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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-04559
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State Street Research Income Trust
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(Exact name of registrant as specified in charter)
One Financial Center, Boston, MA 02111
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(Address of principal executive offices) (Zip code)
Francis J. McNamara, III, Secretary
State Street Research
One Financial Center, Boston, MA 02111
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(Name and address of agent for service)
Registrant's telephone number, including area code: 617-357-1200
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Date of fiscal year end: 03/31/04
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Date of reporting period: 04/01/03 - 09/30/03
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
ITEM 1 (REPORT TO SHAREHOLDERS): The Semiannual Report is attached.
[BACKGROUND GRAPHIC]
[LOGO] STATE STREET RESEARCH
[PHOTO]
High Income Fund
September 30, 2003
Semiannual Report to Shareholders
Table of Contents
3 Performance Discussion
4 Portfolio Holdings
8 Financial Statements
12 Financial Highlights
14 Trustees and Officers
FROM THE CHAIRMAN
State Street Research
Optimism in the Economy
Economic news brightened and investors responded with renewed enthusiasm for the
stock market during the six-month period that ended September 30, 2003. Low
short-term interest rates, a significant income tax cut and higher government
spending worked together to boost economic growth to its highest level in four
years. Housing sales remained strong, although auto sales slipped late in the
period. Corporate profits staged a solid rebound. Employment was the only
holdout, as the jobless rate remained stubbornly high.
Stocks Move Higher on Positive Economic News
Stocks staged an impressive rally in the second quarter of 2003 as economic news
brightened. Technology stocks were the strongest performers. Consumer stocks
also gained ground as spending remained strong. In general, small- and mid-cap
stocks outperformed large-caps, and growth stocks significantly outpaced value.
Although all stock market indexes reported solid gains for the period, they were
trimmed in the final weeks of September after news that consumer confidence had
dropped.
Bonds Retreat as Interest Rates Rise
Investor confidence in the economy translated into solid gains for High-Yield
bonds, which along with Emerging Market bonds, were the period's strongest
performers. U.S. Treasury bonds eked out a positive return, but that masked a
sharp decline in the second half of the period, as interest rates rose above
4.0% before settling back to 3.93% at the end of the period. When interest rates
rise, bond prices decline. Mortgage bonds lagged as the result of higher
mortgage prepayment activity in the spring and municipal bonds were hurt by
concerns over state budget deficits and revenue shortfalls.
Looking Ahead
After three years of disappointing returns, a revival for riskier segments of
both the stock and bond markets took many investors by surprise. Yet, it
provided an excellent reminder that the best way to take advantage of the
market's strongest gains is to own a diversified portfolio of stocks and bonds.
We hope you will take time to talk to your financial advisor about
diversification. And as always, we look forward to helping you achieve your
long-term financial goals with State Street Research Funds.
Sincerely,
/s/ Richard S. Davis
Richard S. Davis
Chairman
September 30, 2003
- --------------------------------------------------------------------------------
A Special Message on Recent News
Recent articles in the press have highlighted investigations into after-hours
trading and frequent-trading practices in the mutual fund industry. These are
serious matters, and we want to assure you that State Street Research is
committed to maintaining full compliance with all legal requirements and ethical
standards regarding these and other mutual fund trading practices. In fact, our
mutual fund trading processes are designed to prevent these types of activities
from taking place, and we are committed to maintaining their integrity. Our
trade processing procedures carefully track the forward-pricing requirements
contained in federal regulations and in our funds' prospectuses. We closely
monitor trading in our funds and take measures to prevent market timing whenever
it is identified. Furthermore, we do not enter into any special arrangements
that would permit investors to avoid the forward-pricing or market-timing
provisions of our prospectuses. In recent weeks, we have carefully reviewed our
trading policies, procedures and operations. In addition, our firm recommended
early on that the funds' Trustees engage an independent accounting firm, which
has been reviewing trading issues on behalf of our funds' Audit Committee. While
there is always more work that can be done, I am pleased to report that we
believe our processes are working effectively, based on our preliminary
findings. We understand that our relationship with our shareholders is based on
trust, and we are committed to acting in the best interests of our shareholders
at all times.
- --------------------------------------------------------------------------------
2
PERFORMANCE
Discussion as of September 30, 2003
How State Street Research High Income Fund Performed
State Street Research High Income Fund returned 8.15% for the six-month period
ended September 30, 2003.(1) That was less than its peer group, the Lipper High
Current Yield Funds Average, which returned 11.34% for the same period.(2) The
fund also underperformed the CSFB Global High Yield II Index, which returned
13.07%.(3)
Reasons for the Fund's Performance
Strong corporate earnings and solid economic growth helped lift the high-yield
bond markets during the period. In fact, High-Yield was the top-performing bond
sector for the six-month period. In general, investors favored lower-quality,
higher-risk, CCC-rated securities. As a result of our focus on higher-quality B-
and BB-rated securities, the fund underperformed both the index and its peer
group. Our decision to overweight the fund's exposure to Aerospace/Defense and
Transportation bonds translated into positive performance. In contrast,
underweights in Mobile Communications and Financials--two of the top-performing
industries in the index--along with an overweight in the lagging chemicals
industry, detracted from the fund's return relative to its benchmark.
Looking Ahead
The yield spread between Treasuries and High-Yield bonds has narrowed
significantly over the past several months. Yet, we believe that High-Yield
issues have the potential for additional gains if the economy improves--which we
think is increasingly more likely--and corporations continue to improve their
financial conditions. Consumer spending is expected to remain strong and
business investment has finally shown signs of improvement. Although we are
cautious with respect to the direction of interest rates, the Fed has gone on
record saying that it will keep short-term interest rates at their current low
level until doubts about the economy have been resolved.
As a result of our favorable outlook on the economy, we moved down the quality
curve and increased our exposure to lower-quality securities. However, the fund
remains focused on higher-quality issues in keeping with our desire to manage
risk.
Quality Distribution
- --------------------------------------------------------------------------------
% of fund net assets
A 1.0%
- --------------------------------
B 59.0%
- --------------------------------
BB 30.0%
- --------------------------------
BBB 2.0%
- --------------------------------
CCC 6.0%
- --------------------------------
Cash 2.0%
- --------------------------------
Quality Ratings based on those provided by Standard & Poor's Corp. and/or
equivalent ratings by Moody's Investors Services, Inc.
Top 5 Industries
- --------------------------------------------------------------------------------
% of fund net assets
Chemicals 8.0%
- -------------------------------------
Manufacturing 7.5%
- -------------------------------------
Energy 7.2%
- -------------------------------------
Services 7.1%
- -------------------------------------
Consumer Products 6.6%
- -------------------------------------
Total 36.4%
- -------------------------------------
Because financial markets and mutual fund strategies are constantly evolving, it
is possible that the fund's holdings, market stance, outlook for various
industries or securities and other matters discussed in this report have changed
since this information was prepared. Portfolio changes should not be considered
recommendations for action by individual investors.
Performance
- --------------------------------------------------------------------------------
Fund average annual total return as of 9/30/03(4,6)
(does not reflect sales charge)
1 Year 5 Years 10 Years
Class A 17.49% -1.44% 3.55%
- ------------------------------------------------
Class B(1) 16.52% -2.19% 2.76%
- ------------------------------------------------
Class B 16.46% -2.15% 2.78%
- ------------------------------------------------
Class C 16.45% -2.19% 2.75%
- ------------------------------------------------
Class S 17.67% -1.22% 3.78%
- ------------------------------------------------
Fund average annual total return as of 9/30/03(4,5,6)
(at maximum applicable sales charge)
1 Year 5 Years 10 Years
Class A 12.20% -2.34% 3.08%
- ------------------------------------------------
Class B(1) 11.52% -2.44% 2.76%
- ------------------------------------------------
Class B 11.46% -2.40% 2.78%
- ------------------------------------------------
Class C 15.45% -2.19% 2.75%
- ------------------------------------------------
Class S 17.67% -1.22% 3.78%
- ------------------------------------------------
(1) Class A shares; does not reflect sales charge.
(2) The Lipper High Current Yield Funds Average shows performance of a category
of mutual funds with similar goals. The Lipper average shows you how well
the fund has done compared with competing funds.
(3) The CSFB Global High Yield II Index mirrors the public high-yield debt
market, representing a total of 250 different sectors within this market.
The index is unmanaged and does not take transaction charges into
consideration. It is not possible to invest directly in the index.
(4) 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
returns shown do not reflect the deduction of taxes that a shareholder
would pay on fund distributions or the redemption of fund shares.
High-yield, high-risk debt securities reflect a greater possibility that
adverse changes in an issuer's business or financial conditions may impair
the issuer's ability to pay principal and interest on the security.
(5) 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. Performance for Class B shares reflects
Class B share performance through December 31, 1998, and Class B(1)
performance thereafter. If the returns for Class B(1) shares had reflected
their current service/distribution (Rule 12b-1) fees for the entire period,
these returns would have been lower.
(6) Class S shares, offered without sales charge, are available through certain
employee benefit plans and special programs.
State Street Research High Income Fund 3
PORTFOLIO
Holdings
September 30, 2003 (unaudited)
Principal Maturity
Amount Date Value
- --------------------------------------------------------------------------------
BONDS 99.1%
Aerospace/Defense 2.9%
Aviall Inc. Sr. Note, 7.625%+ ...... $ 2,350,000 7/01/2011 $ 2,408,750
Hexcel Corp. Note, 9.875% .......... 1,750,000 10/01/2008 1,929,375
Hexcel Corp. Sr. Sub. Note,
9.75% ............................ 3,100,000 1/15/2009 3,231,750
Transdigm Funding Corp. Sr
Sub. Note, 8.375%+ ............... 2,400,000 7/15/2011 2,580,000
-----------
10,149,875
-----------
Airlines 0.7%
Continental Airlines Inc. Note,
6.70% ............................ 2,653,797 6/15/2021 2,580,037
-----------
Cable 2.2%
CSC Holdings Inc. Sr. Note,
7.625% ........................... 1,750,000 4/01/2011 1,745,625
Insight Midwest Co.
Note, 9.75% ...................... 3,500,000 10/01/2009 3,526,250
Mediacom Broadband LLC Sr
Note, 11.00% ..................... 2,100,000 7/15/2013 2,210,250
-----------
7,482,125
-----------
Casino 1.6%
Chumash Casino & Resort
Enterprise Inc. Note, 9.25%+ ..... 1,475,000 7/15/2010 1,585,625
Venetian Casino Resort LLC
Note, 11.00% ..................... 3,600,000 6/15/2010 4,104,000
-----------
5,689,625
-----------
Chemicals 8.0%
Equistar Chemical Co. Note,
10.125% .......................... 1,500,000 9/01/2008 1,485,000
FMC Corp. Note, 10.25% ............. 2,625,000 11/01/2009 2,992,500
Huntsman Advanced Materials
LLC Sr. Note, 11.00%+ ............ 1,175,000 7/15/2010 1,222,000
Huntsman ICI Chemicals LLC Sr
Sub Note, 10.125% ................ 4,425,000 7/01/2009 4,203,750
ISP Chemco Inc. Sr. Sub. Note,
10.25% ........................... 4,000,000 7/01/2011 4,460,000
ISP Holdings Inc. Note,
10.625% .......................... 1,700,000 12/15/2009 1,853,000
Lyondell Chemicals Co. Note,
10.50% ........................... 3,375,000 6/01/2013 3,223,125
MacDermid Inc. Sr. Sub. Note,
9.125% ........................... 1,925,000 7/15/2011 2,127,125
Methanex Corp. Note, 8.75% ......... 875,000 8/15/2012 940,625
Noveon Inc. Sr. Sub. Note,
11.00% ........................... 1,150,000 2/28/2011 1,299,500
Rhodia Inc. Sr. Sub. Note,
8.875%+ .......................... 3,825,000 6/01/2011 3,758,062
-----------
27,564,687
-----------
Principal Maturity
Amount Date Value
- --------------------------------------------------------------------------------
Computer Technology 2.0%
AMI Semiconductor Inc. Sr
Sub. Note, 10.75% ................ $ 1,425,000 2/01/2013 $ 1,610,250
Avaya Inc. Note, 11.125% ........... 1,750,000 4/01/2009 2,025,625
Iron Mountain Inc. Sr. Sub.
Note, 8.625% ..................... 3,100,000 4/01/2013 3,301,500
-----------
6,937,375
-----------
Consumer Products 6.6%
Central Garden & Pet Co.
Note, 9.125% ..................... 950,000 2/01/2013 1,035,500
Hines Nurseries Inc. Sr. Note,
10.25%+ .......................... 650,000 10/01/2011 679,250
Rayovac Corp. Sr. Sub. Note,
8.50%+ ........................... 8,700,000 10/01/2013 8,917,500
Remington Product Co. Note,
11.00% ........................... 2,300,000 5/15/2006 2,340,250
Russell Corp. Note, 9.25% .......... 2,800,000 5/01/2010 2,968,000
Tempur-Pedic Inc. Sr. Sub.
Note, 10.25%+ .................... 2,100,000 8/15/2010 2,278,500
Warnaco Inc. Sr. Note,
8.875%+ .......................... 4,425,000 6/15/2013 4,745,812
-----------
22,964,812
-----------
Energy 7.2%
Chesapeake Energy Corp.
Note, 8.125% ..................... 1,800,000 4/01/2011 1,953,000
Chesapeake Energy Corp.
Note, 9.00% ...................... 1,500,000 8/15/2012 1,687,500
Dynegy Holdings Inc. Note,
6.875% ........................... 4,275,000 4/01/2011 3,580,312
El Paso Production Holding Co.
Sr. Note, 7.75%+ ................. 7,375,000 6/01/2013 7,006,250
Energy Partners Limited Sr
Note, 8.75%+ ..................... 1,650,000 8/01/2010 1,691,250
National Waterworks Inc. Note,
10.50% ........................... 200,000 12/01/2012 218,500
Newpark Resources Inc. Sr
Sub. Note, 8.625% ................ 1,900,000 12/15/2007 1,957,000
Petrobras International Co.
Note, 9.125% ..................... 3,000,000 7/02/2013 3,060,000
Premcor Refining Group Inc.
Note, 9.25% ...................... 1,450,000 2/01/2010 1,580,500
Southern Star Central Corp. Sr
Note, 8.50%+ ..................... 1,050,000 8/01/2010 1,113,000
Westport Resources Corp. Note,
8.25% ............................ 925,000 11/01/2011 1,010,563
Westport Resources Corp. Note,
8.25%+ ........................... 100,000 11/01/2011 109,250
-----------
24,967,125
-----------
Financial 2.1%
Commercial Mortgage
Acceptance Corp.
1998-C1 Note, 6.23%+ ............. 3,200,000 7/15/2031 2,768,131
Commercial Mortgage
Acceptance Corp.
1998-C2 Note, 5.44%+ ............. 4,050,000 9/15/2030 3,569,350
Nomura Asset Securities Corp.
Note, 6.00%+ ..................... 1,000,000 3/15/2030 906,342
-----------
7,243,823
-----------
4 The notes are an integral part of the financial statements.
Principal Maturity
Amount Date Value
- --------------------------------------------------------------------------------
Food & Beverage 2.8%
CIA Brasileira Corp. Note,
8.75%+ ........................... $ 3,800,000 9/15/2013 $ 3,838,000
Del Monte Foods Co. Sr. Sub.
Note, 9.25% ...................... 1,750,000 5/15/2011 1,920,625
Dimon Inc. Sr. Note,
7.75%+ ........................... 2,250,000 6/01/2013 2,306,250
Merisant Co. Sr. Sub. Note,
9.50%+ ........................... 1,400,000 7/15/2013 1,498,000
-----------
9,562,875
-----------
Foreign Government 5.3%
Republic of Brazil, 8.00%# ......... 4,248,365 4/15/2014 3,878,757
Republic of Colombia, 10.00% ....... 1,400,000 1/23/2012 1,522,500
Republic of Peru, 5.00%# ........... 423,000 3/07/2017 385,987
Republic of Philippines, 8.375% .... 575,000 3/12/2009 611,656
Republic of Turkey, 9.50% .......... 1,925,000 1/15/2014 1,970,719
Republic of Turkey, 11.00% ......... 2,050,000 1/14/2013 2,260,125
Republic of Ukraine,
7.65%+ ........................... 1,725,000 6/11/2013 1,716,375
Republic of Uruguay, 7.50% ......... 3,575,000 3/15/2015 2,752,750
Republic of Venezuela,
1.875%# .......................... 1,821,380 12/18/2007 1,666,563
Republic of Venezuela,
10.75%+ .......................... 1,900,000 9/19/2013 1,748,000
-----------
18,513,432
-----------
Health Care 4.8%
Concentra Operating Corp. Sr
Sub. Note, 9.50%+ ................ 2,350,000 8/15/2010 2,455,750
Coventry Health Care Inc. Sr
Note, 8.125% ..................... 1,175,000 2/15/2012 1,257,250
Hanger Orthopedic Group Inc.
Note, 11.25% ..................... 675,000 6/15/2009 754,312
Hanger Orthopedic Group Inc.
Sr. Note, 10.375% ................ 875,000 2/15/2009 976,719
IASIS Healthcare Corp. Sr
Note, 8.50% ...................... 1,400,000 10/15/2009 1,449,000
Kinetic Concepts Inc. Note,
7.375%+ .......................... 700,000 5/15/2013 714,000
Medex Inc. Sr. Sub. Note,
8.875%+ .......................... 700,000 5/15/2013 740,250
Medquest Inc. Note, 11.875% ........ 2,250,000 8/15/2012 2,373,750
PacifiCare Health Systems Inc.
Note, 10.75% ..................... 1,750,000 6/01/2009 2,012,500
PerkinElmer Inc. Note, 8.875% ...... 1,550,000 1/15/2013 1,689,500
Senior Housing Properties Trust
Note, 8.625% ..................... 1,825,000 1/15/2012 1,980,125
-----------
16,403,156
-----------
Homebuilders 2.5%
Associated Materials Inc. Note,
9.75%+ ........................... 475,000 4/15/2012 502,313
Beazer Homes USA Inc. Note,
8.375% ........................... 1,500,000 4/15/2012 1,620,000
Collins & Aikman Floorcovering
Corp. Sr. Sub Note, 9.75% ........ 2,725,000 2/15/2010 2,874,875
Technical Olympic USA Inc.
Note, 9.00% ...................... 1,750,000 7/01/2010 1,846,250
Technical Olympic USA Inc.
Note, 10.375% .................... 1,750,000 7/01/2012 1,881,250
-----------
8,724,688
-----------
Principal Maturity
Amount Date Value
- --------------------------------------------------------------------------------
Hotels & Lodging 3.5%
Extended Stay America Inc. Sr
Sub. Note, 9.15% .................... $ 2,425,000 3/15/2008 $ 2,531,094
John Q. Hammons Hotels Inc.
Note, 8.875% ........................ 3,500,000 5/15/2012 3,788,750
Royal Caribbean Cruises Ltd.
Note, 8.00% ......................... 3,775,000 5/15/2010 3,982,625
Starwood Hotels & Resorts Inc.
Note, 7.875% ........................ 1,525,000 5/01/2012 1,669,875
-----------
11,972,344
-----------
Manufacturing 7.5%
AMETEK Inc. Sr. Note, 7.20% ........... 350,000 7/15/2008 367,937
Case New Holland Inc. Sr
Note, 9.25%+ ........................ 3,775,000 8/01/2011 4,058,125
Eagle-Picher Industries Inc. Sr
Note, 9.75%+ ........................ 1,750,000 9/01/2013 1,837,500
Joy Global Inc. Sr. Sub. Note,
8.75% ............................... 3,150,000 3/15/2012 3,472,875
Norcross Safety Products LLC
Sr. Sub. Note, 9.875%+ .............. 1,750,000 8/15/2011 1,846,250
Terex Corp. Sr. Sub. Note,
9.25% ............................... 3,875,000 7/15/2011 4,243,125
Thomas & Betts Corp. Note,
7.25% ............................... 1,225,000 6/01/2013 1,249,500
Trimas Corp. Sr. Sub. Note,
9.875% .............................. 5,025,000 6/15/2012 5,100,375
United Components Inc. Sr
Sub. Note, 9.375%+ .................. 3,500,000 6/15/2013 3,640,000
-----------
25,815,687
-----------
Media 4.4%
Allbritton Communications Co.
Note, 7.75% ......................... 2,225,000 12/15/2012 2,269,500
Dex Media West LLC Sr. Sub.
Note, 9.875%+ ....................... 750,000 8/15/2013 847,500
Houghton Mifflin Co. Note,
9.875% .............................. 1,750,000 2/01/2013 1,855,000
Houghton Mifflin Co. Note,
8.25% ............................... 450,000 2/01/2011 471,375
Houghton Mifflin Co. Sr. Note,
1.00% *+ ............................ 3,100,000 10/15/2013 1,765,760
Paxson Communications Corp.
Sr. Note, 12.25% * .................. 1,425,000 1/15/2009 1,129,313
Sinclair Broadcast Group Inc.
Note, 8.00% ......................... 2,075,000 3/15/2012 2,189,125
Sinclair Broadcast Group Inc.
Note, 8.75% ......................... 1,325,000 12/15/2011 1,440,937
Vivendi Universal Inc. Note,
9.25%+ .............................. 2,700,000 4/15/2010 3,101,625
-----------
15,070,135
-----------
Metals 1.3%
Century Aluminum Co. Note,
11.75% .............................. 1,250,000 4/15/2008 1,337,500
Gerdau AmeriSteel Corp. Sr
Note, 10.375%+ ...................... 3,200,000 7/15/2011 3,216,000
-----------
4,553,500
-----------
The notes are an integral part of the financial statements.
State Street Research High Income Fund 5
Portfolio Holdings (cont'd)
Principal Maturity
Amount Date Value
- --------------------------------------------------------------------------------
Mobile Communications 4.4%
Crown Castle International
Corp. Sr. Note, 0.00%# .............. $ 1,000,000 5/15/2011 $ 1,005,000
EIRCOM Funding Corp. Sr
Sub. Note, 8.25%+ ................... 2,650,000 8/15/2013 2,848,750
Nextel Communications Inc. Sr
Note, 7.375% ........................ 5,250,000 8/01/2015 5,302,500
Qwest Communications
International Inc. Sr. Note,
7.50% ............................... 4,400,000 11/01/2008 4,224,000
Rogers Wireless Inc. Sr. Note,
9.625% .............................. 1,750,000 5/01/2011 2,012,500
-----------
15,392,750
-----------
Paper & Packaging 6.5%
Anchor Glass Container Corp.
Note, 11.00% ........................ 2,175,000 2/15/2013 2,436,000
BWAY Corp. Note, 10.00%+ .............. 1,075,000 10/15/2010 1,161,000
Crown European Holdings Inc.
Note, 10.875%+ ...................... 2,250,000 3/01/2013 2,480,625
Graham Packaging Co. Note,
8.75% ............................... 875,000 1/15/2008 894,688
Graham Packaging Co. Sr
Sub. Note, 8.75%+ ................... 2,000,000 1/15/2008 2,045,000
Greif Brothers Corp. Note,
8.875% .............................. 1,600,000 8/01/2012 1,732,000
Louisiana Pacific Corp. Sr. Sub.
