 0.1%
Tenet Healthcare Corp.* ...................................... 20,200 734,775
------------
HEALTH CARE SERVICES 0.6%
Community Health Systems Inc.* ............................... 35,500 1,140,437
Quorum Health Group Inc.* .................................... 256,900 3,339,700
------------
4,480,137
------------
HOSPITAL SUPPLY 0.6%
American Medical Systems Inc.* ............................... 49,100 767,187
Aradigm Corp.* ............................................... 33,000 756,938
Cepheid, Inc.* ............................................... 2,900 23,744
Sybron International Corp.* .................................. 59,200 1,420,800
Zoll Medical Corp.* .......................................... 22,100 1,077,375
------------
4,046,044
------------
CHEMICALS 0.0%
Wilson Great Batch Technology, Inc.* ......................... 6,100 139,538
------------
Total Health Care ............................................ 37,054,561
------------
INTEGRATED OILS 1.5%
INTEGRATED DOMESTIC 0.8%
Petroleo Brasileiro SA* ...................................... 36,600 1,100,288
Unocal Corp. ................................................. 75,100 2,661,356
USX-Marathon Group ........................................... 73,700 2,091,237
------------
5,852,881
------------
INTEGRATED INTERNATIONAL 0.7%
Exxon Mobil Corp. ............................................ 32,920 2,933,995
Petro-Canada* ................................................ 75,000 1,673,438
------------
4,607,433
------------
Total Integrated Oils ........................................ 10,460,314
------------
MATERIALS & PROCESSING 2.8%
AGRICULTURE 0.0%
Eden Bioscience Corp.* ....................................... 3,400 112,200
------------
BUILDING & CONSTRUCTION 0.2%
Waxman Industries Inc. Wts.*+ ................................ 29,500 295
York International Corp. ..................................... 50,100 1,246,238
------------
1,246,533
------------
CHEMICALS 0.5%
Cambrex Corp. ................................................ 11,100 410,700
Hercules Inc. ................................................ 56,800 802,300
Reunion Industries Inc.* ..................................... 16,217 30,914
Solutia Inc. ................................................. 177,800 2,022,475
Valence Technology Inc.* ..................................... 21,300 367,425
------------
3,633,814
------------
CONTAINERS & PACKAGING 0.0%
Equitable Bag Inc.*+ ......................................... 47,600 476
Equitable Bag Inc. Series A Pfd.*+ ........................... 4,760 476
------------
952
------------
DIVERSIFIED MANUFACTURING 0.6%
Ball Corp. ................................................... 134,700 4,268,306
------------
FERTILIZERS 0.2%
Agrium Inc. .................................................. 145,700 1,493,425
------------
FOREST PRODUCTS 0.1%
Boise Cascade Corp. .......................................... 8,900 236,406
------------
MISCELLANEOUS MATERIALS & PROCESSING 0.0%
Ladish Inc. Wts.*+ ........................................... 15,095 180,008
------------
PAPER & FOREST PRODUCTS 0.7%
Fort James Corp. ............................................. 101,575 3,104,386
Westvaco Corp. ............................................... 48,000 1,281,000
------------
4,385,386
------------
STEEL 0.5%
Alaska Steel Holding Corp. ................................... 180,118 1,688,606
Harsco Corp. ................................................. 78,000 1,720,875
------------
3,409,481
------------
TEXTILE & PRODUCTS 0.0%
Cluett American Corp. Sr. Exch.
Pfd.*> ......................... 3,366 112,761
------------
Total Materials & Processing ................................. 19,079,272
------------
OTHER 2.1%
MULTI-SECTOR 2.1%
Gencorp Inc. ................................................. 113,300 920,563
General Electric Co. ......................................... 102,900 5,936,044
Ogden Corp.* ................................................. 241,400 3,273,987
Tyco International Ltd. ...................................... 82,500 4,279,687
------------
Total Other .................................................. 14,410,281
------------
OTHER ENERGY 4.4%
GAS PIPELINES 0.6%
Columbia Energy Group ........................................ 7,900 560,900
Williams Companies Inc. ...................................... 74,089 3,130,260
------------
3,691,160
------------
OIL & GAS PRODUCERS 2.6%
Anadarko Petroleum Corp. ..................................... 142,345 9,460,249
Burlington Resources Inc. .................................... 34,000 1,251,625
Cabot Oil & Gas Corp. Cl. A .................................. 9,800 199,675
Cross Timbers Oil Co. ........................................ 14,250 273,422
HS Resources, Inc.* .......................................... 6,100 205,113
Ocean Energy Inc.* ........................................... 295,900 4,567,956
St. Mary Land & Exploration Co. .............................. 19,400 447,413
Ultramar Diamond Shamrock Co. ................................ 65,100 1,651,912
------------
18,057,365
------------
OIL WELL EQUIPMENT & SERVICES 1.2%
Baker Hughes Inc. ............................................ 46,200 1,715,175
Halliburton Co. .............................................. 81,240 3,975,683
National Oilwell Inc.* ....................................... 15,713 491,031
Valero Energy Corp. .......................................... 47,500 1,671,406
Veritas DGC Inc.* ............................................ 20,700 599,006
------------
8,452,301
------------
Total Other Energy ........................................... 30,200,826
------------
PRODUCER DURABLES 1.0%
AEROSPACE 0.0%
Ladish Inc.* ................................................. 8,666 113,741
------------
ELECTRICAL EQUIPMENT & COMPONENTS 0.0%
Proton Energy Systems, Inc.* ................................. 2,300 65,838
------------
MISCELLANEOUS EQUIPMENT 0.2%
Thomas & Betts Corp. ......................................... 83,995 1,464,663
------------
OFFICE FURNITURE & BUSINESS EQUIPMENT 0.2%
Anacomp Inc. Wts.*+ .......................................... 4,941 1,390
Pitney Bowes Inc. ............................................ 43,100 1,699,756
------------
1,701,146
------------
PRODUCTION TECHNOLOGY EQUIPMENT 0.2%
Phase Metrics Inc.*(+) ....................................... 54,205 74,997
Zygo Corp.* .................................................. 11,800 1,026,600
------------
1,101,597
------------
TELECOMMUNICATIONS EQUIPMENT 0.4%
American Tower Corp. Cl. A* .................................. 23,700 893,194
MCK Communications Inc.* ..................................... 73,500 1,662,937
------------
2,556,131
------------
Total Producer Durables ...................................... 7,003,116
------------
TECHNOLOGY 8.3%
COMMUNICATIONS TECHNOLOGY 3.2%
Cisco Systems Inc.* .......................................... 59,160 3,268,590
Comverse Technology Inc.* .................................... 30,000 3,240,000
Corning Inc. ................................................. 15,000 4,455,000
Cosine Communications Inc.* .................................. 2,100 116,681
DMC Stratex Networks Inc.* ................................... 21,420 344,059
Elastic Networks Inc.* ....................................... 2,000 26,000
General Motors Corp. Cl. H* .................................. 47,900 1,780,922
Inrange Technologies Corp. Cl. B* ............................ 1,800 95,400
Natural Microsystems Corp.* .................................. 8,200 441,134
NCR Corp.* ................................................... 31,100 1,175,969
Netro Corp.* ................................................. 9,400 556,950
Nortel Networks Corp. ........................................ 74,000 4,407,625
Packeteer Inc.* .............................................. 22,800 864,975
Spectrasite Holdings, Inc.* .................................. 44,300 822,319
TTM Technologies, Inc.* ...................................... 2,800 65,800
------------
21,661,424
------------
COMPUTER SOFTWARE 0.9%
Acxiom Corp.* ................................................ 54,100 1,717,675
AvantGo, Inc.* ............................................... 900 18,000
Click Commerce, Inc.* ........................................ 15,200 649,800
E Piphany Inc.* .............................................. 4,700 362,194
Kana Communications, Inc.* ................................... 23,500 522,875
Microsoft Corp.* ............................................. 34,400 2,074,750
OpenTV Corp.* ................................................ 12,900 428,925
Sonicwall Inc.* .............................................. 9,600 273,600
Vastera, Inc.* ............................................... 10,700 235,400
------------
6,283,219
------------
COMPUTER TECHNOLOGY 1.5%
EMC Corp.* ................................................... 68,580 6,797,992
Macronix Intl Co Ltd.* ....................................... 7,386 113,560
Radiant Systems Inc.* ........................................ 41,400 884,925
Sun Microsystems Inc.* ....................................... 21,080 2,461,090
------------
10,257,567
------------
ELECTRONICS 1.7%
Aeroflex Inc.* ............................................... 51,500 2,504,188
Nokia Corp. ADR .............................................. 105,200 4,188,275
PE Biosystems Group Corp. .................................... 45,000 5,242,500
------------
11,934,963
------------
ELECTRONICS: SEMI-CONDUCTORS/COMPONENTS 1.0%
Alpha Industries Inc.* ....................................... 18,300 623,344
Analog Devices Inc.* ......................................... 20,000 1,651,250
Artisan Components Inc.* ..................................... 15,500 199,562
AXT Inc.* .................................................... 25,900 1,082,944
Cree Inc.* ................................................... 4,400 511,500
Cypress Semiconductor Corp.* ................................. 29,235 1,215,079
Galileo Technology Ltd.* ..................................... 25,100 796,925
Sawtek Inc.* ................................................. 22,900 882,008
------------
6,962,612
------------
MISCELLANEOUS TECHNOLOGY 0.0%
Genomica Corp.* .............................................. 8,400 159,600
------------
Total Technology ............................................. 57,259,385
------------
UTILITIES 3.2%
ELECTRICAL 2.2%
DQE, Inc. .................................................... 40,900 1,641,113
Energy East Corp. ............................................ 85,400 1,932,175
Niagara Mohawk Holdings Inc.* ................................ 84,000 1,323,000
OGE Energy Corp. ............................................. 99,300 2,116,331
Pinnacle West Capital Corp. .................................. 99,700 5,072,237
Scana Corp. .................................................. 99,600 3,075,150
Southern Energy Inc.* ........................................ 3,200 100,400
------------
15,260,406
------------
GAS DISTRIBUTION 0.5%
National Fuel Gas Co. ........................................ 24,900 1,395,956
Nicor Inc. ................................................... 20,100 727,369
Questar Corp. ................................................ 40,600 1,129,187
------------
3,252,512
------------
TELECOMMUNICATIONS 0.5%
AirGate PCS, Inc.* ........................................... 7,603 341,185
Intelcom Group, Inc. Wts.*+ .................................. 1,650 825
Nextel Communications Inc. Cl. A* ............................ 3,098 144,831
NEXTLINK Communications Inc. Cl. A* .......................... 64,580 2,272,409
Nucentrix Broadband Networks Wts.*+ .......................... 1,500 15
Pagemart Inc. Wts.*+ ......................................... 2,300 9,200
Powertel Inc.* ............................................... 1,028 78,168
RSL Communications Ltd. Cl. A* ............................... 2,981 5,962
Rural Celluar Corp. Cl. A* ................................... 4,400 299,750
Startec Global Communications Corp. Wts.*+ ................... 500 175
Time Warner Telecom Inc. Cl. A* .............................. 3,500 169,094
Viatel Inc.* ................................................. 7,291 74,733
World Access Inc.* ........................................... 1,571 8,493
------------
3,404,840
------------
Total Utilities .............................................. 21,917,758
------------
NON-U.S. EQUITIES 7.1%
Aventis SA ................................................... 16,000 1,201,900
Canon Sales Company, Inc. .................................... 85,000 1,383,235
Citizen Watch Co. ............................................ 105,000 1,130,372
Clearnet Communications Inc. Wts.*+ .......................... 2,640 66,000
Deutsche Bank AG ............................................. 15,800 1,308,356
Hutchison Whampoa ............................................ 82,000 1,088,565
IHC Caland NV ................................................ 47,100 2,372,603
Johnson Matthey .............................................. 800 11,180
Kone Corp. Series B .......................................... 35,300 2,152,549
Maruzen Co. .................................................. 480,000 1,562,242
NEC Corp.* ................................................... 41,000 933,330
Pechiney International NV .................................... 39,600 1,585,341
Petrochina Co. Ltd. .......................................... 11,325,700 2,309,737
Reed International ........................................... 139,000 1,103,896
Renault SA ................................................... 41,100 1,765,255
RTZ Corp. .................................................... 66,300 961,881
Saipem SPA ................................................... 387,500 2,157,454
SAP AG Pfd. .................................................. 7,900 1,955,204
Schering AG .................................................. 21,000 1,375,203
Serono SA .................................................... 1,500 1,834,092
Shohkoh Fund & Co ............................................ 7,400 931,133
Skandia Foersaekrings AB ..................................... 57,700 1,146,199
Societe Generale ............................................. 19,800 1,108,514
Softbank Corp. ............................................... 18,100 1,695,118
Sony Corp. ................................................... 23,900 2,428,893
Technip ...................................................... 23,600 3,295,326
Tesco ........................................................ 379,300 1,393,953
The Swatch Group AG .......................................... 2,040 2,955,408
Trans Cosmos Inc. ............................................ 21,000 2,393,157
UCB (GROUPE) ................................................. 76,100 2,649,110
Woolworths Ltd. .............................................. 318,300 1,162,929
------------
Total Non-U.S. Equities ...................................... 49,418,135
------------
Total Equity Securities (Cost $299,538,945) .................. 366,225,476
------------
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
PRINCIPAL MATURITY VALUE
AMOUNT DATE (NOTE 1)
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FIXED INCOME SECURITIES 38.8%
U.S. TREASURY 2.5%
U.S. Treasury Bond, 6.125% ...................... $ 1,425,000 8/15/2029 $ 1,455,509
U.S. Treasury Bond, 6.25% ....................... 1,050,000 5/15/2030 1,103,487
U.S. Treasury Bond, 10.625% ..................... 7,450,000 8/15/2015 10,698,871
U.S. Treasury Bond, 6.75% ....................... 1,350,000 8/15/2026 1,469,394
U.S. Treasury Bond TIPS, 3.875% ................. 2,203,950 4/15/2029 2,187,420
------------
16,914,681
------------
U.S. AGENCY MORTGAGE 12.0%
Federal Home Loan Mortgage Corp., 7.50% ......... 17,123 4/01/2002 17,148
Federal Home Loan Mortgage Corp., 8.50% ......... 148 7/01/2009 150
Federal Home Loan Mortgage Corp., 6.50% ......... 1,305,210 7/01/2029 1,255,443
Federal National Mortgage Association, 9.50% .... 307,908 10/01/2003 310,224
Federal National Mortgage Association, 8.00% .... 113,322 4/01/2008 115,944
Federal National Mortgage Association, 8.00% .... 147,314 6/01/2008 149,617
Federal National Mortgage Association, 8.50% .... 130,361 2/01/2009 134,172
Federal National Mortgage Association, 7.50% .... 151 10/01/2025 151
Federal National Mortgage Association, 6.50% .... 556,167 9/01/2028 534,438
Federal National Mortgage Association, 6.50% .... 4,370,874 11/01/2028 4,200,104
Federal National Mortgage Association, 6.00% .... 736,262 12/01/2028 687,720
Federal National Mortgage Association, 6.50% .... 2,103,070 12/01/2028 2,020,903
Federal National Mortgage Association, 6.50% .... 1,013,217 3/01/2029 973,631
Federal National Mortgage Association, 7.50% .... 2,464,374 7/01/2029 2,464,374
Federal National Mortgage Association, 7.00% .... 1,433,899 12/01/2029 1,404,317
Federal National Mortgage Association, 7.00% .... 2,664,048 12/01/2029 2,609,914
Federal National Mortgage Association, 7.00% .... 4,547,841 12/01/2029 4,455,429
Federal National Mortgage Association, 7.00% .... 3,001,699 2/01/2030 2,943,526
Federal National Mortgage Association, 7.00% .... 3,202,378 5/01/2030 3,136,313
Federal National Mortgage Association, 7.25% .... 5,875,000 5/15/2030 6,163,227
Federal National Mortgage Association TBA, 7.00% 3,700,000 12/01/2030 3,678,022
Federal National Mortgage Association TBA, 7.00% 7,850,000 12/01/2030 7,688,133
Federal National Mortgage Association TBA, 7.50% 13,025,000 12/01/2030 12,992,437
Federal National Mortgage Association TBA, 8.00% 4,650,000 12/01/2030 4,711,055
Government National Mortgage Association, 6.50% . 315,870 2/15/2009 313,612
Government National Mortgage Association, 6.50% . 123,794 6/15/2009 122,909
Government National Mortgage Association, 6.50% . 703,014 7/15/2009 697,988
Government National Mortgage Association, 7.50% . 58,913 11/15/2010 59,871
Government National Mortgage Association, 7.50% . 418,754 12/15/2010 425,559
Government National Mortgage Association, 7.00% . 723,207 1/15/2025 714,846
Government National Mortgage Association, 7.00% . 3,098,998 5/15/2028 3,052,513
Government National Mortgage Association, 6.50% . 4,183,266 11/15/2028 4,031,622
Government National Mortgage Association, 7.00% . 3,240,513 11/15/2028 3,192,942
Government National Mortgage Association, 7.00% . 120,546 11/15/2028 118,776
Government National Mortgage Association TBA,
8.00% ......................................... 7,625,000 12/15/2030 7,760,801
------------
83,137,831
------------
FOREIGN 0.2%
Province of Quebec, 7.50% ....................... 750,000 9/15/2029 749,168
United Mexican States, 10.375% .................. 850,000 2/17/2009 925,437
------------
1,674,605
------------
FINANCE/MORTGAGE 4.7%
Arcadia Automobile Trust 97-C A5, 6.55% ......... 675,000 6/15/2005 673,961
AT&T Corp. Note, 6.50% .......................... 400,000 3/15/2029 332,376
Bombardier Capital Inc. Note, 7.30%+ ............ 1,750,000 12/15/2002 1,752,625
Capital One Bank Note, 6.62% .................... 800,000 8/04/2003 780,584
Capital One Bank Note, 6.65% .................... 1,175,000 3/15/2004 1,136,061
Citibank Credit Card Issuance Trust, 7.45% ...... 900,000 9/15/2005 899,370
Conseco Inc., 8.75% ............................. 1,675,000 2/09/2004 1,180,875
Conseco Inc. Note, 9.00% ........................ 1,700,000 10/15/2006 1,164,500
Credit Suisse First Boston 97-C2 Cl. A2, 6.52% .. 975,000 7/17/2007 956,415
DLJ Commercial Mortgage Corp. 98-C2, 6.24% ...... 2,400,000 11/12/2031 2,272,500
DLJ Commercial Mortgage Corp. 98-C2 Cl. A1-A,
5.88% ......................................... 1,355,514 11/12/2031 1,300,870
First Union Lehman Brothers Bank Series 1998-C2
Cl. A1, 6.28% ................................. 1,511,403 6/18/2007 1,479,285
GE Global Insurance Holding Corp. Note, 7.00% ... 2,825,000 2/15/2026 2,615,328
General Motors Acceptance Corp. Note, 6.57% ..... 1,625,000 10/07/2002 1,638,374
GMAC Commercial Mortgage Security Inc. 98-C1 Cl.