Note, 10.875% ....................... 2,125,000 11/15/2008 2,470,312
Owens Brockway Glass
Container Corp. Note,
8.25%+ .............................. 2,025,000 5/15/2013 2,065,500
Owens Brockway Glass
Container Corp. Note,
8.875% .............................. 2,100,000 2/15/2009 2,236,500
Radnor Holdings Corp. Note,
11.00%+ ............................. 3,500,000 3/15/2010 2,957,500
United States Can Corp. Note,
10.875%+ ............................ 2,200,000 7/15/2010 2,227,500
-----------
22,706,625
-----------
Retail 3.2%
Hollywood Entertainment Corp.
Note, 9.625% ........................ 1,625,000 3/15/2011 1,767,187
JC Penney Co. Note, 8.00% ............. 1,800,000 3/01/2010 1,975,500
Perry Ellis International Inc.
Senior Note, 8.875%+ ................ 1,750,000 9/15/2013 1,785,000
Saks Inc. Note, 8.25% ................. 3,575,000 11/15/2008 3,914,625
United Auto Group Inc. Note,
9.625% .............................. 1,425,000 3/15/2012 1,556,813
-----------
10,999,125
-----------
Services 7.1%
Airgas Inc. Sr. Note, 9.125% .......... 2,825,000 10/01/2011 3,135,750
Alderwoods Group Inc. Sr
Note, 12.25% ........................ 5,950,000 1/02/2009 6,589,625
Principal Maturity
Amount Date Value
- --------------------------------------------------------------------------------
Allied Waste North America
Inc. Sr. Sub. Note, 10.00% ........ $ 6,125,000 8/01/2009 $ 6,637,992
Coinmach Corp. Note, 9.00% .......... 3,200,000 2/01/2010 3,408,000
Interline Brands Inc. Sr. Sub.
Note, 11.50%+ ..................... 1,400,000 5/15/2011 1,505,000
Williams Scotsman Inc. Note,
9.875% ............................ 3,500,000 6/01/2007 3,447,500
------------
24,723,867
------------
Steel 2.8%
Earle M. Jorgensen Co. Note,
9.75% ............................. 2,200,000 6/01/2012 2,343,000
IPSCO Inc. Sr. Note, 8.75%+ ......... 1,750,000 6/01/2013 1,828,750
United States Steel LLC Note,
10.75% ............................ 1,775,000 8/01/2008 1,890,375
United States Steel LLC Sr. Note,
9.75% ............................. 3,500,000 5/15/2010 3,587,500
------------
9,649,625
------------
Supermarkets/Drug 2.1%
Rite Aid Corp. Note, 6.125%+ ........ 1,750,000 12/15/2008 1,627,500
Rite Aid Corp. Sr. Note,
8.125%+ ........................... 1,750,000 5/01/2010 1,863,750
Stater Brothers Holdings Inc. Sr
Note, 10.75% ...................... 3,575,000 8/15/2006 3,744,813
------------
7,236,063
------------
Transportation 4.2%
Aran Shipping & Trading SA
Note (acquired 8/17/01,
cost $0), 8.30%*++-@ .............. 65,240 1/31/2004 32,620
Dana Corp. Sr. Note, 9.00% .......... 3,275,000 8/15/2011 3,586,125
Goodyear Tire & Rubber Co.
Note, 7.85% ....................... 1,750,000 8/15/2011 1,470,000
Stena AB Note, 9.625% ............... 2,100,000 12/01/2012 2,283,750
Tenneco Automotive Inc. Sr
Note, 10.25%+ ..................... 1,900,000 7/15/2013 2,061,500
TRW Automotive Inc. Note,
9.375%+ ........................... 1,975,000 2/15/2013 2,221,875
TRW Automotive Inc. Note,
11.00%+ ........................... 2,575,000 2/15/2013 2,999,875
------------
14,655,745
------------
Utility 3.4%
AES Corp. Note, 9.00% ............... 2,536,197 1/02/2017 2,612,283
AES Corp. Sr. Note, 8.75%+ .......... 2,450,000 5/15/2013 2,572,500
Calpine Corp. Note, 8.50%+ .......... 1,750,000 7/15/2010 1,610,000
Reliant Resources Inc. Note,
9.25%+ ............................ 1,900,000 7/15/2010 1,719,500
Williams Companies Inc. Note,
8.125% ............................ 3,250,000 3/15/2012 3,380,000
------------
11,894,283
------------
Total Bonds (Cost $326,602,580) .................................. 343,453,384
------------
6 The notes are an integral part of the financial statements.
Principal Maturity
Amount Date Value
- --------------------------------------------------------------------------------
Common Stocks & Other 0.3%
Freedom Pay Inc. Com. (acquired
3/29/00, cost $50,875)*++@ ....................... 3,145,340 $ 31,548
IKS Corp. Com. (acquired 11/4/99
through 1/20/00, cost $4,339,383)*++@ ............ 30,218 349,463
Ladish Inc. Com.* .................................. 50,946 318,447
Micadant LLC Com. (acquired 7/1/01,
cost $0)*++ ...................................... 492,397 8,187
Phase Metrics Inc. Cl. A Com. (acquired
1/23/98 through 6/9/98, cost
$11,424,092)*++@ ................................. 842,908 168,677
Prime Succession Holdings Inc. Com
(acquired 10/7/98 thru 11/20/01,
cost $1,809,483)*++ .............................. 266,679 3,593
Reunion Industries Inc. Com* ....................... 8,341 1,835
Waxman Industries Inc. Wts. (acquired
8/12/94, cost $0)*++@ ............................ 236,000 35,400
----------
Total Common Stocks & Other (Cost $31,525,115) ................... 917,150
----------
- --------------------------------------------------------------------------------
Short-Term Investments 8.3%
State Street Navigator Securities Lending
Prime Portfolio ................................................ 28,914,355
----------
Total Short-Term Investments (cost $28,914,355)................... 28,914,355
----------
% of
Net Assets
- --------------------------------------------------------------------------------
Summary of Portfolio Assets
Investments (Cost $387,042,050) ................. 107.7% 373,284,889
Cash and Other Assets, Less Liabilities ......... (7.7%) (26,645,631)
----- -------------
Net Assets ...................................... 100.0% $ 346,639,258
===== =============
Federal Income Tax Information
At September 30, 2003, the net unrealized
depreciation of investments based on cost for federal
income tax purposes of $387,147,962 was as
follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of value over
tax cost $ 19,325,287
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax cost
over value (33,188,360)
------------
$(13,863,073)
============
KEY TO SYMBOLS
* Non-income-producing securities.
- - Security is in default.
@ Security valued under consistently applied procedures established by the
Trustees.
++ Security restricted as to public resale. At September 30, 2003, 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,
2003 were $17,623,833 and $629,488 (0.18% 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, 2003, were $114,965,078 and $118,751,895 (34.3% of net
assets), respectively.
# Interest rates on these floating-rate bonds will reset annually or biannually
based on the six-month London Interbank Offered Rate (LIBOR) plus 0.8125%.
The notes are an integral part of the financial statements.
State Street Research High Income Fund 7
FINANCIAL
Statements
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
September 30, 2003 (unaudited)
Assets
Investments, at value (Cost $387,042,050) (Note 1) .......... $ 373,284,889
Cash ........................................................ 1,006,143
Receivable for securities sold .............................. 8,791,837
Interest receivable ......................................... 7,414,646
Receivable for fund shares sold ............................. 669,421
Other assets ................................................ 24,122
-------------
391,191,058
-------------
Liabilities
Payable for collateral received on securities loaned ........ 28,914,355
Payable for securities purchased ............................ 11,454,601
Payable for fund shares redeemed ............................ 2,542,742
Dividends payable ........................................... 715,603
Accrued transfer agent and shareholder services ............. 291,934
Accrued management fee ...................................... 174,133
Accrued distribution and service fees ....................... 99,186
Accrued administration fee .................................. 23,446
Accrued trustees' fees ...................................... 11,747
Other accrued expenses ...................................... 324,053
-------------
44,551,800
-------------
Net Assets .................................................. $ 346,639,258
=============
Net Assets consist of:
Undistributed net investment income ........................ $ 273,432
Unrealized depreciation of investments ..................... (13,757,161)
Accumulated net realized loss .............................. (447,707,594)
Paid-in capital ............................................ 807,830,581
-------------
$ 346,639,258
=============
Net Asset Value (NAV) of Each Share Class
Except where noted, the NAV is the offering and the redemption price for each
class.
Class Net Assets / Number of Shares = NAV
A $228,296,809 67,783,049 $3.37*
B(1) $ 39,991,539 12,014,332 $3.33**
B $ 57,061,925 17,073,921 $3.34**
C $ 11,685,746 3,493,701 $3.34**
S $ 9,603,239 2,881,687 $3.33
* Maximum offering price per share = $3.53 ($3.37 [divided by] 0.955)
** When you sell Class B(1), Class B or Class C shares, you receive the net
asset value minus deferred sales charge, if any.
Statement of Operations
- --------------------------------------------------------------------------------
For the six months ended September 30, 2003 (unaudited)
Investment Income
Interest (Note 1) ........................................... $ 15,757,047
------------
Expenses
Management fee (Note 2) ..................................... 1,098,074
Transfer agent and shareholder services (Note 2) ............ 478,817
Custodian fee ............................................... 78,375
Reports to shareholders ..................................... 47,172
Administration fee (Note 2) ................................. 46,299
Legal fees .................................................. 44,373
Distribution and service fees -- Class A (Note 4) ........... 366,719
Distribution and service fees -- Class B(1) (Note 4) ........ 193,039
Distribution and service fees -- Class B (Note 4) ........... 306,426
Distribution and service fees -- Class C (Note 4) ........... 62,635
Registration fees ........................................... 32,391
Audit fee ................................................... 21,846
Trustees' fees (Note 2) ..................................... 8,784
Miscellaneous ............................................... 41,850
------------
2,826,800
Fees paid indirectly (Note 2) ............................... (3,920)
------------
2,822,880
------------
Net investment income ....................................... 12,934,167
------------
Realized and Unrealized Gain on
Investments
Net realized gain on investments ............................ 10,638,129
Change in unrealized appreciation of investments ............ 4,948,319
------------
Net gain on investments ..................................... 15,586,448
------------
Net increase in net assets resulting from operations ........ $ 28,520,615
============
8 The notes are an integral part of the financial statements.
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
Six months ended
September 30, 2003 Year ended
(unaudited) March 31, 2003*
- --------------------------------------------------------------------------------
Increase (Decrease) In Net Assets
Operations:
Net investment income .................... $ 12,934,167 $ 23,159,505
Net realized gain (loss) on
investments ............................ 10,638,129 (10,892,198)
Change in unrealized appreciation of
investments ............................ 4,948,319 5,438,809
---------------------------------
Net increase resulting from
operations ............................. 28,520,615 17,706,116
---------------------------------
Dividends from net investment income:
Class A ................................. (8,803,459) (16,818,674)
Class B(1) .............................. (1,281,757) (1,761,228)
Class B ................................. (2,017,480) (4,555,287)
Class C ................................. (411,695) (649,537)
Class S ................................. (346,206) (369,268)
---------------------------------
(12,860,597) (24,153,994)
---------------------------------
Net increase (decrease)
from fund share
transactions (Note 6) .................. (32,256,410) 42,793,371
---------------------------------
Total increase (decrease) in
net assets ............................. (16,596,392) 36,345,493
Net Assets
Beginning of period ...................... 363,235,650 326,890,157
---------------------------------
End of period (including
undistributed net
investment income of
$273,432 and
$199,862 respectively) ................. $ 346,639,258 $ 363,235,650
=================================
* Audited by other auditors.
Notes to Unaudited Financial Statements
- --------------------------------------------------------------------------------
September 30, 2003
Note 1
State Street Research High Income Fund is a series of State Street Research
Income Trust (the "Trust"), which was organized as a Massachusetts business
trust in December 1985, and is registered under the Investment Company Act of
1940 as an open-end management investment company.
The investment objective of the fund is to seek, primarily, high current income
and, secondarily, capital appreciation, from investments in fixed income
securities. Under normal circumstances, the fund invests at least 80% of its net
assets in low quality securities, primarily junk bonds. In selecting investments
for the fund, the investment manager seeks to identify those fixed income
securities which it believes will not involve undue risk. Certain of the fund's
investments, however, may be considered predominantly speculative.
The fund offers five classes of shares. Class A shares are subject to an initial
sales charge of up to 4.50% and pay annual service and distribution fees equal
to 0.30% of average daily net assets. Class B 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 equal to 1.00% of
average daily net assets 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 purchase. Class C shares also pay annual
service and distribution fees equal to 1.00% of average daily net assets. Class
S shares are only offered through certain retirement accounts, advisory accounts
of State Street Research & Management Company (the "Adviser"), an investment
management 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 accounting principles generally accepted in the United States of America.
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. If not valued by a pricing
service, such securities are valued at prices obtained from independent
brokers. 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. If trading or events occurring in
other markets after the close of the principal market in which foreign
securities are traded, and before the close of business of the fund, are
expected to materially affect the value of these securities, then they are
valued at their fair value taking this trading or these events into account.
The notes are an integral part of the financial statements.
State Street Research High Income Fund 9
Notes (continued)
- --------------------------------------------------------------------------------
B. Security Transactions
Security transactions are accounted for on the trade date (date the order to
buy or sell is executed). Realized gains or losses are reported on the basis of
identified cost of securities delivered.
C. Net Investment Income
Net investment income is determined daily and consists of interest and
dividends accrued and discount earned, less the estimated daily expenses of the
fund. Interest income is accrued daily as earned. Dividend income is accrued on
the ex-dividend date. The fund is charged for expenses directly attributable to
it, while indirect expenses are allocated between both funds in the Trust.
D. Dividends
Dividends from net investment income are declared daily 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 accounting principles
generally accepted in the United States of America. The difference is primarily
caused by differing treatment of accrued interest on defaulted bonds and
premium amortization on fixed income securities.
E. Federal Income Taxes
No provision for federal income taxes is necessary because the fund has elected
to qualify under Subchapter M of the Internal Revenue Code and its policy is to
distribute all of its taxable income, including net realized capital gains,
within the prescribed time periods.
At March 31, 2003, the fund had a net capital loss carryforward of $457,906,388
available, to the extent provided in regulations, to offset future capital
gains, if any, of which $3,347,001, $50,214,582, $65,333,995, $274,563,922 and
$64,446,888 expire on March 31, 2007, 2008, 2009, 2010 and 2011, respectively.
A portion of the losses expiring in 2007, 2008, 2009 and 2010, $3,347,001,
$5,252,309, $7,214,873 and $927,509, respectively, were acquired in connection
with the merger of State Street Research Strategic Income Fund. Future
utilization of these losses may be limited under current tax laws.
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, 2002
through March 31, 2003, the fund incurred net capital losses of approximately
$101,000 and intends to defer and treat such losses as arising in the fiscal
year ended March 31, 2004.
F. Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America 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 these
estimates.
G. 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, 2003, the value of the securities loaned and the value
of collateral were $27,626,560 and $28,914,355, respectively. During the six
months ended September 30, 2003, income from securities lending amounted to
$30,394 and is included in interest income.
Note 2
The Trust and the Adviser have entered into an agreement under which the
Adviser earns monthly fees at an annual rate of 0.60% of the first $500 million
of net assets annually, 0.55% of the next $500 million, and 0.50% of any amount
over $1 billion. In consideration of these fees, the Adviser furnishes the fund
with management, investment advisory, statistical and research facilities and
services. The Adviser also pays all salaries, rent and certain other expenses
of management. During the six months ended September 30, 2003, the fees
pursuant to such agreement amounted to $1,098,074.
State Street Research Service Center, a division of State Street Research
Investment Services, Inc., the Trust's principal underwriter (the
"Distributor"), 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. Total shareholder service
costs are allocated to each fund in the same ratios as the transfer agent
costs. During the six months ended September 30, 2003, the amount of such
expenses allocated to the Fund was $190,764.
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 expenses. During the six months ended September 30, 2003,
the fund's transfer agent fees were reduced by $3,920 under these arrangements.
The fees of the Trustees not currently affiliated with the Adviser amounted to
$8,784 during the six months ended September 30, 2003.
The fund has agreed to pay the Adviser for certain administrative costs
incurred in providing other assistance and services to the fund. The fee was
based on a fixed amount that has been allocated equally among State Street
Research funds. During the six months ended September 30, 2003, the amount of
such expenses was $46,299.
Note 3
For the six months ended September 30, 2003, purchases and sales of securities,
exclusive of short-term obligations and U.S. government obligations, aggregated
$243,487,400, and $257,843,761, 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) and Class C shares. In addition, 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 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, 2003, fees pursuant
to such plans amounted to $366,719, $193,039, $306,426 and $62,635 for Class A,
Class B(1), Class B and Class C shares, respectively. For Class A, Class B and
Class C shares, the payments are intended to reimburse the distributor for
expenditures incurred under the plan, and any unused payments are returnable to
the fund. As of September 30, 2003, there were $2,725,875, $107,530 and
$2,358,396 for Class A, Class B and Class C, respectively, of unreimbursed
distribution and shareholder servicing related expenses to be carried forward
to future plan years. For Class B(1) shares, the payments compensate the
distributor for services and expenditures incurred under the plan, and none of
the payments are returnable to the fund.
The fund has been informed that the Distributor and MetLife Securities, Inc., a
wholly-owned subsidiary of MetLife, earned initial sales charges aggregating
$289,335 and $133,856, respectively, on sales of Class A shares of the fund
during the six months ended September 30, 2003, and that MetLife Securities,
Inc., earned commissions aggregating $102,194 and $5,876 on sales of Class B(1)
and Class C shares, respectively, and the Distributor collected contingent
deferred sales charges aggregating $67,973, $9,992 and $277 on redemptions of
Class B(1), Class B and Class C shares, respectively, during the same period.
10
Note 5
PricewaterhouseCoopers LLP resigned as the fund's independent accountants as of
April 25, 2003. The Trustees voted to appoint Deloitte & Touche LLP as the
fund's independent accountants for the fund's fiscal year ended March 31, 2004.
During the previous two years, PricewaterhouseCoopers LLP's audit reports
contained no adverse opinion or disclaimer of opinion; nor were its reports
qualified or modified as to uncertainty, audit scope, or accounting principle.
Further, in connection with its audits for the two previous fiscal years and
through April 25, 2003, there were no disagreements between the fund and
PricewaterhouseCoopers LLP on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure, which if not
resolved to the satisfaction of PricewaterhouseCoopers LLP would have caused it
to make reference to the disagreements in its report on the financial statements
for such years.
Note 6
The trustees have the authority to issue an unlimited number of shares of
beneficial interest at $0.001 par value per share.
These transactions break down by share class as follows:
Six months ended
September 30, 2003 Year ended
(unaudited) March 31, 2003*
------------------------------------------------------------
Class A Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------------------------------------
Shares sold 56,806,068 $ 188,004,961 52,284,767 $ 165,355,126
Issued in connection with acquisition of Strategic Income Fund -- -- 5,706,743 18,204,510
Issued upon reinvestment of dividends from net investment income 2,060,664 6,865,658 3,516,042 11,158,479
Shares redeemed (66,224,427) (220,144,720) (51,768,395) (164,212,893)
----------- ------------- ----------- -------------
Net increase (decrease) (7,357,695) $ (25,274,101) 9,739,157 $ 30,505,222
=========== ============= =========== =============
Class B(1) Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------------------------------------
Shares sold 2,003,683 $ 6,573,985 2,602,510 $ 8,180,420
Issued in connection with acquisition of Strategic Income Fund -- -- 3,380,392 10,682,038
Issued upon reinvestment of dividends from net investment income 258,219 849,463 331,552 1,042,352
Shares redeemed (1,387,035) (4,537,529) (2,411,666) (8,501,187)
----------- ------------- ----------- -------------
Net increase 874,867 $ 2,885,919 3,902,788 $ 11,403,623
=========== ============= =========== =============
Class B Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------------------------------------
Shares sold 375,891 $ 1,241,848 771,634 $ 2,454,011
Issued in connection with acquisition of Strategic Income Fund -- -- 4,551,737 14,429,006
Issued upon reinvestment of dividends from net investment income 360,804 1,192,925 782,596 2,467,980
Shares redeemed (3,674,442) (12,075,950) (8,603,561) (26,369,187)
----------- ------------- ----------- -------------
Net decrease (2,937,747) $ (9,641,177) (2,497,594) $ (7,018,190)
=========== ============= =========== =============
Class C Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------------------------------------
Shares sold 868,139 $ 2,848,321 1,468,188 $ 4,616,179
Issued in connection with acquisition of Strategic Income Fund -- -- 680,946 2,158,600
Issued upon reinvestment of dividends from net investment income 58,930 194,844 89,096 280,839
Shares redeemed (1,173,825) (3,863,457) (1,115,064) (3,372,980)
----------- ------------- ----------- -------------
Net increase (decrease) (246,756) $ (820,292) 1,123,166 $ 3,682,638
=========== ============= =========== =============
Class S Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------------------------------------
Shares sold 3,781,187 $ 12,442,434 4,318,082 $ 13,579,470
Issued in connection with acquisition of Strategic Income Fund -- -- 973,303 3,075,636
Issued upon reinvestment of dividends from net investment income 96,871 319,351 102,798 323,540
Shares redeemed (3,693,283) (12,168,544) (3,894,087) (12,758,568)
----------- ------------- ----------- -------------
Net increase 184,775 $ 593,241 1,500,096 $ 4,220,078
=========== ============= =========== =============
* Audited by other auditors.