A1, 6.41% ..................................... 860,524 11/15/2007 843,784
GMAC Commercial Mortgage Security Inc. 99-C1 Cl.
A2, 6.175% .................................... 1,250,000 5/15/2033 1,175,831
Household Finance Corp. Sr. Note, 6.125% ........ 900,000 7/15/2012 886,941
LB Commercial Conduit Mortgage Trust 97-LL1-A1,
6.79% ......................................... 1,277,924 6/12/2004 1,265,494
LB Commercial Conduit Mortgage Trust 98C1-A1,
6.33% ......................................... 1,230,846 11/18/2004 1,213,681
LB Commercial Conduit Mortgage Trust 98C4-A1,
6.21% ......................................... $ 450,000 10/15/2008 $ 423,070
MBNA Corp. Sr. Note, 6.875% ..................... 675,000 11/15/2002 671,726
MBNA Corp. Sr. Note, 7.125% ..................... 1,300,000 9/15/2004 1,297,153
MBNA Master Credit Card Trust, 6.90% ............ 3,500,000 1/15/2008 3,491,523
MBNA Master Credit Card Trust Series 99-J-A,
7.00% ......................................... 3,100,000 2/15/2012 3,086,453
Morgan Stanley Capital Inc. 98-A1, 6.19% ........ 233,947 1/15/2007 229,158
------------
32,767,938
------------
FOREIGN GOVERNMENT 4.5%
Greek Drachma
Republic of Greece, 8.80% ....................... 3,341,400,000 6/19/2007 10,024,209
New Zealand Dollar
Government of New Zealand, 8.00% ................ 2,450,000 4/15/2004 1,036,417
Government of New Zealand, 8.00% ................ 8,350,000 11/15/2006 3,610,349
Spanish Peseta
Government of Spain, 6.00% ...................... 11,000,000 1/31/2008 9,986,638
Republic of Brazil, 8.00% ....................... $ 2,216,538 4/15/2014 1,695,652
Republic of Bulgaria, 5.875% .................... 1,075,000 7/28/2011 822,375
Republic of Peru, 4.50% ......................... 1,250,000 3/07/2003 770,250
Republic Of Philippines, 7.938% ................. 3,325,000 12/01/2009 2,909,375
------------
30,855,265
------------
CORPORATE 14.9%
Abbey Healthcare Group Inc., 9.50% .............. 375,000 11/01/2002 372,656
Acetex Sr. Note, 9.75% .......................... 290,000 10/01/2003 276,950
Advanced Radio Telecom Corp. Sr. Note, 14.00% ... 200,000 2/15/2007 134,000
Advanstar Communications Inc. Sr. Sub. Note,
9.25% ......................................... 550,000 5/01/2008 558,250
AES Corp., 9.375% ............................... 1,475,000 9/15/2010 1,483,142
Agriculture Minerals & Chemicals Sr. Note, 10.75% 30,000 9/30/2003 19,200
AirGate PCS Inc. Sr. Sub. Note, 0.00% to 9/30/
2004, 13.50% from 10/1/2004 to maturity ....... 1,050,000 10/01/2009 630,000
Alaska Steel Corp. Sr. Note, 9.125% ............. 1,300,000 12/15/2006 1,254,500
Albertsons Inc. Sr. Deb., 7.45% ................. 1,475,000 8/01/2029 1,306,643
Alcoa Inc., 7.375% .............................. 1,100,000 8/01/2010 1,109,251
Allbritton Communications Co. Sr. Sub. Deb.,
9.75% ......................................... 500,000 11/30/2007 489,375
American Pacific Corp. Sr. Note, 9.25% .......... 150,000 3/01/2005 149,250
Ametek Inc. Sr. Note, 7.20% ..................... 400,000 7/15/2008 367,016
Archibald Candy Corp. Sr. Sec. Note, 10.25% ..... 475,000 7/01/2004 277,875
Aurora Foods Inc. Sr. Sub. Note Series E, 8.75% . 350,000 7/01/2008 271,250
Ball Corp. Sr. Sub. Note, 8.25% ................. 850,000 8/01/2008 799,000
Beckman Industries Sr. Note, 7.45% .............. 400,000 3/04/2008 370,524
Bio-Rad Laboratories Inc., 11.625% .............. 415,000 2/15/2007 433,675
British Sky Broadcasting Group Note, 6.875% ..... 2,600,000 2/23/2009 2,256,982
BTI Telecom Corp. Sr. Note, 10.50% .............. 250,000 9/15/2007 145,000
Buckeye Cellulose Corp. Sr. Sub. Note, 9.25% .... 275,000 9/15/2008 279,125
Buckeye Technologies Inc. Sr. Sub. Note, 8.00% .. 500,000 10/15/2010 473,750
California Infrastructure Development Series
1997-A7, 6.42% ................................ 1,475,000 9/25/2008 1,454,188
Call-Net Enterprises Inc. Sr. Note, 9.375% ...... 1,000,000 5/15/2009 460,000
Celcaribe SA Sr. Sec. Note, 13.50% .............. 180,000 3/15/2004 137,700
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 54,375
Charter Communication Holding LLC Sr. Note,
8.625% ........................................ 550,000 4/01/2009 492,250
Cheasapeake Energy Sr. Note
Series B, 9.625% .............................. 1,125,000 5/01/2005 1,132,031
CK Witco Corp., 8.50% ........................... 450,000 3/15/2005 450,716
Clear Channel Communications, 7.25% ............. 1,850,000 9/15/2003 1,852,220
Coca-Cola Enterprises Inc. Deb., 6.95% .......... 1,000,000 11/15/2026 905,660
Columbia/HCA Healthcare Corp. Note, 8.12% ....... 1,625,000 8/04/2003 1,594,125
Crown Castle International Corp., 10.75% ........ 700,000 8/01/2011 714,000
Deutsche Telekom International, 8.00% ........... 1,450,000 6/15/2010 1,489,034
Dominion Resources Inc., 7.40% .................. 1,825,000 9/16/2002 1,845,531
Dominion Resources Inc., 7.625% ................. 1,100,000 7/15/2005 1,112,518
Drypers Corp. Series B Sr. Note, 10.25%[ ] ...... 750,000 6/15/2007 100,313
Duke Energy Co., 7.125% ......................... 1,825,000 9/03/2002 1,806,750
Duke Energy Co., 7.375% ......................... 1,100,000 3/01/2010 1,112,166
Dynegy Holdings Inc., 8.125% .................... 1,050,000 3/15/2005 1,062,579
Echostar DBS Corp. Sr. Note, 9.375% 1,250,000 2/01/2009 1,225,000
Econophone Inc. Sr. Note, 13.50% ................ 250,000 7/15/2007 156,250
Electronic Data Systems Corp., 7.125% ........... 1,050,000 10/15/2009 1,041,306
Elgar Holdings Inc. Sr. Sub. Note, 9.875% ....... 100,000 2/01/2008 54,500
Empire Gas Corp. Sr. Sec. Note, 12.875%[ ] ...... 275,000 7/15/2004 165,000
Envirosource Inc. Note, 9.75% ................... 1,000,000 6/15/2003 350,000
Exodus Communications Inc., 11.625%+ ............ 1,125,000 7/15/2010 1,130,625
Extended Stay America Inc. Sr. Sub. Note, 9.15% . 325,000 3/15/2008 308,750
First Wave Marine Inc. Sr. Note, 11.00% ......... 250,000 2/01/2008 146,563
Fisher Scientific International Inc. Sr. Sub.
Note, 9.00% ................................... 325,000 2/01/2008 299,000
Fort James Corp. Note, 6.23% .................... 825,000 3/15/2011 820,586
Four M Corp. Sr. Sec. Note Series B, 12.00% ..... 350,000 6/01/2006 333,375
Fresenius Medical Care Capital Trust, 9.00% ..... 1,025,000 12/01/2006 1,017,312
Frontier Corp. Sr. Note, 9.125% ................. 600,000 2/15/2006 543,000
Gentek Inc. Sr. Sub. Note, 11.00% ............... 675,000 8/01/2009 693,562
Global Crossing Holdings Ltd. Note, 9.50% ....... 800,000 11/15/2009 796,000
Globix Corp. Note, 12.50% ....................... 150,000 2/01/2010 108,000
GNI Group Inc. Sr. Note, 10.875%[ ] ............. 650,000 7/15/2005 52,000
Golden Ocean Group Ltd. Sr. Note, 10.00%[ ] ..... 750,000 8/31/2001 135,000
Great Central Mines Ltd. Sr. Note, 8.875% ....... 1,000,000 4/01/2008 880,000
GTE Corp. Note, 6.94% ........................... 1,100,000 4/15/2028 997,205
Gulf Canada Resources Ltd., 8.375% .............. 1,000,000 11/15/2005 1,000,000
Gulfmark Offshore Inc. Sr. Note, 8.75% .......... 300,000 6/01/2008 282,000
Harrahs Operating Inc. Sr. Sub. Note, 7.875% .... 750,000 12/15/2005 720,000
HCA Healthcare Co., 8.75% ....................... 250,000 9/01/2010 252,813
Healthsouth Corp., 7.00% ........................ 525,000 6/15/2008 419,071
Healthsouth Corp. Sr. Note, 6.875% .............. 175,000 6/15/2005 149,662
Henry Co. Sr. Note Series B, 10.00% ............. 200,000 4/15/2008 101,000
Hollinger International Publishing Inc. Sr. Sub.
Note, 9.25% ................................... 300,000 3/15/2007 300,000
Hollinger International Sr. Sub. Note, 9.25% .... 540,000 2/01/2006 540,675
Hollywood Casino Shreveport, 13.00% ............. 125,000 8/01/2006 134,688
Horizon PCS Inc., 0.00% to 9/30/2005, 14.00%
from 10/1/2005 to maturity+ ................... 600,000 10/01/2010 306,000
Huntsman ICI Chemicals LLC, 10.125% ............. 575,000 7/01/2009 563,500
Hyperion Telecommunication Inc. Sr. Sub. Note,
12.00% ........................................ 325,000 11/01/2007 211,250
Iaisi Healthcare Corp., 13.00% .................. 300,000 10/15/2009 294,000
Insight Midwest LP, 9.75% ....................... 775,000 10/01/2009 771,125
Intermedia Communications Inc. Sr. Note, 8.60% .. 350,000 6/01/2008 334,250
International Game Technology Sr. Note, 8.375% .. 550,000 5/15/2009 539,000
International Home Foods Inc., 10.375% .......... 525,000 11/01/2006 561,750
International Knife & Saw Inc. Sr. Sub. Note,
11.375% ....................................... 180,000 11/15/2006 95,625
International Paper Co., 8.00%+ ................. 2,200,000 7/08/2003 2,235,772
International Shipholding Corp. Sr. Note, 9.00% . 113,000 7/01/2003 113,000
International Shipholding Corp. Sr. Note Series
B, 7.75% ...................................... 350,000 10/15/2007 306,250
Intersil Corp. Sr. Note, 13.25% ................. 244,000 8/15/2009 283,040
Intertek Finance PLC Series B Sr. Sub. Note,
10.25% ........................................ 300,000 11/01/2006 106,500
J. Crew Group Inc. Sr. Deb., 0.00% to 10/14/2002,
13.125% from 10/15/2002 to maturity ........... 450,000 10/15/2008 276,750
J. Crew Operating Corp. Sr. Sub. Note, 10.375% .. 425,000 10/15/2007 381,969
J.B. Poindexter Inc. Sr. Note, 12.50% ........... 1,075,000 5/15/2004 1,005,125
J.H. Heafner Inc. Sr. Note Series D, 10.00% ..... 500,000 5/15/2008 175,000
K-III Communications Corp. Sr. Note, 8.50% ...... 1,500,000 2/01/2006 1,425,000
Kaiser Aluminum & Chemical Corp. Sub. Note,
12.75% ........................................ 1,100,000 2/01/2003 979,000
Lear Corp., 7.96% ............................... 975,000 5/15/2005 934,167
Level 3 Communications Inc., 11.00% ............. 315,000 3/15/2008 302,400
Lin Televison Corp., 8.375% ..................... 675,000 3/01/2008 646,312
Lockheed Martin Corp. Note, 7.95% ............... 3,000,000 12/01/2005 3,073,170
Loehmanns Inc. Sr. Note, 11.875%[ ] ............. 350,000 5/15/2003 87,500
Lucent Technologies Inc. Deb., 6.45% ............ 625,000 3/15/2029 521,875
Lyondell Chemical Co. Sr. Note, 9.625% .......... 700,000 5/01/2007 686,000
MGM Grand Inc., 9.75% ........................... 625,000 6/01/2007 645,313
MGM Mirage Inc., 8.50% .......................... 750,000 9/15/2010 750,435
Mohegan Tribal Gaming Authority Sr. Note, 8.125% 350,000 1/01/2006 341,250
NE Restaurant Inc. Sr. Note, 10.75% ............. 450,000 7/15/2008 353,250
New York State Power Authority Revenue Series D,
6.17% ......................................... 2,000,000 2/15/2001 1,997,060
Newpark Resources Inc. Sr. Sub. Note Series B,
8.625% ........................................ 700,000 12/15/2007 658,000
News America Inc. Sr. Deb., 7.125% .............. 925,000 4/08/2028 789,043
Nextel Communications, 9.375% ................... 1,150,000 11/15/2009 1,127,000
Nextel Partners Inc. Sr. Note, 11.00%+ .......... 500,000 3/15/2010 501,875
NEXTLINK Communications Inc., 10.50% ............ 450,000 12/01/2009 409,500
North Atlantic Trading Inc. Sr. Note, 11.00% .... 750,000 6/15/2004 641,250
North Point Communications, 12.875% ............. 575,000 2/15/2010 563,500
Ocean Energy Inc. Series B Sr. Note, 7.625% ..... 750,000 7/01/2005 725,625
Owens-Illinois Inc. Sr. Deb., 7.50% ............. 250,000 5/15/2010 211,363
Packaging Corp. America Sr. Sub. Note Series B,
9.625% ........................................ 1,000,000 4/01/2009 1,010,000
Packaging Resources Inc. Sr. Sec. Note, 11.625%[ ] 250,000 5/01/2003 176,250
Park Place Entertainment Corp., 9.375% .......... 650,000 2/15/2007 662,187
Peco Energy Transition Trust, 7.65% ............. 1,075,000 3/01/2010 1,109,088
Peco Energy Transport Trust Series 99-A Cl. A7,
6.13% ......................................... 1,150,000 3/01/2009 1,088,774
Pepsi Bottling Holdings Inc. Note, 5.625%+ ...... 1,950,000 2/17/2009 1,738,171
Pioneer Americans Acquisition Corp. Sr. Sec. Note
Series B, 9.25% ............................... 450,000 6/15/2007 202,500
Plains Resources Inc. Sr. Sub. Note, 10.25% ..... 150,000 3/15/2006 154,125
Plains Resources Inc. Sr. Sub. Note, 10.25%+ .... 150,000 3/15/2006 154,125
Playtex Family Products Corp. Sr. Sub. Note,
9.00% ......................................... 1,000,000 12/15/2003 991,250
Pogo Producing Co. Sr. Sub. Note, 8.75% ......... 150,000 5/15/2007 146,250
Pool Energy Services Co. Sr. Sub. Note, 8.625% .. 400,000 4/01/2008 404,500
Price Communications Wireless Inc. Sr. Sec. Note
Series B, 9.125% .............................. 625,000 12/15/2006 625,000
Prime Succession Inc. Sr. Sub. Note, 10.75%[ ] .. 150,000 8/15/2004 33,000
Primus Telecommunications Group Sr. Note, 11.75% 625,000 8/01/2004 390,625
Quest Diagnostics Inc. Sr. Sub. Note, 10.75% .... 500,000 12/15/2006 530,000
Qwest Capital Funding Inc., 7.90%+ .............. 1,775,000 8/15/2010 1,811,370
R. H. Donnelley Inc. Sr. Sub. Note, 9.125% ...... 650,000 6/01/2008 633,750
RBF Finance Co., 11.375% ........................ 300,000 3/15/2009 348,000
Rhythms Netconnections Inc. Note, 12.75% ........ 600,000 4/15/2009 372,000
Rose Hills Co. Sr. Sub. Note, 9.50% ............. 500,000 11/15/2004 335,000
RSL Communications Ltd. Sr. Note, 12.25% ........ 900,000 11/15/2006 270,000
Safety Kleen Corp. Sr. Note, 9.25%[ ] ........... 200,000 5/15/2009 6,250
Safety Kleen Services Inc. Sr. Sub. Note, 9.25%[ ] 575,000 6/01/2008 17,969
Safeway Inc. Note, 7.00% ........................ 1,775,000 9/15/2002 1,771,432
Scotts Co. Sr. Sub. Note, 8.625%+ ............... 250,000 1/15/2009 245,000
Seagull Energy Corp. Sr. Sub. Note, 8.625% ...... 350,000 8/01/2005 350,438
Service Master Co., 8.45% ....................... 575,000 4/15/2005 558,268
Sheffield Steel Corp. Note Series B, 11.50% ..... 350,000 12/01/2005 206,500
Simonds Industries Inc. Sr. Sub. Note, 10.25% ... 395,000 7/01/2008 317,975
Sprint Capital Corp., 7.625% .................... 1,075,000 6/10/2002 1,082,976
Startec Global Communications Sr. Note, 12.00% .. 650,000 5/15/2008 520,000
Stater Brothers Holdings Inc. Sr. Note, 10.75% .. 350,000 8/15/2006 295,750
Stericycle Inc. Sr. Sub. Note Series B, 12.375% . 160,000 11/15/2009 169,600
Tekni Plex Inc., 12.75%+ ........................ 750,000 6/15/2010 750,000
Telefonica Europe BV, 8.25% ..................... 200,000 9/15/2030 204,106
Tembec Industries Inc., 8.625% .................. 700,000 6/30/2009 682,500
Tenet Healthcare Corp., 9.25%+ .................. 150,000 9/01/2010 156,000
Tenet Healthcare Corp. Sr. Note, 8.00% .......... 495,000 1/15/2005 487,575
Terra Industries Sr. Note, 10.50% ............... 100,000 6/15/2005 61,750
Transwestern Publishing Co. LP Sr. Sub. Note
Series D, 9.625% .............................. 675,000 11/15/2007 676,687
Triad Hospitals Sr. Sub. Note, 11.00% 300,000 5/15/2009 307,500
Tyco International Group SA, 6.875% ............. 1,050,000 9/05/2002 1,047,375
U.S. West Capital Funding Inc., 6.375% .......... 1,100,000 7/15/2008 1,025,310
US Unwired Inc., 1.00% .......................... 960,000 11/01/2009 513,600
USA Waste Services Inc. Sr. Note, 6.50% ......... 775,000 12/15/2002 749,130
USA Waste Services Inc. Sr. Note, 7.00% ......... 200,000 10/01/2004 191,600
Viatel Inc. Sr. Note, 11.25% .................... 500,000 4/15/2008 255,000
Waste Management Inc., 7.70% .................... 650,000 10/01/2002 643,585
Westinghouse Air Brake Co. Sr. Note Series B2,
9.375% ........................................ 150,000 6/15/2005 145,500
Westpoint Stevens Inc., 7.875% .................. 2,000,000 6/15/2005 1,730,000
Williams Communications Corp., 10.70% ........... 375,000 10/01/2007 346,875