State Street Research High Income Fund 11
FINANCIAL
Highlights
For a share outstanding throughout each period:
Class A
------------------
Six months ended
September 30, 2003
(unaudited)(a)
- ----------------------------------------------------------------------------
Net asset value, beginning of period ($) 3.23
-------
Net investment income ($) 0.12
Net realized and unrealized gain (loss) on investments ($) 0.14
-------
Total from investment operations ($) 0.26
-------
Dividends from net investment income ($) (0.12)
Distribution from capital gains ($) --
-------
Total distributions ($) (0.12)
-------
Net asset value, end of period ($) 3.37
=======
Total return (%)(b) 8.15(c)
Ratios/supplemental data:
- ----------------------------------------------------------------------------
Net assets at end of period ($ thousands) 228,297
Expense ratio (%) 1.34(d)
Expense ratio after expense reductions (%) 1.34(d)
Ratio of net investment income to average net assets (%) 7.27(d)
Portfolio turnover rate (%) 69.35
Class A
-------------------------------------------------------------------
Years ended March 31
-------------------------------------------------------------------
2003(a)(g) 2002(a)(f)(g) 2001(a)(g) 2000(a)(g) 1999(a)(g)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ($) 3.31 3.48 5.05 5.65 6.62
------- ------- ------- ------- -------
Net investment income ($) 0.25 0.23 0.43 0.52 0.58
Net realized and unrealized gain (loss) on investments ($) (0.07) (0.12) (1.57) (0.60) (0.80)
------- ------- ------- ------- -------
Total from investment operations ($) 0.18 0.11 (1.14) (0.08) (0.22)
------- ------- ------- ------- -------
Dividends from net investment income ($) (0.26 (0.28) (0.43) (0.52) (0.58)
Distribution from capital gains ($) -- -- -- -- (0.17)
------- ------- ------- ------- -------
Total distributions ($) (0.26 (0.28) (0.43) (0.52) (0.75)
------- ------- ------- ------- -------
Net asset value, end of period ($) 3.23 3.31 3.48 5.05 5.65
======= ======= ======= ======= =======
Total return (%)(b) 6.02 3.33 (23.51) (1.65) (3.19)
Ratios/supplemental data:
- -------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period ($ thousands) 242,824 216,612 257,702 501,042 648,217
Expense ratio (%) 1.48 1.48 1.30 1.12 1.06
Expense ratio after expense reductions (%) 1.47 1.47 1.29 1.11 1.05
Ratio of net investment income to average net assets (%) 7.92 6.83 10.15 9.50 9.63
Portfolio turnover rate (%) 98.71 80.07 52.96 50.49 53.46
Class B(1)
------------------
Six months ended
September 30, 2003
(unaudited)(a)
- ----------------------------------------------------------------------------
Net asset value, beginning of period ($) 3.20
-------
Net investment income ($) 0.11
Net realized and unrealized gain (loss) on investments ($) 0.13
-------
Total from investment operations ($) 0.24
-------
Dividends from net investment income ($) (0.11)
-------
Total distributions ($) (0.11)
-------
Net asset value, end of period ($) 3.33
=======
Total return (%)(b) 7.54(c)
Ratios/supplemental data:
- ----------------------------------------------------------------------------
Net assets at end of period ($ thousands) 39,992
Expense ratio (%) 2.04(d)
Expense ratio after expense reductions (%) 2.04(d)
Ratio of net investment income to average net assets (%) 6.57(d)
Portfolio turnover rate (%) 69.35
Class B(1)
-------------------------------------------------------------------
Years ended March 31
-------------------------------------------------------------------
2003(a)(g) 2002(a)(f)(g) 2001(a)(g) 2000(a)(g) 1999(a)(e)(g)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ($) 3.28 3.45 5.01 5.62 5.62
------- ------- ------- ------- -------
Net investment income ($) 0.22 0.20 0.40 0.47 0.12
Net realized and unrealized gain (loss) on investments ($) (0.06) (0.12) (1.55) (0.60) 0.01
------- ------- ------- ------- -------
Total from investment operations ($) 0.16 0.08 (1.15) (0.13) 0.13
------- ------- ------- ------- -------
Dividends from net investment income ($) (0.24) (0.25) (0.41) (0.48) (0.13)
------- ------- ------- ------- -------
Total distributions ($) (0.24) (0.25) (0.41) (0.48) (0.13)
------- ------- ------- ------- -------
Net asset value, end of period ($) 3.20 3.28 3.45 5.01 5.62
======= ======= ======= ======= =======
Total return (%)(b) 5.36 2.65 (24.03) (2.57) 2.25(c)
Ratios/supplemental data:
- ------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period ($ thousands) 35,593 23,728 24,472 36,038 12,732
Expense ratio (%) 2.18 2.18 2.00 1.87 1.74(d)
Expense ratio after expense reductions (%) 2.17 2.17 1.99 1.86 1.73(d)
Ratio of net investment income to average net assets (%) 7.21 6.13 9.62 8.76 8.81(d)
Portfolio turnover rate (%) 98.71 80.07 52.96 50.49 53.46
Class B
------------------
Six months ended
September 30, 2003
(unaudited)(a)
- ----------------------------------------------------------------------------
Net asset value, beginning of period ($) 3.21
-------
Net investment income ($) 0.11
Net realized and unrealized gain (loss) on investments ($) 0.13
-------
Total from investment operations ($) 0.24
-------
Dividends from net investment income ($) (0.11)
Distribution from capital gains ($) --
-------
Total distributions ($) (0.11)
-------
Net asset value, end of period ($) 3.34
=======
Total return (%)(b) 7.51(c)
Ratios/supplemental data:
- ----------------------------------------------------------------------------
Net assets at end of period ($ thousands) 57,062
Expense ratio (%) 2.04(d)
Expense ratio after expense reductions (%) 2.04(d)
Ratio of net investment income to average net assets (%) 6.58(d)
Portfolio turnover rate (%) 69.35
Class B
-------------------------------------------------------------------
Years ended March 31
-------------------------------------------------------------------
2003(a)(g) 2002(a)(f)(g) 2001(a)(g) 2000(a)(g) 1999(a)(g)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ($) 3.29 3.46 5.02 5.62 6.58
------- ------- ------- ------- -------
Net investment income ($) 0.23 0.20 0.40 0.47 0.53
Net realized and unrealized gain (loss) on investments ($) (0.07) (0.12) (1.55) (0.59) (0.79)
------- ------- ------- ------- -------
Total from investment operations ($) 0.16 0.08 (1.15) (0.12) (0.26)
------- ------- ------- ------- -------
Dividends from net investment income ($) (0.24) (0.25) (0.41) (0.48) (0.53)
Distribution from capital gains ($) -- -- -- -- (0.17)
------- ------- ------- ------- -------
Total distributions ($) (0.24) (0.25) (0.41) (0.48) (0.70)
------- ------- ------- ------- -------
Net asset value, end of period ($) 3.21 3.29 3.46 5.02 5.62
======= ======= ======= ======= =======
Total return (%)(b) 5.33 2.64 (23.98) (2.38) (3.77)
Ratios/supplemental data:
- ------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period ($ thousands) 64,182 74,004 109,691 230,786 336,420
Expense ratio (%) 2.18 2.18 2.00 1.87 1.81
Expense ratio after expense reductions (%) 2.17 2.17 1.99 1.86 1.80
Ratio of net investment income to average net assets (%) 7.23 6.14 9.41 8.76 8.90
Portfolio turnover rate (%) 98.71 80.07 52.96 50.49 53.46
12
FINANCIAL
Highlights
Class C
------------------
Six months ended
September 30, 2003
(unaudited)(a)
- ----------------------------------------------------------------------------
Net asset value, beginning of period ($) 3.21
------
Net investment income ($) 0.11
Net realized and unrealized gain (loss) on investments ($) 0.13
------
Total from investment operations ($) 0.24
------
Dividends from net investment income ($) (0.11)
Distribution from capital gains ($) --
------
Total distributions ($) (0.11)
------
Net asset value, end of period ($) 3.34
======
Total return (%)(b) 7.51(c)
Ratios/supplemental data:
- ----------------------------------------------------------------------------
Net assets at end of period ($ thousands) 11,686
Expense ratio (%) 2.04(d)
Expense ratio after expense reductions (%) 2.04(d)
Ratio of net investment income to average net assets (%) 6.58(d)
Portfolio turnover rate (%) 69.35
Class C
-------------------------------------------------------------------
Years ended March 31
-------------------------------------------------------------------
2003(a)(g) 2002(a)(f)(g) 2001(a)(g) 2000(a)(g) 1999(a)(g)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ($) 3.29 3.46 5.02 5.63 6.59
------ ----- ------ ------ ------
Net investment income ($) 0.23 0.20 0.40 0.48 0.53
Net realized and unrealized gain (loss) on investments ($) (0.07) (0.12) (1.55) (0.61) (0.79)
------ ----- ------ ------ ------
Total from investment operations ($) 0.16 0.08 (1.15) (0.13) (0.26)
------ ----- ------ ------ ------
Dividends from net investment income ($) (0.24 (0.25) (0.41) (0.48) (0.53)
Distribution from capital gains ($) -- -- -- -- (0.17)
------ ----- ------ ------ ------
Total distributions ($) (0.24) (0.25) (0.41) (0.48) (0.70)
------ ----- ------ ------ ------
Net asset value, end of period ($) 3.21 3.29 3.46 5.02 5.63
====== ===== ====== ====== ======
Total return (%)(b) 5.33 2.63 (23.98) (2.57) (3.76)
Ratios/supplemental data:
- -------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period ($ thousands) 12,008 8,616 11,896 26,154 40,342
Expense ratio (%) 2.18 2.18 2.00 1.87 1.81
Expense ratio after expense reductions (%) 2.17 2.17 1.99 1.86 1.80
Ratio of net investment income to average net assets (%) 7.21 6.16 9.40 8.77 8.91
Portfolio turnover rate (%) 98.71 80.07 52.96 50.49 53.46
Class S
------------------
Six months ended
September 30, 2003
(unaudited)(a)
- ----------------------------------------------------------------------------
Net asset value, beginning of period ($) 3.20
------
Net investment income ($) 0.13
Net realized and unrealized gain (loss) on investments ($) 0.13
------
Total from investment operations ($) 0.26
------
Dividends from net investment income ($) (0.13)
Distributions from capital gains ($) --
------
Total distributions ($) (0.13)
------
Net asset value, end of period ($) 3.33
======
Total return (%)(b) 8.07(c)
Ratios/supplemental Data:
- ----------------------------------------------------------------------------
Net assets at end of period ($ thousands) 9,603
Expense ratio (%) 1.04(d)
Expense ratio after expense reductions (%) 1.04(d)
Ratio of net investment income to average net assets (%) 7.57(d)
Portfolio turnover rate (%) 69.35
Class S
-------------------------------------------------------------------
Years ended March 31
-------------------------------------------------------------------
2003(a)(g) 2002(a)(f)(g) 2001(a)(g) 2000(a)(g) 1999(a)(g)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ($) 3.28 3.46 5.01 5.61 6.58
------ ----- ------ ------ ------
Net investment income ($) 0.25 0.24 0.41 0.53 0.58
Net realized and unrealized gain (loss) on investments ($) (0.06) (0.13) (1.51) (0.60) (0.79)
------ ----- ------ ------ ------
Total from investment operations ($) 0.19 0.11 (1.10) (0.07) (0.21)
------ ----- ------ ------ ------
Dividends from net investment income ($) (0.27) (0.29) (0.45) (0.53) (0.59)
Distributions from capital gains ($) -- -- -- -- (0.17)
------ ----- ------ ------ ------
Total distributions ($) (0.27) (0.29) (0.45) (0.53) (0.76)
------ ----- ------ ------ ------
Net asset value, end of period ($) 3.20 3.28 3.46 5.01 5.61
====== ===== ====== ====== ======
Total return (%)(b) 6.40 3.36 (23.06) (1.41) (2.97)
Ratios/supplemental Data:
- -------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period ($ thousands) 8,628 3,930 3,438 45,737 48,384
Expense ratio (%) 1.18 1.18 1.00 0.87 0.81
Expense ratio after expense reductions (%) 1.17 1.17 0.99 0.86 0.80
Ratio of net investment income to average net assets (%) 7.92 7.20 10.40 9.81 10.00
Portfolio turnover rate (%) 98.71 80.07 52.96 50.49 53.46
(a) Per-share figures have been calculated using the average shares method.
(b) Does not reflect any front-end or contingent deferred sales charges.
(c) Not annualized
(d) Annualized
(e) January 1, 1999 (commencement of share class) to March 31, 1999
(f) Effective April 1, 2001, the fund has adopted the provisions on the AICPA
Audit and Accounting Guide, Audit of Investment Companies and began
amortizing premium on all fixed income securities. The effect of this change
for the year ended March 31, 2002, was to decrease net investment income per
share by $0.05, increase net realized and unrealized loss per share by
$0.05, and decrease the ratio of net investment income to average net assets
by 1.47%. The financial highlights for the period prior to April 1, 2001,
have not been restated for this change in policy.
(g) Audited by other auditors.
State Street Research High Income Fund 13
TRUSTEES AND OFFICERS
State Street Research Income Trust
Name, Position(s) Term of Office
Address Held with and Length of Principal Occupations
and Age(a) Fund Time Served(b) During Past 5 Years
===================================================================================================
Independent Trustees
Bruce R. Bond Trustee Since Retired; formerly Chairman of the Board, Chief
(57) 1999 Executive Officer and President, PictureTel
Corporation (video conferencing systems)
- ---------------------------------------------------------------------------------------------------
Steve A. Garban Trustee Since Retired; formerly Senior Vice President for
(66) 1997 Finance and Operations and Treasurer, The
Pennsylvania State University
- ---------------------------------------------------------------------------------------------------
Dean O. Morton Trustee Since Retired; formerly Executive Vice President, Chief
(71) 1986 Operating Officer and Director, Hewlett-Packard
Company (computer manufacturer)
- ---------------------------------------------------------------------------------------------------
Susan M. Phillips Trustee Since Dean, School of Business and Public Management,
(58) 1999 George Washington University; formerly a member of
the Board of Governors of the Federal Reserve
System; and Chairman and Commissioner of the
Commodity Futures Trading Commission
- ---------------------------------------------------------------------------------------------------
Toby Rosenblatt Trustee Since President, Founders Investments Ltd.
(65) 1993 (investments); formerly President, The Glen Ellen
Company (private investment firm)
- ---------------------------------------------------------------------------------------------------
Michael S. Trustee Since Jay W. Forrester Professor of Management, Sloan
Scott Morton (66) 1987 School of Management, Massachusetts Institute of
Technology
- ---------------------------------------------------------------------------------------------------
James M. Storey Trustee Since Attorney; formerly Partner, Dechert (law firm)
(72) 2002
===================================================================================================
Interested Trustees
Richard S. Davis(+) Trustee Since Chairman of the Board, President and Chief
(58) 2000 Executive Officer of State Street Research &
Management Company; formerly Senior Vice
President, Fixed Income Investments, Metropolitan
Life Insurance Company
===================================================================================================
Officers
Donald G. DeVeuve Vice Since Senior Vice President of State Street Research &
(46) President 2001 Management Company; formerly Vice President, State
Street Research & Management Company
- ---------------------------------------------------------------------------------------------------
Rosalina Feliciano Vice Since Senior Vice President of State Street Research &
(40) President 2001 Management Company; formerly Vice President, State
Street Research & Management Company
- ---------------------------------------------------------------------------------------------------
C. Kim Goodwin Vice Since Managing Director and Chief Investment Officer -
(44) President 2002 Equities of State Street Research & Management
Company; formerly Chief Investment Officer - U.S.
Growth Equities, American Century
- ---------------------------------------------------------------------------------------------------
John S. Lombardo Vice Since Managing Director, Chief Financial Officer and
(48) President 2001 Director of State Street Research & Management
Company; formerly Executive Vice President, State
Street Research & Management Company; and Senior
Vice President, Product and Financial Management,
MetLife Auto & Home
- ---------------------------------------------------------------------------------------------------
Mark Marinella Vice Since Managing Director and Chief Investment Officer -
(45) President 2003 Fixed Income, State Street Research & Management
Company; formerly Executive Vice President and
Senior Vice President, State Street Research &
Management Company; and Chief Investment Officer
and Head of Fixed Income, Columbia Management
Group
- ---------------------------------------------------------------------------------------------------
Elizabeth M. Vice Since Managing Director of State Street Research &
Westvold (43) President 2003 Management Company; formerly Senior Vice
President, State Street Research & Management
Company
- ---------------------------------------------------------------------------------------------------
Douglas A. Romich Treasurer Since Senior Vice President and Treasurer of State
(46) 2001 Street Research & Management Company; formerly
Vice President and Assistant Treasurer, State
Street Research & Management Company
- ---------------------------------------------------------------------------------------------------
Francis J. Secretary Since Managing Director, General Counsel and Secretary
McNamara, III (48) 1995 of State Street Research & Management Company;
formerly Executive Vice President, State Street
Research & Management Company
Number of Funds
Name, in Fund Complex Other
Address Overseen by Directorships Held
and Age(a) Trustee/Officer(c) by Trustee/Officer
================================================================================
Independent Trustees 19 Ceridian Corporation
Bruce R. Bond
(57)
- --------------------------------------------------------------------------------
Steve A. Garban 55 Metropolitan Series Fund, Inc.(d)
(66)
- --------------------------------------------------------------------------------
Dean O. Morton 55 The Clorox Company; KLA-Tencor
(71) Corporation; BEA Systems, Inc.;
Cepheid; Pharsight Corporation; and
Metropolitan Series Fund, Inc.
- --------------------------------------------------------------------------------
Susan M. Phillips 19 The Kroger Co.
(58)
- --------------------------------------------------------------------------------
Toby Rosenblatt 55 A.P. Pharma, Inc.; and Metropolitan
(65) Series Fund, Inc.(d)
- --------------------------------------------------------------------------------
Michael S. 55 Metropolitan Series Fund, Inc.(d)
Scott Morton (66)
- --------------------------------------------------------------------------------
James M. Storey 19 SEI Investments Funds (consisting of
(72) 104 portfolios); and The
Massachusetts Health & Education
Tax-Exempt Trust
================================================================================
Interested Trustees
Richard S. Davis(+) 19 None
(58)
================================================================================
Officers
Donald G. DeVeuve 6 None
(46)
- --------------------------------------------------------------------------------
Rosalina Feliciano 6 None
(40)
- --------------------------------------------------------------------------------
C. Kim Goodwin 18 None
(44)
- --------------------------------------------------------------------------------
John S. Lombardo 19 None
(48)
- --------------------------------------------------------------------------------
Mark Marinella 9 None
(45)
- --------------------------------------------------------------------------------
Elizabeth M. 8 None
WestVold (43)
- --------------------------------------------------------------------------------
Douglas A. Romich 19 None
(46)
- --------------------------------------------------------------------------------
Francis J. 19 None
McNamara, III (48)
The fund's Statement of Additional Information includes additional information
about the fund's trustees, and is available without charge, by contacting State
Street Research, One Financial Center, Boston, Massachusetts 02111-2690, or by
calling toll-free 1-87-SSR-FUNDS (1-877-773-8637).
(a) The address of each person is c/o State Street Research & Management
Company, One Financial Center, Boston, MA 02111-2690.
(b) A Trustee serves until he or she retires, resigns or is removed as provided
in the master trust agreement of the respective Trust. Each Trust has
adopted a mandatory retirement age of 72. Each officer holds office until he
or she resigns, is removed or a successor is elected.
(c) Includes all series of 9 investment companies for which State Street
Research & Management Company has served as sole investment adviser and all
series of Metropolitan Series Fund, Inc. The primary adviser to Metropolitan
Series Fund, Inc., is MetLife Advisers, LLC, which has retained State Street
Research & Management Company as sub-adviser to certain series of
Metropolitan Series Fund, Inc.
(d) Serves as Director of Metropolitan Series Fund, Inc., an investment company
comprising 36 separate portfolios.
(+) Mr. Davis is an "interested person" of the Trust under the Investment
Company Act of 1940 by reason of his affiliation with the Trust's Investment
Manager, State Street Research & Management Company, as noted.
14
[LOGO] STATE STREET RESEARCH
One Financial Center
Boston, MA 02111-2690
----------------
PRSRT STD
U.S. POSTAGE
PAID
PERMIT #6
HUDSON, MA
----------------
- --------------------------------------------------------------------------------
New accounts, mutual fund purchases,
exchanges and account information
Internet www.ssrfunds.com
E-mail info@ssrfunds.com
Phone 1-87-SSR-FUNDS (1-877-773-8637),
toll-free, 7 days a week, 24 hours a day
Hearing-impaired: 1-800-676-7876
Chinese- and Spanish-speaking: 1-888-638-3193
Fax 1-617-737-9722 (request confirmation number
first from the Service Center by calling 1-877-773-8637)
Mail State Street Research Service Center
P.O. Box 8408, Boston, MA 02266-8408
- --------------------------------------------------------------------------------
Did You Know?
State Street Research offers electronic delivery of quarterly statements,
shareholder reports and fund prospectuses. If you elect this option, we will
send these materials to you via e-mail. To learn more, visit us on the Web at
www.ssrfunds.com and click on "Go to Your Account" or call us at 1-87-SSR-FUNDS
(1-877-773-8637).
Did you know that you can give a State Street Research mutual fund as a gift?
Call a service center representative at 1-87-SSR-FUNDS (1-877-773-8637), Monday
through Friday, 8am-6pm eastern time, to learn more.
- --------------------------------------------------------------------------------
OverView
For more information on the products and services we offer, refer to OverView,
our quarterly shareholder newsletter.
Webcasts
For a professional perspective on the markets, the economy and timely investment
topics, tune in to a State Street Research webcast by visiting our website at
www.ssrfunds.com.
Complete Fund Listing
For a list of our funds, visit our website at www.ssrfunds.com under Research
Our Funds.
[GRAPHIC]
for Excellence in
Shareholder Communications
[GRAPHIC]
for Excellence in Service
This report must be accompanied or preceded by a current prospectus. When used
as sales material after December 31, 2003, this report must be accompanied by a
current Quarterly Performance Update.
To obtain a prospectus for any State Street Research fund call 1-87-SSR-FUNDS
(1-877-773-8637) or by visiting our website at www.ssrfunds.com. The prospectus
contains more complete information, including sales charges and expenses. Please
read the prospectus carefully before investing or sending money.
The DALBAR awards recognize quality shareholder service and quality shareholder
communications, 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 industrywide.
Member NASD, SIPC
(C)2003 State Street Research Investment Services, Inc.
One Financial Center
Boston, MA 02111-2690
www.ssrfunds.com
CONTROL NUMBER:(exp1104)SSR-LD
MM-2657-1103
[BACKGROUND GRAPHIC]
[LOGO] STATE STREET RESEARCH
[PHOTO]
Asset Allocation Fund
September 30, 2003
Semiannual Report to Shareholders
Table of Contents
3 Performance Discussion
4 Portfolio Holdings
15 Financial Statements
20 Financial Highlights
22 Trustees and Officers
FROM THE CHAIRMAN
State Street Research
Optimism in the Economy
Economic news brightened and investors responded with renewed enthusiasm for the
stock market during the six-month period that ended September 30, 2003. Low
short-term interest rates, a significant income tax cut and higher government
spending worked together to boost economic growth to its highest level in four
years. Housing sales remained strong, although auto sales slipped late in the
period. Corporate profits staged a solid rebound. Employment was the only
holdout, as the jobless rate remained stubbornly high.
Stocks Move Higher on Positive Economic News
Stocks staged an impressive rally in the second quarter of 2003 as economic news
brightened. Technology stocks were the strongest performers. Consumer stocks
also gained ground as spending remained strong. In general, small- and mid-cap
stocks outperformed large-caps, and growth stocks significantly outpaced value.
Although all stock market indexes reported solid gains for the period, they were
trimmed in the final weeks of September after news that consumer confidence had
dropped.
Bonds Retreat as Interest Rates Rise
Investor confidence in the economy translated into solid gains for High-Yield
bonds, which along with Emerging Market bonds, were the period's strongest
performers. U.S. Treasury bonds eked out a positive return, but that masked a
sharp decline in the second half of the period, as interest rates rose above
4.0% before settling back to 3.93% at the end of the period. When interest rates
rise, bond prices decline. Mortgage bonds lagged as the result of higher
mortgage prepayment activity in the spring and municipal bonds were hurt by
concerns over state budget deficits and revenue shortfalls.
Looking Ahead
After three years of disappointing returns, a revival for riskier segments of
both the stock and bond markets took many investors by surprise. Yet, it
provided an excellent reminder that the best way to take advantage of the
market's strongest gains is to own a diversified portfolio of stocks and bonds.
We hope you will take time to talk to your financial advisor about
diversification. And as always, we look forward to helping you achieve your
long-term financial goals with State Street Research Funds.
Sincerely,
/s/ Richard S. Davis
Richard S. Davis
Chairman
September 30, 2003
- --------------------------------------------------------------------------------
A Special Message on Recent News
Recent articles in the press have highlighted investigations into after-hours
trading and frequent-trading practices in the mutual fund industry. These are
serious matters, and we want to assure you that State Street Research is
committed to maintaining full compliance with all legal requirements and ethical
standards regarding these and other mutual fund trading practices. In fact, our
mutual fund trading processes are designed to prevent these types of activities
from taking place, and we are committed to maintaining their integrity. Our
trade processing procedures carefully track the forward-pricing requirements
contained in federal regulations and in our funds' prospectuses. We closely
monitor trading in our funds and take measures to prevent market timing whenever
it is identified. Furthermore, we do not enter into any special arrangements
that would permit investors to avoid the forward-pricing or market-timing
provisions of our prospectuses.
In recent weeks, we have carefully reviewed our trading policies, procedures and
operations. In addition, our firm recommended early on that the funds' Trustees
engage an independent accounting firm, which has been reviewing trading issues
on behalf of our funds' Audit Committee. While there is always more work that
can be done, I am pleased to report that we believe our processes are working
effectively, based on our preliminary findings. We understand that our
relationship with our shareholders is based on trust, and we are committed to
acting in the best interests of our shareholders at all times.
- --------------------------------------------------------------------------------
2
PERFORMANCE
Discussion as of September 30, 2003
How State Street Research Asset Allocation Fund Performed
State Street Research Asset Allocation Fund returned 16.15% for the six-month
period ended September 30, 2003.(1) It outperformed its peer group, the
Lipper Flexible Portfolio Funds Average, which had an average return of
13.86% over the same period.(2) It also outperformed the S&P 500/Lehman
Blended Index, which returned 11.87% for the six-month period.(3)
Reasons for the Fund's Performance
Both the stock and bond portions of the fund posted attractive gains for the
six-month period. Our decision to increase our equity weighting to 65% during
the period (neutral weight is 60%) helped performance as stocks significantly
outperformed for the period. A higher exposure to small-cap stocks drove the
fund's relative gains as investors favored small-cap stocks over their mid- and
large-cap counterparts. Large-cap growth, small-cap growth, international and
value stocks also performed well, though the fund's inflation exposure lagged.
Within the fixed income portion of the fund's portfolio, High-Yield and Emerging
Market positions provided the bulk of returns. Lower-quality CCC-rated issues
outperformed higher-quality B-rated names. Our investments in Emerging Market
securities made modest positive contributions to overall performance as the
improving global economy and higher commodity prices provided a favorable
backdrop for continued outperformance. The fund's investments in High-Grade
bonds also contributed to positive performance, but the fund was below its
normal target weight within the High-Grade sector.
Looking Ahead
Although we still believe that equities have the potential to generate strong
returns in the period ahead, we felt it prudent to trim our equity weight back
to 61% at the end of the period, given the recent strength in the equity
markets. Within equities, we have emphasized small-cap and international stocks,
which we expect to be the primary beneficiaries of strengthening economies
around the world, and underweighted large-cap growth and value stocks. Within
the bond portion of the portfolio, we remain modestly overweight in High-Yield,
underweight in High-Grade and neutral weight in Emerging Markets.
Top 5 Equity Industries
- --------------------------------------------------------------------------------
Issuer/Security % of fund net assets
1 Miscellaneous Financial 3.0%
--------------------------------------------------
2 Drugs & Biotechnology 3.0%
--------------------------------------------------
3 Electronics: Semiconductors/
Components 3.0%
--------------------------------------------------
4 Banks & Savings & Loan 2.7%
--------------------------------------------------
5 Commercial Services 2.6%
--------------------------------------------------
Total 14.3%
Because financial markets and mutual fund strategies are constantly evolving, it
is possible that the fund's holdings, market stance, outlook for various
industries or securities and other matters discussed in this report have changed
since this information was prepared. Portfolio changes should not be considered
recommendations for action by individual investors.
Performance
- --------------------------------------------------------------------------------
Fund average annual total return as of 9/30/03(4,6)
(does not reflect sales charge)
1 Year 5 Years 10 Years
Class A 17.26% 5.88% 8.14%
- ------------------------------------------------
Class B(1) 16.51% 5.13% 7.35%
- ------------------------------------------------
Class B 17.65% 5.48% 7.53%
- ------------------------------------------------
Class C 16.42% 5.12% 7.35%
- ------------------------------------------------
Class S 17.60% 6.17% 8.42%
- ------------------------------------------------
Fund average annual total return as of 9/30/03(4,5,6)
(at maximum applicable sales charge)
1 Year 5 Years 10 Years
Class A 10.52% 4.63% 7.50%
- ------------------------------------------------
Class B(1) 11.51% 4.83% 7.35%
- ------------------------------------------------
Class B 12.65% 5.17% 7.53%
- ------------------------------------------------
Class C 15.42% 5.12% 7.35%
- ------------------------------------------------
Class S 17.60% 6.17% 8.42%
- ------------------------------------------------
(1) Class A shares; does not reflect sales charge.
(2) The Lipper Flexible Portfolio Funds Average shows performance of a category
of mutual funds with similar goals. The Lipper average shows you how well
the fund has done compared with competing funds.
(3) The S&P 500/Lehman Blended Index is an index created by State Street
Research. The index is comprised of 60% of the performance of the S&P 500
Index and 40% of the performance of the Lehman Brothers Aggregate Bond
Index. The S&P 500 Index (officially the "Standard & Poor's 500 Composite
Stock Price Index") is an unmanaged index of 500 U.S. stocks. The Lehman
Brothers Aggregate Bond Index is a market value-weighted index of
investment-grade, fixed-rate debt issues, including government, corporate,
asset-backed and mortgage-backed securities, with maturities of one year or
more. The indexes are unmanaged and do not take transaction charges into
consideration. It is not possible to invest directly in an index.
(4) 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
returns shown do not reflect the deduction of taxes that shareholder would
pay on fund distributions, or the redemption of fund shares. Performance for
Class B(1) shares reflects Class B share performance through December 31,
1998, and Class B(1) performance thereafter. If the returns for Class B(1)
shares had reflected their current service/distribution (Rule 12b-1) fees
for the entire period, these returns would have been lower.
(5) Performance reflects 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 charge, where applicable.
(6) Investments in foreign derivative securities pose additional risks not
associated with domestic securities, such as changes in exchange rates, and
different government regulations, economic conditions, and accounting
standards.
State Street Research Asset Allocation Fund 3
PORTFOLIO
Holdings
September 30, 2003 (unaudited)
Issuer Shares Value
- --------------------------------------------------------------------------------
Equity Securities 50.8%
Automobiles & Transportation 1.5%
Air Transport 0.1%
Expeditors International Inc. .................. 11,900 $ 409,479
Ryanair Holdings plc ADR* ...................... 10,700 433,350
-----------
842,829
-----------
Automotive Parts 0.6%
Delphi Automotive Systems Corp. ................ 66,700 603,635
Gentex Corp.* .................................. 36,400 1,268,176
Navistar International Corp.* .................. 35,600 1,327,168
-----------
3,198,979
-----------
Miscellaneous Transportation 0.4%
Frontline Ltd.* ................................ 32,400 542,700
OMI Corp.* ..................................... 84,600 560,052
Tidewater Inc. ................................. 36,100 1,021,630
-----------
2,124,382
-----------
Truckers 0.4%
CNF Transportation Inc. ........................ 62,600 2,006,330
-----------
Total Automobiles & Transportation ............................. 8,172,520
-----------
Consumer Discretionary 11.3%
Advertising Agencies 0.3%
Valassis Communications Inc.* .................. 66,850 1,764,840
-----------
Casinos/Gambling, Hotel/Motel 0.4%
Boyd Gaming Corp. .............................. 54,300 828,618
International Game Technology Inc. ............. 53,900 1,517,285
-----------
2,345,903
-----------
Commercial Services 2.6%
Ask Jeeves Inc.* ............................... 29,600 515,040
Autobytel Inc.* ................................ 181,202 1,725,043
Cendant Corp.* ................................. 109,300 2,042,817
eBay Inc.* ..................................... 16,000 856,160
InterActiveCorp.* .............................. 70,466 2,328,909
Kroll Inc.* .................................... 43,100 801,660
Manpower Inc. .................................. 58,900 2,185,190
Tech Data Corp.* ............................... 47,800 1,474,630
Viad Corp. ..................................... 97,800 2,335,464
-----------
14,264,913
-----------
Communications, Media & Entertainment 1.5%
Alliance Gaming Corp.* ......................... 105,500 2,139,540
Entravision Communications Corp.* .............. 105,100 998,450
Hollywood Entertainment Corp.* ................. 67,100 1,140,700
Radio One Inc. Cl. D* .......................... 58,700 842,932
Univision Communications Inc. Cl. A* ........... 43,930 1,402,685
Walt Disney Co. ................................ 84,900 1,712,433
-----------
8,236,740
-----------
Issuer Shares Value
- --------------------------------------------------------------------------------
Consumer Electronics 0.4%
Harman International Inc. ...................... 8,000 $ 786,800
Yahoo! Inc.* ................................... 42,250 1,494,805
-----------
2,281,605
-----------
Consumer Products 0.3%
Avon Products Inc. ............................. 24,280 1,567,517
-----------
Consumer Services 0.7%
Apollo Group Inc. Cl. A* ....................... 12,200 805,566
Career Education Corp.* ........................ 37,300 1,689,690
Sylvan Learning Systems Inc.* .................. 54,200 1,478,709
-----------
3,973,965
-----------
Household Furnishings 0.3%
Stanley Works Corp. ............................ 65,100 1,921,752
-----------
Leisure Time 0.4%
Penn National Gaming Inc.* ..................... 43,500 927,420
Royal Caribbean Cruises Ltd. ................... 38,700 1,087,857
-----------
2,015,277
-----------
Printing & Publishing 1.2%
News Corp. Ltd. ADR ............................ 67,200 2,204,160
Reader's Digest Association Inc. Cl. A ......... 158,400 2,216,016
RR Donnelley & Sons Co. ........................ 77,800 1,934,886
Sullivan Holdings Inc. (acquired 5/14/93,
cost $216,706) *++ ........................... 149 74,088
-----------
6,429,150
-----------
Restaurants 0.7%
The Cheesecake Factory Inc.* ................... 18,500 669,145
Darden Restaurants Inc. ........................ 98,700 1,875,300
Krispy Kreme Doughnuts Inc.* ................... 26,200 1,008,700
Starbucks Corp.* ............................... 21,600 622,080
-----------
4,175,225
-----------
Retail 2.1%
Bed Bath & Beyond Inc.* ........................ 20,600 786,508
Best Buy Company Inc.* ......................... 17,370 825,422
Cache Inc.* .................................... 22,300 454,920
Dollar General Corp. ........................... 21,000 420,000
Federated Department Stores Inc. ............... 52,500 2,199,750
Gap Inc. ....................................... 32,480 556,058
Limited Inc. ................................... 101,400 1,529,112
Lowes Companies Inc. ........................... 23,340 1,211,346
Michael's Stores Inc. .......................... 15,400 627,704
Staples Inc.* .................................. 18,500 439,375
Talbots Inc. ................................... 24,100 839,885
Wal-Mart Stores Inc. ........................... 29,370 1,640,314
-----------
11,530,394
-----------
Shoes 0.1%
Nike Inc. ...................................... 8,400 510,888
-----------
Textile Apparel Manufacturers 0.1%
Coach Inc.* .................................... 7,080 386,568
-----------
Toys 0.2%
LeapFrog Enterprises Inc.* ..................... 36,100 1,371,800
-----------
Total Consumer Discretionary ................................... 62,776,537
-----------
Consumer Staples 1.7%
Beverages 0.8%
Coca-Cola Co. .................................. 39,000 1,675,440
Pepsi Bottling Group Inc. ...................... 107,100 2,204,118
PepsiCo Inc. ................................... 9,750 446,842
-----------
4,326,400
-----------
4 The notes are an integral part of the financial statements.
Issuer Shares Value
- --------------------------------------------------------------------------------
Drug & Grocery Store Chains 0.4%
Pathmark Stores Inc.* ........................ 2,667 $ 18,589
Safeway Inc.* ................................ 55,300 1,269,233
Whole Foods Market Inc.* ..................... 12,200 673,196
-----------
1,961,018
-----------
Household Products 0.5%
Clorox Co. ................................... 16,700 766,029
Procter & Gamble Co. ......................... 23,740 2,203,547
-----------
2,969,576
-----------
Total Consumer Staples ........................................ 9,256,994
-----------
Financial Services 7.8%
Banks & Savings & Loan 2.7%
City National Corp. .......................... 36,000 1,834,560
Comerica Inc. ................................ 47,200 2,199,520
East West Bancorp Inc. ....................... 26,500 1,132,875
Goldman Sachs Group Inc. ..................... 14,400 1,208,160
KeyCorp ...................................... 79,700 2,037,929
Mercantile Bankshares Corp. .................. 49,000 1,960,000
New York Community Bancorp Inc. .............. 39,200 1,235,192
Texas Capital Bancshares Inc.* ............... 107,800 1,317,316
Union Planters Corp. ......................... 58,300 1,844,612
-----------
14,770,164
-----------
Insurance 1.3%
ACE Limited .................................. 45,100 1,491,908
American International Group Inc. ............ 19,400 1,119,380
Lincoln National Corp. ....................... 53,300 1,885,754
WellChoice Inc.* ............................. 54,100 1,630,033
XL Capital Ltd. .............................. 16,000 1,239,040
-----------
7,366,115
-----------
Miscellaneous Financial 3.0%
Ambac Financial Group Inc. ................... 29,750 1,904,000
American Express Co. ......................... 32,840 1,479,771
Capital One Financial Corp. .................. 19,600 1,117,984
CapitalSource Inc.* .......................... 60,100 1,051,750
CIT Group Inc. ............................... 81,700 2,349,692
Citigroup Inc. ............................... 41,720 1,898,677
H&R Block Inc. ............................... 34,500 1,488,675
iShares Russell 2000 Growth Index ............ 18,100 951,879
MBNA Corp. ................................... 37,300 850,440
MGIC Investment Corp. ........................ 44,400 2,311,908
SLM Corp. .................................... 33,900 1,320,744
-----------
16,725,520
-----------
Real Estate Investment Trusts 0.4%
Boston Properties Inc. ....................... 55,500 2,412,585
-----------
Securities Brokerage & Services 0.4%
Affiliated Managers Group Inc.* .............. 12,500 785,000
Janus Capital Group Inc. ..................... 99,300 1,387,221
-----------
2,172,221
-----------
Total Financial Services ...................................... 43,446,605
-----------
Health Care 5.9%
Drugs & Biotechnology 3.0%
Alkermes Inc.* ............................... 45,900 629,748
Allergan Inc. ................................ 8,400 661,332
Altana AG ADR ................................ 1,800 114,030
Amgen Inc.* .................................. 27,340 1,765,344
CV Therapeutics Inc.* ........................ 41,200 906,400
Forest Laboratories Inc.* .................... 11,980 616,371
Issuer Shares Value
- --------------------------------------------------------------------------------
Genentech, Inc.* ............................... 12,400 $ 993,736
Gilead Sciences, Inc.* ......................... 7,500 419,475
ICOS Corp.* .................................... 27,700 1,061,464
Invitrogen Corp.* .............................. 4,700 272,553
Johnson & Johnson Ltd. ......................... 34,640 1,715,373
Medimmune Inc.* ................................ 12,200 402,722
Novartis AG ADR ................................ 31,930 1,240,161
Pfizer Inc. .................................... 119,382 3,626,825
Sanofi Synthelabo Inc. ADR ..................... 14,500 438,190
Teva Pharmaceutical Industries Ltd. ADR ........ 7,700 440,055
Wyeth Inc. ..................................... 28,900 1,332,290
-----------
16,636,069
-----------
Health Care Services 1.3%
Anthem Inc.* ................................... 12,110 863,806
Caremark Rx Inc.* .............................. 138,850 3,138,010
Coventry Health Care Inc.* ..................... 25,900 1,365,966
Universal Health Services Inc.* ................ 40,600 2,007,670
-----------
7,375,452
-----------
Hospital Supply 1.6%
American Medical Systems Holdings Inc.* ........ 55,900 1,213,030
Bausch & Lomb Inc. ............................. 35,100 1,549,665
Cyberonics Inc.* ............................... 24,600 759,156
Guidant Corp. .................................. 19,100 894,835
Medtronic Inc. ................................. 35,170 1,650,177
Respironics Inc.* .............................. 29,800 1,245,044
TheraSense Inc.* ............................... 65,596 819,294
Zoll Medical Corp.* ............................ 24,300 778,815
-----------
8,910,016
-----------
Total Health Care .............................................. 32,921,537
-----------
Integrated Oils 0.4%
Integrated International 0.4%
Unocal Corp. ................................... 68,400 2,155,968
-----------
Total Integrated Oils 2,155,968
-----------
Materials & Processing 2.5%
Building & Construction 0.2%
Vulcan Materials Inc. .......................... 27,000 1,077,570
Waxman Industries Inc.
(acquired 8/12/94, cost $0)*++ ................ 29,500 4,425
-----------
1,081,995
-----------
Chemicals 0.4%
Air Products & Chemicals Inc. .................. 18,440 831,644
Rohm & Haas Co. ................................ 46,600 1,558,901
-----------
2,390,545
-----------
Containers & Packaging 0.6%
Pactive Corp.* ................................. 69,800 1,415,544
Smurfit-Stone Container Corp.* ................. 126,600 1,896,468
-----------
3,312,012
-----------
Diversified Manufacturing 0.2%
American Standard Companies Inc.* .............. 14,300 1,204,775
-----------
Miscellaneous Materials & Processing 0.1%
Maverick Tube Corp.* ........................... 24,400 378,688
-----------
Office Supplies 0.4%
Avery Dennison Corp. ........................... 38,400 1,939,968
-----------
Paper & Forest Products 0.6%
Bowater Inc. ................................... 30,000 1,261,800
MeadWestvaco Corp. ............................. 86,200 2,198,100
-----------
3,459,900
-----------
The notes are an integral part of the financial statements.
State Street Research Asset Allocation Fund 5
Portfolio Holdings (cont'd)
Issuer Shares Value
- --------------------------------------------------------------------------------
Steel 0.0%
Allegheny Technologies Inc. .................. 26,100 $ 170,955
-----------
Total Materials & Processing .................................. 13,938,838
-----------
Non-U.S. Equities 1.2%
Axis Capital Holdings Ltd.* .................. 90,500 2,257,975
Baytex Energy Trust* ......................... 94,300 663,347
Cequel Energy Inc.* .......................... 97,700 488,319
Crew Energy Inc.* ............................ 37,167 99,625
Endev Energy Inc.* ........................... 310,800 423,452
Impact Energy Inc.* .......................... 52,500 49,759
Navigo Energy Inc.* .......................... 220,000 521,289
Niko Resources Ltd. .......................... 10,000 211,403
Olympia Energy Inc.* ......................... 180,500 378,241
Penn West Petroleum Ltd.* .................... 30,000 1,016,068
Progess Energy Ltd.* ......................... 64,500 470,437
Purcell Energy Inc.* ......................... 68,773 181,561
Thunder Energy Inc.* ......................... 24,900 120,029
-----------
Total Non-U.S. Equities ....................................... 6,881,505
-----------
Other 1.5%
Multi-Sector 1.5%
General Electric Co. ......................... 86,020 2,564,256
Hillenbrand Industries, Inc. ................. 19,000 1,071,980
McDermott International Inc.* ................ 83,400 476,214
SPX Corp.* ................................... 49,800 2,254,944
Textron Inc. ................................. 47,300 1,865,985
-----------
Total Other ................................................... 8,233,379
-----------
Other Energy 4.8%
Miscellaneous Energy 0.9%
Arch Coal Inc. ............................... 42,400 941,704
Consol Energy Inc*@ .......................... 35,200 621,315
Consol Energy Inc. ........................... 43,300 804,514
Massey Energy Corp.* ......................... 50,900 676,970
Peabody Energy Corp. ......................... 30,000 941,100
Penn Virginia Corp. .......................... 23,000 1,016,600
-----------
5,002,203
-----------
Offshore Drilling 0.3%
Transocean Inc. .............................. 92,800 1,856,000
-----------
Oil & Gas Producers 1.9%
Apache Corp. ................................. 10,400 721,136
Burlington Resources Inc. .................... 52,400 2,525,680
Clayton Williams Energy Inc.* ................ 35,000 659,750
Devon Energy Corp. ........................... 31,021 1,494,902
Energy Partners Ltd.* ........................ 86,000 956,320
Esprit Exploration Ltd.* ..................... 100,000 196,964
Newfield Exploration Co.* .................... 54,700 2,109,779
Plains Exploration & Production Co.* ......... 48,000 598,560
Plains Resources Inc.* ....................... 38,100 474,345
Remington Oil Gas Corp.* ..................... 52,800 958,320
Treasure Islands Royalty Trust* .............. 300,000 108,000
-----------
10,803,756
-----------
Oil Well Equipment & Services 1.7%
BJ Services Co.* ............................. 14,100 481,797
Global Industries Ltd.* ...................... 50,000 227,500
Halliburton Co. .............................. 101,200 2,454,100
Hanover Compressor Co.* ...................... 43,600 431,640
MarkWest Hydrocarbon Inc.* ................... 600 4,350
Nabors Industries Ltd.* ...................... 8,400 312,984
Issuer Shares Value
- --------------------------------------------------------------------------------