Williams Communications Group, 11.70%+ .......... 750,000 8/01/2008 714,375
Winstar Communicaions Inc., 12.50%+ ............. 375,000 4/15/2008 273,750
World Access Inc. Sr. Note, 13.25% .............. 500,000 1/15/2008 390,000
------------
103,396,648
------------
Total Fixed Income Securities (Cost $283,294,015) ........................................ 268,746,968
------------
CASH EQUIVALENTS 13.4%
American Express Credit Corp., 6.49% ............ 7,533,000 10/11/2000 7,533,000
American Express Credit Corp., 6.49% ............ 5,300,000 10/23/2000 5,300,000
Associates First Capital Corp., 6.49% ........... 14,720,000 10/16/2000 14,720,000
Ford Motor Credit Co., 6.53% .................... 4,952,000 10/05/2000 4,952,000
Ford Motor Credit Co., 6.51% .................... 6,420,000 10/06/2000 6,420,000
Ford Motor Credit Co., 6.57% .................... 11,120,000 10/06/2000 11,120,000
Ford Motor Credit Co., 6.47% .................... 7,326,000 10/19/2000 7,326,000
General Electric Capital Corp., 6.51% ........... 3,275,000 10/02/2000 3,275,000
General Electric Capital Corp., 6.46% ........... 21,103,000 10/03/2000 21,103,000
Verizon Network Funding Inc., 6.49%.............. 11,035,000 10/11/2000 11,015,106
------------
Total Cash Equivalents (Cost $92,764,106) ................................................ 92,764,106
------------
-----------------------------------------------------------------------------------------------------------------
SHARES
-----------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS 4.4%
State Street Navigator Securities Lending Prime
Portfolio ..................................... 30,247,104 30,247,104
------------
Total Short-Term Investments (Cost $30,247,104) .......................................... 30,247,104
------------
Total Investments (Cost $705,844,170) - 109.5% ........................................... 757,983,654
Cash and Other Assets, Less Liabilities - (9.5%) ......................................... (65,977,228)
------------
Net Assets - 100.0% ...................................................................... $692,006,426
============
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
Federal Income Tax Information (Note 1):
At September 30, 2000, the net unrealized appreciation of investments based on cost for
Federal income tax purposes of $706,723,281 was as follows:
Aggregate gross unrealized appreciation for all investments in which there is an excess
of value over tax cost ................................................................. $ 86,155,410
Aggregate gross unrealized depreciation for all investments in which there is an excess
of tax cost over value ................................................................. (34,895,037)
------------
$ 51,260,373
============
-----------------------------------------------------------------------------------------------------------------
ADR and GDR stand for American Depositary Receipt and Global Depositary Receipt, respectively, representing
ownership of foreign 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, 2000 were $702,377 and $74,997 (0.01% of net assets), respectively.
+ Security restricted in accordance with Rule 144A under the Securities Act of 1933, which allows for the resale
of such secur ities among certain qualified institutional buyers. The total cost and market value of Rule 144A
securities owned at September 30, 2000 were $12,769,078 and $12,133,517 (1.75% of net assets), respectively.
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, 2000, are as follows:
<CAPTION>
CONTRACT UNREALIZED DELIVERY
TOTAL VALUE PRICE APPRECIATION DATE
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Buy Euro, sell U.S. dollars 674,800 EUR 0.88315 EUR $ 406 10/02/00
Buy Euro, sell U.S. dollars 342,400 EUR 0.88240 EUR 462 10/03/00
Sell New Zealand dollars, buy U.S. dollars 3,688,000 NZD 0.46192 NZD 199,979 10/24/00
Sell New Zealand dollars, buy U.S. dollars 2,270,000 NZD 0.46201 NZD 123,305 10/24/00
Sell New Zealand dollars, buy U.S. dollars 4,141,000 NZD 0.45005 NZD 175,214 11/20/00
Sell New Zealand dollars, buy U.S. dollars 920,000 NZD 0.44903 NZD 37,989 11/20/00
--------
$537,355
========
Futures contracts open at September 30, 2000, are as follows:
<CAPTION>
EXPIRATION UNREALIZED
TYPE NOTIONAL COST MONTH DEPRECIATION
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
10 year U.S. Treasury Notes $1,700,000 December, 2000 $(10,478)
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, 2000 (Unaudited)
Investments, at value (Cost $705,844,170) (Note 1) ........ $757,983,654
Foreign currency, at value (Cost $450,205) ................ 450,205
Receivable for securities sold ............................ 17,990,341
Interest and dividends receivable ......................... 5,078,206
Receivable for fund shares sold ........................... 775,415
Receivable for open forward contracts ..................... 537,355
Other assets .............................................. 14,093
------------
782,829,269
LIABILITIES
Payable for securities purchased .......................... 58,902,164
Payable for collateral received on securities loaned ...... 30,247,104
Accrued management fee (Note 2) ........................... 420,758
Accrued distribution and service fees (Note 4) ............ 370,010
Payable for fund shares redeemed .......................... 301,895
Dividends payable ......................................... 103,152
Accrued transfer agent and shareholder services (Note 2) .. 57,983
Accrued trustees' fees (Note 2) ........................... 18,849
Payable for variation margin (Note 1) ..................... 1,594
Other accrued expenses .................................... 399,334
------------
90,822,843
------------
NET ASSETS $692,006,426
============
Net Assets consist of:
Undistributed net investment income ..................... $ 5,049,811
Unrealized appreciation of investments .................. 52,139,484
Unrealized depreciation of futures contracts ............ (10,478)
Unrealized appreciation of forward contracts and
foreign currency ...................................... 493,631
Accumulated net realized gain ........................... 22,705,728
Paid-in capital ......................................... 611,628,250
------------
$692,006,426
============
Net Asset Value and redemption price per share of
Class A shares ($289,037,864 / 27,350,853 shares) ....... $10.57
======
Maximum Offering Price per share of Class A
shares ($10.57 / .9425) ................................. $11.21
======
Net Asset Value and offering price per share of
Class B(1) shares ($46,660,914 / 4,439,885 shares)* ..... $10.51
======
Net Asset Value and offering price per share of
Class B shares ($314,399,180 / 29,865,936 shares)* ...... $10.53
======
Net Asset Value and offering price per share of
Class C shares ($14,667,459 / 1,389,935 shares)* ........ $10.55
======
Net Asset Value, offering price and redemption price
per share of Class S shares
($27,241,009 / 2,576,824 shares)* ....................... $10.57
======
-------------------------------------------------------------------------------
* 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, 2000 (Unaudited)
Interest, net of foreign taxes of $771 (Note 1) ............. $ 12,432,597
Dividends, net of foreign taxes of $52,485 .................. 2,115,464
------------
14,548,061
EXPENSES
Management fee (Note 2) ..................................... 2,558,577
Transfer agent and shareholder services (Note 2) ............ 850,769
Custodian fee ............................................... 217,038
Service fee - Class A (Note 4) .............................. 365,975
Distribution and service fees - Class B(1) (Note 4) ......... 202,753
Distribution and service fees - Class B (Note 4) ............ 1,607,455
Distribution and service fees - Class C (Note 4) ............ 77,550
Reports to shareholders ..................................... 52,338
Registration fees ........................................... 44,835
Audit fee ................................................... 19,581
Trustees' fees (Note 2) ..................................... 18,849
Legal fees .................................................. 5,490
Miscellaneous ............................................... 19,764
------------
6,040,974
Fees paid indirectly (Note 2) ............................... (26,537)
------------
6,014,437
------------
Net investment income ....................................... 8,533,624
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS, FOREIGN
CURRENCY, FORWARD CONTRACTS AND FUTURES CONTRACTS
Net realized gain on investments (Notes 1 and 3) ............ 25,522,427
Net realized loss on futures contracts (Note 1) ............. (452,461)
Net realized gain on forward contracts and foreign
currency (Note 1) ......................................... 463,607
------------
Total net realized gain ................................... 25,533,573
------------
Net unrealized depreciation of investments .................. (19,889,539)
Net unrealized appreciation of futures contracts ............ 241,044
Net unrealized depreciation of forward contracts and
foreign currency .......................................... (13,962)
------------
Total net unrealized depreciation ......................... (19,662,457)
------------
Net gain on investments, foreign currency and
forward contracts ......................................... 5,871,116
------------
Net increase in net assets resulting from operations ........ $ 14,404,740
============
The accompanying notes are an integral part of the financial statements.