NewPark Resources Inc.* ........................ 169,500 $ 728,850
Noble Corp.* ................................... 50,700 1,723,293
Patterson UTI Energy Inc.* ..................... 38,500 1,042,195
Pride International Inc.* ...................... 30,000 508,500
Rowan Companies, Inc.* ......................... 50,600 1,243,748
-----------
9,158,957
-----------
Total Other Energy ............................................. 26,820,916
-----------
Producer Durables 2.9%
Aerospace 0.2%
Ladish Inc.* ................................... 15,095 94,344
Rockwell Collins Inc. .......................... 49,700 1,254,925
-----------
1,349,269
-----------
Electrical Equipment & Components 0.2%
Cooper Industries Ltd. ......................... 22,600 1,085,478
-----------
Industrial Products 0.3%
ESCO Technologies Inc.* ........................ 35,920 1,626,098
-----------
Machinery 0.5%
AGCO Corp.* .................................... 81,100 1,390,054
Helix Technology Corp. ......................... 79,300 1,298,141
-----------
2,688,195
-----------
Miscellaneous Equipment 0.3%
Pentair Inc. ................................... 38,200 1,523,034
-----------
Office Furniture & Business Equipment 0.3%
Pitney Bowes Inc. .............................. 43,000 1,647,760
-----------
Production Technology Equipment 1.0%
Applied Materials Inc.* ........................ 63,000 1,142,820
August Technology Corp.* ....................... 30,100 428,624
Axcelis Technologies, Inc.* .................... 143,600 1,186,136
Phase Metrics Inc. (acquired 1/23/98
through 6/9/98, cost $651,892)*++@ ............ 50,574 10,115
Teradyne Inc.* ................................. 110,200 2,049,720
Varian Semiconductor Equipment Inc.* ........... 13,100 490,595
-----------
5,308,010
-----------
Telecommunications Equipment 0.1%
SpectraLink Corp.* ............................. 34,400 642,592
-----------
Total Producer Durables ........................................ 15,870,436
-----------
Technology 7.4%
Communications Technology 1.2%
Avocent Corp.* ................................. 48,700 1,475,123
Cisco Systems Inc.* ............................ 171,420 3,349,553
NCR Corp.* ..................................... 64,500 2,044,005
-----------
6,868,681
-----------
Computer Software 1.8%
Autodesk Inc. .................................. 79,300 1,349,686
eCollege Inc.*@ ................................ 53,800 863,813
Embarcadero Technologies Inc.* ................. 81,100 814,244
Microsoft Corp. ................................ 179,120 4,977,744
SafeNet Inc.* .................................. 36,800 1,329,584
SAP AG ADR ..................................... 28,390 863,340
-----------
10,198,411
-----------
Computer Technology 0.7%
Dell Inc.* ..................................... 54,130 1,807,401
EMC Corp.* ..................................... 100,700 1,271,841
Ingram Micro Inc. Cl. A* ....................... 25,200 329,399
Sandisk Corp.* ................................. 3,200 203,968
-----------
3,612,609
-----------
6 The notes are an integral part of the financial statements.
Issuer Shares Value
- --------------------------------------------------------------------------------
Electronics 0.7%
Aeroflex Inc.* ................................. 156,800 $ 1,387,680
Kemet Corp.* ................................... 87,300 1,112,202
Nokia Corp. ADR ................................ 29,000 452,400
Sanmina-SCI Corp.* ............................. 68,200 661,540
-----------
3,613,822
-----------
Electronics: Semiconductors/Components 3.0%
Artisan Components Inc.* ....................... 51,400 864,034
ASM International NV* .......................... 83,300 1,228,675
Broadcom Corp. Cl. A* .......................... 30,700 817,234
Cypress Semiconductor Corp.* ................... 131,800 2,330,224
Integrated Silicon Solution Inc.* .............. 69,600 692,520
Intel Corp. .................................... 153,730 4,229,117
International Rectifier Corp.* ................. 21,200 793,728
Linear Technology Corp. ........................ 34,200 1,224,702
National Semiconductor Corp.* .................. 26,900 868,601
O2Micro International Ltd.* .................... 106,600 1,540,370
Silicon Storage Technology Inc.* ............... 163,800 1,433,250
Texas Instruments Inc. ......................... 36,100 823,080
-----------
16,845,535
-----------
Total Technology ............................................... 41,139,058
-----------
Utilities 1.9%
Cable Television & Radio 0.2%
Comcast Corp. Cl. A* ........................... 32,300 954,142
-----------
Electrical 1.4%
Cinergy Corp. .................................. 22,100 811,070
Constellation Energy Group Inc. ................ 64,600 2,311,388
Pepco Holdings Inc. ............................ 130,800 2,260,224
PPL Corp. ...................................... 57,000 2,334,150
-----------
7,716,832
-----------
Gas Distribution 0.3%
KeySpan Energy Corp. ........................... 41,900 1,469,852
Western Gas Resources Inc. ..................... 5,000 190,000
-----------
1,659,852
-----------
Telecommunications 0.0%
Nextel Communications Inc. Cl. A* .............. 3,098 61,000
-----------
61,000
-----------
Total Utilities ................................................ 10,391,826
-----------
Total Equity Securities (Cost $243,411,051) .................... 282,006,119
-----------
Maturity Principal
Date Amount
- --------------------------------------------------------------------------------
Fixed Income Securities 45.8%
U.S. Treasury 2.8%
U.S. Treasury Bond, 7.25% ......... 5/15/2016 $1,425,000 1,821,997
U.S. Treasury Bond, 8.875% ........ 2/15/2019 1,925,000 2,824,412
U.S. Treasury Bond, 6.25% ......... 8/15/2023 1,525,000 1,782,760
U.S. Treasury Bond, 6.25% ......... 5/15/2030 3,000,000 3,559,806
U.S. Treasury Bond, 5.25% ......... 11/15/2028 750,000 777,012
U.S. Treasury Note, 7.00% ......... 7/15/2006 2,700,000 3,075,891
U.S. Treasury Note, 5.625% ........ 5/15/2008 500,000 563,750
U.S. Treasury Note, 5.00% ......... 8/15/2011 1,100,000 1,203,211
----------
15,608,839
----------
U.S. Agency Mortgage 10.3%
Federal Home Loan Mortgage
Corp., 3.625% ................... 9/15/2008 2,475,000 2,521,438
Maturity Principal
Date Amount
- --------------------------------------------------------------------------------
Federal National Mortgage
Association 0.00% ................ 11/25/2012 $ 6,908,142 $ 291,334
Federal National Mortgage
Association, 8.00% ............... 4/01/2008 40,868 43,617
Federal National Mortgage
Association, 8.00% ............... 6/01/2008 54,993 59,385
Federal National Mortgage
Association, 8.50% ............... 2/01/2009 51,772 56,395
Federal National Mortgage
Association, 7.00% ............... 8/01/2014 319,329 339,906
Federal National Mortgage
Association, 7.00% ............... 9/01/2014 488,651 519,974
Federal National Mortgage
Association, 6.00% ............... 5/01/2017 583,429 609,026
Federal National Mortgage
Association, 7.50% ............... 7/01/2029 475,007 507,950
Federal National Mortgage
Association TBA, 5.50% ........... 11/13/2033 7,325,000 7,446,317
Federal National Mortgage
Association TBA, 6.00% ........... 10/13/2033 8,050,000 8,306,594
Federal National Mortgage
Association TBA, 6.50% ........... 10/13/2033 6,025,000 6,279,183
Federal National Mortgage
Association TBA, 7.00% ........... 10/13/2033 2,200,000 2,325,125
Federal National Mortgage
Association TBA, 6.00% ........... 10/13/2033 2,600,000 2,711,311
Federal National Mortgage
Association, 4.50% ............... 4/25/2009 1,500,000 1,549,554
Federal National Mortgage
Association, 5.00% ............... 11/13/2033 3,550,000 3,537,795
Federal National Mortgage
Association, 4.00% ............... 10/20/2018 675,000 664,875
Federal National Mortgage
Association, 4.50% ............... 10/20/2018 1,225,000 1,234,953
Federal National Mortgage
Association, 5.00% ............... 10/20/2018 4,850,000 4,968,219
Federal National Mortgage
Association, 5.50% ............... 10/20/2018 2,525,000 2,611,797
Federal National Mortgage
Association, 6.50% ............... 10/20/2018 2,950,000 3,114,159
Federal National Mortgage
Association, 6.50% ............... 5/01/2029 425,867 444,439
Government National Mortgage
Association, 6.50% ............... 2/15/2009 112,701 119,607
Government National Mortgage
Association, 6.50% ............... 6/15/2009 46,949 49,842
Government National Mortgage
Association, 6.50% ............... 7/15/2009 245,437 260,429
Government National Mortgage
Association, 7.50% ............... 11/15/2010 13,005 13,950
Government National Mortgage
Association, 7.50% ............... 12/15/2010 124,615 133,674
Government National Mortgage
Association, 7.00% ............... 1/15/2025 204,893 219,480
Government National Mortgage
Association, 6.50% ............... 11/15/2028 914,084 961,656
Government National Mortgage
Association, 7.00% ............... 11/15/2028 431,930 460,256
Government National Mortgage
Association, 7.00% ............... 11/15/2028 29,755 31,714
Government National Mortgage
Association, 5.50% ............... 10/22/2033 3,100,000 3,177,500
Government National Mortgage
Association, 5.00% ............... 10/27/2033 1,125,000 1,127,109
-----------
56,698,563
-----------
The notes are an integral part of the financial statements.
State Street Research Asset Allocation Fund 7
Portfolio Holdings (cont'd)
Maturity Principal
Date Amount Value
- --------------------------------------------------------------------------------
Finance/Mortgage 14.2%
ACE Securities Corp. 1999 Cl
M2, 2.37% .......................... 8/25/2030 $ 170,797 $ 169,511
AIG SunAmerica Global
Finance Inc. Sr. Note, 7.60% ....... 6/15/2005 350,000 385,343
Allstate Financial Global
Funding LLC Note, 2.50% ............ 6/20/2008 325,000 312,447
AmeriCredit Automobile
Recreation Trust Note 2002
Cl. A4, 3.40% ...................... 4/13/2009 350,000 357,111
Artesia Mortgage Cmbs Inc.
Note 1998-C1, 7.01% ................ 6/25/2030 150,000 162,311
Bank of America Corp.
Note, 7.40% ........................ 1/15/2011 675,000 801,819
Bank One Issuance Trust
Note 2002-C3, 3.76% ................ 8/15/2008 300,000 306,633
Bear Stearns Commercial
Mortgage Securities Inc.
Note Cl. A1, 6.80% ................. 9/15/2008 94,028 101,571
Bear Stearns Commercial
Mortgage Securities Inc.
Note Cl. A1, 6.08% ................. 2/15/2035 1,102,076 1,201,583
Bear Stearns Commercial
Mortgage Securities Inc.
Note Cl. A1, 5.92% ................. 10/15/2036 255,320 280,362
Bear Stearns Commercial
Mortgage Securities Inc.
Note Cl. A2, 7.08% ................. 6/15/2009 250,000 289,431
Bear Stearns Commerical
Mortgage Securities Inc.
Note Cl. A2, 7.32% ................. 10/15/2032 475,000 560,156
Capital Auto Receivables Trust
Note, 4.16% ........................ 7/16/2007 300,000 310,841
Caterpillar Financial Asset Trust
Note 2001 Cl. A3, 4.85% ............ 4/25/2007 292,692 297,634
Centex Home Equity Loan Trust
Note 2003 Cl. M3, 4.22% ............ 6/25/2033 475,000 476,805
Chase Commercial Mortgage
Securities Corp. Note 1998-
2 Cl. A2, 6.39% .................... 11/18/2030 300,000 337,956
Chase Manhattan Auto Owner
Trust Note 2001 Cl. A4,
3.80% .............................. 5/15/2008 125,000 128,830
Chase Manhattan Auto Owner
Trust Note 2002, 4.17% ............. 9/15/2008 974,280 1,002,213
Chase Manhattan Auto Owner
Trust Note 2002 Cl A3,
3.49% .............................. 3/15/2006 247,919 250,481
Chase Manhattan Auto Owner
Trust Note 2003, 2.43% ............. 2/16/2010 1,500,000 1,499,901
CIT Group Inc., Note 4.125% .......... 2/21/2006 275,000 286,050
Citibank Credit Card Issuance
Trust Note 2001 Cl. A8,
4.10% .............................. 12/07/2006 275,000 283,779
Citibank Credit Card Issuance
Trust Note 2001 Cl. B2,
1.61% .............................. 12/10/2008 500,000 503,303
Citibank Credit Card Issuance
Trust Note 2001 Cl. C3,
6.65% .............................. 5/15/2008 575,000 626,557
Citibank Credit Card Issuance
Trust Note 2000 Cl. C1,
7.45% .............................. 9/15/2007 150,000 163,971
Citibank Credit Card Issuance
Trust Note 2001 Cl. B1,
1.61% .............................. 1/15/2010 250,000 252,100
Maturity Principal
Date Amount Value
- --------------------------------------------------------------------------------
Citigroup Inc. Sub. Note, 7.25% ...... 10/01/2010 $1,100,000 $1,302,927
Commercial Mortgage
Acceptance Corp. 1998
Cl. C, 6.49% ....................... 9/15/2030 275,000 307,645
Commercial Mortgage
Acceptance Corp. 1998
Cl. F, 5.44%+ ...................... 9/15/2030 950,000 837,255
Countrywide Asset-Backed
Securities, Inc. Note 2003
Cl. B, 4.61% ....................... 11/25/2031 250,000 246,443
Countrywide Asset-Backed
Securities, Inc. Note 2003
Cl. M2, 2.77% ...................... 3/26/2033 400,000 400,125
Countrywide Asset-Backed
Securities, Inc. Note 2003
Cl. A1, 1.24% ...................... 5/25/2018 279,482 279,404
Countrywide Asset-Backed
Securities, Inc. Note 2003
Cl. M6, 4.00% ...................... 7/25/2032 1,500,000 1,500,000
Countrywide Asset-Backed
Securities, Inc. Note 2003
Cl. A1, 1.25% ...................... 10/25/2019 934,566 934,566
Countrywide Asset-Backed
Securities, Inc. Note 2003
Cl. M3, 2.87% ...................... 6/25/2033 650,000 648,699
Countrywide Asset-Backed
Securities, Inc. Note 2002-A
Cl. M2, 2.27% ...................... 12/25/2031 75,000 74,317
Countrywide Asset-Backed
Securities, Inc. Note
2002 Cl. M2, 3.12% ................. 9/25/2032 300,000 303,421
Countrywide Home Loan Inc.
Note, 5.50% ........................ 8/01/2006 375,000 404,043
Countrywide Mortgage-Backed
Securities, Inc. Note 2003
Cl. M, 4.06% ....................... 6/25/2033 894,069 866,692
Countrywide Mortgage-Backed
Securities, Inc. Note
2002 Cl. B1, 4.76% ................. 9/19/2032 146,138 147,782
Credit Suisse First Boston
Note, 5.75% ........................ 4/15/2007 200,000 219,246
Delta Airlines Inc. Note, MBIA,
6.42% .............................. 7/02/2012 300,000 319,708
Distribution Financial Services
Inc. Note, 2001 Cl. A3,
4.74% .............................. 5/15/2013 75,522 75,994
Distribution Financial Services
Inc. Note, 2001 Cl. A4,
5.67% .............................. 1/17/2017 150,000 156,063
DLJ Commercial Mortgage
Corp. Note 1999 Cl. A1,
6.46% .............................. 3/10/2032 150,000 169,999
DLJ Commerical Mortgage
Corp. Note 1998 Cl. A1,
6.11% .............................. 6/10/2031 165,936 171,951
EOP Operating LP Note, 6.80% ......... 1/15/2009 775,000 881,205
ERAC USA Finance Co. Note,
8.25%+ ............................. 5/01/2005 450,000 491,310
ERAC USA Finance Co. Note,
6.625% ............................. 5/15/2006 225,000 246,117
ERP Operating LP Note, 6.63% ......... 4/13/2005 600,000 637,807
First National Bank Sub.
Note, 7.375% ....................... 9/15/2006 125,000 142,237
First Union Lehman Brothers,
Series 1998 Cl. A1, 6.28% .......... 11/18/2035 174,698 185,261
8 The notes are an integral part of the financial statements.
Maturity Principal
Date Amount Value
- --------------------------------------------------------------------------------
Finance/Mortgage (cont'd)
Fleet Commercial Loan 2002
Cl. B1, 2.19% ...................... 11/16/2009 $ 475,000 $ 473,969
Fleet Commercial Loan Note
2002 Cl. C1, 3.23% ................. 11/16/2009 750,000 748,313
Ford Credit Auto Owner Trust
Note 2002 Cl. A4, 4.36% ............ 9/15/2006 275,000 285,920
Ford Credit Auto Owner Trust
Note 2002 Cl. B, 4.79% ............. 11/15/2006 525,000 545,991
Ford Credit Auto Owner Trust
Note 2002 Cl. A3, 6.58% ............ 11/15/2004 275,000 275,639
Ford Credit Auto Owner Trust
Note 2003 Cl. B2, 1.53% ............ 8/15/2007 325,000 326,732
Ford Credit Auto Owner Trust
Note 2003-B Cl. C, 4.18% ........... 1/15/2008 75,000 75,833
Ford Motor Credit Co. Note,
6.875% ............................. 2/01/2006 500,000 531,904
Ford Motor Credit Co. Note,
7.375% ............................. 10/28/2009 800,000 852,722
General Electric Business Loan
Trust Note, 1.55% .................. 4/15/2031 370,191 370,191
General Electric Business Loan
Trust Note, 2.42% .................. 4/15/2031 148,085 148,085
General Electric Capital Corp.
Note, 5.875% ....................... 2/15/2012 150,000 163,006
General Electric Capital Corp.
Note, 6.125% ....................... 2/22/2011 1,425,000 1,582,005
General Motors Acceptance
Corp. Note, 6.125% ................. 2/01/2007 450,000 476,431
General Motors Acceptance
Corp. Note, 7.25% .................. 3/02/2011 225,000 238,298
GGP Mall Properties Trust
Note 2001 Cl. C2, 5.56% ............ 11/15/2011 508,331 546,299
GGP Mall Properties Trust
Note 2001 Cl. C3, 2.42% ............ 2/15/2014 82,639 82,990
Goldman Sachs Group Inc.
Note, 6.875% ....................... 1/15/2011 625,000 718,653
Grace Church Card Funding
LLC Note, 2.06% .................... 8/15/2008 750,000 750,000
Granite Mortage Trust Note
2002 Cl. C, 2.41% .................. 4/20/2042 1,000,000 990,940
Granite Mortgage Trust Note
2001 Cl. C1, 2.51% ................. 1/20/2041 150,000 151,401
Granite Mortgage Trust Note
2002 Cl. C1, 2.36% ................. 1/20/2043 100,000 99,008
Granite Mortgage Trust Note
2003 Cl. C1, 2.81% ................. 1/20/2043 425,000 425,000
GSR Mortgage Loan Trust Note
2002 Cl. B2, 5.27% ................. 10/25/2032 200,480 203,708
Hedged Mutual Fund Fee Trust
Note 2003 Cl. 2, 5.22% ............. 11/30/2010 181,913 181,913
HFG HealthCo-4 LLC Note
2002 Cl. B, 2.40% .................. 6/05/2007 125,000 124,460
HFG HealthCo-4 LLC 2002 Sr
Note Cl. A, 2.22% .................. 6/05/2007 200,000 191,764
Holmes Financing Note Cl. C,
2.46% .............................. 7/15/2040 75,000 74,977
Holmes Financing Note Cl. C,
2.56% .............................. 7/15/2040 100,000 100,000
Holmes Financing Note Cl. M,
1.86% .............................. 7/15/2040 150,000 150,000
Household Finance Corp.
Note, 6.375% ....................... 11/27/2012 825,000 915,237
Household Finance Corp.
Note, 6.375% ....................... 10/15/2011 225,000 250,164
Maturity Principal
Date Amount Value
- --------------------------------------------------------------------------------
IMPAC CMB Trust Note 2001
Cl. A1, 1.49% ................... 10/25/2031 $ 104,415 $ 104,453
IMPAC CMB Trust Note 2002
Cl. B1, 3.32% ................... 6/25/2032 370,364 367,396
IMPAC CMB Trust Note 2002
Cl. M1, 5.58% ................... 11/25/2032 110,011 114,412
IMPAC CMB Trust Note 2002
Cl. A1, 1.49% ................... 7/25/2032 231,654 231,808
IMPAC CMB Trust Note 2002
Cl. A, 1.58% .................... 3/25/2033 132,397 132,685
IMPAC Commercial Mortgage
Trust Note 2003 Cl. M1,
1.87% ........................... 8/25/2033 272,916 273,639
IMPAC Commerical Mortgage
Trust Note 2003 Cl. M,
2.77% ........................... 8/25/2033 148,531 149,164
iSTAR Asset Receivables Trust
Note 2002 Cl. D, 1.97% .......... 5/28/2020 225,000 221,366
J.P. Morgan Commercial
Mortgage Finance Corp.
Note 1999 Cl. A1, 6.18% ......... 10/15/2035 142,364 154,597
J.P. Morgan Chase & Co.
Note, 6.75% ..................... 2/01/2011 575,000 660,650
J.P. Morgan Commercial
Mortgage Finance Corp.
1997 Cl. C5, 7.24% .............. 9/15/2029 1,600,000 1,851,630
J.P. Morgan Commercial
Mortgage Finance Corp.
1999 Cl. A2, 6.51% .............. 10/15/2035 600,000 678,731
J.P. Morgan Commercial
Mortgage Finance Corp.
2003 Cl. D, 2.32% ............... 2/17/2015 142,188 142,188
J.P. Morgan Commercial
Mortgage Finance Corp.
2003 Cl. F, 3.07% ............... 2/17/2015 142,188 142,188
J.P. Morgan Commercial
Mortgage Finance Corp.
Note 1999 Cl. A2, 7.31% ......... 2/15/2032 725,000 838,595
J.P. Morgan Commercial
Mortgage Finance Corp.
Note 1999 Cl. D, 1.00% .......... 2/15/2032 125,000 141,823
John Hancock Global Funding
Note, 7.90% ..................... 7/02/2010 525,000 636,547
Lehman Brothers Commercial
Conduit Mortgage Trust Cl
A4, 5.93% ....................... 12/15/2025 825,000 913,258
Lehman Brothers Commercial
Conduit Mortgage Trust
Note 1997 Cl. A1, 6.79% ......... 10/12/2034 115,041 118,410
Lehman Brothers Commercial
Conduit Mortgage Trust
Note 1999 Cl. A1, 7.105% ........ 10/15/2032 1,178,680 1,290,197
Lehman Brothers Commercial
Conduit Mortgage Trust Note
2001 Cl. A, 6.155% .............. 7/14/2016 760,459 828,584
Lehman Brothers Commercial
Conduit Mortgage Trust
Note 1998 Cl. A1, 6.21% ......... 10/15/2035 85,000 95,079
Lehman Brothers Holdings Inc.
Note, 6.25% ..................... 5/15/2006 200,000 220,578
Manufacturers & Traders Trust
Co., Note 3.85% ................. 4/01/2013 225,000 225,627
Massachusetts Mutual Life
Insurance Co. Note, 5.625% ...... 5/15/2033 275,000 265,944
MBNA Corp. Note, 5.625% ........... 11/30/2007 525,000 570,446
The notes are an integral part of the financial statements.
State Street Research Asset Allocation Fund 9
Portfolio Holdings (cont'd)
Maturity Principal
Date Amount Value
- --------------------------------------------------------------------------------
Finance/Mortgage (cont'd)
MBNA Credit Card Master Trust
Note 2001 Cl. C, 2.34% ............. 6/15/2009 $ 475,000 $ 480,374
MBNA Credit Card Master Trust
Note 2001 Cl. C3, 6.55% ............ 12/15/2008 350,000 378,177
Merrill Lynch & Co. Inc.
Note, 4.00% ........................ 11/15/2007 125,000 129,313
Merrill Lynch & Co. Inc.
Note, 3.70% ........................ 4/21/2008 175,000 177,602
Morgan Stanley & Co. Inc.
Note, 4.25% ........................ 5/15/2010 625,000 630,975
Morgan Stanley Capital Inc.,
Note 7.22% ......................... 7/15/2029 722,742 805,085
Morgan Stanley Capital Inc.
Note 1999 Cl. A2, 6.21% ............ 11/15/2031 325,000 363,342
Morgan Stanley Capital Inc.
Note 1998 Cl. A1, 6.19% ............ 3/15/2030 88,924 92,460
Morgan Stanley Capital Inc.
Note 1999 Cl. A1, 5.91% ............ 11/15/2031 443,782 474,937
Morgan Stanley Dean Witter
Inc. Note 2001 Cl. A3,
6.46% .............................. 2/15/2033 1,500,000 1,679,079
Morgan Stanley Dean Witter
Inc. Note 2001 Cl. C, 7.00% ........ 2/15/2033 125,000 144,113
Morgan Stanley Dean Witter
Inc. Note 2002 Cl. A1, 5.38% ....... 1/15/2039 900,848 967,311
NationsLink Funding Corp.
Note 1999 Cl. D, 7.66% ............. 6/20/2031 125,000 145,544
NationsLink Funding Corp.
Note 1998 Cl. A2, 6.48% ............ 8/20/2030 225,000 253,911
NationsLink Funding Corp.
Note 1998 Cl. B, 6.795% ............ 8/20/2030 125,000 141,894
NationsLink Funding Corp.
Note 1998 Cl. E, 7.105% ............ 8/20/2030 975,000 1,065,970
Nomura Asset Securities Corp.
Note, 6.00%+ ....................... 3/15/2030 1,000,000 906,342
Northwest Airlines Note
2001-1 Cl. G, 8.07% ................ 10/1/2019 131,033 145,969
Option One Mortgage Loan
Trust Note 2002 Cl. M1,
1.87% .............................. 11/25/2032 150,000 150,179
Option One Mortgage Loan
Trust Note 2002 Cl. M2,
2.81% .............................. 11/25/2032 75,000 74,920
Option One Mortgage Loan
Trust Note 2003 Cl. M2,
3.07% .............................. 2/25/2033 150,000 150,336
Option One Mortgage Loan
Trust Note 2003 Cl. M2,
2.82% .............................. 4/25/2033 150,000 150,529
Option One Mortgage Loan
Trust Note 2003 Cl. M2,
2.72% .............................. 6/25/2033 375,000 374,786
Option One Mortgage Loan
Trust Note 2003 Cl. A2,
1.44% .............................. 7/25/2033 293,713 293,393
Option One Mortgage Loan
Trust Note 2003 Cl. M4,
4.02% .............................. 8/25/2033 125,000 124,351
Permanent Financing plc
Note Cl. C, 2.39% .................. 6/10/2040 300,000 300,000
PNC Mortgage Acceptance
Corp. Note 2000 Cl. A1,
7.05% .............................. 10/12/2033 225,581 251,021
Maturity Principal
Date Amount Value
- --------------------------------------------------------------------------------
PNC Mortgage Acceptance
Corp. Note 2002 Cl. A2,
7.30% .............................. 10/12/2033 $ 700,000 $ 824,410
PSE&G Transitions Funding LLC
Note Cl.A3, 5.98% .................. 6/15/2008 600,000 652,036
PSE&G Transitions Funding LLC
Note Cl. A2, 5.74% ................. 3/15/2007 154,851 160,598
Residential Asset Mortgage
Note 2003 Cl. AI1, 1.27% ........... 10/25/2021 239,815 239,792
Residential Asset Security Corp.
Note 2002 Cl. AI3, 4.99% ........... 2/25/2027 1,600,000 1,621,076
Residential Asset Security
Mortgage Note 2002
Cl. AI1, 1.26% ..................... 10/25/2017 5,006 5,005
Residential Asset Security
Mortgage Note 2003
Cl. M2, 2.87% ...................... 1/25/2033 575,000 578,371
Residential Asset Security
Mortgage Note 2003
Cl. M3, 5.50% ...................... 4/25/2033 425,000 424,992
Residential Asset Security
Mortgage Note 2003
Cl. MII2, 2.87% .................... 4/25/2033 150,000 150,240
Residential Asset Security
Mortgage Corp. Note,
5.75% .............................. 3/25/2027 267,066 268,634
Residential Asset Security
Mortgage Corp. Note,
1.37% .............................. 7/25/2032 246,019 245,469
Safeco Capital Trust Note,
8.07% .............................. 7/15/2037 300,000 348,548
Safeco Corp. Note, 4.20% ............. 2/01/2008 200,000 206,108
Salomon Brothers Commercial
Mortgage Trust Note 2001
Cl. A2, 6.22% ...................... 12/18/2035 2,175,000 2,418,860
Salomon Brothers Mortgage
Trust Note 2001 Cl. A2,
6.13%+ ............................. 2/18/2034 175,000 193,019
Simon Property Group LP
Note, 7.375% ....................... 1/20/2006 400,000 444,782
Structured Asset Investment
Loan Trust Note, 1.00% ............. 4/25/2033 132,266 132,129
Structured Asset Investment
Loan Trust Note, 3.07% ............. 4/25/2033 150,000 149,700
Structured Asset Investment
Loan Trust Note, 1.25% ............. 7/25/2033 1,360,600 1,357,879
Structured Asset Securities
Corp. Note 2001 Cl. B2,
6.74% .............................. 1/25/2032 122,409 126,693
Structured Asset Securities
Corp. Note 2002 Cl. A3,
1.54% .............................. 11/25/2033 238,420 238,828
Structured Asset Securities
Corp. Note 2002 Cl. M2,
2.21% .............................. 11/25/2032 300,000 295,005
Structured Asset Securities
Corp. Note 2002 Cl. A2,
1.33% .............................. 11/25/2032 192,619 192,651
Structured Asset Securities
Corp. Note, 3.17% .................. 1/25/2032 750,000 732,475
Structured Asset Securities
Corp. Note, 5.51% .................. 2/25/2033 225,130 232,447
Structured Asset Securities
Corp. Note, 3.07% .................. 4/25/2033 350,000 350,467
10 The notes are an integral part of the financial statements.
Maturity Principal
Date Amount Value
- --------------------------------------------------------------------------------
Finance/Mortgage (cont'd)
Structured Asset Securities
Corp. Note 2002
Cl. M2, 2.26% .................... 10/25/2003 $ 275,000 $ 269,767
Union Planters Bank Note,
5.125% ........................... 6/15/2007 150,000 160,676
USA Education Note, 5.625% ......... 4/10/2007 250,000 273,859
Vornado Reality Trust Sr. Note,
5.625% ........................... 6/15/2007 375,000 400,152
Wachovia Bank Commercial
Mortgage Trust Note 2003
Cl. A1, 2.99% .................... 6/15/2035 298,030 287,130
Wachovia Bank Commerical
Mortgage Trust Note 2002
Cl. A2, 1.47% .................... 3/15/2015 1,500,000 1,499,999
Washington Mutual Inc. Note
2003 Cl. A5, 3.43% ............... 5/25/2033 850,000 848,511
Washington Mutual Inc. Note
2003 Cl. A4, 4.13% ............... 3/25/2033 300,000 306,872
Washington Mutual Inc. Note
2003 Cl. A5, 3.93% ............... 4/25/2033 300,000 303,033
Washington Mutual Inc. Note
2003 Cl. A6, 3.70% ............... 6/25/2033 850,000 848,321
Washington Mutual Inc. Note
2003 Cl. B1, 4.25% ............... 8/25/2033 399,817 406,242
Wells Fargo Bank Inc. Sub.
Note, 6.45% ...................... 2/01/2011 375,000 427,474
Western Massachusetts
Electrical Co. Note 2001 Cl
A, 6.53% ......................... 6/01/2015 1,310,159 1,481,797
Whole Auto Loan Trust Note
2002 Cl. A2, 1.88% ............... 6/15/2005 229,929 230,414
-----------
78,906,838
-----------
Foreign Government 2.1%
Republic of Bulgaria 1.94%# ........ 7/28/2011 1,140,000 1,091,550
Malaysia Government Bond,
7.50% ............................ 7/15/2011 175,000 209,353
Petroleos Mexicanos Note,
6.50%# ........................... 2/01/2005 425,000 448,375
Republic of Brazil, 1.00% .......... 4/15/2014 554,135 505,925
Republic of Brazil, 8.00% .......... 4/15/2014 800,417 730,780
Republic of Bulgaria, 8.25% ........ 1/15/2015 1,250,000 1,428,125
Republic of Chile, 5.625% .......... 7/23/2007 425,000 460,594
Republic of Colombia, 10.00% ....... 1/23/2012 450,000 489,375
Republic of Peru, 5.00% ............ 3/07/2017 446,500 407,431
Republic of Philippines, 8.375% .... 3/12/2009 450,000 478,687
Republic of South Africa,
9.125% ........................... 5/19/2009 425,000 520,094
Republic of Turkey, 11.00% ......... 1/14/2013 675,000 744,187
Republic of Turkey, 9.50% .......... 1/15/2014 625,000 639,844
Republic of Ukraine, 7.65%+ ........ 6/11/2013 575,000 572,125
Republic of Uruguay, 7.50% ......... 3/15/2015 875,000 673,750
Republic of Venezuela,
1.875%# .......................... 12/18/2007 428,560 392,132
Republic of Venezuela,
10.75%+ .......................... 9/19/2013 600,000 552,000
Russian Federation Bond,
5.00%# ........................... 3/31/2030 950,000 897,750
United Mexican States, 6.375% ...... 1/16/2013 400,000 422,000
United Mexican States, 8.30% ....... 8/15/2031 100,000 113,550
-----------
11,777,627
-----------
Maturity Principal
Date Amount Value
- --------------------------------------------------------------------------------
Corporate 16.4%
AES Corp. Note 8.75%+ ................ 5/15/2013 $ 500,000 $ 525,000
AES Eastern Energy, L.P. Note,
9.00% .............................. 1/02/2017 547,023 563,434
Alderwoods Group Inc. Note,
12.25% ............................. 1/02/2009 1,300,000 1,439,750
Allbritton Communications Co.
Note, 7.75% ........................ 12/15/2012 500,000 510,000
Allied Waste North America
Inc. Sr. Sub. Note, 10.00% ......... 8/01/2009 1,500,000 1,625,625
AMI Semiconductor Inc. Sr
Sub Note, 10.75% ................... 2/01/2013 850,000 960,500
Anchor Glass Container Corp.
Note, 11.00% ....................... 2/15/2013 700,000 784,000
Associated Materials Inc. Note,
9.75% .............................. 4/15/2012 450,000 475,875
AT&T Broadband Corp. Note,
9.455% ............................. 11/15/2022 1,700,000 2,351,112
AT&T Wireless Services Inc.
Note, 8.125% ....................... 5/01/2012 150,000 178,099
Availl Inc. Sr. Note, 7.625%+ ........ 7/01/2011 300,000 307,500
BAE Systems Holdings Inc.
Note, 6.66% ........................ 9/15/2013 528,354 591,846
Boeing Co. Note, 8.75% ............... 8/15/2021 175,000 221,225
Bombardier Capital Inc. Note,
6.125%+ ............................ 6/29/2006 175,000 184,188
Boston Edison Co. Note,
4.875% ............................. 10/15/2012 250,000 254,637
British Telecommunications plc
Note, 8.875% ....................... 12/15/2030 200,000 262,196
Burlington Resources Finance
Co. Note, 7.20% .................... 8/15/2031 500,000 586,018
BWAY Corp. Note, 10.00%+ ............. 10/15/2010 500,000 540,000
Cadbury Schweppes US
Finance LLC Note, 3.875% ........... 10/01/2008 475,000 474,050
Calpine Corp. Note, 8.50%+ ........... 7/15/2010 1,000,000 920,000
Cargill Inc. Note, 6.25% ............. 5/01/2006 500,000 550,834
Case New Holland Inc. Sr
Note, 9.25%+ ....................... 8/01/2011 1,700,000 1,827,500
Central Garden & Pet Co.
Note, 9.125% ....................... 2/01/2013 400,000 436,000
Chesapeake Energy Corp.
Note, 9.00% ........................ 8/15/2012 250,000 281,250
Chumash Casino & Resort
Enterprise Sr. Note, 9.25%+ ........ 7/15/2010 700,000 752,500
Clear Channel
Communications Inc. Sr
Note, 5.75% ........................ 1/15/2013 225,000 238,765
Coinmach Corp. Sr. Note,
9.75% .............................. 2/01/2010 550,000 585,750
Collins & Aikman Corp. Note,
9.75% .............................. 2/15/2010 750,000 791,250
Concentra Operating Corp. Sr
Sub. Note, 9.50%+ .................. 8/15/2010 375,000 391,875
Continental Airlines Inc. Note,
6.73% .............................. 6/15/2021 768,204 746,853
Cox Communications Inc.
Note, 3.875% ....................... 10/01/2008 125,000 126,264
Cox Communications Inc.
Note, 4.625% ....................... 6/01/2013 250,000 242,682
Crown Castle International
Corp. Sr. Note, 0.00% .............. 5/15/2011 575,000 577,875
CSC Holdings Inc. Note,
7.625% ............................. 4/01/2011 600,000 598,500
The notes are an integral part of the financial statements.
State Street Research Asset Allocation Fund 11
Portfolio Holdings (cont'd)
Maturity Principal
Date Amount Value
- --------------------------------------------------------------------------------
Corporate (cont'd)
DaimlerChrysler Corp. Note,
8.50% .............................. 1/18/2031 $ 225,000 $ 263,023
Dana Corp. Sr. Note, 9.00% ........... 8/15/2011 1,000,000 1,095,000
Deutsche Telekom AG Global
Note, 9.25% ........................ 6/01/2032 325,000 443,865
Deutsche Telekom International
Finance Co. Note, 5.25% ............ 7/22/2013 150,000 151,592
Devon Energy Corp. Note,
7.95% .............................. 4/15/2032 225,000 278,085
Dex Media West LLC Sr. Sub.
Note, 9.875%+ ...................... 8/15/2013 225,000 254,250
Dimon Inc. Sr. Note, 7.75%+ .......... 6/01/2013 675,000 691,875
Dominion Resources Inc. Sr
Note, 7.625% ....................... 7/15/2005 600,000 658,543
DTE Energy Co. Note, 6.45% ........... 6/01/2006 350,000 381,433
Dynegy Holdings Inc. Note,
6.875% ............................. 4/01/2011 1,000,000 837,500
Eagle Pincher Industries Inc.
Note, 9.75%+ ....................... 9/01/2013 500,000 525,000
Earle M Jorgensen Co. Sr
Note, 9.75% ........................ 6/01/2012 1,000,000 1,065,000
EirCom Funding Sr. Sub.
Note, 8.25%+ ....................... 8/15/2013 600,000 645,000
El Paso Production Holding Co.
Note, 7.75%+ ....................... 6/01/2013 1,000,000 950,000
Energy Partners Ltd. Note,
8.75%+ ............................. 8/01/2010 600,000 615,000
Entergy Gulf States Inc. Note,
3.60% .............................. 6/01/2008 300,000 292,092
Exelon Corp. Sr. Note, 6.75% ......... 5/01/2011 250,000 282,855
Extended Stay America Inc. Sr
Sub. Note, 9.875% .................. 6/15/2011 1,000,000 1,103,750
Federated Department Stores
Inc. Note, 7.00% ................... 2/15/2028 150,000 166,181
FFCA Secured Lending Corp.
Note, 6.94% ........................ 9/18/2025 100,000 101,201
France Telecom Inc. Note,
9.75% .............................. 3/01/2031 175,000 233,649
General Electric Co. Note,
5.00% .............................. 2/01/2013 750,000 768,841
General Motors Corp. Note,
8.25% .............................. 7/15/2023 500,000 522,888
Georgia Power Co. Note,
4.875% ............................. 7/15/2007 525,000 561,917
Gerdau AmeriSteel Corp. Sr
Note, 10.375%+ ..................... 7/15/2011 400,000 402,000
Goodyear Tire & Rubber Co.
Note, 7.86% ........................ 8/15/2011 500,000 420,000
Graham Packaging Co. Sr
Sub. Note, 8.75%+ .................. 1/15/2008 750,000 766,875
Grief Brothers Corp. Note,
8.875% ............................. 8/01/2012 650,000 703,625
Hewlett-Packard Co. Note,
3.625% ............................. 3/15/2008 475,000 482,319
Hexcel Corp. Note, 9.875% ............ 10/01/2008 500,000 551,250
Hexcel Corp. Note Sr. Sub.
Note, 9.75% ........................ 1/15/2009 450,000 469,125
Hines Nurseries Inc. Note,
10.25%+ ............................ 10/01/2011 250,000 261,250
Houghton Mifflin Co. Note,
8.25% .............................. 2/01/2011 75,000 78,563
Houghton Mifflin Co. Sr. Sub.
Note, 9.875% ....................... 2/01/2013 1,000,000 1,060,000
Maturity Principal
Date Amount Value
- --------------------------------------------------------------------------------
Huntsman Advanced Materials
LLC Note, 11.00%+ .................. 7/15/2010 $ 225,000 $ 234,000
Huntsman ICI Chemicals LLC,
Sr. Sub. Note, 10.125% ............. 7/01/2009 1,675,000 1,591,250
IASIS Healthcare Corp. Sr
Sub. Note, 8.50% ................... 10/15/2009 400,000 414,000
Indiana Michigan Power Co.
Note, 6.125% ....................... 12/15/2006 325,000 358,844
Insight Midwest Note, 9.75% .......... 10/01/2009 625,000 629,687
InterLine Brands Inc. Sr. Sub.
Note, 11.50%+ ...................... 5/15/2011 400,000 430,000
International Lease Finance
Corp. Note, 5.75% .................. 2/15/2007 525,000 573,754
International Paper Co. Note,
6.75% .............................. 9/01/2011 325,000 366,639
IPSCO Inc. Sr. Note, 8.75%+ .......... 6/01/2013 1,000,000 1,045,000
ISP Chemco Inc. Sr. Sub. Note,
10.25% ............................. 7/01/2011 1,475,000 1,644,625
John Deere Capital Corp.
Note, 3.90% ........................ 1/15/2008 275,000 282,916
John Q Hammons Note,
8.875% ............................. 5/15/2012 1,200,000 1,299,000
Joy Global Inc. Sr. Sub. Note,
8.75% .............................. 3/15/2012 600,000 661,500
Kern River Funding Corp.
Note, 4.89% ........................ 4/30/2018 271,641 272,956
Kinetic Concepts Inc. Sr. Sub.
Note, 7.375%+ ...................... 5/15/2013 200,000 204,000
Kroger Co. Sr. Sub. Note,
7.80% .............................. 8/15/2007 775,000 902,691
Loral Corp. Note, 7.00% .............. 9/15/2023 150,000 167,306
Lyondell Chemical Co. Sr
Note, 10.50% ....................... 6/01/2013 1,000,000 955,000
Medex Inc. Sr. Sub. Note,
8.875%+ ............................ 5/15/2013 200,000 211,500
Mediacom Broadband LLC Sr
Note, 11.00% ....................... 7/15/2013 500,000 526,250
Merisant Co. Sr. Sub. Note,
9.50%+ ............................. 7/15/2013 400,000 428,000
Newpark Resources Inc. Sr
Sub. Note, Series B 8.625% ......... 12/15/2007 355,000 365,650
News America Holdings Inc.
Sr. Note, 6.625% ................... 1/09/2008 450,000 504,829
Nextel Communications Inc. Sr
Note, 7.375% ....................... 8/01/2015 1,650,000 1,666,500
Norcross Safety Products LLC
Sr. Sub. Note, 9.875%+ ............. 8/15/2011 1,000,000 1,055,000
Owens-Brockway Glass
Container Sr. Note, 8.25%+ ......... 5/15/2013 700,000 714,000
PerkinElmer Inc. Note, 8.875% ........ 1/15/2013 825,000 899,250
Perry Ellis International Inc.
Note, 8.875%+ ...................... 9/15/2013 750,000 765,000
Premcor Refining Group Inc.
Note, 9.25% ........................ 2/01/2010 900,000 981,000
Progress Energy Inc. Sr. Note,
7.10% .............................. 3/01/2011 300,000 338,599
Qwest Communications
International Inc. Note,
7.50% .............................. 11/01/2008 1,000,000 960,000
Radnor Holdings Corp. Note,
11.00%+ ............................ 3/15/2010 1,000,000 845,000
Rayovac Corp. Sr. Sub. Note,
8.50%+ ............................. 10/01/2013 1,200,000 1,230,000
Raytheon Co. Note, 8.20% ............. 3/01/2006 150,000 169,747
12 The notes are an integral part of the financial statements.
Maturity Principal
Date Amount Value
- --------------------------------------------------------------------------------
Corporate (cont'd)
Reliant Resources Inc. Note,
9.25%+ ............................. 7/15/2010 $ 500,000 $ 452,500
Rhodia Sr. Sub. Note,
8.875%+ ............................ 6/01/2011 525,000 515,812
Rite Aid Corp. Note, 6.125%+ ......... 12/15/2008 750,000 697,500
Rite Aid Corp. Sr. Note,
8.125%+ ............................ 5/01/2010 750,000 798,750
Rogers Wireless Inc. 9.625% .......... 5/01/2011 550,000 632,500
Royal Caribbean Cruises Ltd
Note, 8.00% ........................ 5/15/2010 500,000 527,500
Russell Corp. Note, 9.25% ............ 5/01/2010 1,000,000 1,060,000
Safeway Inc. Note, 7.50% ............. 9/15/2009 175,000 204,915
Sinclair Broadcast Group Inc.
Sr. Sub. Note, 8.75% ............... 12/15/2011 1,200,000 1,305,000
Southern Star Central Corp.
Note, 8.50%+ ....................... 8/01/2010 300,000 318,000
Sprint Capital Corp. Note,
7.625% ............................. 1/30/2011 400,000 450,894
Stater Brothers Holdings. Inc.
Sr. Note, 10.75% ................... 8/15/2006 1,200,000 1,257,000
Stena AB Note, 9.625% ................ 12/01/2012 800,000 870,000
TD Funding Corp. Sr. Sub.
Note, 8.375% ....................... 7/15/2011 300,000 322,500
Technical Olympic USA Inc.
Note, 9.00% ........................ 7/01/2010 1,000,000 1,055,000
Telecom de Puerto Rico Senior
Note, 6.65% ........................ 5/15/2006 450,000 490,711
Tempur-Pedic Inc. Sr. Sub.
Note, 10.25%+ ...................... 8/15/2010 600,000 651,000
Terex Corp. Sr. Sub. Note,
9.25% .............................. 7/15/2011 1,400,000 1,533,000
Thomas & Betts Corp. Note,
7.25% .............................. 6/01/2013 300,000 306,000
Thomson Corp. Sr. Note,
5.75% .............................. 2/01/2008 250,000 273,214
Time Warner Entertainment
Co., 8.375% ........................ 3/15/2023 425,000 525,436
Time Warner Inc., 9.15% .............. 2/01/2023 400,000 506,454
TriMas Corp. Note, 9.875% ............ 6/15/2012 1,225,000 1,243,375
TRW Automotive Inc. Note
9.375%+ ............................ 2/15/2013 850,000 956,250
Union Pacific Corp. Note,
7.60% .............................. 5/01/2005 375,000 410,056
United Auto Group Inc. Note,
9.625% ............................. 3/15/2012 575,000 628,187
United Components Inc. Sr
Sub. Note, 9.375%+ ................. 6/15/2013 1,000,000 1,040,000
United States Steel Corp. Note,
9.75% .............................. 5/15/2010 1,000,000 1,025,000
UnitedHealth Group Inc. Note,
7.50% .............................. 11/15/2005 175,000 195,278
Valero Energy Corp. Note,
7.375% ............................. 3/15/2006 200,000 221,071
Verizon Global Funding Corp.
Note, 7.375% ....................... 9/01/2012 200,000 235,859
Verizon New Jersey Inc. Note,
5.875% ............................. 1/17/2012 200,000 217,107
Vodafone Airtouch plc Note,
7.75% .............................. 2/15/2010 225,000 271,518
Walt Disney Co. Note, 6.75% .......... 3/30/2006 400,000 440,319
Warnaco Inc. Note, 8.875%+ ........... 6/15/2013 850,000 911,625
Western Wireless Corp. Note,
9.25% .............................. 7/15/2013 775,000 790,500
Maturity Principal
Date Amount Value
- --------------------------------------------------------------------------------
Westport Resources Corp. Note,
8.25% .............................. 11/01/2011 $ 25,000 $ 27,313
Westport Resources Corp. Note,
8.25% .............................. 11/01/2011 300,000 327,750
Weyerhaeuser Co. Note,
6.00% .............................. 8/01/2006 500,000 542,790
William Carter Co. Sr. Sub. ..........