<PAGE>
STATE STREET RESEARCH STRATEGIC GROWTH & INCOME FUND
<TABLE>
-------------------------------------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
-------------------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED SEPTEMBER 30, 2000
MARCH 31, 2000 (UNAUDITED)
-------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
Operations:
Net investment income ....................................... $ 12,997,838 $ 8,533,624
Net realized gain on investments, foreign currency, forward
contracts and futures contracts .......................... 82,760,639 25,533,573
Net unrealized appreciation (depreciation) of investments,
foreign currency, forward contracts and futures contracts 12,249,100 (19,662,457)
------------- -------------
Net increase resulting from operations ...................... 108,007,577 14,404,740
------------- -------------
Dividends from net investment income:
Class A ................................................... (6,002,303) (2,767,813)
Class B(1) ................................................ (346,435) (271,077)
Class B ................................................... (4,035,270) (1,861,672)
Class C ................................................... (210,626) (87,801)
Class S ................................................... (443,039) (277,192)
------------- -------------
(11,037,673) (5,265,555)
------------- -------------
Distributions from capital gains:
Class A ................................................... (5,639,218) (31,117,734)
Class B(1) ................................................ (501,338) (4,067,757)
Class B ................................................... (6,456,349) (34,536,703)
Class C ................................................... (337,772) (1,725,534)
Class S ................................................... (452,326) (2,626,549)
------------- -------------
(13,387,003) (74,074,277)
------------- -------------
Net increase (decrease) from fund share transactions (Note 5) (83,118,748) 37,249,960
------------- -------------
Total increase (decrease) in net assets ..................... 464,153 (27,685,132)
NET ASSETS
Beginning of period ......................................... 719,227,405 719,691,558
------------- -------------
End of period (including undistributed net investment
income of $1,781,742 and $5,049,811, respectively) ........ $ 719,691,558 $ 692,006,426
============= =============
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, 2000
NOTE 1
State Street Research Strategic Growth & Income Fund (the "Fund"), formerly
State Street Research Managed Assets, 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, 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. Class A shares are subject to an initial
sales charge of up to 5.75% and a service fee equal to 0.25% of average daily
net assets. Class B(1) shares are offered only to current shareholders through
reinvestment of dividends and distributions or through exchanges from existing
Class B accounts of State Street Research funds. Class B(1) and Class B pay
annual service and distribution fees of 1.00% and both classes automatically
convert into Class A shares (which pay lower ongoing expenses) at the end of
eight years. Class B(1) shares are subject to a contingent deferred sales charge
on certain redemptions made within six years of purchase. Class B shares are
subject to a contingent deferred sales charge on certain redemptions made within
five years of purchase. Class C shares are subject to a contingent deferred
sales charge of 1.00% on any shares redeemed within one year of their purchase.
Class C shares also pay annual service and distribution fees of 1.00%. Class S
shares are only offered through certain retirement accounts, advisory accounts
of State Street Research & Management Company (the "Adviser"), an indirect
wholly owned subsidiary of MetLife, Inc. ("MetLife"), and special programs. No
sales charge is imposed at the time of purchase or redemption of Class S shares.
Class S shares do not pay any service or distribution fees. The Fund's expenses
are borne pro-rata by each class, except that each class bears expenses, and has
exclusive voting rights with respect to provisions of the plans of distribution,
related specifically to that class. The Trustees declare separate dividends on
each class of shares.
The following significant accounting policies are consistently followed by the
Fund in preparing its financial statements, and such policies are in conformity
with generally accepted accounting principles for investment companies.
A. INVESTMENT VALUATION
Values for listed 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 gains 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, 2000, the value of the securities loaned and the value of collateral were
$30,188,182 and $31,931,969 (including $30,247,104 of cash collateral),
respectively. During the six months ended September 30, 2000, income from
securities lending amounted to $325,471 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, 2000, the fees pursuant to
such agreement amounted to $2,558,577.
State Street Research Service Center, a division of State Street Research
Investment Services, Inc., the Trust's principal underwriter (the
"Distributor"), an indirect wholly owned subsidiary of MetLife, provides certain
shareholder services to the Fund such as responding to inquiries and
instructions from investors with respect to the purchase and redemption of
shares of the Fund. In addition, MetLife 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, 2000, the amount of such
expenses was $321,444.
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, 2000 the Fund's
transfer agent fees were reduced by $26,537 under this arrangement.
The fees of the Trustees not currently affiliated with the Adviser amounted to
$18,849 during the six months ended September 30, 2000.
NOTE 3
For the six months ended September 30, 2000, purchases and sales of securities,
exclusive of short-term obligations and forward foreign currency exchange
contracts, aggregated $544,302,365, and $568,441,878 (including $246,468,412 and
$261,701,436 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, 2000, fees pursuant to such plans
amounted to $365,975, $202,753, $1,607,455 and $77,550 for Class A, Class B(1),
Class B and Class C shares, respectively.
The Fund has been informed that the Distributor and MetLife Securities, Inc., a
wholly owned subsidiary of MetLife, earned initial sales charges aggregating
$67,829 and $201,587, respectively, on sales of Class A shares of the Fund
during the six months ended September 30, 2000, and that MetLife Securities,
Inc. earned commissions aggregating $264,440 and $5,309 on sales of Class B(1)
and Class B shares, and the Distributor collected contingent deferred sales
charges aggregating $58,673, $227,861 and $4,970 on redemptions of Class B(1),
Class B and Class C shares, respectively, during the same period.
NOTE 5
The Trustees have the authority to issue an unlimited number of shares of
beneficial interest, $.001 par value per share.
These transactions break down by share class as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED SEPTEMBER 30, 2000
MARCH 31, 2000 (UNAUDITED)
---------------------------------- ----------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
-------------------------------- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold .......................... 2,085,702 $ 22,724,696 1,443,858 $ 15,680,566
Issued upon reinvestment of:
Dividends from net investment income 536,778 5,849,521 261,835 2,727,476
Distributions from capital gains ... 507,119 5,498,604 3,003,903 30,159,198
Shares redeemed ...................... (6,860,916) (74,711,926) (3,406,038) (36,663,543)
----------- ------------ ----------- ------------
Net increase (decrease) .............. (3,731,317) $(40,639,105) 1,303,558 $ 11,903,697
=========== ============ =========== ============
<CAPTION>
CLASS B(1) SHARES AMOUNT SHARES AMOUNT
-------------------------------- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold .......................... 2,460,931 $ 26,554,583 1,159,385 $ 12,375,675
Issued upon reinvestment of:
Dividends from net investment income 30,143 326,960 25,324 262,870
Distributions from capital gains ... 45,856 495,228 401,229 3,956,108
Shares redeemed ...................... (431,736) (4,713,993) (244,299) (2,596,979)
----------- ------------ ----------- ------------
Net increase ......................... 2,105,194 $ 22,662,778 1,341,639 $ 13,997,674
=========== ============ =========== ============
<CAPTION>
CLASS B SHARES AMOUNT SHARES AMOUNT
-------------------------------- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold .......................... 540,623 $ 5,895,812 282,013 $ 3,037,087
Issued upon reinvestment of:
Dividends from net investment income 361,328 3,908,090 174,098 1,807,072
Distributions from capital gains ... 582,763 6,293,003 3,370,604 33,672,338
Shares redeemed ...................... (7,481,193) (81,084,212) (3,050,530) (32,472,961)
----------- ------------ ----------- ------------
Net increase (decrease) .............. (5,996,479) $(64,987,307) 776,185 $ 6,043,536
=========== ============ =========== ============
<CAPTION>
CLASS C SHARES AMOUNT SHARES AMOUNT
-------------------------------- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold .......................... 161,261 $ 1,747,522 52,938 $ 557,493
Issued upon reinvestment of:
Dividends from net investment income 15,283 165,634 6,780 70,602
Distributions from capital gains ... 28,548 308,824 142,195 1,424,798
Shares redeemed ...................... (717,519) (7,776,036) (276,267) (2,917,998)
----------- ------------ ----------- ------------
Net decrease ......................... (512,427) $ (5,554,056) (74,354) $ (865,105)
=========== ============ =========== ============
<CAPTION>
CLASS S SHARES AMOUNT SHARES AMOUNT
-------------------------------- -------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold .......................... 1,462,967 $ 15,554,370 656,320 $ 7,073,354
Issued upon reinvestment of:
Dividends from net investment income 40,271 441,422 26,517 276,851
Distributions from capital gains ... 41,650 451,884 261,201 2,625,069
Shares redeemed ...................... (1,006,152) (11,048,734) (362,028) (3,805,116)
----------- ------------ ----------- ------------
Net increase ......................... 538,736 $ 5,398,942 582,010 $ 6,170,158
=========== ============ =========== ============
</TABLE>
<PAGE>
STATE STREET RESEARCH STRATEGIC GROWTH & INCOME FUND
<TABLE>
---------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
---------------------------------------------------------------------------------------------------------------------------------
For a share outstanding throughout each period:
<CAPTION>
CLASS A
------------------------------------------------------------------------------------
YEARS ENDED MARCH 31 SIX MONTHS ENDED
------------------------------------------------------------------ SEPTEMBER 30, 2000
1996(a) 1997(a) 1998(a) 1999(a) 2000(a) (UNAUDITED)(a)
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD($) 8.76 10.29 10.40 11.60 10.40 11.69
----- ----- ----- ----- ----- -----
Net investment income ($)* 0.23 0.21 0.22 0.25 0.24 0.15
Net realized and unrealized gain (loss) on
investments, foreign currency, forward
contracts and futures contracts ($) 1.72 1.05 2.61 (0.35) 1.48 0.05
----- ----- ----- ----- ----- -----
TOTAL FROM INVESTMENT OPERATIONS($) 1.95 1.26 2.83 (0.10) 1.72 0.20
----- ----- ----- ----- ----- -----
Dividends from net investment income ($) (0.26) (0.28) (0.23) (0.22) (0.22) (0.10)
Distributions from capital gains ($) (0.16) (0.87) (1.40) (0.87) (0.21) (1.22)
Distribution in excess of capital gains ($) -- -- -- (0.01) -- --
----- ----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS($) (0.42) (1.15) (1.63) (1.10) (0.43) (1.32)
----- ----- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD ($) 10.29 10.40 11.60 10.40 11.69 10.57
===== ===== ===== ===== ===== =====
Total return(b) (%) 22.55 12.49 29.62 (0.66) 16.88 2.36(c)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period ($ thousands) 207,713 244,348 330,421 309,752 304,400 289,038
Expense ratio (%)* 1.25 1.25 1.28 1.28 1.30 1.34(d)
Expense ratio after expense reductions(%)* 1.25 1.25 1.28 1.27 1.29 1.33(d)
Ratio of net investment income to average
net assets (%)* 2.34 2.02 1.96 2.32 2.23 2.85(d)
Portfolio turnover rate (%) 109.20 108.41 133.30 136.37 122.57 82.06
*Reflects voluntary reduction of expenses
per share of these amounts ($) 0.02 0.01 0.00 -- -- --
<CAPTION>
CLASS B(1)
--------------------------------------------------------------
YEARS ENDED MARCH 31 SIX MONTHS ENDED
---------------------------------- SEPTEMBER 30, 2000
1999(a)(e) 2000(a) (UNAUDITED)(a)
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ($) 10.35 10.36 11.63
----- ----- -----
Net investment income ($) 0.04 0.17 0.11
Net realized and unrealized gain on investments, foreign currency,
forward contracts and futures contracts ($) 0.01 1.45 0.06
----- ----- -----
TOTAL FROM INVESTMENT OPERATIONS ($) 0.05 1.62 0.17
----- ----- -----
Dividends from net investment income ($) (0.04) (0.14) (0.07)
Distributions from capital gains ($) -- (0.21) (1.22)
----- ----- -----
TOTAL DISTRIBUTIONS ($) (0.04) (0.35) (1.29)
----- ----- -----
NET ASSET VALUE, END OF PERIOD ($) 10.36 11.63 10.51
===== ===== =====
Total return(b) (%) 0.51(c) 15.93 2.03(c)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period ($ thousands) 10,289 36,045 46,661
Expense ratio (%) 2.08(d) 2.05 2.09(d)
Expense ratio after expense reductions (%) 2.08(d) 2.04 2.08(d)
Ratio of net investment income to average net assets (%) 1.89(d) 1.48 2.11(d)
Portfolio turnover rate (%) 136.37 122.57 82.06
---------------------------------------------------------------------------------------------------------------------------------
(a) Per-share figures have been calcuated using the average shares method.
(b) Does not reflect any front-end or contingent deferred sales charge.
(c) Not annualized.
(d) Annualized.
(e) January 1, 1999 (commencement of share class) to March 31, 1999.
</TABLE>
<PAGE>
STATE STREET RESEARCH STRATEGIC GROWTH & INCOME FUND
<TABLE>
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS B
-----------------------------------------------------------------------------------
YEARS ENDED MARCH 31 SIX MONTHS ENDED
------------------------------------------------------------------ SEPTEMBER 30, 2000
1996(a) 1997(a) 1998(a) 1999(a) 2000(a) (UNAUDITED)(a)
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD($) 8.74 10.25 10.37 11.55 10.36 11.65
----- ----- ----- ----- ----- -----
Net investment income ($)* 0.15 0.13 0.13 0.17 0.16 0.11
Net realized and unrealized gain (loss)
on investments, foreign currency,
forward contracts and futures contracts ($) 1.71 1.06 2.59 (0.34) 1.47 0.05
----- ----- ----- ----- ----- -----
TOTAL FROM INVESTMENT OPERATIONS ($) 1.86 1.19 2.72 (0.17) 1.63 0.16
----- ----- ----- ----- ----- -----
Dividends from net investment income ($) (0.19) (0.20) (0.14) (0.14) (0.13) (0.06)
Distributions from capital gains ($) (0.16) (0.87) (1.40) (0.87) (0.21) (1.22)
Distribution in excess of capital gains ($) -- -- -- (0.01) -- --
----- ----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS($) (0.35) (1.07) (1.54) (1.02) (0.34) (1.28)
----- ----- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD ($) 10.25 10.37 11.55 10.36 11.65 10.53
===== ===== ===== ===== ===== =====
Total return(b) (%) 21.48 11.76 28.53 (1.31) 15.98 2.00(c)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period ($ thousands) 193,272 251,518 368,975 363,517 338,838 314,399
Expense ratio (%)* 2.00 2.00 2.03 2.03 2.05 2.09(d)
Expense ratio after expense reductions(%)* 2.00 2.00 2.03 2.02 2.04 2.08(d)
Ratio of net investment income to average
net assets (%)* 1.59 1.27 1.21 1.57 1.48 2.10(d)
Portfolio turnover rate (%) 109.20 108.41 133.30 136.37 122.57 82.06
*Reflects voluntary reduction of
expenses per share of these amounts($) 0.02 0.01 0.00 -- -- --
<CAPTION>
CLASS C
------------------------------------------------------------------------------------
YEARS ENDED MARCH 31 SIX MONTHS ENDED
------------------------------------------------------------------ SEPTEMBER 30, 2000
1996(a) 1997(a) 1998(a) 1999(a) 2000(a) (UNAUDITED)(a)
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD($) 8.75 10.27 10.38 11.57 10.38 11.67
----- ----- ----- ----- ----- -----
Net investment income ($)* 0.15 0.13 0.13 0.17 0.16 0.11
Net realized and unrealized gain (loss) on
investments, foreign currency, forward
contracts and futures contracts ($) 1.72 1.05 2.60 (0.34) 1.47 0.05
----- ----- ----- ----- ----- -----
TOTAL FROM INVESTMENT OPERATIONS ($) 1.87 1.18 2.73 (0.17) 1.63 0.16
----- ----- ----- ----- ----- -----
Dividends from net investment income ($) (0.19) (0.20) (0.14) (0.14) (0.13) (0.06)
Distributions from capital gains ($) (0.16) (0.87) (1.40) (0.87) (0.21) (1.22)
Distribution in excess of capital gains ($) -- -- -- (0.01) -- --
----- ----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS($) (0.35) (1.07) (1.54) (1.02) (0.34) (1.28)
----- ----- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD ($) 10.27 10.38 11.57 10.38 11.67 10.55
===== ===== ===== ===== ===== =====
Total return(b) (%) 21.54 11.64 28.59 (1.33) 15.93 1.98(c)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period ($ thousands) 13,061 17,485 23,807 20,519 17,093 14,667
Expense ratio (%)* 2.00 2.00 2.03 2.03 2.05 2.09(d)
Expense ratio after expense reductions(%)* 2.00 2.00 2.03 2.02 2.04 2.08(d)
Ratio of net investment income to average
net assets (%)* 1.60 1.26 1.21 1.56 1.47 2.10(d)
Portfolio turnover rate (%) 109.20 108.41 133.30 136.37 122.57 82.06
*Reflects voluntary reduction of
expenses per shareof these amounts ($) 0.02 0.01 0.00 -- -- --
-----------------------------------------------------------------------------------------------------------------------------------
(a) Per-share figures have been calcuated using the average shares method.