Note, 10.875% ...................... 8/15/2011 1,200,000 1,338,000
Williams Companies Inc. Note,
8.125% ............................. 3/15/2012 500,000 520,000
Williams Scotsman Inc. Note,
9.875% ............................. 6/01/2007 1,200,000 1,182,000
-----------
90,957,677
-----------
Total Fixed Income Securities (Cost $246,494,284) ................ 253,949,544
-----------
Shares
- --------------------------------------------------------------------------------
Short-Term Investments 9.4%
State Street Navigator Securities
Lending Prime Portfolio ........................... 51,772,847 51,772,847
----------
Total Short-Term Investments (Cost $51,772,847) .................... 51,772,847
----------
Commercial Paper 10.9%
Merrill Lynch & Co. 1.08% ............... 10/01/2003 2,595,000 2,595,000
UBS Finance Inc. 1.05% .................. 10/15/2003 7,000,000 6,997,142
UBS Finance Inc. 1.03% .................. 10/28/2003 3,698,000 3,695,143
American Express Credit
Corp., 1.03% .......................... 10/06/2003 8,954,000 8,952,719
American Express Credit
Corp., 1.02% .......................... 10/09/2003 1,649,000 1,648,626
American Express Credit
Corp., 1.03% .......................... 10/09/2003 8,057,000 8,055,156
American Express Credit
Corp., 1.00% .......................... 10/15/2003 2,197,000 2,196,146
General Electric Capital
Corp., 1.04% .......................... 10/02/2003 10,743,000 10,742,690
General Electric Capital
Corp., 1.04% .......................... 10/22/2003 8,881,000 8,875,612
Morgan Stanley Dean Witter &
Co., 1.03% ............................ 10/09/2003 1,757,000 1,756,598
United States Treasury Bill,
0.995% ................................ 3/11/2004 5,000,000 4,977,612
----------
Total Commercial Paper (Cost $60,492,444) .......................... 60,492,444
----------
% of
Net Assets
- --------------------------------------------------------------------------------
Summary of Portfolio Assets
Investments (Cost $602,170,626) ................. 116.9% 648,220,954
Cash and Other Assets, Less Liabilities ......... (16.9%) (93,577,029)
----- -------------
Net Assets ...................................... 100.0% $ 554,643,925
===== =============
Federal Income Tax Information
At September 30, 2003, the net unrealized
appreciation of investments based on cost for federal
income tax purposes of $605,064,693 was as
follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of value over
tax cost $51,170,037
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax cost
over value (8,013,776)
-----------
$43,156,261
===========
The notes are an integral part of the financial statements.
State Street Research Asset Allocation Fund 13
- --------------------------------------------------------------------------------
* Non-income-producing securities.
** A portion of these securities was pledged and segregated with the custodian
to cover margin requirements for futures contracts at March 31, 2003.
@ 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, 2003, were $868,597 and $88,628
(0.02% of net assets), respectively.
+ Security restricted in accordance with Rule 144A under the Securities Act of
1933, which allows for the resale of such securities among certain qualified
institutional buyers. The total cost and market value of Rule 144A
securities owned at September 30, 2003, were $25,905,808 and $26,773,597
(4.8% 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.
# Interest rates on this floating-rate bond will reset annually or biannually
based on the six-months London Interbank Offered Rate (LIBOR) plus 0.8125%.
Futures contracts open at September 30, 2003 are as follows:
Unrealized
Number of Appreciation
Type Contracts Notional Amount Currency Expiration Month (Depreciation)
- ------------------------------------------------------------------------------------------------------------------------------
DJ Euro Stoxx 50 Index Long ............ 281 6,758,050 EUR December 2003 $ (775,685)
FT SE 100 Index Long ................... 202 8,294,120 GBP December 2003 (513,560)
Swiss Market Index Long ................ 102 5,136,720 CHF December 2003 (253,851)
Topix Index Long ....................... 302 3,066,810,000 JPY December 2003 (658,259)
2-Year US Treasury Notes Long .......... 4 4,311,875 USD December 2003 18,136
10-Year US Treasury Notes Long ......... 24 458,500 USD December 2003 10,169
5-Year US Treasury Notes Short ......... (109) (12,368,094) USD December 2003 (390,487)
------------
$ (2,563,537)
============
14 The notes are an integral part of the financial statements.
FINANCIAL
Statements
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
September 30, 2003 (unaudited)
Assets
Investments, at value** (Cost $602,170,626) (Note 1) ........ $ 648,220,954
Cash ........................................................ 246,278
Receivable for securities sold .............................. 52,834,764
Interest and dividends receivable ........................... 3,067,936
Receivable for foreign currency ............................. 2,008,813
Receivable for fund shares sold ............................. 812,238
Other assets ................................................ 4,992
-------------
707,195,975
-------------
Liabilities
Payable for securities purchased ............................ 98,947,393
Payable for collateral received on securities loaned ........ 51,772,847
Payable for fund shares redeemed ............................ 356,718
Accrued management fee ...................................... 340,536
Accrued transfer agent and shareholder services ............. 281,324
Accrued distribution and service fees ....................... 176,388
Dividends payable ........................................... 153,615
Payable for futures variation margin ........................ 116,623
Accrued administration fee .................................. 21,045
Accrued trustees' fees ...................................... 13,396
Other accrued expenses ...................................... 372,165
-------------
152,552,050
-------------
Net Assets .................................................. $ 554,643,925
=============
Net Assets consist of:
Unrealized appreciation of investments ..................... $ 46,050,328
Unrealized depreciation of futures contracts ............... (2,563,537)
Unrealized appreciation of foreign currency and
foreign currency translations ............................ 2,008,813
Accumulated net realized loss .............................. (50,595,790)
Paid-in capital ............................................ 559,744,111
-------------
$ 554,643,925
=============
Net Asset Value (NAV) of Each Share Class
Except where noted, the NAV is the offering and the redemption price for each
class.
Class Net Assets / Number of Shares = NAV
A $294,485,268 31,270,996 $9.42*
B(1) $101,337,099 10,818,258 $9.37**
B $112,416,871 11,963,398 $9.40**
C $ 26,020,937 2,762,866 $9.42**
S $ 20,383,750 2,163,426 $9.42
* Maximum offering price per share = $10.00 ($9.42 [divided by] 0.9425)
** When you sell Class B(1), Class B or Class C shares, you receive the net
asset value minus deferred sales charge, if any.
Statement of Operations
- --------------------------------------------------------------------------------
For the six months ended September 30, 2003 (unaudited)
Investment Income
Interest, net of foreign taxes of $6,976 (Note 1) ........... $ 6,004,236
Dividends ................................................... 1,648,760
------------
7,652,996
------------
Expenses
Management fee (Note 2) ..................................... 1,975,993
Transfer agent and shareholder services (Note 2) ............ 793,323
Custodian fee ............................................... 150,844
Reports to shareholders ..................................... 44,484
Administration fee (Note 2) ................................. 44,249
Distribution and service fees - Class A (Note 4) ............ 419,698
Distribution and service fees - Class B(1) (Note 4) ......... 451,167
Distribution and service fees - Class C (Note 4) ............ 113,848
Registration fees ........................................... 35,319
Audit fee ................................................... 21,960
Trustees' fees (Note 2) ..................................... 14,457
Legal fees .................................................. 12,161
Miscellaneous ............................................... 23,250
------------
4,100,753
Fees paid indirectly (Note 2) ............................... (6,856)
------------
4,093,897
------------
Net investment income ....................................... 3,559,099
------------
Realized and Unrealized Gain (Loss) on
Investments, Foreign Currency and
Futures Contracts
Net realized gain on investments (Notes 1 and 3) ............ 19,059,278
Net realized loss on foreign currency (Note 1) .............. (2,018,571)
Net realized gain on futures contracts (Note 1) ............. 13,023,114
------------
Total net realized gain ................................... 30,063,821
------------
Change in unrealized appreciation of investments ............ 45,084,875
Change in unrealized appreciation of foreign
currency ................................................... 2,007,934
Change in unrealized depreciation of futures
contracts .................................................. (4,350,530)
------------
Total change in unrealized appreciation ................... 42,742,279
------------
Net gain on investments, foreign currency, and
futures contracts ......................................... 72,806,100
------------
Net increase in net assets resulting from operations ........ $ 76,365,199
============
The notes are an integral part of the financial statements. 15
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
Six months ended
September 30, 2003 Year ended
(unaudited) March 31, 2003*
--------------------------------------
Increase (Decrease) In Net Assets
Operations:
Net investment income .................... $ 3,559,099 $ 10,660,222
Net realized gain (loss) on
investments, foreign
currency and future
contracts ............................. 30,063,821 (73,727,227)
Change in unrealized
appreciation
(depreciation) of
investments, foreign
currency and futures
contracts ............................. 42,742,279 (53,715,304)
--------------------------------------
Net increase (decrease)
resulting from
operations ............................ 76,365,199 (116,782,309)
--------------------------------------
Dividends from net
investment income:
Class A ................................. (2,470,443) (6,789,088)
Class B(1) .............................. (516,963) (1,337,209)
Class B ................................. (1,161,999) (4,016,663)
Class C ................................. (130,561) (300,754)
Class S ................................. (203,880) (588,253)
--------------------------------------
(4,483,846) (13,031,967)
--------------------------------------
Distribution from capital
gains:
Class A ................................. -- (1,432,538)
Class B(1) .............................. -- (373,621)
Class B ................................. -- (918,885)
Class C ................................. -- (61,275)
Class S ................................. -- (117,436)
--------------------------------------
-- (2,903,755)
--------------------------------------
Net increase (decrease)
from fund share
transactions (Note 6) ................. 4,093,698 (63,585,266)
--------------------------------------
Total increase (decrease) in
net assets ............................ 75,975,051 (196,303,297)
Net Assets
Beginning of period ...................... 478,668,874 674,972,171
--------------------------------------
End of period ............................ $ 554,643,925 $ 478,668,874
======================================
* Audited by other auditors
Notes to Unaudited Financial Statements
- --------------------------------------------------------------------------------
September 30, 2003
Note 1
State Street Research Asset Allocation Fund is a series of State Street
Research Income Trust (the "Trust"), which was organized as a Massachusetts
business trust in December 1985, and is registered under the Investment Company
Act of 1940 as an open-end management investment company.
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. 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 pay annual service and distribution fees equal
to 0.30% of average daily net assets. Class B(1) shares pay annual service and
distribution fees equal to 1.00% of average daily net assets and 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
offered only to current shareholders through reinvestment of dividends and
distributions or through exchanges from existing Class B accounts of State
Street Research funds and also automatically convert to Class A shares at the
end of eight years. Class B shares may also be subject to annual service and
distribution fees equal to 1.00% of average daily net assets. However, these
fees are currently waived under the terms of the distribution plan. 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
purchase, and also pay annual service and distribution fees equal to 1.00% of
average daily net assets. Class S shares are only offered through certain
retirement accounts, advisory accounts of State Street Research & Management
Company (the "Adviser"), an investment management 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 prorata 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 accounting principles generally accepted in the United States of America.
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. If not valued by a pricing
service, such securities are valued at prices obtained from independent
brokers. 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. If trading or events occurring in
other markets after the close of the principal market in which foreign
securities are traded, and before the close of business of the fund, are
expected to materially affect the value of these securities, then they are
valued at their fair value taking this trading or these events into account.
16 The notes are an integral part of the financial statements.
B. Security Transactions
Security transactions are accounted for on the trade date (date the order to
buy or sell is executed). Realized gains or losses are reported on the basis of
identified cost of securities delivered.
C. Net Investment Income
Net investment income is determined daily and consists of interest and
dividends accrued and discount earned, less the estimated daily expenses of the
fund. Interest income is accrued daily as earned. Dividend income is accrued on
the ex-dividend date. All discounts/premiums are accreted/amortized. 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. The fund is charged for expenses directly
attributable to it, while indirect expenses are allocated between both funds in
the Trust.
D. 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 accounting principles
generally accepted in the United States of America. The difference is primarily
due to differing treatments for foreign currency transactions, paydown gains
and losses, wash sale deferrals and premium amortization on fixed income
securities.
E. Federal Income Taxes
No provision for federal income taxes is necessary because the fund has elected
to qualify under Subchapter M of the Internal Revenue Code and its policy is to
distribute all of its taxable income, including net realized capital gains,
within the prescribed time periods.
At March 31, 2003, the fund had a capital loss carryforward of $51,419,359
available, to the extent provided in regulations, to offset future capital
gains, if any, which expires on March 31, 2011.
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, 2002,
through March 31, 2003, the fund incurred net capital losses of approximately
$23,625,000 and intends to defer and treat such losses as arising in the fiscal
year ended March 31, 2004.
F. Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America 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 these
estimates.
G. 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, 2003, the value of the securities loaned and the value
of collateral were $50,310,776 and $51,772,847 (consisting of $51,323,678 of
cash collateral invested in State Street Navigator Securities Lending Prime
portfolio and $449,169 of U.S. government obligations), respectively. During
the six months ended September 30, 2003, income from securities lending
amounted to $30,755 and is included in interest income.
H. 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 an 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.
The potential risk to the fund is that the change in value of futures contracts
may not correspond to the change in value of the hedged instruments. In
addition, losses may arise in changes from the value of the underlying
instruments, if there is an illiquid secondary market for the contracts, or if
the counterparty to the contract is unable to perform.
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, 2003, the fees
pursuant to such agreement amounted to $1,975,993.
State Street Research Service Center, a division of State Street Research
Investment Services, Inc., the Trust's principal underwriter (the
"Distributor"), 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. Total shareholder service
costs are allocated to each fund in the same ratios as the transfer agent
costs. During the six months ended September 30, 2003, the amount of such
expenses allocated to the fund was $231,794.
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 expenses. During the six months ended September 30, 2003,
the fund's transfer agent fees were reduced by $6,856, under this arrangement.
The fees of the Trustees not currently affiliated with the Adviser amounted to
$14,457 during the six months ended September 30, 2003.
The fund has agreed to pay the Adviser for certain administrative costs
incurred in providing other assistance and services to the fund. The fee was
based on a fixed amount that has been allocated equally among State Street
Research funds. During the six months ended September 30, 2003, the amount of
such expenses was $44,249.
Note 3
For the six months ended September 30, 2003, purchases and sales of securities,
exclusive of short-term obligations, aggregated $546,190,563, and $511,450,183
(including $247,606,387 and $224,936,690 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
State Street Research Asset Allocation Fund 17
fees to the Distributor at a rate of 0.25% of average daily net assets for Class
A, Class B(1) and Class C shares. In addition, 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) and
Class C shares. Currently, the annual service and distribution fees paid by
Class B shares have been voluntarily waived to 0.00%. The fund expects this
waiver to continue, although there is no guarantee that it will. The fund does
not pay any annual service or distribution fees for Class B 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, 2003, fees pursuant to such plans amounted to $419,698, $451,167
and $113,848 for Class A, Class B(1) and Class C shares, respectively. For Class
A, Class B and Class C shares, the payments are intended to reimburse the
distributor for expenditures incurred under the plan, and any unused payments
are returnable to the fund. As of September 30, 2003, there were $2,678,058 and
$1,713,909 for Class A and Class C, respectively, of unreimbursed distribution
and shareholder servicing related expenses to be carried forward to future plan
years. For Class B(1) shares, the payments compensate the distributor for
services and expenditures incurred under the plan, and none of the payments are
returnable to the fund.
The fund has been informed that the Distributor and MetLife Securities, Inc., a
wholly-owned subsidiary of MetLife, earned initial sales charges aggregating
$67,250 and $295,643, respectively, on sales of Class A shares of the fund
during the six months ended September 30, 2003, and that MetLife Securities,
Inc., earned commissions aggregating $403,862 and $4,324 on sales of Class B(1)
and Class C shares, respectively, and the Distributor collected contingent
deferred sales charges aggregating $123,756, $14,033 and $968 on redemptions of
Class B(1), Class B and Class C shares, respectively, during the same period.
Note 5
PricewaterhouseCoopers LLP resigned as the fund's independent accountants as of
April 25, 2003. The Trustees voted to appoint Deloitte & Touche LLP as the
fund's independent accountants for the fund's fiscal year ended March 31, 2004.
During the previous two years, PricewaterhouseCoopers LLP's audit reports
contained no adverse opinion or disclaimer of opinion; nor were its reports
qualified or modified as to uncertainty, audit scope, or accounting principle.
Further, in connection with its audits for the two previous fiscal years and
through April 25, 2003, there were no disagreements between the fund and
PricewaterhouseCoopers LLP on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure, which if not
resolved to the satisfaction of PricewaterhouseCoopers LLP would have caused it
to make reference to the disagreements in its report on the financial statements
for such years.
18
Note 6
The Trustees have the authority to issue an unlimited number of shares of
beneficial interest at $0.001 par value per share. These transactions break
down by share class as follows:
Six months ended
September 30, 2003 Year ended
(unaudited) March 31, 2003*
-----------------------------------------------------------
Class A Shares Amount Shares Amount
- ---------------------------------------------------------------------------------------------------
Shares sold ......................... 4,666,885 $ 42,501,435 13,698,027 $ 120,685,041
Issued upon reinvestment of:
Dividends from net investment income 253,819 2,358,118 760,698 6,481,424
Distribution from capital gains .... -- -- 138,092 1,393,351
Shares redeemed ..................... (4,471,477) (40,404,178) (15,235,996) (131,032,179)
---------- ------------ ----------- -------------
Net increase (decrease) ............. 449,227 $ 4,455,375 (639,179) $ (2,472,363)
========== ============ =========== =============
Class B(1) Shares Amount Shares Amount
- ---------------------------------------------------------------------------------------------------
Shares sold ......................... 2,111,798 $ 19,256,701 3,869,074 $ 34,466,893
Issued upon reinvestment of:
Dividend from net investment income 49,913 461,362 146,627 1,239,834
Distribution from capital gains .... -- -- 36,414 364,865
Shares redeemed ..................... (678,859) (6,133,395) (2,753,502) (23,597,915)
---------- ------------ ----------- -------------
Net increase ........................ 1,482,852 $ 13,584,668 1,298,613 $ 12,473,677
========== ============ =========== =============
Class B Shares Amount Shares Amount
- ---------------------------------------------------------------------------------------------------
Shares sold ......................... 214,207 $ 1,952,916 671,930 $ 6,012,035
Issued upon reinvestment of:
Dividends from net investment income 122,548 1,135,319 449,530 3,836,167
Distribution from capital gains .... -- -- 89,082 897,062
Shares redeemed ..................... (2,288,846) (20,713,767) (10,190,441) (90,058,853)
---------- ------------ ----------- -------------
Net decrease ........................ (1,952,091) $(17,625,532) (8,979,899) $ (79,313,589)
========== ============ =========== =============
Class C Shares Amount Shares Amount
- ---------------------------------------------------------------------------------------------------
Shares sold ......................... 600,030 $ 5,492,278 1,391,469 $ 12,262,877
Issued upon reinvestment of:
Dividends from net investment income 9,212 85,614 29,150 245,390
Distribution from capital gains .... -- -- 5,719 57,645
Shares redeemed ..................... (178,193) (1,608,847) (391,907) (3,315,267)
---------- ------------ ----------- -------------
Net increase ........................ 431,049 $ 3,969,045 1,034,431 $ 9,250,645
========== ============ =========== =============
Class S Shares Amount Shares Amount
- ---------------------------------------------------------------------------------------------------
Shares sold ......................... 180,322 $ 1,619,612 404,618 $ 3,606,996
Issued upon reinvestment of:
Dividends from net investment income 21,795 202,530 68,505 584,868
Distribution from capital gains .... -- -- 11,603 117,077)
Shares redeemed ..................... (237,547) (2,112,000) (917,086) (7,832,577
---------- ------------ ----------- -------------
Net decrease ........................ (35,430) $ (289,858) (432,360) $ (3,523,636)
========== ============ =========== =============
* Audited by other auditors
State Street Research Asset Allocation Fund 19
FINANCIAL
Highlights
Class A
------------------
Six months ended
September 30, 2003
(unaudited)(a)
- ---------------------------------------------------------------------------------
Net asset value, beginning of period ($) 8.18
-------
Net investment income ($) 0.06
Net realized and unrealized gain (loss) on investments ($) 1.26
-------
Total from investment operations ($) 1.32
-------
Dividends from net investment income ($) (0.08)
Distributions from capital gains ($) --
-------
Total distributions ($) (0.08)
-------
Net asset value, end of period ($) 9.42
=======
Total return (%)(b) 16.15(c)
Ratios/Supplemental Data:
- ---------------------------------------------------------------------------------
Net assets at end of period ($ thousands) 294,485
Expense ratio (%)* 1.48(d)
Expense ratio after expense reductions (%) 1.48(d)
Ratio of net investment income to average net assets (%) 1.42(d)
Portfolio turnover rate (%) 100.52
Class A
----------------------------------------------------------------
Years ended March 31
----------------------------------------------------------------
2003(a)(g) 2002(a)(f)(g) 2001(a)(g) 2000(a)(g) 1999(a)(e)(g)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ($) 10.19 10.10 11.69 10.40 11.60
------- ------- ------- ------- -------
Net investment income ($) 0.17 0.20 0.28 0.24 0.25
Net realized and unrealized gain (loss) on investments ($) (1.93) 0.60 (0.29) 1.48 (0.35)
------- ------- ------- ------- -------
Total from investment operations ($) (1.76) 0.80 (0.01) 1.72 (0.10)
------- ------- ------- ------- -------
Dividends from net investment income ($) (0.21) (0.22) (0.22) (0.22) (0.22)
Distributions from capital gains ($) (0.04) (0.49) (1.36) (0.21) (0.88)
------- ------- ------- ------- -------
Total distributions ($) (0.25) (0.71) (1.58) (0.43) (1.10)
------- ------- ------- ------- -------
Net asset value, end of period ($) 8.18 10.19 10.10 11.69 10.40
======= ======= ======= ======= =======
Total return (%)(b) (17.37) 8.15 0.29 16.88 (0.66)
Ratios/Supplemental Data:
- ---------------------------------------------------------------------------------------------------------------------------
Net assets at end of period ($ thousands) 252,069 320,614 272,813 304,400 309,752
Expense ratio (%)* 1.43 1.41 1.46 1.30 1.28
Expense ratio after expense reductions (%) 1.42 1.40 1.44 1.29 1.27
Ratio of net investment income to average net assets (%) 1.92 1.95 2.61 2.23 2.32
Portfolio turnover rate (%) 180.68 185.79 180.98 122.57 136.37
Class B(1)
------------------
Six months ended
September 30, 2003
(unaudited)(a)
- ---------------------------------------------------------------------------------
Net asset value, beginning of period ($) 8.14
-------
Net investment income ($) 0.03
Net realized and unrealized gain (loss) on investments ($) 1.25
-------
Total from investment operations ($) 1.28
-------
Dividends from net investment income ($) (0.05)
Distributions from capital gains ($) --
-------
Total distributions ($) (0.05)
-------
Net asset value, end of period ($) 9.37
=======
Total return (%)(b) 15.73(c)
Ratios/Supplemental Data:
- ---------------------------------------------------------------------------------
Net assets at end of period ($ thousands) 101,337
Expense ratio (%) 2.18(d)
Expense ratio after expense reductions (%) 2.18(d)
Ratio of net investment income to average net assets (%) 0.71(d)
Portfolio turnover rate (%) 100.52
Class B(1)
-------------------------------------------------------------
Years ended March 31
-------------------------------------------------------------
2003(a)(g) 2002(a)(f)(g) 2001(a)(g) 2000(a)(g) 1999(a)(g)
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ($) 10.13 10.05 11.63 10.36 10.35
------- ------- ------- ------- -------
Net investment income ($) 0.11 0.12 0.19 0.17 0.04
Net realized and unrealized gain (loss) on investments ($) (1.91) 0.60 (0.27) 1.45 0.01
------- ------- ------- ------- -------
Total from investment operations ($) (1.80) 0.72 (0.08) 1.62 0.05
------- ------- ------- ------- -------
Dividends from net investment income ($) (0.15) (0.15) (0.14) (0.14) (0.04)
Distributions from capital gains ($) (0.04) (0.49) (1.36) (0.21) --
------- ------- ------- ------- -------
Total distributions ($) (0.19) (0.64) (1.50) (0.35) (0.04)
------- ------- ------- ------- -------
Net asset value, end of period ($) 8.14 10.13 10.05 11.63 10.36
======= ======= ======= ======= =======
Total return (%)(b) (17.91) 7.30 (0.35) 15.93 0.51(c)
Ratios/Supplemental Data:
- ---------------------------------------------------------------------------------------------------------------------------
Net assets at end of period ($ thousands) 75,963 81,440 56,543 36,045 10,289
Expense ratio (%) 2.13 2.11 2.19 2.05 2.08(d)
Expense ratio after expense reductions (%) 2.12 2.10 2.17 2.04 2.08(d)
Ratio of net investment income to average net assets (%) 1.22 1.25 1.86 1.48 1.89(d)
Portfolio turnover rate (%) 180.68 185.79 180.98 122.57 136.37
(a) Per-share figures have been calculated using the average shares method.