(b) Does not reflect any front-end or contingent deferred sales charge.
(c) Not annualized.
(d) Annualized.
</TABLE>
<PAGE>
STATE STREET RESEARCH STRATEGIC GROWTH & INCOME FUND
<TABLE>
---------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (cont'd)
---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS S
------------------------------------------------------------------------------------
YEARS ENDED MARCH 31 SIX MONTHS ENDED
------------------------------------------------------------------ SEPTEMBER 30, 2000
1996(a) 1997(a) 1998(a) 1999(a) 2000(a) (UNAUDITED)(a)
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ($) 8.77 10.29 10.40 11.60 10.40 11.69
----- ----- ----- ----- ----- -----
Net investment income ($)* 0.25 0.24 0.25 0.27 0.29 0.17
Net realized and unrealized gain (loss)
on investments, foreign currency,
forward contracts and futures contracts ($) 1.71 1.05 2.60 (0.34) 1.46 0.04
----- ----- ----- ----- ----- -----
TOTAL FROM INVESTMENT OPERATIONS ($) 1.96 1.29 2.85 (0.07) 1.75 0.21
----- ----- ----- ----- ----- -----
Dividends from net investment income ($) (0.28) (0.31) (0.25) (0.25) (0.25) (0.11)
Distributions from capital gains ($) (0.16) (0.87) (1.40) (0.87) (0.21) (1.22)
Distribution in excess of capital gains ($) -- -- -- (0.01) -- --
----- ----- ----- ----- ----- -----
TOTAL DISTRIBUTIONS($) (0.44) (1.18) (1.65) (1.13) (0.46) (1.33)
----- ----- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD ($) 10.29 10.40 11.60 10.40 11.69 10.57
===== ===== ===== ===== ===== =====
Total return(b) (%) 22.70 12.77 29.93 (0.41) 17.17 2.47(c)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period ($ thousands) 19,548 21,263 26,648 15,149 23,316 27,241
Expense ratio (%)* 1.00 1.00 1.03 1.03 1.05 1.09(d)
Expense ratio after expense reductions (%)* 1.00 1.00 1.03 1.02 1.04 1.08(d)
Ratio of net investment income to average
net assets (%)* 2.59 2.26 2.21 2.53 2.62 3.05(d)
Portfolio turnover rate (%) 109.20 108.41 133.30 136.37 122.57 82.06
*Reflects voluntary reduction of
expenses per share of these amounts ($) 0.02 0.01 0.00 -- -- --
-----------------------------------------------------------------------------------------------------------------------------------
(a) Per-share figures have been calcuated using the average shares method.
(b) Does not reflect any front-end or contingent deferred sales charge.
(c) 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"), a series of State Street Research Income Trust, was
convened on September 28, 2000 ("Meeting"). The results of the Meeting are set
forth below.
<TABLE>
<CAPTION>
VOTES (MILLIONS OF SHARES)
-------------------------------------------
ACTION ON PROPOSAL FOR AGAINST ABSTAIN
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. CLASS A SHARES
The Fund's current Rule 12b-1 Distribution Plan was amended to increase the amount that
may be expended for the distribution of Class A shares ................................. 12.7 1.7 1.2
CLASS B SHARES
The Fund's current Rule 12b-1 Distribution Plan was amended to increase the amount that
may be expended for the distribution of Class A shares ................................. 15.3 1.8 1.7
CLASS B(1) SHARES
The Fund's current Rule 12b-1 Distribution Plan was amended to increase the amount that
may be expended for the distribution of Class A shares ................................. 1.7 0.2 0.2
<CAPTION>
VOTES (MILLIONS OF SHARES)
(COMBINED FOR ALL CLASSES OF THE FUND)
---------------------------------------------
FOR AGAINST ABSTAIN
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
2. The fundamental policy on diversification of investments was amended ................... 33.3 2.1 2.9
</TABLE>
<PAGE>
STATE STREET RESEARCH STRATEGIC GROWTH & INCOME FUND
<TABLE>
------------------------------------------------------------------------------------------------------------
FUND INFORMATION, OFFICERS AND TRUSTEES OF STATE STREET RESEARCH INCOME TRUST
------------------------------------------------------------------------------------------------------------
<CAPTION>
FUND INFORMATION OFFICERS TRUSTEES
<S> <C> <C>
STATE STREET RESEARCH RICHARD S. DAVIS RICHARD S. DAVIS
STRATEGIC GROWTH & INCOME FUND Chairman of the Board, Chairman of the Board
One Financial Center President and Chief Executive President, Chief Executive
Boston, MA 02111 Officer Officer and Director,
State Street Research
INVESTMENT ADVISER JOHN H. KALLIS & Management Company
State Street Research & Vice President
Management Company BRUCE R. BOND
One Financial Center THOMAS A. SHIVELY Former Chairman of the Board,
Boston, MA 02111 Vice President Chief Executive Officer and
President, PictureTel Corporation
DISTRIBUTOR JAMES M. WEISS
State Street Research Vice President STEVE A. GARBAN
Investment Services, Inc. Former Senior Vice President
One Financial Center GERARD P. MAUS for Finance and Operations and
Boston, MA 02111 Treasurer Treasurer, The Pennsylvania
State University
SHAREHOLDER SERVICES DOUGLAS A. ROMICH
State Street Research Assistant Treasurer DEAN O. MORTON
Service Center Former Executive Vice President,
P.O. Box 8408 FRANCIS J. MCNAMARA, III Chief Operating Officer and
Boston, MA 02266-8408 Secretary and General Counsel Director, Hewlett-Packard Company
1-87-SSR-FUNDS (1-877-773-8637)
DARMAN A. WING SUSAN M. PHILLIPS
CUSTODIAN Assistant Secretary and Dean, School of Business and
State Street Bank and Assistant General Counsel Public Management, George
Trust Company Washington University; former
225 Franklin Street SUSAN E. BREEN Member of the Board of Governors
Boston, MA 02110 Assistant Secretary of the Federal Reserve System and
Chairman and Commissioner of
LEGAL COUNSEL AMY L. SIMMONS the Commodity Futures Trading
Goodwin, Procter & Hoar LLP Assistant Secretary Commission
Exchange Place
Boston, MA 02109 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>
STATE STREET RESEARCH STRATEGIC GROWTH & INCOME FUND ------------
One Financial Center Bulk Rate
Boston, MA 02111 U.S. Postage
PAID
Canton, MA
Permit #313
------------
QUESTIONS? COMMENTS?
E-MAIL us at:
[email protected]
INTERNET site:
www.statestreetresearch.com
CALL us toll-free at 1-87-SSR-FUNDS (1-877-773-8637) or
[hearing-impaired 1-800-676-7876]
[Chinese and Spanish-speaking 1-888-638-3193]
WRITE us at:
State Street Research
Service Center
P.O. Box 8408
Boston, MA 02266-8408
[Logo] STATE STREET RESEARCH
(c)2000 State Street Research Investment Services, Inc.,
One Financial Center, Boston, MA 02111
This report is prepared for the general information of current shareholders.
This publication must be preceded or accompanied by a current State Street
Research Strategic Growth & Income Fund prospectus. The prospectus contains more
complete information, including sales charges and expenses. Please read the
prospectus carefully before investing.
When used after December 31, 2000, this report must be accompanied by a current
Quarterly Performance Update.
Portfolio changes should not be considered recommendations for action by
individual investors.
The Dalbar awards recognize quality shareholder service and should not be
considered a rating of fund performance. The survey included mutual fund
complexes that volunteered or were otherwise selected to participate and was not
industry-wide.
CONTROL NUMBER: (exp1101) SSR-LD SGI-2659-1100