(b) Does not reflect any front-end or contingent deferred sales charges.
(c) Not annualized
(d) Annualized
(e) January 1, 1999 (commencement of share class) to March 31, 1999
(f) Effective April 1, 2001, the fund has adopted the provisions on the AICPA
Audit and Accounting Guide, Audit of Investment Companies and began
amortizing premium on all fixed income securities. The effect of this change
for the year ended March 31, 2002, was to decrease net investment income per
share by $0.01, increase net realized and unrealized loss per share by
$0.01, and decrease the ratio of net investment income to average net assets
by 0.13%. Financial highlights for the period prior to April 1, 2001, have
not been restated for this change in policy.
(g) Audited by other auditors
20
Class B
-------------------
Six months ended
September 30, 2003
(unaudited)(a)
- ----------------------------------------------------------------------------------
Net asset value, beginning of period ($) 8.16
-------
Net investment income ($) 0.08
Net realized and unrealized gain (loss) on investments ($) 1.25
-------
Total from investment operations ($) 1.33
-------
Dividends from net investment income ($) (0.09)
Distributions from capital gains ($) --
-------
Total distributions ($) (0.09)
-------
Net asset value, end of period ($) 9.40
=======
Total return (%)(b) 16.37(c)
Ratios/Supplemental Data:
- ----------------------------------------------------------------------------------
Net assets at end of period ($ thousands) 112,417
Expense ratio (%) 1.18(d)
Expense ratio after expense reductions (%) 1.18(d)
Ratio of net investment income to average net assets (%) 1.74(d)
Portfolio turnover rate (%) 100.52
Class B
-----------------------------------------------------------------
Years ended March 31
-----------------------------------------------------------------
2003(a)(g) 2002(a)(f)(g) 2001(a)(g) 2000(a)(g) 1999(a)(g)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ($) 10.17 10.07 11.65 10.36 11.55
------- ------- ------- ------- -------
Net investment income ($) 0.20 0.14 0.20 0.16 0.17
Net realized and unrealized gain (loss) on investments ($) (1.93) 0.60 (0.29) 1.47 (0.34)
------- ------- ------- ------- -------
Total from investment operations ($) (1.73) 0.74 (0.09) 1.63 (0.17)
------- ------- ------- ------- -------
Dividends from net investment income ($) (0.24) (0.15) (0.13) (0.13) (0.14)
Distributions from capital gains ($) (0.04) (0.49) (1.36) (0.21) (0.88)
------- ------- ------- ------- -------
Total distributions ($) (0.28) (0.64) (1.49) (0.34) (1.02)
------- ------- ------- ------- -------
Net asset value, end of period ($) 8.16 10.17 10.07 11.65 10.36
======= ======= ======= ======= =======
Total return (%)(b) (17.15) 7.56 (0.41) 15.98 (1.31)
Ratios/Supplemental Data:
- --------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period ($ thousands) 113,566 232,871 288,061 338,838 363,517
Expense ratio (%) 1.13 1.94 2.19 2.05 2.03
Expense ratio after expense reductions (%) 1.12 1.93 2.17 2.04 2.02
Ratio of net investment income to average net assets (%) 2.20 1.38 1.89 1.48 1.57
Portfolio turnover rate (%) 180.68 185.79 180.98 122.57 136.37
Class C
-------------------
Six months ended
September 30, 2003
(unaudited)(a)
- ----------------------------------------------------------------------------------
Net asset value, beginning of period ($) 8.18
-------
Net investment income ($) 0.03
Net realized and unrealized gain (loss) on investments ($) 1.26
-------
Total from investment operations ($) 1.29
-------
Dividends from net investment income ($) (0.05)
Distributions from capital gains ($) --
-------
Total distributions ($) (0.05)
-------
Net asset value, end of period ($) 9.42
=======
Total return (%)(b) 15.78(c)
Ratios/Supplemental Data:
- ----------------------------------------------------------------------------------
Net assets at end of period ($ thousands) 26,021
Expense ratio (%) 2.18(d)
Expense ratio after expense reductions (%) 2.18(d)
Ratio of net investment income to average net assets (%) 0.71(d)
Portfolio turnover rate (%) 100.52
Class C
-----------------------------------------------------------------
Years ended March 31
-----------------------------------------------------------------
2003(a)(g) 2002(a)(f)(g) 2001(a)(g) 2000(a)(g) 1999(a)(g)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ($) 10.19 10.10 11.67 10.38 11.57)
------- ------- ------- ------- -------
Net investment income ($) 0.11 0.13 0.20 0.16 0.17)
Net realized and unrealized gain (loss) on investments ($) (1.93) 0.59 (0.28) 1.47 (0.34)
------- ------- ------- ------- -------
Total from investment operations ($) (1.82) 0.72 (0.08) 1.63 (0.17)
------- ------- ------- ------- -------
Dividends from net investment income ($) (0.15) (0.14) (0.13) (0.13) (0.14)
Distributions from capital gains ($) (0.04) (0.49) (1.36) (0.21) (0.88)
------- ------- ------- ------- -------
Total distributions ($) (0.19) (0.63) (1.49) (0.34) (1.02)
------- ------- ------- ------- -------
Net asset value, end of period ($) 8.18 10.19 10.10 11.67 10.38)
======= ======= ======= ======= =======
Total return (%)(b) (17.96) 7.31 (0.35) 15.93 (1.33)
Ratios/Supplemental Data:
- --------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period ($ thousands) 19,079 13,226 12,687 17,093 20,519
Expense ratio (%) 2.13 2.11 2.19 2.05 2.03
Expense ratio after expense reductions (%) 2.12 2.10 2.17 2.04 2.02
Ratio of net investment income to average net assets (%) 1.21 1.26 1.89 1.47 1.56
Portfolio turnover rate (%) 180.68 185.79 180.98 122.57 136.37
Class S
--------------------
Six months ended
September 30, 2003
(unaudited)(a)
- -----------------------------------------------------------------------------------
Net asset value, beginning of period ($) 8.18
-------
Net investment income ($) 0.08
Net realized and unrealized gain (loss) on investments ($) 1.25
-------
Total from investment operations ($) 1.33
-------
Dividends from net investment income ($) (0.09)
Distributions from capital gains ($) --
-------
Total distributions ($) (0.09)
-------
Net asset value, end of period ($) 9.42
=======
Total return (%)(b) 16.33(c)
Ratios/Supplemental Data:
- -----------------------------------------------------------------------------------
Net assets at end of period ($ thousands) 20,384
Expense ratio (%) 1.18(d)
Expense ratio after expense reductions (%) 1.18(d)
Ratio of net investment income }to average net assets (%) 1.72(d)
Portfolio turnover rate (%) 100.52
Class S
-----------------------------------------------------------------
Years ended March 31
-----------------------------------------------------------------
2003(a)(g) 2002(a)(f)(g) 2001(a)(g) 2000(a)(g) 1999(a)(g)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period ($) 10.19 10.10 11.69 10.40 11.60
------- ------- ------- ------- -------
Net investment income ($) 0.20 0.23 0.30) 0.29 0.27
Net realized and unrealized gain (loss) on investments ($) (1.93) 0.60 (0.29) 1.46 (0.34)
------- ------- ------- ------- -------
Total from investment operations ($) (1.73) 0.83 0.01 1.75 (0.07)
------- ------- ------- ------- -------
Dividends from net investment income ($) (0.24) (0.25) (0.24) (0.25) (0.25)
Distributions from capital gains ($) (0.04) (0.49) (1.36) (0.21) (0.88)
------- ------- ------- ------- -------
Total distributions ($) (0.28) (0.74) (1.60) (0.46) (1.13)
------- ------- ------- ------- -------
Net asset value, end of period ($) 8.18 10.19 10.10 11.69 10.40
======= ======= ======= ======= =======
Total return (%)(b) (17.12) 8.47 0.56 17.17 (0.41)
Ratios/Supplemental Data:
- --------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period ($ thousands) 17,992 26,821 26,917 23,316 15,149
Expense ratio (%) 1.13 1.11 1.19 1.05 1.03
Expense ratio after expense reductions (%) 1.12 1.10 1.17 1.04 1.02
Ratio of net investment income }to average net assets (%) 2.21 2.27 2.85 2.62 2.53
Portfolio turnover rate (%) 180.68 185.79 180.98 122.57 136.37
State Street Research Asset Allocation Fund 21
TRUSTEES AND OFFICERS
State Street Research Income Trust
Name, Position(s) Term of Office
Address Held with and Length of Principal Occupations
and Age(a) Fund Time Served(b) During Past 5 Years
===================================================================================================
Independent Trustees
Bruce R. Bond Trustee Since Retired; formerly Chairman of the Board, Chief
(57) 1999 Executive Officer and President, PictureTel
Corporation (video conferencing systems)
- ---------------------------------------------------------------------------------------------------
Steve A. Garban Trustee Since Retired; formerly Senior Vice President for
(66) 1997 Finance and Operations and Treasurer, The
Pennsylvania State University
- ---------------------------------------------------------------------------------------------------
Dean O. Morton Trustee Since Retired; formerly Executive Vice President, Chief
(71) 1986 Operating Officer and Director, Hewlett-Packard
Company (computer manufacturer)
- ---------------------------------------------------------------------------------------------------
Susan M. Phillips Trustee Since Dean, School of Business and Public Management,
(58) 1999 George Washington University; formerly a member of
the Board of Governors of the Federal Reserve
System; and Chairman and Commissioner of the
Commodity Futures Trading Commission
- ---------------------------------------------------------------------------------------------------
Toby Rosenblatt Trustee Since President, Founders Investments Ltd.
(65) 1993 (investments); formerly President, The Glen Ellen
Company (private investment firm)
- ---------------------------------------------------------------------------------------------------
Michael S. Trustee Since Jay W. Forrester Professor of Management, Sloan
Scott Morton (66) 1987 School of Management, Massachusetts Institute of
Technology
- ---------------------------------------------------------------------------------------------------
James M. Storey Trustee Since Attorney; formerly Partner, Dechert (law firm)
(72) 2002
- ---------------------------------------------------------------------------------------------------
Interested Trustees
Richard S. Davis(+) Trustee Since Chairman of the Board, President and Chief
(58) 2000 Executive Officer of State Street Research &
Management Company; formerly Senior Vice
President, Fixed Income Investments, Metropolitan
Life Insurance Company
- ---------------------------------------------------------------------------------------------------
Officers
Donald G. Vice Since Senior Vice President of State Street Research &
DeVeuve (46) President 2001 Management Company; formerly Vice President, State
Street Research & Management Company
- ---------------------------------------------------------------------------------------------------
Rosalina Feliciano Vice Since Senior Vice President of State Street Research &
(40) President 2001 Management Company; formerly Vice President, State
Street Research & Management Company
- ---------------------------------------------------------------------------------------------------
C. Kim Goodwin Vice Since Managing Director and Chief Investment Officer -
(44) President 2002 Equities of State Street Research & Management
Company; formerly Chief Investment Officer - U.S.
Growth Equities, American Century
- ---------------------------------------------------------------------------------------------------
John S. Lombardo Vice Since Managing Director, Chief Financial Officer and
(48) President 2001 Director of State Street Research & Management
Company; formerly Executive Vice President, State
Street Research & Management Company; and Senior
Vice President, Product and Financial Management,
MetLife Auto & Home
- ---------------------------------------------------------------------------------------------------
Mark Marinella (45) Vice Since Managing Director and Chief Investment Officer -
President 2003 Fixed Income, State Street Research & Management
Company; formerly Executive Vice President and
Senior Vice President, State Street Research &
Management Company; and Chief Investment Officer
and Head of Fixed Income, Columbia Management
Group
- ---------------------------------------------------------------------------------------------------
Elizabeth M. Vice Since Managing Director of State Street Research &
Westvold (43) President 2003 Management Company; formerly Senior Vice
President, State Street Research & Management
Company
- ---------------------------------------------------------------------------------------------------
Douglas A. Romich Treasurer Since Senior Vice President and Treasurer of State
(46) 2001 Street Research & Management Company; formerly
Vice President and Assistant Treasurer, State
Street Research & Management Company
- ---------------------------------------------------------------------------------------------------
Francis J. Secretary Since Managing Director, General Counsel and Secretary
McNamara, III (48) 1995 of State Street Research & Management Company;
formerly Executive Vice President, State Street
Research & Management Company
Number of Funds
Name, in Fund Complex Other
Address Overseen by Directorships Held
and Age(a) Trustee/Officer(c) by Trustee/Officer
=========================================================================================
Independent Trustees
Bruce R. Bond 19 Ceridian Corporation
(57)
- -----------------------------------------------------------------------------------------
Steve A. Garban 55 Metropolitan Series Fund, Inc.(d)
(66)
- -----------------------------------------------------------------------------------------
Dean O. Morton 55 The Clorox Company; KLA-Tencor
(71) Corporation; BEA Systems, Inc.;
Cepheid; Pharsight Corporation; and
Metropolitan Series Fund, Inc.
- -----------------------------------------------------------------------------------------
Susan M. Phillips 19 The Kroger Co.
(58)
- -----------------------------------------------------------------------------------------
Toby Rosenblatt 55 A.P. Pharma, Inc.; and Metropolitan
(65) Series Fund, Inc.(d)
- -----------------------------------------------------------------------------------------
Michael S. 55 Metropolitan Series Fund, Inc.(d)
Scott Morton (66)
- -----------------------------------------------------------------------------------------
James M. Storey 19 SEI Investments Funds (consisting of
(72) 104 portfolios); and The
Massachusetts Health & Education
Tax-Exempt Trust
- -----------------------------------------------------------------------------------------
Interested Trustees 19 None
Richard S. Davis(+)
(58)
- -----------------------------------------------------------------------------------------
Officers 6 None
Donald G.
DeVeuve (46)
- -----------------------------------------------------------------------------------------
Rosalina Feliciano 6 None
(40)
- -----------------------------------------------------------------------------------------
C. Kim Goodwin 18 None
(44)
- -----------------------------------------------------------------------------------------
John S. Lombardo 19 None
(48)
- -----------------------------------------------------------------------------------------
Mark Marinella (45) 9 None
- -----------------------------------------------------------------------------------------
Elizabeth M. 8 None
Westvold (43)
- -----------------------------------------------------------------------------------------
Douglas A. Romich 19 None
(46)
- -----------------------------------------------------------------------------------------
Francis J. 19 None
McNamara, III (48)
The fund's Statement of Additional Information includes additional information
about the fund's trustees, and is available without charge, by contacting State
Street Research, One Financial Center, Boston, Massachusetts 02111-2690, or by
calling toll-free 1-87-SSR-FUNDS (1-877-773-8637).
(a) The address of each person is c/o State Street Research & Management
Company, One Financial Center, Boston, MA 02111-2690.
(b) A Trustee serves until he or she retires, resigns or is removed as provided
in the master trust agreement of the respective Trust. Each Trust has
adopted a mandatory retirement age of 72. Each officer holds office until he
or she resigns, is removed or a successor is elected.
(c) Includes all series of 9 investment companies for which State Street
Research & Management Company serves as sole investment adviser and all
series of Metropolitan Series Fund, Inc. The primary adviser to Metropolitan
Series Fund, Inc., is MetLife Advisers, LLC, which has retained State Street
Research & Management Company as sub-adviser to certain series of
Metropolitan Series Fund, Inc.
(d) Serves as Director of Metropolitan Series Fund, Inc., an investment company
comprising 36 separate portfolios.
(+) Mr. Davis is an "interested person" of the Trust under the Investment
Company Act of 1940 by reason of his affiliation with the Trust's Investment
Manager, State Street Research & Management Company, as noted.
22 State Street Research Asset Allocation Fund
------------
[LOGO]STATE STREET RESEARCH PRSRT STD
One Financial Center U.S. POSTAGE
Boston, MA 02111-2690 PAID
PERMIT #6
HUDSON, MA
------------
- --------------------------------------------------------------------------------
New accounts, mutual fund purchases,
exchanges and account information
Internet www.ssrfunds.com
E-mail info@ssrfunds.com
Phone 1-87-SSR-FUNDS (1-877-773-8637),
toll-free, 7 days a week, 24 hours a day
Hearing-impaired: 1-800-676-7876
Chinese- and Spanish-speaking: 1-888-638-3193
Fax 1-617-737-9722 (request confirmation number
first from the Service Center by calling 1-877-773-8637)
Mail State Street Research Service Center
P.O. Box 8408, Boston, MA 02266-8408
- --------------------------------------------------------------------------------
Did You Know?
State Street Research offers electronic delivery of quarterly statements,
shareholder reports and fund prospectuses. If you elect this option, we will
send these materials to you via e-mail. To learn more, visit us on the Web at
www.ssrfunds.com and click on "Go to Your Account" or call us at 1-87-SSR-FUNDS
(1-877-773-8637).
Did you know that you can give a State Street Research mutual fund as a gift?
Call a service center representative at 1-87-SSR-FUNDS (1-877-773-8637), Monday
through Friday, 8am-6pm eastern time, to learn more.
- --------------------------------------------------------------------------------
OverView
For more information on the products and services we offer, refer to OverView,
our quarterly shareholder newsletter.
Webcasts
For a professional perspective on the markets, the economy and timely investment
topics, tune in to a State Street Research webcast by visiting our website at
www.ssrfunds.com.
Complete Fund Listing
For a list of our funds, visit our website at www.ssrfunds.com under Research
Our Funds.
[GRAPHIC]
for Excellence in
Shareholder Communications
[GRAPHIC]
for Excellence in Service
This report must be accompanied or preceded by a current prospectus. When used
as sales material after December 31, 2003, this report must be accompanied by a
current Quarterly Performance Update.
To obtain a prospectus for any State Street Research fund call 1-87-SSR-FUNDS
(1-877-773-8637) or by visiting our website at www.ssrfunds.com. The prospectus
contains more complete information, including sales charges and expenses. Please
read the prospectus carefully before investing or sending money.
The DALBAR awards recognize quality shareholder service and quality shareholder
communications, 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 industrywide.
Member NASD, SIPC
(C)2003 State Street Research Investment Services, Inc.
One Financial Center
Boston, MA 02111-2690
www.ssrfunds.com
CONTROL NUMBER:(exp1104)SSR-LD AA-2659-1103
<Page>
FORM N-CSR(2 OF 3)
ITEM 2:
(a) The Registrant has, as of the end of the period covered by this
report, adopted a code of ethics pursuant to Section 406 of the
Sarbanes-Oxley Act and as defined in the instructions to Form N-CSR
that applies to the Registrant's principal executive officer,
principal financial officer, principal accounting officer or
controller, or persons performing similar functions, regardless of
whether these individuals are employed by the Registrant or a third
party.
(b) During the period covered by this report, there were not any amendments
to the provisions of the code of ethics adopted in 2(a) above.
(c) During the period covered by this report, there were not any waivers or
implicit waivers to a provision of the code of ethics adopted in 2(a)
above.
ITEM 3:
The Registrant's Board of Directors has determined that Steve A. Garban,
a member of the Registrant's Board of Directors and Audit Committee,
qualifies as the "audit committee financial expert" as such term is
defined in the instructions to Form N-CSR. Mr. Garban is "independent,"
as defined in the instructions to Form N-CSR.
ITEM 4 (PRINCIPAL ACCOUNTANT FEES AND SERVICES): Not applicable to this filing.
ITEM 5 (RESERVED)
ITEM 6 (RESERVED)
ITEM 7 (DISCLOSURE OF PROXY VOTING POLICIES & PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES): Not applicable to this filing.
ITEM 8 (RESERVED)
ITEM 9 (CONTROLS AND PROCEDURES):
SUB-ITEM 9a - The Principal Executive Officer and the Principal
Financial Officer have concluded that the State Street Research Income
Trust disclosure controls and procedures (as defined in Rule 30-a2(c)
under the Investment Company Act) provide reasonable assurances that
material information relating to the State Street Research Income Trust
is made known to them by the appropriate persons, based on their
evaluation of these controls and procedures as of a date within 90 days
of the filing date of this report.
SUB-ITEM 9b - There were no significant changes in the registrant's
internal controls or in other factors that could significantly affect
these controls subsequent to the date of their evaluation referenced in
(a)(i) above.
ITEM 10 (EXHIBITS):
(a)(1) Code of Ethics required to be disclosed under Item 2 of Form
N-CSR attached hereto as Exhibit 99.CODE ETH
(a)(2) Certification for each principal executive and principal
financial officer of the Registrant required by Rule 30a-2(a)
under the Investment Company Act of 1940, as amended
(17 CFR 270.30a-2(a)) attached hereto as Exhibit 99.302CERT
(b) Certification required by Rule 30a-2(b) under the Investment
Company Act of 1940, as amended (17 CFR 270.30a-2(b)) attached
hereto as Exhibit 99.906CERT
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
State Street Research Income Trust
By: /s/ Richard S. Davis
------------------------------------------------------
Richard S. Davis, President, Chairman and
Chief Executive Officer
Principal Executive Officer
Date December 3, 2003
------------------------------------------------------
<Page>
FORM N-CSR(3 OF 3)
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities, and on the
dates indicated.
By: /s/ Richard S. Davis
------------------------------------------------------
Richard S. Davis, President, Chairman and
Chief Executive Officer
Principal Executive Officer
Date December 3, 2003
------------------------
By: /s/ Douglas A. Romich
------------------------------------------------------
Douglas A. Romich, Treasurer
Principal Financial Officer
Date December 3, 2003
------------------------